[House Report 116-39]
[From the U.S. Government Publishing Office]
116th Congress } { Rept. 116-39
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
_______________________________________________________________________
TAXPAYER FIRST ACT OF 2019
----------
R E P O R T
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
on
H.R. 1957
[Including cost estimate of the Congressional Budget Office]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
April 9, 2019.--Ordered to be printed
116th Congress } { Rept. 116-39
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
_______________________________________________________________________
TAXPAYER FIRST ACT OF 2019
__________
R E P O R T
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
on
H.R. 1957
[Including cost estimate of the Congressional Budget Office]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
April 9, 2019.--Ordered to be printed
______
U.S. GOVERNMENT PUBLISHING OFFICE
89-006 WASHINGTON : 2019
C O N T E N T S
----------
Page
I. SUMMARY AND BACKGROUND...........................................26
A. Purpose and Summary................................... 26
B. Background and Need for Legislation................... 26
C. Legislative History................................... 27
II. EXPLANATION OF THE BILL..........................................28
TITLE I--PUTTING TAXPAYERS FIRST................................. 28
A. Independent Appeals Process........................... 28
1. Establishment of Internal Revenue Service
Independent Office of Appeals (sec. 1001 of the
bill and sec. 7803 of the Code).................... 28
B. Improved Service...................................... 32
1. Comprehensive customer service strategy (sec. 1101
of the bill)....................................... 32
2. IRS Free File Program (sec. 1102 of the bill)..... 33
3. Low-income exception for payments otherwise
required in connection with a submission of an
offer-in-compromise (sec. 1103 of the bill and sec.
7122 of the Code).................................. 34
C. Sensible Enforcement.................................. 35
1. Internal Revenue Service seizure requirements with
respect to structuring transactions (sec. 1201 of
the bill).......................................... 35
2. Exclusion of interest received in action to
recover property seized by the Internal Revenue
Service based on structuring transaction (sec. 1202
of the bill and new sec. 139H of the Code)......... 38
3. Clarification of equitable relief from joint
liability (sec. 1203 of the bill and sec. 6015 of
the Code).......................................... 38
4. Modification of procedures for issuance of third-
party summons (sec. 1204 of the bill and sec. 7609
of the Code)....................................... 40
5. Private debt collection and special compliance
personnel program (sec. 1205 of the bill and sec.
6306 of the Code).................................. 42
6. Reform of notice of contact of third parties (sec.
1206 of the bill and sec. 7602 of the Code)........ 44
7. Modification of authority to issue designated
summons (sec. 1207 of the bill and sec. 6503(j) of
the Code).......................................... 45
8. Limitation on access of non-Internal Revenue
Service employees to returns and return information
(sec. 1208 of the bill and sec. 7602 of the Code).. 48
D. Organizational Modernization.......................... 50
1. Office of the National Taxpayer Advocate (sec.
1301 of the bill and sec. 7803(c) of the Code)..... 50
2. Modernization of Internal Revenue Service
organizational structure (sec. 1302 of the bill)... 53
E. Other Provisions...................................... 54
1. Return preparation programs for applicable
taxpayers (sec. 1401 of the bill and new sec. 7526A
of the Code)....................................... 54
2. Provision of information regarding low-income
taxpayer clinics (sec. 1402 of the bill and sec.
7526 of the Code).................................. 57
3. Notice from IRS regarding closure of Taxpayer
Assistance Centers (sec. 1403 of the bill)......... 58
4. Rules for seizure and sale of perishable goods
restricted to only perishable goods (sec. 1404 of
the bill and sec. 6336 of the Code)................ 58
5. Whistleblower reforms (sec. 1405 of the bill and
sec. 6103 of the Code)............................. 59
6. Customer service information (sec. 1406 of the
bill).............................................. 61
7. Misdirected tax refund deposits (sec. 1407 of the
bill and sec. 6402 of the Code).................... 62
TITLE II--21ST CENTURY IRS....................................... 63
A. Cybersecurity and Identity Protection................. 63
1. Public-private partnership to address identity
theft tax refund fraud (sec. 2001 of the bill)..... 63
2. Recommendations of Electronic Tax Administration
Advisory Committee regarding identity theft refund
fraud (sec. 2002 of the bill)...................... 64
3. Information sharing and analysis center (sec. 2003
of the bill and sec. 6103 of the Code)............. 65
4. Compliance by contractors with confidentiality
safeguards (sec. 2004 of the bill and sec. 6103 of
the Code).......................................... 69
5. Report on electronic payments (sec. 2005 of the
bill).............................................. 71
6. Identity protection personal identification
numbers (sec. 2006 of the bill).................... 71
7. Single point of contact for tax-related identity
theft victims (sec. 2007 of the bill).............. 73
8. Notification of suspected identity theft (sec.
2008 of the bill and new sec. 7529 of the Code).... 74
9. Guidelines for stolen identity theft refund fraud
cases (sec. 2009 of the bill)...................... 76
10. Increased penalty for improper disclosure or use
of information by preparers of returns (sec. 2010
of the bill and sec. 6713 of the Code)............. 77
B. Development of Information Technology................. 78
1. Management of IRS information technology (sec.
2101 of the bill and sec. 7803 of the Code)........ 78
2. Internet platform for Form 1099 filings (sec. 2102
of the bill)....................................... 80
3. Streamlined critical pay authority for information
technology positions (sec. 2103 of the bill and new
sec. 7812 of the Code)............................. 81
C. Modernization of Consent-Based Income Verification
System................................................. 83
1. Disclosure of taxpayer information for third-party
income verification (sec. 2201 of the bill and sec.
6103 of the Code).................................. 83
2. Limit redisclosures and uses of consent-based
disclosures of tax return information (sec. 2202 of
the bill and sec. 6103 of the Code)................ 85
D. Expanded Use of Electronic Systems.................... 86
1. Electronic filing of returns (sec. 2301 of the
bill and sec. 6011 of the Code).................... 86
2. Uniform standards for the use of electronic
signatures for disclosure authorizations to, and
other authorizations of, practitioners (sec. 2302
of the bill and sec. 6061 of the Code)............. 88
3. Payment of taxes by debit and credit cards (sec.
2303 of the bill and sec. 6311 of the Code)........ 90
4. Authentication of users of electronic services
accounts (sec. 2304 of the bill)................... 91
F. Other Provisions...................................... 91
1. Repeal of provision regarding certain tax
compliance procedures and reports (sec. 2401 of the
bill).............................................. 91
2. Comprehensive training strategy (sec. 2402 of the
bill).............................................. 92
TITLE III--MISCELLANEOUS PROVISIONS.............................. 93
A. Reform of Laws Governing Internal Revenue Service
Employees.............................................. 93
1. Prohibition on rehiring any employee of the
Internal Revenue Service who was involuntarily
separated from service for misconduct (sec. 3001 of
the bill and sec. 7804 of the Code)................ 93
2. Notification of unauthorized inspection or
disclosure of returns and return information (sec.
3002 of the bill and sec. 7431 of the Code)........ 95
B. Provisions Relating to Exempt Organizations........... 96
1. Mandatory e-filing by exempt organizations (sec.
3101 of the bill and secs. 6033 and 6104 of the
Code).............................................. 96
2. Notice required before revocation of tax-exempt
status for failure to file return (sec. 3102 of the
bill and sec. 6033(j) of the Code)................. 98
C. Revenue Provision..................................... 101
1. Increase in penalty for failure to file (sec. 3201
of the bill and sec. 6651(a) of the Code).......... 101
III.VOTES OF THE COMMITTEE..........................................103
IV. BUDGET EFFECTS OF THE BILL......................................103
A. Committee Estimate of Budgetary Effects............... 103
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority.......................... 108
C. Cost Estimate Prepared by the Congressional Budget
Office................................................. 108
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......113
A. Committee Oversight Findings and Recommendations...... 113
B. Statement of General Performance Goals and Objectives. 113
C. Information Relating to Unfunded Mandates............. 113
D. Applicability of House Rule XXI 5(b).................. 113
E. Tax Complexity Analysis............................... 114
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits................................ 114
G. Duplication of Federal Programs....................... 114
H. Hearings.............................................. 114
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........115
A. Text of Existing Law Amended or Repealed by the Bill,
as Reported............................................ 115
B. Changes in Existing Law Proposed by the Bill, as
Reported............................................... 115
116th Congress } { Rept. 116-39
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
======================================================================
TAXPAYER FIRST ACT OF 2019
_______
April 9, 2019.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Neal, from the Committee on Ways and Means, submitted the following
R E P O R T
[To accompany H.R. 1957]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 1957) to amend the Internal Revenue Code of 1986 to
modernize and improve the Internal Revenue Service, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Taxpayer First Act
of 2019''.
(b) Amendment of 1986 Code.--Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--PUTTING TAXPAYERS FIRST
Subtitle A--Independent Appeals Process
Sec. 1001. Establishment of Internal Revenue Service Independent Office
of Appeals.
Subtitle B--Improved Service
Sec. 1101. Comprehensive customer service strategy.
Sec. 1102. IRS Free File Program.
Sec. 1103. Low-income exception for payments otherwise required in
connection with a submission of an offer-in-compromise.
Subtitle C--Sensible Enforcement
Sec. 1201. Internal Revenue Service seizure requirements with respect
to structuring transactions.
Sec. 1202. Exclusion of interest received in action to recover property
seized by the Internal Revenue Service based on structuring
transaction.
Sec. 1203. Clarification of equitable relief from joint liability.
Sec. 1204. Modification of procedures for issuance of third-party
summons.
Sec. 1205. Private debt collection and special compliance personnel
program.
Sec. 1206. Reform of notice of contact of third parties.
Sec. 1207. Modification of authority to issue designated summons.
Sec. 1208. Limitation on access of non-Internal Revenue Service
employees to returns and return information.
Subtitle D--Organizational Modernization
Sec. 1301. Office of the National Taxpayer Advocate.
Sec. 1302. Modernization of Internal Revenue Service organizational
structure.
Subtitle E--Other Provisions
Sec. 1401. Return preparation programs for applicable taxpayers.
Sec. 1402. Provision of information regarding low-income taxpayer
clinics.
Sec. 1403. Notice from IRS regarding closure of taxpayer assistance
centers.
Sec. 1404. Rules for seizure and sale of perishable goods restricted to
only perishable goods.
Sec. 1405. Whistleblower reforms.
Sec. 1406. Customer service information.
Sec. 1407. Misdirected tax refund deposits.
TITLE II--21ST CENTURY IRS
Subtitle A--Cybersecurity and Identity Protection
Sec. 2001. Public-private partnership to address identity theft refund
fraud.
Sec. 2002. Recommendations of Electronic Tax Administration Advisory
Committee regarding identity theft refund fraud.
Sec. 2003. Information sharing and analysis center.
Sec. 2004. Compliance by contractors with confidentiality safeguards.
Sec. 2005. Report on electronic payments.
Sec. 2006. Identity protection personal identification numbers.
Sec. 2007. Single point of contact for tax-related identity theft
victims.
Sec. 2008. Notification of suspected identity theft.
Sec. 2009. Guidelines for stolen identity refund fraud cases.
Sec. 2010. Increased penalty for improper disclosure or use of
information by preparers of returns.
Subtitle B--Development of Information Technology
Sec. 2101. Management of Internal Revenue Service information
technology.
Sec. 2102. Internet platform for Form 1099 filings.
Sec. 2103. Streamlined critical pay authority for information
technology positions.
Subtitle C--Modernization of Consent-Based Income Verification System
Sec. 2201. Disclosure of taxpayer information for third-party income
verification.
Sec. 2202. Limit redisclosures and uses of consent-based disclosures of
tax return information.
Subtitle D--Expanded Use of Electronic Systems
Sec. 2301. Electronic filing of returns.
Sec. 2302. Uniform standards for the use of electronic signatures for
disclosure authorizations to, and other authorizations of,
practitioners.
Sec. 2303. Payment of taxes by debit and credit cards.
Sec. 2304. Authentication of users of electronic services accounts.
Subtitle E--Other Provisions
Sec. 2401. Repeal of provision regarding certain tax compliance
procedures and reports.
Sec. 2402. Comprehensive training strategy.
TITLE III--MISCELLANEOUS PROVISIONS
Subtitle A--Reform of Laws Governing Internal Revenue Service Employees
Sec. 3001. Prohibition on rehiring any employee of the Internal Revenue
Service who was involuntarily separated from service for misconduct.
Sec. 3002. Notification of unauthorized inspection or disclosure of
returns and return information.
Subtitle B--Provisions Relating to Exempt Organizations
Sec. 3101. Mandatory e-filing by exempt organizations.
Sec. 3102. Notice required before revocation of tax-exempt status for
failure to file return.
Subtitle C--Revenue Provision
Sec. 3201. Increase in penalty for failure to file.
TITLE I--PUTTING TAXPAYERS FIRST
Subtitle A--Independent Appeals Process
SEC. 1001. ESTABLISHMENT OF INTERNAL REVENUE SERVICE INDEPENDENT OFFICE
OF APPEALS.
(a) In General.--Section 7803 is amended by adding at the end the
following new subsection:
``(e) Independent Office of Appeals.--
``(1) Establishment.--There is established in the Internal
Revenue Service an office to be known as the `Internal Revenue
Service Independent Office of Appeals'.
``(2) Chief of appeals.--
``(A) In general.--The Internal Revenue Service
Independent Office of Appeals shall be under the
supervision and direction of an official to be known as
the `Chief of Appeals'. The Chief of Appeals shall
report directly to the Commissioner of Internal Revenue
and shall be entitled to compensation at the same rate
as the highest rate of basic pay established for the
Senior Executive Service under section 5382 of title 5,
United States Code.
``(B) Appointment.--The Chief of Appeals shall be
appointed by the Commissioner of Internal Revenue
without regard to the provisions of title 5, United
States Code, relating to appointments in the
competitive service or the Senior Executive Service.
``(C) Qualifications.--An individual appointed under
subparagraph (B) shall have experience and expertise
in--
``(i) administration of, and compliance with,
Federal tax laws,
``(ii) a broad range of compliance cases, and
``(iii) management of large service
organizations.
``(3) Purposes and duties of office.--It shall be the
function of the Internal Revenue Service Independent Office of
Appeals to resolve Federal tax controversies without litigation
on a basis which--
``(A) is fair and impartial to both the Government
and the taxpayer,
``(B) promotes a consistent application and
interpretation of, and voluntary compliance with, the
Federal tax laws, and
``(C) enhances public confidence in the integrity and
efficiency of the Internal Revenue Service.
``(4) Right of appeal.--The resolution process described in
paragraph (3) shall be generally available to all taxpayers.
``(5) Limitation on designation of cases as not eligible for
referral to independent office of appeals.--
``(A) In general.--If any taxpayer which is in
receipt of a notice of deficiency authorized under
section 6212 requests referral to the Internal Revenue
Service Independent Office of Appeals and such request
is denied, the Commissioner of Internal Revenue shall
provide such taxpayer a written notice which--
``(i) provides a detailed description of the
facts involved, the basis for the decision to
deny the request, and a detailed explanation of
how the basis of such decision applies to such
facts, and
``(ii) describes the procedures prescribed
under subparagraph (C) for protesting the
decision to deny the request.
``(B) Report to congress.--The Commissioner of
Internal Revenue shall submit a written report to
Congress on an annual basis which includes the number
of requests described in subparagraph (A) which were
denied and the reasons (described by category) that
such requests were denied.
``(C) Procedures for protesting denial of request.--
The Commissioner of Internal Revenue shall prescribe
procedures for protesting to the Commissioner of
Internal Revenue a denial of a request described in
subparagraph (A).
``(D) Not applicable to frivolous positions.--This
paragraph shall not apply to a request for referral to
the Internal Revenue Service Independent Office of
Appeals which is denied on the basis that the issue
involved is a frivolous position (within the meaning of
section 6702(c)).
``(6) Staff.--
``(A) In general.--All personnel in the Internal
Revenue Service Independent Office of Appeals shall
report to the Chief of Appeals.
``(B) Access to staff of office of the chief
counsel.--The Chief of Appeals shall have authority to
obtain legal assistance and advice from the staff of
the Office of the Chief Counsel. The Chief Counsel
shall ensure, to the extent practicable, that such
assistance and advice is provided by staff of the
Office of the Chief Counsel who were not involved in
the case with respect to which such assistance and
advice is sought and who are not involved in preparing
such case for litigation.
``(7) Access to case files.--
``(A) In general.--In any case in which a conference
with the Internal Revenue Service Independent Office of
Appeals has been scheduled upon request of a specified
taxpayer, the Chief of Appeals shall ensure that such
taxpayer is provided access to the nonprivileged
portions of the case file on record regarding the
disputed issues (other than documents provided by the
taxpayer to the Internal Revenue Service) not later
than 10 days before the date of such conference.
``(B) Taxpayer election to expedite conference.--If
the taxpayer so elects, subparagraph (A) shall be
applied by substituting `the date of such conference'
for `10 days before the date of such conference'.
``(C) Specified taxpayer.--For purposes of this
paragraph--
``(i) In general.--The term `specified
taxpayer' means--
``(I) in the case of any taxpayer who
is a natural person, a taxpayer whose
adjusted gross income does not exceed
$400,000 for the taxable year to which
the dispute relates, and
``(II) in the case of any other
taxpayer, a taxpayer whose gross
receipts do not exceed $5,000,000 for
the taxable year to which the dispute
relates.
``(ii) Aggregation rule.--Rules similar to
the rules of section 448(c)(2) shall apply for
purposes of clause (i)(II).''.
(b) Conforming Amendments.--
(1) The following provisions are each amended by striking
``Internal Revenue Service Office of Appeals'' and inserting
``Internal Revenue Service Independent Office of Appeals'':
(A) Section 6015(c)(4)(B)(ii)(I).
(B) Section 6320(b)(1).
(C) Subsections (b)(1) and (d)(3) of section 6330.
(D) Section 6603(d)(3)(B).
(E) Section 6621(c)(2)(A)(i).
(F) Section 7122(e)(2).
(G) Subsections (a), (b)(1), (b)(2), and (c)(1) of
section 7123.
(H) Subsections (c)(7)(B)(i) and (g)(2)(A) of section
7430.
(I) Section 7522(b)(3).
(J) Section 7612(c)(2)(A).
(2) Section 7430(c)(2) is amended by striking ``Internal
Revenue Service Office of Appeals'' each place it appears and
inserting ``Internal Revenue Service Independent Office of
Appeals''.
(3) The heading of section 6330(d)(3) is amended by inserting
``independent'' after ``irs''.
(c) Other References.--Any reference in any provision of law, or
regulation or other guidance, to the Internal Revenue Service Office of
Appeals shall be treated as a reference to the Internal Revenue Service
Independent Office of Appeals.
(d) Savings Provisions.--Rules similar to the rules of paragraphs (2)
through (6) of section 1001(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 shall apply for purposes of this
section (and the amendments made by this section).
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on the date of the enactment of this Act.
(2) Access to case files.--Section 7803(e)(7) of the Internal
Revenue Code of 1986, as added by subsection (a), shall apply
to conferences occurring after the date which is 1 year after
the date of the enactment of this Act.
Subtitle B--Improved Service
SEC. 1101. COMPREHENSIVE CUSTOMER SERVICE STRATEGY.
(a) In General.--Not later than the date which is 1 year after the
date of the enactment of this Act, the Secretary of the Treasury (or
the Secretary's delegate) shall submit to Congress a written
comprehensive customer service strategy for the Internal Revenue
Service. Such strategy shall include--
(1) a plan to provide assistance to taxpayers that is secure,
designed to meet reasonable taxpayer expectations, and adopts
appropriate best practices of customer service provided in the
private sector, including online services, telephone call back
services, and training of employees providing customer
services;
(2) a thorough assessment of the services that the Internal
Revenue Service can co-locate with other Federal services or
offer as self-service options;
(3) proposals to improve Internal Revenue Service customer
service in the short term (the current and following fiscal
year), medium term (approximately 3 to 5 fiscal years), and
long term (approximately 10 fiscal years);
(4) a plan to update guidance and training materials for
customer service employees of the Internal Revenue Service,
including the Internal Revenue Manual, to reflect such
strategy; and
(5) identified metrics and benchmarks for quantitatively
measuring the progress of the Internal Revenue Service in
implementing such strategy.
(b) Updated Guidance and Training Materials.--Not later than 2 years
after the date of the enactment of this Act, the Secretary of the
Treasury (or the Secretary's delegate) shall make available the updated
guidance and training materials described in subsection (a)(4)
(including the Internal Revenue Manual). Such updated guidance and
training materials (including the Internal Revenue Manual) shall be
written in a manner so as to be easily understood by customer service
employees of the Internal Revenue Service and shall provide clear
instructions.
SEC. 1102. IRS FREE FILE PROGRAM.
(a) In General.--
(1) The Secretary of the Treasury, or the Secretary's
delegate, shall continue to operate the IRS Free File Program
as established by the Internal Revenue Service and published in
the Federal Register on November 4, 2002 (67 Fed. Reg. 67247),
including any subsequent agreements and governing rules
established pursuant thereto.
(2) The IRS Free File Program shall continue to provide free
commercial-type online individual income tax preparation and
electronic filing services to the lowest 70 percent of
taxpayers by adjusted gross income. The number of taxpayers
eligible to receive such services each year shall be calculated
by the Internal Revenue Service annually based on prior year
aggregate taxpayer adjusted gross income data.
(3) In addition to the services described in paragraph (2),
and in the same manner, the IRS Free File Program shall
continue to make available to all taxpayers (without regard to
income) a basic, online electronic fillable forms utility.
(4) The IRS Free File Program shall continue to work
cooperatively with the private sector to provide the free
individual income tax preparation and the electronic filing
services described in paragraphs (2) and (3).
(5) The IRS Free File Program shall work cooperatively with
State government agencies to enhance and expand the use of the
program to provide needed benefits to the taxpayer while
reducing the cost of processing returns.
(b) Innovations.--The Secretary of the Treasury, or the Secretary's
delegate, shall work with the private sector through the IRS Free File
Program to identify and implement, consistent with applicable law,
innovative new program features to improve and simplify the taxpayer's
experience with completing and filing individual income tax returns
through voluntary compliance.
SEC. 1103. LOW-INCOME EXCEPTION FOR PAYMENTS OTHERWISE REQUIRED IN
CONNECTION WITH A SUBMISSION OF AN OFFER-IN-
COMPROMISE.
(a) In General.--Section 7122(c) is amended by adding at the end the
following new paragraph:
``(3) Exception for low-income taxpayers.--Paragraph (1), and
any user fee otherwise required in connection with the
submission of an offer-in-compromise, shall not apply to any
offer-in-compromise with respect to a taxpayer who is an
individual with adjusted gross income, as determined for the
most recent taxable year for which such information is
available, which does not exceed 250 percent of the applicable
poverty level (as determined by the Secretary).''.
(b) Effective Date.--The amendment made by this section shall apply
to offers-in-compromise submitted after the date of the enactment of
this Act.
Subtitle C--Sensible Enforcement
SEC. 1201. INTERNAL REVENUE SERVICE SEIZURE REQUIREMENTS WITH RESPECT
TO STRUCTURING TRANSACTIONS.
Section 5317(c)(2) of title 31, United States Code, is amended--
(1) by striking ``Any property'' and inserting the following:
``(A) In general.--Any property''; and
(2) by adding at the end the following:
``(B) Internal revenue service seizure requirements
with respect to structuring transactions.--
``(i) Property derived from an illegal
source.--Property may only be seized by the
Internal Revenue Service pursuant to
subparagraph (A) by reason of a claimed
violation of section 5324 if the property to be
seized was derived from an illegal source or
the funds were structured for the purpose of
concealing the violation of a criminal law or
regulation other than section 5324.
``(ii) Notice.--Not later than 30 days after
property is seized by the Internal Revenue
Service pursuant to subparagraph (A), the
Internal Revenue Service shall--
``(I) make a good faith effort to
find all persons with an ownership
interest in such property; and
``(II) provide each such person so
found with a notice of the seizure and
of the person's rights under clause
(iv).
``(iii) Extension of notice under certain
circumstances.--The Internal Revenue Service
may apply to a court of competent jurisdiction
for one 30-day extension of the notice
requirement under clause (ii) if the Internal
Revenue Service can establish probable cause of
an imminent threat to national security or
personal safety necessitating such extension.
``(iv) Post-seizure hearing.--If a person
with an ownership interest in property seized
pursuant to subparagraph (A) by the Internal
Revenue Service requests a hearing by a court
of competent jurisdiction within 30 days after
the date on which notice is provided under
subclause (ii), such property shall be returned
unless the court holds an adversarial hearing
and finds within 30 days of such request (or
such longer period as the court may provide,
but only on request of an interested party)
that there is probable cause to believe that
there is a violation of section 5324 involving
such property and probable cause to believe
that the property to be seized was derived from
an illegal source or the funds were structured
for the purpose of concealing the violation of
a criminal law or regulation other than section
5324.''.
SEC. 1202. EXCLUSION OF INTEREST RECEIVED IN ACTION TO RECOVER PROPERTY
SEIZED BY THE INTERNAL REVENUE SERVICE BASED ON
STRUCTURING TRANSACTION.
(a) In General.--Part III of subchapter B of chapter 1 is amended by
inserting before section 140 the following new section:
``SEC. 139H. INTEREST RECEIVED IN ACTION TO RECOVER PROPERTY SEIZED BY
THE INTERNAL REVENUE SERVICE BASED ON STRUCTURING
TRANSACTION.
``Gross income shall not include any interest received from the
Federal Government in connection with an action to recover property
seized by the Internal Revenue Service pursuant to section 5317(c)(2)
of title 31, United States Code, by reason of a claimed violation of
section 5324 of such title.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 is amended by inserting before the item
relating to section 140 the following new item:
``Sec. 139H. Interest received in action to recover property seized by
the Internal Revenue Service based on structuring transaction.''.
(c) Effective Date.--The amendments made by this section shall apply
to interest received on or after the date of the enactment of this Act.
SEC. 1203. CLARIFICATION OF EQUITABLE RELIEF FROM JOINT LIABILITY.
(a) In General.--Section 6015 is amended--
(1) in subsection (e), by adding at the end the following new
paragraph:
``(7) Standard and scope of review.--Any review of a
determination made under this section shall be reviewed de novo
by the Tax Court and shall be based upon--
``(A) the administrative record established at the
time of the determination, and
``(B) any additional newly discovered or previously
unavailable evidence.''; and
(2) by amending subsection (f) to read as follows:
``(f) Equitable Relief.--
``(1) In general.--Under procedures prescribed by the
Secretary, if--
``(A) taking into account all the facts and
circumstances, it is inequitable to hold the individual
liable for any unpaid tax or any deficiency (or any
portion of either), and
``(B) relief is not available to such individual
under subsection (b) or (c),
the Secretary may relieve such individual of such liability.
``(2) Limitation.--A request for equitable relief under this
subsection may be made with respect to any portion of any
liability that--
``(A) has not been paid, provided that such request
is made before the expiration of the applicable period
of limitation under section 6502, or
``(B) has been paid, provided that such request is
made during the period in which the individual could
submit a timely claim for refund or credit of such
payment.''.
(b) Effective Date.--The amendments made by this section shall apply
to petitions or requests filed or pending on or after the date of the
enactment of this Act.
SEC. 1204. MODIFICATION OF PROCEDURES FOR ISSUANCE OF THIRD-PARTY
SUMMONS.
(a) In General.--Section 7609(f) is amended by adding at the end the
following flush sentence:
``The Secretary shall not issue any summons described in the preceding
sentence unless the information sought to be obtained is narrowly
tailored to information that pertains to the failure (or potential
failure) of the person or group or class of persons referred to in
paragraph (2) to comply with one or more provisions of the internal
revenue law which have been identified for purposes of such
paragraph.''.
(b) Effective Date.--The amendments made by this section shall apply
to summonses served after the date that is 45 days after the date of
the enactment of this Act.
SEC. 1205. PRIVATE DEBT COLLECTION AND SPECIAL COMPLIANCE PERSONNEL
PROGRAM.
(a) Certain Tax Receivables Not Eligible for Collection Under Tax
Collection Contracts.--Section 6306(d)(3) is amended by striking ``or''
at the end of subparagraph (C) and by inserting after subparagraph (D)
the following new subparagraphs:
``(E) a taxpayer substantially all of whose income
consists of disability insurance benefits under section
223 of the Social Security Act or supplemental security
income benefits under title XVI of the Social Security
Act (including supplemental security income benefits of
the type described in section 1616 of such Act or
section 212 of Public Law 93-66), or
``(F) a taxpayer who is an individual with adjusted
gross income, as determined for the most recent taxable
year for which such information is available, which
does not exceed 200 percent of the applicable poverty
level (as determined by the Secretary),''.
(b) Determination of Inactive Tax Receivables Eligible for Collection
Under Tax Collection Contracts.--Section 6306(c)(2)(A)(ii) is amended
by striking ``more than \1/3\ of the period of the applicable statute
of limitation has lapsed'' and inserting ``more than 2 years has passed
since assessment''.
(c) Maximum Length of Installment Agreements Offered Under Tax
Collection Contracts.--Section 6306(b)(1)(B) is amended by striking ``5
years'' and inserting ``7 years''.
(d) Clarification That Special Compliance Personnel Program Account
May Be Used for Program Costs.--
(1) In general.--Section 6307(b) is amended--
(A) in paragraph (2), by striking all that follows
``under such program'' and inserting a period, and
(B) in paragraph (3), by striking all that follows
``out of such account'' and inserting ``for other than
program costs.''.
(2) Communications, software, and technology costs treated as
program costs.--Section 6307(d)(2)(B) is amended by striking
``telecommunications'' and inserting ``communications,
software, technology''.
(3) Conforming amendment.--Section 6307(d)(2) is amended by
striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``,
and'', and by inserting after subparagraph (B) the following
new subparagraph:
``(C) reimbursement of the Internal Revenue Service
or other government agencies for the cost of
administering the qualified tax collection program
under section 6306.''.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
tax receivables identified by the Secretary (or the Secretary's
delegate) after December 31, 2020.
(2) Maximum length of installment agreements.--The amendment
made by subsection (c) shall apply to contracts entered into
after the date of the enactment of this Act.
(3) Use of special compliance personnel program account.--The
amendment made by subsection (d) shall apply to amounts
expended from the special compliance personnel program account
after the date of the enactment of this Act.
SEC. 1206. REFORM OF NOTICE OF CONTACT OF THIRD PARTIES.
(a) In General.--Section 7602(c)(1) is amended to read as follows:
``(1) General notice.--An officer or employee of the Internal
Revenue Service may not contact any person other than the
taxpayer with respect to the determination or collection of the
tax liability of such taxpayer unless such contact occurs
during a period (not greater than 1 year) which is specified in
a notice which--
``(A) informs the taxpayer that contacts with persons
other than the taxpayer are intended to be made during
such period, and
``(B) except as otherwise provided by the Secretary,
is provided to the taxpayer not later than 45 days
before the beginning of such period.
Nothing in the preceding sentence shall prevent the issuance of
notices to the same taxpayer with respect to the same tax
liability with periods specified therein that, in the
aggregate, exceed 1 year. A notice shall not be issued under
this paragraph unless there is an intent at the time such
notice is issued to contact persons other than the taxpayer
during the period specified in such notice. The preceding
sentence shall not prevent the issuance of a notice if the
requirement of such sentence is met on the basis of the
assumption that the information sought to be obtained by such
contact will not be obtained by other means before such
contact.''.
(b) Effective Date.--The amendment made by this section shall apply
to notices provided, and contacts of persons made, after the date which
is 45 days after the date of the enactment of this Act.
SEC. 1207. MODIFICATION OF AUTHORITY TO ISSUE DESIGNATED SUMMONS.
(a) In General.--Paragraph (1) of section 6503(j) is amended by
striking ``coordinated examination program'' and inserting
``coordinated industry case program''.
(b) Requirements for Summons.--Clause (i) of section 6503(j)(2)(A) is
amended to read as follows:
``(i) the issuance of such summons is
preceded by a review and written approval of
such issuance by the Commissioner of the
relevant operating division of the Internal
Revenue Service and the Chief Counsel which--
``(I) states facts clearly
establishing that the Secretary has
made reasonable requests for the
information that is the subject of the
summons, and
``(II) is attached to such
summons,''.
(c) Establishment That Reasonable Requests for Information Were
Made.--Subsection (j) of section 6503 is amended by adding at the end
the following new paragraph:
``(4) Establishment that reasonable requests for information
were made.--In any court proceeding described in paragraph (3),
the Secretary shall establish that reasonable requests were
made for the information that is the subject of the summons.''.
(d) Effective Date.--The amendments made by this section shall apply
to summonses issued after the date which is 45 days after the date of
the enactment of this Act.
SEC. 1208. LIMITATION ON ACCESS OF NON-INTERNAL REVENUE SERVICE
EMPLOYEES TO RETURNS AND RETURN INFORMATION.
(a) In General.--Section 7602 is amended by adding at the end the
following new subsection:
``(f) Limitation on Access of Persons Other Than Internal Revenue
Service Officers and Employees.--The Secretary shall not, under the
authority of section 6103(n), provide any books, papers, records, or
other data obtained pursuant to this section to any person authorized
under section 6103(n), except when such person requires such
information for the sole purpose of providing expert evaluation and
assistance to the Internal Revenue Service. No person other than an
officer or employee of the Internal Revenue Service or the Office of
Chief Counsel may, on behalf of the Secretary, question a witness under
oath whose testimony was obtained pursuant to this section.''.
(b) Effective Date.--The amendment made by this section--
(1) shall take effect on the date of the enactment of this
Act; and
(2) shall not fail to apply to a contract in effect under
section 6103(n) of the Internal Revenue Code of 1986 merely
because such contract was in effect before the date of the
enactment of this Act.
Subtitle D--Organizational Modernization
SEC. 1301. OFFICE OF THE NATIONAL TAXPAYER ADVOCATE.
(a) Taxpayer Advocate Directives.--
(1) In general.--Section 7803(c) is amended by adding at the
end the following new paragraph:
``(5) Taxpayer advocate directives.--In the case of any
Taxpayer Advocate Directive issued by the National Taxpayer
Advocate pursuant to a delegation of authority from the
Commissioner of Internal Revenue--
``(A) the Commissioner or a Deputy Commissioner shall
modify, rescind, or ensure compliance with such
directive not later than 90 days after the issuance of
such directive, and
``(B) in the case of any directive which is modified
or rescinded by a Deputy Commissioner, the National
Taxpayer Advocate may (not later than 90 days after
such modification or rescission) appeal to the
Commissioner, and the Commissioner shall (not later
than 90 days after such appeal is made) ensure
compliance with such directive as issued by the
National Taxpayer Advocate or provide the National
Taxpayer Advocate with the reasons for any modification
or rescission made or upheld by the Commissioner
pursuant to such appeal.''.
(2) Report to certain committees of congress regarding
directives.--Section 7803(c)(2)(B)(ii) is amended by
redesignating subclauses (VIII) through (XI) as subclauses (IX)
through (XII), respectively, and by inserting after subclause
(VII) the following new subclause:
``(VIII) identify any Taxpayer
Advocate Directive which was not
honored by the Internal Revenue Service
in a timely manner, as specified under
paragraph (5);''.
(b) National Taxpayer Advocate Annual Reports to Congress.--
(1) Inclusion of most serious taxpayer problems.--Section
7803(c)(2)(B)(ii)(III) is amended by striking ``at least 20 of
the'' and inserting ``the 10''.
(2) Coordination with treasury inspector general for tax
administration.--Section 7803(c)(2) is amended by adding at the
end the following new subparagraph:
``(E) Coordination with treasury inspector general
for tax administration.--Before beginning any research
or study, the National Taxpayer Advocate shall
coordinate with the Treasury Inspector General for Tax
Administration to ensure that the National Taxpayer
Advocate does not duplicate any action that the
Treasury Inspector General for Tax Administration has
already undertaken or has a plan to undertake.''.
(3) Statistical support.--
(A) In general.--Section 6108 is amended by adding at
the end the following new subsection:
``(d) Statistical Support for National Taxpayer Advocate.--Upon
request of the National Taxpayer Advocate, the Secretary shall, to the
extent practicable, provide the National Taxpayer Advocate with
statistical support in connection with the preparation by the National
Taxpayer Advocate of the annual report described in section
7803(c)(2)(B)(ii). Such statistical support shall include statistical
studies, compilations, and the review of information provided by the
National Taxpayer Advocate for statistical validity and sound
statistical methodology.''.
(B) Disclosure of review.--Section 7803(c)(2)(B)(ii),
as amended by subsection (a), is amended by striking
``and'' at the end of subclause (XI), by redesignating
subclause (XII) as subclause (XIII), and by inserting
after subclause (XI) the following new subclause:
``(XII) with respect to any
statistical information included in
such report, include a statement of
whether such statistical information
was reviewed or provided by the
Secretary under section 6108(d) and, if
so, whether the Secretary determined
such information to be statistically
valid and based on sound statistical
methodology; and''.
(C) Conforming amendment.--Section 7803(c)(2)(B)(iii)
is amended by adding at the end the following: ``The
preceding sentence shall not apply with respect to
statistical information provided to the Secretary for
review, or received from the Secretary, under section
6108(d).''.
(c) Salary of National Taxpayer Advocate.--Section 7803(c)(1)(B)(i)
is amended by striking ``, or, if the Secretary of the Treasury so
determines, at a rate fixed under section 9503 of such title''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on the date of the enactment of this Act.
(2) Salary of national taxpayer advocate.--The amendment made
by subsection (c) shall apply to compensation paid to
individuals appointed as the National Taxpayer Advocate after
March 31, 2019.
SEC. 1302. MODERNIZATION OF INTERNAL REVENUE SERVICE ORGANIZATIONAL
STRUCTURE.
(a) In General.--Not later than September 30, 2020, the Secretary of
the Treasury (or the Secretary's delegate) shall submit to Congress a
comprehensive written plan to redesign the organization of the Internal
Revenue Service. Such plan shall--
(1) ensure the successful implementation of the priorities
specified by Congress in this Act;
(2) prioritize taxpayer services to ensure that all taxpayers
easily and readily receive the assistance that they need;
(3) streamline the structure of the agency including
minimizing the duplication of services and responsibilities
within the agency;
(4) best position the Internal Revenue Service to combat
cybersecurity and other threats to the Internal Revenue
Service; and
(5) address whether the Criminal Investigation Division of
the Internal Revenue Service should report directly to the
Commissioner of Internal Revenue.
(b) Repeal of Restriction on Organizational Structure of Internal
Revenue Service.--Paragraph (3) of section 1001(a) of the Internal
Revenue Service Restructuring and Reform Act of 1998 shall cease to
apply beginning 1 year after the date on which the plan described in
subsection (a) is submitted to Congress.
Subtitle E--Other Provisions
SEC. 1401. RETURN PREPARATION PROGRAMS FOR APPLICABLE TAXPAYERS.
(a) In General.--Chapter 77 is amended by inserting after section
7526 the following new section:
``SEC. 7526A. RETURN PREPARATION PROGRAMS FOR APPLICABLE TAXPAYERS.
``(a) Establishment of Volunteer Income Tax Assistance Matching Grant
Program.--The Secretary shall establish a Community Volunteer Income
Tax Assistance Matching Grant Program under which the Secretary may,
subject to the availability of appropriated funds, make grants to
provide matching funds for the development, expansion, or continuation
of qualified return preparation programs assisting applicable taxpayers
and members of underserved populations.
``(b) Use of Funds.--
``(1) In general.--Qualified return preparation programs may
use grants received under this section for--
``(A) ordinary and necessary costs associated with
program operation in accordance with cost principles
under the applicable Office of Management and Budget
circular, including--
``(i) wages or salaries of persons
coordinating the activities of the program,
``(ii) developing training materials,
conducting training, and performing quality
reviews of the returns prepared under the
program,
``(iii) equipment purchases, and
``(iv) vehicle-related expenses associated
with remote or rural tax preparation services,
``(B) outreach and educational activities described
in subsection (c)(2)(B), and
``(C) services related to financial education and
capability, asset development, and the establishment of
savings accounts in connection with tax return
preparation.
``(2) Requirement of matching funds.--A qualified return
preparation program must provide matching funds on a dollar-
for-dollar basis for all grants provided under this section.
Matching funds may include--
``(A) the salary (including fringe benefits) of
individuals performing services for the program,
``(B) the cost of equipment used in the program, and
``(C) other ordinary and necessary costs associated
with the program.
Indirect expenses, including general overhead of any entity
administering the program, shall not be counted as matching
funds.
``(c) Application.--
``(1) In general.--Each applicant for a grant under this
section shall submit an application to the Secretary at such
time, in such manner, and containing such information as the
Secretary may reasonably require.
``(2) Priority.--In awarding grants under this section, the
Secretary shall give priority to applications which
demonstrate--
``(A) assistance to applicable taxpayers, with
emphasis on outreach to, and services for, such
taxpayers,
``(B) taxpayer outreach and educational activities
relating to eligibility and availability of income
supports available through this title, including the
earned income tax credit, and
``(C) specific outreach and focus on one or more
underserved populations.
``(3) Amounts taken into account.--In determining matching
grants under this section, the Secretary shall only take into
account amounts provided by the qualified return preparation
program for expenses described in subsection (b).
``(d) Program Adherence.--
``(1) In general.--The Secretary shall establish procedures
for, and shall conduct not less frequently than once every 5
calendar years during which a qualified return preparation
program is operating under a grant under this section, periodic
site visits--
``(A) to ensure the program is carrying out the
purposes of this section, and
``(B) to determine whether the program meets such
program adherence standards as the Secretary shall by
regulation or other guidance prescribe.
``(2) Additional requirements for grant recipients not
meeting program adherence standards.--In the case of any
qualified return preparation program which--
``(A) is awarded a grant under this section, and
``(B) is subsequently determined--
``(i) not to meet the program adherence
standards described in paragraph (1)(B), or
``(ii) not to be otherwise carrying out the
purposes of this section,
such program shall not be eligible for any additional grants
under this section unless such program provides sufficient
documentation of corrective measures established to address any
such deficiencies determined.
``(e) Definitions.--For purposes of this section--
``(1) Qualified return preparation program.--The term
`qualified return preparation program' means any program--
``(A) which provides assistance to individuals, not
less than 90 percent of whom are applicable taxpayers,
in preparing and filing Federal income tax returns,
``(B) which is administered by a qualified entity,
``(C) in which all volunteers who assist in the
preparation of Federal income tax returns meet the
training requirements prescribed by the Secretary, and
``(D) which uses a quality review process which
reviews 100 percent of all returns.
``(2) Qualified entity.--
``(A) In general.--The term `qualified entity' means
any entity which--
``(i) is an eligible organization,
``(ii) is in compliance with Federal tax
filing and payment requirements,
``(iii) is not debarred or suspended from
Federal contracts, grants, or cooperative
agreements, and
``(iv) agrees to provide documentation to
substantiate any matching funds provided
pursuant to the grant program under this
section.
``(B) Eligible organization.--The term `eligible
organization' means--
``(i) an institution of higher education
which is described in section 102 (other than
subsection (a)(1)(C) thereof) of the Higher
Education Act of 1965 (20 U.S.C. 1002), as in
effect on the date of the enactment of this
section, and which has not been disqualified
from participating in a program under title IV
of such Act,
``(ii) an organization described in section
501(c) and exempt from tax under section
501(a),
``(iii) a local government agency,
including--
``(I) a county or municipal
government agency, and
``(II) an Indian tribe, as defined in
section 4(13) of the Native American
Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C.
4103(13)), including any tribally
designated housing entity (as defined
in section 4(22) of such Act (25 U.S.C.
4103(22))), tribal subsidiary,
subdivision, or other wholly owned
tribal entity,
``(iv) a local, State, regional, or national
coalition (with one lead organization which
meets the eligibility requirements of clause
(i), (ii), or (iii) acting as the applicant
organization), or
``(v) in the case of applicable taxpayers and
members of underserved populations with respect
to which no organizations described in the
preceding clauses are available--
``(I) a State government agency, or
``(II) an office providing
Cooperative Extension services (as
established at the land-grant colleges
and universities under the Smith-Lever
Act of May 8, 1914).
``(3) Applicable taxpayers.--The term `applicable taxpayer'
means a taxpayer whose income for the taxable year does not
exceed an amount equal to the completed phaseout amount under
section 32(b) for a married couple filing a joint return with
three or more qualifying children, as determined in a revenue
procedure or other published guidance.
``(4) Underserved population.--The term `underserved
population' includes populations of persons with disabilities,
persons with limited English proficiency, Native Americans,
individuals living in rural areas, members of the Armed Forces
and their spouses, and the elderly.
``(f) Special Rules and Limitations.--
``(1) Duration of grants.--Upon application of a qualified
return preparation program, the Secretary is authorized to
award a multi-year grant not to exceed 3 years.
``(2) Aggregate limitation.--Unless otherwise provided by
specific appropriation, the Secretary shall not allocate more
than $30,000,000 per fiscal year (exclusive of costs of
administering the program) to grants under this section.
``(g) Promotion of Programs.--
``(1) In general.--The Secretary shall promote tax
preparation through qualified return preparation programs
through the use of mass communications and other means.
``(2) Provision of information regarding qualified return
preparation programs.--The Secretary may provide taxpayers
information regarding qualified return preparation programs
receiving grants under this section.
``(3) Referrals to low-income taxpayer clinics.--Qualified
return preparation programs receiving a grant under this
section are encouraged, in appropriate cases, to--
``(A) advise taxpayers of the availability of, and
eligibility requirements for receiving, advice and
assistance from qualified low-income taxpayer clinics
receiving funding under section 7526, and
``(B) provide information regarding the location of,
and contact information for, such clinics.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by inserting after the item relating to section 7526 the
following new item:
``Sec. 7526A. Return preparation programs for applicable taxpayers.''.
SEC. 1402. PROVISION OF INFORMATION REGARDING LOW-INCOME TAXPAYER
CLINICS.
(a) In General.--Section 7526(c) is amended by adding at the end the
following new paragraph:
``(6) Provision of information regarding qualified low-income
taxpayer clinics.--Notwithstanding any other provision of law,
officers and employees of the Department of the Treasury may--
``(A) advise taxpayers of the availability of, and
eligibility requirements for receiving, advice and
assistance from one or more specific qualified low-
income taxpayer clinics receiving funding under this
section, and
``(B) provide information regarding the location of,
and contact information for, such clinics.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 1403. NOTICE FROM IRS REGARDING CLOSURE OF TAXPAYER ASSISTANCE
CENTERS.
Not later than 90 days before the date that a proposed closure of a
Taxpayer Assistance Center would take effect, the Secretary of the
Treasury (or the Secretary's delegate) shall--
(1) make publicly available (including by non-electronic
means) a notice which--
(A) identifies the Taxpayer Assistance Center
proposed for closure and the date of such proposed
closure; and
(B) identifies the relevant alternative sources of
taxpayer assistance which may be utilized by taxpayers
affected by such proposed closure; and
(2) submit to Congress a written report that includes--
(A) the information included in the notice described
in paragraph (1);
(B) the reasons for such proposed closure; and
(C) such other information as the Secretary may
determine appropriate.
SEC. 1404. RULES FOR SEIZURE AND SALE OF PERISHABLE GOODS RESTRICTED TO
ONLY PERISHABLE GOODS.
(a) In General.--Section 6336 is amended by striking ``or become
greatly reduced in price or value by keeping, or that such property
cannot be kept without great expense''.
(b) Effective Date.--The amendment made by this section shall apply
to property seized after the date of the enactment of this Act.
SEC. 1405. WHISTLEBLOWER REFORMS.
(a) Modifications to Disclosure Rules for Whistleblowers.--
(1) In general.--Section 6103(k) is amended by adding at the
end the following new paragraph:
``(13) Disclosure to whistleblowers.--
``(A) In general.--The Secretary may disclose, to any
individual providing information relating to any
purpose described in paragraph (1) or (2) of section
7623(a), return information related to the
investigation of any taxpayer with respect to whom the
individual has provided such information, but only to
the extent that such disclosure is necessary in
obtaining information, which is not otherwise
reasonably available, with respect to the correct
determination of tax liability for tax, or the amount
to be collected with respect to the enforcement of any
other provision of this title.
``(B) Updates on whistleblower investigations.--The
Secretary shall disclose to an individual providing
information relating to any purpose described in
paragraph (1) or (2) of section 7623(a) the following:
``(i) Not later than 60 days after a case for
which the individual has provided information
has been referred for an audit or examination,
a notice with respect to such referral.
``(ii) Not later than 60 days after a
taxpayer with respect to whom the individual
has provided information has made a payment of
tax with respect to tax liability to which such
information relates, a notice with respect to
such payment.
``(iii) Subject to such requirements and
conditions as are prescribed by the Secretary,
upon a written request by such individual--
``(I) information on the status and
stage of any investigation or action
related to such information, and
``(II) in the case of a determination
of the amount of any award under
section 7623(b), the reasons for such
determination.
Clause (iii) shall not apply to any information if the
Secretary determines that disclosure of such
information would seriously impair Federal tax
administration. Information described in clauses (i),
(ii), and (iii) may be disclosed to a designee of the
individual providing such information in accordance
with guidance provided by the Secretary.''.
(2) Conforming amendments.--
(A) Confidentiality of information.--Section
6103(a)(3) is amended by striking ``subsection
(k)(10)'' and inserting ``paragraph (10) or (13) of
subsection (k)''.
(B) Penalty for unauthorized disclosure.--Section
7213(a)(2) is amended by striking ``(k)(10)'' and
inserting ``(k)(10) or (13)''.
(C) Coordination with authority to disclose for
investigative purposes.--Section 6103(k)(6) is amended
by adding at the end the following new sentence: ``This
paragraph shall not apply to any disclosure to an
individual providing information relating to any
purpose described in paragraph (1) or (2) of section
7623(a) which is made under paragraph (13)(A).''.
(b) Protection Against Retaliation.--Section 7623 is amended by
adding at the end the following new subsection:
``(d) Civil Action To Protect Against Retaliation Cases.--
``(1) Anti-retaliation whistleblower protection for
employees.--No employer, or any officer, employee, contractor,
subcontractor, or agent of such employer, may discharge,
demote, suspend, threaten, harass, or in any other manner
discriminate against an employee in the terms and conditions of
employment (including through an act in the ordinary course of
such employee's duties) in reprisal for any lawful act done by
the employee--
``(A) to provide information, cause information to be
provided, or otherwise assist in an investigation
regarding underpayment of tax or any conduct which the
employee reasonably believes constitutes a violation of
the internal revenue laws or any provision of Federal
law relating to tax fraud, when the information or
assistance is provided to the Internal Revenue Service,
the Secretary of Treasury, the Treasury Inspector
General for Tax Administration, the Comptroller General
of the United States, the Department of Justice, the
United States Congress, a person with supervisory
authority over the employee, or any other person
working for the employer who has the authority to
investigate, discover, or terminate misconduct, or
``(B) to testify, participate in, or otherwise assist
in any administrative or judicial action taken by the
Internal Revenue Service relating to an alleged
underpayment of tax or any violation of the internal
revenue laws or any provision of Federal law relating
to tax fraud.
``(2) Enforcement action.--
``(A) In general.--A person who alleges discharge or
other reprisal by any person in violation of paragraph
(1) may seek relief under paragraph (3) by--
``(i) filing a complaint with the Secretary
of Labor, or
``(ii) if the Secretary of Labor has not
issued a final decision within 180 days of the
filing of the complaint and there is no showing
that such delay is due to the bad faith of the
claimant, bringing an action at law or equity
for de novo review in the appropriate district
court of the United States, which shall have
jurisdiction over such an action without regard
to the amount in controversy.
``(B) Procedure.--
``(i) In general.--An action under
subparagraph (A)(i) shall be governed under the
rules and procedures set forth in section
42121(b) of title 49, United States Code.
``(ii) Exception.--Notification made under
section 42121(b)(1) of title 49, United States
Code, shall be made to the person named in the
complaint and to the employer.
``(iii) Burdens of proof.--An action brought
under subparagraph (A)(ii) shall be governed by
the legal burdens of proof set forth in section
42121(b) of title 49, United States Code,
except that in applying such section--
``(I) `behavior described in
paragraph (1)' shall be substituted for
`behavior described in paragraphs (1)
through (4) of subsection (a)' each
place it appears in paragraph (2)(B)
thereof, and
``(II) `a violation of paragraph (1)'
shall be substituted for `a violation
of subsection (a)' each place it
appears.
``(iv) Statute of limitations.--A complaint
under subparagraph (A)(i) shall be filed not
later than 180 days after the date on which the
violation occurs.
``(v) Jury trial.--A party to an action
brought under subparagraph (A)(ii) shall be
entitled to trial by jury.
``(3) Remedies.--
``(A) In general.--An employee prevailing in any
action under paragraph (2)(A) shall be entitled to all
relief necessary to make the employee whole.
``(B) Compensatory damages.--Relief for any action
under subparagraph (A) shall include--
``(i) reinstatement with the same seniority
status that the employee would have had, but
for the reprisal,
``(ii) the sum of 200 percent of the amount
of back pay and 100 percent of all lost
benefits, with interest, and
``(iii) compensation for any special damages
sustained as a result of the reprisal,
including litigation costs, expert witness
fees, and reasonable attorney fees.
``(4) Rights retained by employee.--Nothing in this section
shall be deemed to diminish the rights, privileges, or remedies
of any employee under any Federal or State law, or under any
collective bargaining agreement.
``(5) Nonenforceability of certain provisions waiving rights
and remedies or requiring arbitration of disputes.--
``(A) Waiver of rights and remedies.--The rights and
remedies provided for in this subsection may not be
waived by any agreement, policy form, or condition of
employment, including by a predispute arbitration
agreement.
``(B) Predispute arbitration agreements.--No
predispute arbitration agreement shall be valid or
enforceable, if the agreement requires arbitration of a
dispute arising under this subsection.''.
(c) Effective Date.--
(1) In general.--The amendments made by subsection (a) shall
apply to disclosures made after the date of the enactment of
this Act.
(2) Civil protection.--The amendment made by subsection (b)
shall take effect on the date of the enactment of this Act.
SEC. 1406. CUSTOMER SERVICE INFORMATION.
The Secretary of the Treasury (or the Secretary's delegate) shall
provide helpful information to taxpayers placed on hold during a
telephone call to any Internal Revenue Service help line, including the
following:
(1) Information about common tax scams.
(2) Information on where and how to report tax scams.
(3) Additional advice on how taxpayers can protect themselves
from identity theft and tax scams.
SEC. 1407. MISDIRECTED TAX REFUND DEPOSITS.
Section 6402 is amended by adding at the end the following new
subsection:
``(n) Misdirected Direct Deposit Refund.--Not later than the date
which is 6 months after the date of the enactment of the Taxpayer First
Act of 2019, the Secretary shall prescribe regulations to establish
procedures to allow for--
``(1) taxpayers to report instances in which a refund made by
the Secretary by electronic funds transfer was not transferred
to the account of the taxpayer;
``(2) coordination with financial institutions for the
purpose of--
``(A) identifying the accounts to which transfers
described in paragraph (1) were made; and
``(B) recovery of the amounts so transferred; and
``(3) the refund to be delivered to the correct account of
the taxpayer.''.
TITLE II--21ST CENTURY IRS
Subtitle A--Cybersecurity and Identity Protection
SEC. 2001. PUBLIC-PRIVATE PARTNERSHIP TO ADDRESS IDENTITY THEFT REFUND
FRAUD.
The Secretary of the Treasury (or the Secretary's delegate) shall
work collaboratively with the public and private sectors to protect
taxpayers from identity theft refund fraud.
SEC. 2002. RECOMMENDATIONS OF ELECTRONIC TAX ADMINISTRATION ADVISORY
COMMITTEE REGARDING IDENTITY THEFT REFUND FRAUD.
The Secretary of the Treasury shall ensure that the advisory group
convened by the Secretary pursuant to section 2001(b)(2) of the
Internal Revenue Service Restructuring and Reform Act of 1998 (commonly
known as the Electronic Tax Administration Advisory Committee) studies
(including by providing organized public forums) and makes
recommendations to the Secretary regarding methods to prevent identity
theft and refund fraud.
SEC. 2003. INFORMATION SHARING AND ANALYSIS CENTER.
(a) In General.--The Secretary of the Treasury (or the Secretary's
delegate) may participate in an information sharing and analysis center
to centralize, standardize, and enhance data compilation and analysis
to facilitate sharing actionable data and information with respect to
identity theft tax refund fraud.
(b) Development of Performance Metrics.--The Secretary of the
Treasury (or the Secretary's delegate) shall develop metrics for
measuring the success of such center in detecting and preventing
identity theft tax refund fraud.
(c) Disclosure.--
(1) In general.--Section 6103(k), as amended by this Act, is
amended by adding at the end the following new paragraph:
``(14) Disclosure of return information for purposes of
cybersecurity and the prevention of identity theft tax refund
fraud.--
``(A) In general.--Under such procedures and subject
to such conditions as the Secretary may prescribe, the
Secretary may disclose specified return information to
specified ISAC participants to the extent that the
Secretary determines such disclosure is in furtherance
of effective Federal tax administration relating to the
detection or prevention of identity theft tax refund
fraud, validation of taxpayer identity, authentication
of taxpayer returns, or detection or prevention of
cybersecurity threats.
``(B) Specified isac participants.--For purposes of
this paragraph--
``(i) In general.--The term `specified ISAC
participant' means--
``(I) any person designated by the
Secretary as having primary
responsibility for a function performed
with respect to the information sharing
and analysis center described in
section 2003(a) of the Taxpayer First
Act of 2019, and
``(II) any person subject to the
requirements of section 7216 and which
is a participant in such information
sharing and analysis center.
``(ii) Information sharing agreement.--Such
term shall not include any person unless such
person has entered into a written agreement
with the Secretary setting forth the terms and
conditions for the disclosure of information to
such person under this paragraph, including
requirements regarding the protection and
safeguarding of such information by such
person.
``(C) Specified return information.--For purposes of
this paragraph, the term `specified return information'
means--
``(i) in the case of a return which is in
connection with a case of potential identity
theft refund fraud--
``(I) in the case of such return
filed electronically, the internet
protocol address, device
identification, email domain name,
speed of completion, method of
authentication, refund method, and such
other return information related to the
electronic filing characteristics of
such return as the Secretary may
identify for purposes of this
subclause, and
``(II) in the case of such return
prepared by a tax return preparer,
identifying information with respect to
such tax return preparer, including the
preparer taxpayer identification number
and electronic filer identification
number of such preparer,
``(ii) in the case of a return which is in
connection with a case of a identity theft
refund fraud which has been confirmed by the
Secretary (pursuant to such procedures as the
Secretary may provide), the information
referred to in subclauses (I) and (II) of
clause (i), the name and taxpayer
identification number of the taxpayer as it
appears on the return, and any bank account and
routing information provided for making a
refund in connection with such return, and
``(iii) in the case of any cybersecurity
threat to the Internal Revenue Service,
information similar to the information
described in subclauses (I) and (II) of clause
(i) with respect to such threat.
``(D) Restriction on use of disclosed information.--
``(i) Designated third parties.--Any return
information received by a person described in
subparagraph (B)(i)(I) shall be used only for
the purposes of and to the extent necessary
in--
``(I) performing the function such
person is designated to perform under
such subparagraph,
``(II) facilitating disclosures
authorized under subparagraph (A) to
persons described in subparagraph
(B)(i)(II), and
``(III) facilitating disclosures
authorized under subsection (d) to
participants in such information
sharing and analysis center.
``(ii) Return preparers.--Any return
information received by a person described in
subparagraph (B)(i)(II) shall be treated for
purposes of section 7216 as information
furnished to such person for, or in connection
with, the preparation of a return of the tax
imposed under chapter 1.
``(E) Data protection and safeguards.--Return
information disclosed under this paragraph shall be
subject to such protections and safeguards as the
Secretary may require in regulations or other guidance
or in the written agreement referred to in subparagraph
(B)(ii). Such written agreement shall include a
requirement that any unauthorized access to information
disclosed under this paragraph, and any breach of any
system in which such information is held, be reported
to the Treasury Inspector General for Tax
Administration.''.
(2) Application of civil and criminal penalties.--
(A) Section 6103(a)(3), as amended by this Act, is
amended by striking ``or (13)'' and inserting ``, (13),
or (14)''.
(B) Section 7213(a)(2), as amended by this Act, is
amended by striking ``or (13)'' and inserting ``, (13),
or (14)''.
SEC. 2004. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY SAFEGUARDS.
(a) In General.--Section 6103(p) is amended by adding at the end the
following new paragraph:
``(9) Disclosure to contractors and other agents.--
Notwithstanding any other provision of this section, no return
or return information shall be disclosed to any contractor or
other agent of a Federal, State, or local agency unless such
agency, to the satisfaction of the Secretary--
``(A) has requirements in effect which require each
such contractor or other agent which would have access
to returns or return information to provide safeguards
(within the meaning of paragraph (4)) to protect the
confidentiality of such returns or return information,
``(B) agrees to conduct an on-site review every 3
years (or a mid-point review in the case of contracts
or agreements of less than 3 years in duration) of each
contractor or other agent to determine compliance with
such requirements,
``(C) submits the findings of the most recent review
conducted under subparagraph (B) to the Secretary as
part of the report required by paragraph (4)(E), and
``(D) certifies to the Secretary for the most recent
annual period that such contractor or other agent is in
compliance with all such requirements.
The certification required by subparagraph (D) shall include
the name and address of each contractor or other agent, a
description of the contract or agreement with such contractor
or other agent, and the duration of such contract or agreement.
The requirements of this paragraph shall not apply to
disclosures pursuant to subsection (n) for purposes of Federal
tax administration.''.
(b) Conforming Amendment.--Section 6103(p)(8)(B) is amended by
inserting ``or paragraph (9)'' after ``subparagraph (A)''.
(c) Effective Date.--The amendments made by this section shall apply
to disclosures made after December 31, 2022.
SEC. 2005. REPORT ON ELECTRONIC PAYMENTS.
Not later than 2 years after the date of the enactment of this Act,
the Secretary of the Treasury (or the Secretary's delegate), in
coordination with the Bureau of Fiscal Service and the Internal Revenue
Service, and in consultation with private sector financial
institutions, shall submit a written report to Congress describing how
the government can utilize new payment platforms to increase the number
of tax refunds paid by electronic funds transfer. Such report shall
weigh the interests of reducing identity theft tax refund fraud,
reducing the Federal Government's costs in delivering tax refunds, the
costs and any associated fees charged to taxpayers (including monthly
and point-of-service fees) to access their tax refunds, the impact on
individuals who do not have access to financial accounts or
institutions, and ensuring payments are made to accounts at a financial
institution that complies with section 21 of the Federal Deposit
Insurance Act, chapter 2 of title I of Public Law 91-508, and
subchapter II of chapter 53 of title 31, United States Code (commonly
referred to collectively as the ``Bank Secrecy Act'') and the USA
PATRIOT Act. Such report shall include any legislative recommendations
necessary to accomplish these goals.
SEC. 2006. IDENTITY PROTECTION PERSONAL IDENTIFICATION NUMBERS.
(a) In General.--Subject to subsection (b), the Secretary of the
Treasury or the Secretary's delegate (hereafter referred to in this
section as the ``Secretary'') shall establish a program to issue, upon
the request of any individual, a number which may be used in connection
with such individual's social security number (or other identifying
information with respect to such individual as determined by the
Secretary) to assist the Secretary in verifying such individual's
identity.
(b) Requirements.--
(1) Annual expansion.--For each calendar year beginning after
the date of the enactment of this Act, the Secretary shall
provide numbers through the program described in subsection (a)
to individuals residing in such States as the Secretary deems
appropriate, provided that the total number of States served by
such program during such year is greater than the total number
of States served by such program during the preceding year.
(2) Nationwide availability.--Not later than 5 years after
the date of the enactment of this Act, the Secretary shall
ensure that the program described in subsection (a) is made
available to any individual residing in the United States.
SEC. 2007. SINGLE POINT OF CONTACT FOR TAX-RELATED IDENTITY THEFT
VICTIMS.
(a) In General.--The Secretary of the Treasury (or the Secretary's
delegate) shall establish and implement procedures to ensure that any
taxpayer whose return has been delayed or otherwise adversely affected
due to tax-related identity theft has a single point of contact at the
Internal Revenue Service throughout the processing of the taxpayer's
case. The single point of contact shall track the taxpayer's case to
completion and coordinate with other Internal Revenue Service employees
to resolve case issues as quickly as possible.
(b) Single Point of Contact.--
(1) In general.--For purposes of subsection (a), the single
point of contact shall consist of a team or subset of specially
trained employees who--
(A) have the ability to work across functions to
resolve the issues involved in the taxpayer's case; and
(B) shall be accountable for handling the case until
its resolution.
(2) Team or subset.--The employees included within the team
or subset described in paragraph (1) may change as required to
meet the needs of the Internal Revenue Service, provided that
procedures have been established to--
(A) ensure continuity of records and case history;
and
(B) notify the taxpayer when appropriate.
SEC. 2008. NOTIFICATION OF SUSPECTED IDENTITY THEFT.
(a) In General.--Chapter 77 is amended by adding at the end the
following new section:
``SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.
``(a) In General.--If the Secretary determines that there has been or
may have been an unauthorized use of the identity of any individual,
the Secretary shall, without jeopardizing an investigation relating to
tax administration--
``(1) as soon as practicable--
``(A) notify the individual of such determination,
``(B) provide instructions on how to file a report
with law enforcement regarding the unauthorized use,
``(C) identify any steps to be taken by the
individual to permit law enforcement to access personal
information of the individual during the investigation,
``(D) provide information regarding actions the
individual may take in order to protect the individual
from harm relating to the unauthorized use, and
``(E) offer identity protection measures to the
individual, such as the use of an identity protection
personal identification number, and
``(2) at the time the information described in paragraph (1)
is provided (or, if not available at such time, as soon as
practicable thereafter), issue additional notifications to such
individual (or such individual's designee) regarding--
``(A) whether an investigation has been initiated in
regards to such unauthorized use,
``(B) whether the investigation substantiated an
unauthorized use of the identity of the individual, and
``(C) whether--
``(i) any action has been taken against a
person relating to such unauthorized use, or
``(ii) any referral has been made for
criminal prosecution of such person and, to the
extent such information is available, whether
such person has been criminally charged by
indictment or information.
``(b) Employment-Related Identity Theft.--
``(1) In general.--For purposes of this section, the
unauthorized use of the identity of an individual includes the
unauthorized use of the identity of the individual to obtain
employment.
``(2) Determination of employment-related identity theft.--
For purposes of this section, in making a determination as to
whether there has been or may have been an unauthorized use of
the identity of an individual to obtain employment, the
Secretary shall review any information--
``(A) obtained from a statement described in section
6051 or an information return relating to compensation
for services rendered other than as an employee, or
``(B) provided to the Internal Revenue Service by the
Social Security Administration regarding any statement
described in section 6051,
which indicates that the social security account number
provided on such statement or information return does not
correspond with the name provided on such statement or
information return or the name on the tax return reporting the
income which is included on such statement or information
return.''.
(b) Additional Measures.--
(1) Examination of both paper and electronic statements and
returns.--The Secretary of the Treasury (or the Secretary's
delegate) shall examine the statements, information returns,
and tax returns described in section 7529(b)(2) of the Internal
Revenue Code of 1986 (as added by subsection (a)) for any
evidence of employment-related identity theft, regardless of
whether such statements or returns are submitted electronically
or on paper.
(2) Improvement of effective return processing program with
social security administration.--Section 232 of the Social
Security Act (42 U.S.C. 432) is amended by inserting after the
third sentence the following: ``For purposes of carrying out
the return processing program described in the preceding
sentence, the Commissioner of Social Security shall request,
not less than annually, such information described in section
7529(b)(2) of the Internal Revenue Code of 1986 as may be
necessary to ensure the accuracy of the records maintained by
the Commissioner of Social Security related to the amounts of
wages paid to, and the amounts of self-employment income
derived by, individuals.''.
(3) Underreporting of income.--The Secretary of the Treasury
(or the Secretary's delegate) shall establish procedures to
ensure that income reported in connection with the unauthorized
use of a taxpayer's identity is not taken into account in
determining any penalty for underreporting of income by the
victim of identity theft.
(c) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7529. Notification of suspected identity theft.''.
(d) Effective Date.--The amendments made by this section shall apply
to determinations made after the date that is 6 months after the date
of the enactment of this Act.
SEC. 2009. GUIDELINES FOR STOLEN IDENTITY REFUND FRAUD CASES.
(a) In General.--Not later than 1 year after the date of the
enactment of this Act, the Secretary of the Treasury (or the
Secretary's delegate), in consultation with the National Taxpayer
Advocate, shall develop and implement publicly available guidelines for
management of cases involving stolen identity refund fraud in a manner
that reduces the administrative burden on taxpayers who are victims of
such fraud.
(b) Standards and Procedures To Be Considered.--The guidelines
described in subsection (a) may include--
(1) standards for--
(A) the average length of time in which a case
involving stolen identity refund fraud should be
resolved;
(B) the maximum length of time, on average, a
taxpayer who is a victim of stolen identity refund
fraud and is entitled to a tax refund which has been
stolen should have to wait to receive such refund; and
(C) the maximum number of offices and employees
within the Internal Revenue Service with whom a
taxpayer who is a victim of stolen identity refund
fraud should be required to interact in order to
resolve a case;
(2) standards for opening, assigning, reassigning, or closing
a case involving stolen identity refund fraud; and
(3) procedures for implementing and accomplishing the
standards described in paragraphs (1) and (2), and measures for
evaluating such procedures and determining whether such
standards have been successfully implemented.
SEC. 2010. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF
INFORMATION BY PREPARERS OF RETURNS.
(a) In General.--Section 6713 is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively; and
(2) by inserting after subsection (a) the following new
subsection:
``(b) Enhanced Penalty for Improper Use or Disclosure Relating to
Identity Theft.--
``(1) In general.--In the case of a disclosure or use
described in subsection (a) that is made in connection with a
crime relating to the misappropriation of another person's
taxpayer identity (as defined in section 6103(b)(6)), whether
or not such crime involves any tax filing, subsection (a) shall
be applied--
``(A) by substituting `$1,000' for `$250', and
``(B) by substituting `$50,000' for `$10,000'.
``(2) Separate application of total penalty limitation.--The
limitation on the total amount of the penalty under subsection
(a) shall be applied separately with respect to disclosures or
uses to which this subsection applies and to which it does not
apply.''.
(b) Criminal Penalty.--Section 7216(a) is amended by striking
``$1,000'' and inserting ``$1,000 ($100,000 in the case of a disclosure
or use to which section 6713(b) applies)''.
(c) Effective Date.--The amendments made by this section shall apply
to disclosures or uses on or after the date of the enactment of this
Act.
Subtitle B--Development of Information Technology
SEC. 2101. MANAGEMENT OF INTERNAL REVENUE SERVICE INFORMATION
TECHNOLOGY.
(a) Duties and Responsibilities of Internal Revenue Service Chief
Information Officer.--Section 7803, as amended by section 1001, is
amended by adding at the end the following new subsection:
``(f) Internal Revenue Service Chief Information Officer.--
``(1) In general.--There shall be in the Internal Revenue
Service an Internal Revenue Service Chief Information Officer
(hereafter referred to in this subsection as the `IRS CIO') who
shall be appointed by the Commissioner of Internal Revenue.
``(2) Centralized responsibility for internal revenue service
information technology.--The Commissioner of Internal Revenue
(and the Secretary) shall act through the IRS CIO with respect
to all development, implementation, and maintenance of
information technology for the Internal Revenue Service. Any
reference in this subsection to the IRS CIO which directs the
IRS CIO to take any action, or to assume any responsibility,
shall be treated as a reference to the Commissioner of Internal
Revenue acting through the IRS CIO.
``(3) General duties and responsibilities.--The IRS CIO
shall--
``(A) be responsible for the development,
implementation, and maintenance of information
technology for the Internal Revenue Service,
``(B) ensure that the information technology of the
Internal Revenue Service is secure and integrated,
``(C) maintain operational control of all information
technology for the Internal Revenue Service,
``(D) be the principal advocate for the information
technology needs of the Internal Revenue Service, and
``(E) consult with the Chief Procurement Officer of
the Internal Revenue Service to ensure that the
information technology acquired for the Internal
Revenue Service is consistent with--
``(i) the goals and requirements specified in
subparagraphs (A) through (D), and
``(ii) the strategic plan developed under
paragraph (4).
``(4) Strategic plan.--
``(A) In general.--The IRS CIO shall develop and
implement a multiyear strategic plan for the
information technology needs of the Internal Revenue
Service. Such plan shall--
``(i) include performance measurements of
such technology and of the implementation of
such plan,
``(ii) include a plan for an integrated
enterprise architecture of the information
technology of the Internal Revenue Service,
``(iii) include and take into account the
resources needed to accomplish such plan,
``(iv) take into account planned major
acquisitions of information technology by the
Internal Revenue Service, and
``(v) align with the needs and strategic plan
of the Internal Revenue Service.
``(B) Plan updates.--The IRS CIO shall, not less
frequently than annually, review and update the
strategic plan under subparagraph (A) (including the
plan for an integrated enterprise architecture
described in subparagraph (A)(ii)) to take into account
the development of new information technology and the
needs of the Internal Revenue Service.
``(5) Scope of authority.--
``(A) Information technology.--For purposes of this
subsection, the term `information technology' has the
meaning given such term by section 11101 of title 40,
United States Code.
``(B) Internal revenue service.--Any reference in
this subsection to the Internal Revenue Service
includes a reference to all components of the Internal
Revenue Service, including--
``(i) the Office of the Taxpayer Advocate,
``(ii) the Criminal Investigation Division of
the Internal Revenue Service, and
``(iii) except as otherwise provided by the
Secretary with respect to information
technology related to matters described in
subsection (b)(3)(B), the Office of the Chief
Counsel.''.
(b) Independent Verification and Validation of the Customer Account
Data Engine 2 and Enterprise Case Management System.--
(1) In general.--The Commissioner of Internal Revenue shall
enter into a contract with an independent reviewer to verify
and validate the implementation plans (including the
performance milestones and cost estimates included in such
plans) developed for the Customer Account Data Engine 2 and the
Enterprise Case Management System.
(2) Deadline for completion.--Such contract shall require
that such verification and validation be completed not later
than the date which is 1 year after the date of the enactment
of this Act.
(3) Application to phases of cade 2.--
(A) In general.--Paragraphs (1) and (2) shall not
apply to phase 1 of the Customer Account Data Engine 2
and shall apply separately to each other phase.
(B) Deadline for completing plans.--Not later than 1
year after the date of the enactment of this Act, the
Commissioner of Internal Revenue shall complete the
development of plans for all phases of the Customer
Account Data Engine 2.
(C) Deadline for completion of verification and
validation of plans.--In the case of any phase after
phase 2 of the Customer Account Data Engine 2,
paragraph (2) shall be applied by substituting ``the
date on which the plan for such phase was completed''
for ``the date of the enactment of this Act''.
(c) Coordination of IRS CIO and Chief Procurement Officer of the
Internal Revenue Service.--
(1) In general.--The Chief Procurement Officer of the
Internal Revenue Service shall--
(A) identify all significant IRS information
technology acquisitions and provide written
notification to the Internal Revenue Service Chief
Information Officer (hereafter referred to in this
subsection as the ``IRS CIO'') of each such acquisition
in advance of such acquisition, and
(B) regularly consult with the IRS CIO regarding
acquisitions of information technology for the Internal
Revenue Service, including meeting with the IRS CIO
regarding such acquisitions upon request.
(2) Significant irs information technology acquisitions.--For
purposes of this subsection, the term ``significant IRS
information technology acquisitions'' means--
(A) any acquisition of information technology for the
Internal Revenue Service in excess of $1,000,000; and
(B) such other acquisitions of information technology
for the Internal Revenue Service (or categories of such
acquisitions) as the IRS CIO, in consultation with the
Chief Procurement Officer of the Internal Revenue
Service, may identify.
(3) Scope.--Terms used in this subsection which are also used
in section 7803(f) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall have the same meaning as when
used in such section.
SEC. 2102. INTERNET PLATFORM FOR FORM 1099 FILINGS.
(a) In General.--Not later than January 1, 2023, the Secretary of the
Treasury or the Secretary's delegate (hereafter referred to in this
section as the ``Secretary'') shall make available an Internet website
or other electronic media, with a user interface and functionality
similar to the Business Services Online Suite of Services provided by
the Social Security Administration, that provides access to resources
and guidance provided by the Internal Revenue Service and allows
persons to--
(1) prepare and file Forms 1099;
(2) prepare Forms 1099 for distribution to recipients other
than the Internal Revenue Service; and
(3) maintain a record of completed, filed, and distributed
Forms 1099.
(b) Electronic Services Treated as Supplemental; Application of
Security Standards.--The Secretary shall ensure that the services
described in subsection (a)--
(1) are a supplement to, and not a replacement for, other
services provided by the Internal Revenue Service to taxpayers;
and
(2) comply with applicable security standards and guidelines.
SEC. 2103. STREAMLINED CRITICAL PAY AUTHORITY FOR INFORMATION
TECHNOLOGY POSITIONS.
(a) In General.--Subchapter A of chapter 80 is amended by adding at
the end the following new section:
``SEC. 7812. STREAMLINED CRITICAL PAY AUTHORITY FOR INFORMATION
TECHNOLOGY POSITIONS.
``In the case of any position which is critical to the functionality
of the information technology operations of the Internal Revenue
Service--
``(1) section 9503 of title 5, United States Code, shall be
applied--
``(A) by substituting `during the period beginning on
the date of the enactment of section 7812 of the
Internal Revenue Code of 1986, and ending on September
30, 2025' for `Before September 30, 2013 in subsection
(a)',
``(B) without regard to subparagraph (B) of
subsection (a)(1), and
``(C) by substituting `the date of the enactment of
the Taxpayer First Act of 2019' for `June 1, 1998' in
subsection (a)(6),
``(2) section 9504 of such title 5 shall be applied by
substituting `During the period beginning on the date of the
enactment of section 7812 of the Internal Revenue Code of 1986,
and ending on September 30, 2025' for `Before September 30,
2013' each place it appears in subsections (a) and (b), and
``(3) section 9505 of such title shall be applied--
``(A) by substituting `During the period beginning on
the date of the enactment of section 7812 of the
Internal Revenue Code of 1986, and ending on September
30, 2025' for `Before September 30, 2013' in subsection
(a), and
``(B) by substituting `the information technology
operations' for `significant functions' in subsection
(a).''.
(b) Clerical Amendment.--The table of sections for subchapter A of
chapter 80 is amended by adding at the end the following new item:
``Sec. 7812. Streamlined critical pay authority for information
technology positions.''.
Subtitle C--Modernization of Consent-Based Income Verification System
SEC. 2201. DISCLOSURE OF TAXPAYER INFORMATION FOR THIRD-PARTY INCOME
VERIFICATION.
(a) In General.--Not later than 1 year after the close of the 2-year
period described in subsection (d)(1), the Secretary of the Treasury or
the Secretary's delegate (hereafter referred to in this section as the
``Secretary'') shall implement a program to ensure that any qualified
disclosure--
(1) is fully automated and accomplished through the Internet;
and
(2) is accomplished in as close to real-time as is
practicable.
(b) Qualified Disclosure.--For purposes of this section, the term
``qualified disclosure'' means a disclosure under section 6103(c) of
the Internal Revenue Code of 1986 of returns or return information by
the Secretary to a person seeking to verify the income or
creditworthiness of a taxpayer who is a borrower in the process of a
loan application.
(c) Application of Security Standards.--The Secretary shall ensure
that the program described in subsection (a) complies with applicable
security standards and guidelines.
(d) User Fee.--
(1) In general.--During the 2-year period beginning on the
first day of the 6th calendar month beginning after the date of
the enactment of this Act, the Secretary shall assess and
collect a fee for qualified disclosures (in addition to any
other fee assessed and collected for such disclosures) at such
rates as the Secretary determines are sufficient to cover the
costs related to implementing the program described in
subsection (a), including the costs of any necessary
infrastructure or technology.
(2) Deposit of collections.--Amounts received from fees
assessed and collected under paragraph (1) shall be deposited
in, and credited to, an account solely for the purpose of
carrying out the activities described in subsection (a). Such
amounts shall be available to carry out such activities without
need of further appropriation and without fiscal year
limitation.
SEC. 2202. LIMIT REDISCLOSURES AND USES OF CONSENT-BASED DISCLOSURES OF
TAX RETURN INFORMATION.
(a) In General.--Section 6103(c) is amended by adding at the end the
following: ``Persons designated by the taxpayer under this subsection
to receive return information shall not use the information for any
purpose other than the express purpose for which consent was granted
and shall not disclose return information to any other person without
the express permission of, or request by, the taxpayer.''.
(b) Application of Penalties.--Section 6103(a)(3) is amended by
inserting ``subsection (c),'' after ``return information under''.
(c) Effective Date.--The amendments made by this section shall apply
to disclosures made after the date which is 180 days after the date of
the enactment of this Act.
Subtitle D--Expanded Use of Electronic Systems
SEC. 2301. ELECTRONIC FILING OF RETURNS.
(a) In General.--Section 6011(e)(2)(A) is amended by striking ``250''
and inserting ``the applicable number of''.
(b) Applicable Number.--Section 6011(e) is amended by striking
paragraph (5) and inserting the following new paragraphs:
``(5) Applicable number.--
``(A) In general.--For purposes of paragraph (2)(A),
the applicable number shall be--
``(i) except as provided in subparagraph (B),
in the case of calendar years before 2021, 250,
``(ii) in the case of calendar year 2021,
100, and
``(iii) in the case of calendar years after
2021, 10.
``(B) Special rule for partnerships for 2018, 2019,
2020, and 2021.--In the case of a partnership, for any
calendar year before 2022, the applicable number shall
be--
``(i) in the case of calendar year 2018, 200,
``(ii) in the case of calendar year 2019,
150,
``(iii) in the case of calendar year 2020,
100, and
``(iv) in the case of calendar year 2021, 50.
``(6) Partnerships required to file on magnetic media.--
Notwithstanding paragraph (2)(A), the Secretary shall require
partnerships having more than 100 partners to file returns on
magnetic media.''.
(c) Returns Filed by a Tax Return Preparer.--Section 6011(e)(3) is
amended by adding at the end the following new subparagraph:
``(D) Exception for certain preparers located in
areas without internet access.--The Secretary may waive
the requirement of subparagraph (A) if the Secretary
determines, on the basis of an application by the tax
return preparer, that the preparer cannot meet such
requirement by reason of being located in a geographic
area which does not have access to internet service
(other than dial-up or satellite service).''.
(d) Conforming Amendment.--Section 6724(c) is amended by striking
``250 information returns (more than 100 information returns in the
case of a partnership having more than 100 partners)'' and inserting
``the applicable number (determined under section 6011(e)(5) with
respect to the calendar year to which such returns relate) of
information returns''.
(e) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 2302. UNIFORM STANDARDS FOR THE USE OF ELECTRONIC SIGNATURES FOR
DISCLOSURE AUTHORIZATIONS TO, AND OTHER
AUTHORIZATIONS OF, PRACTITIONERS.
Section 6061(b)(3) is amended to read as follows:
``(3) Published guidance.--
``(A) In general.--The Secretary shall publish
guidance as appropriate to define and implement any
waiver of the signature requirements or any method
adopted under paragraph (1).
``(B) Electronic signatures for disclosure
authorizations to, and other authorizations of,
practitioners.--Not later than 6 months after the date
of the enactment of this subparagraph, the Secretary
shall publish guidance to establish uniform standards
and procedures for the acceptance of taxpayers'
signatures appearing in electronic form with respect to
any request for disclosure of a taxpayer's return or
return information under section 6103(c) to a
practitioner or any power of attorney granted by a
taxpayer to a practitioner.
``(C) Practitioner.--For purposes of subparagraph
(B), the term `practitioner' means any individual in
good standing who is regulated under section 330 of
title 31, United States Code.''.
SEC. 2303. PAYMENT OF TAXES BY DEBIT AND CREDIT CARDS.
Section 6311(d)(2) is amended by adding at the end the following:
``The preceding sentence shall not apply to the extent that the
Secretary ensures that any such fee or other consideration is fully
recouped by the Secretary in the form of fees paid to the Secretary by
persons paying taxes imposed under subtitle A with credit, debit, or
charge cards pursuant to such contract. Notwithstanding the preceding
sentence, the Secretary shall seek to minimize the amount of any fee or
other consideration that the Secretary pays under any such contract.''.
SEC. 2304. AUTHENTICATION OF USERS OF ELECTRONIC SERVICES ACCOUNTS.
Beginning 180 days after the date of the enactment of this Act, the
Secretary of the Treasury (or the Secretary's delegate) shall verify
the identity of any individual opening an e-Services account with the
Internal Revenue Service before such individual is able to use the e-
Services tools.
Subtitle E--Other Provisions
SEC. 2401. REPEAL OF PROVISION REGARDING CERTAIN TAX COMPLIANCE
PROCEDURES AND REPORTS.
Section 2004 of the Internal Revenue Service Restructuring and Reform
Act of 1998 (26 U.S.C. 6012 note) is repealed.
SEC. 2402. COMPREHENSIVE TRAINING STRATEGY.
Not later than 1 year after the date of the enactment of this Act,
the Commissioner of Internal Revenue shall submit to Congress a written
report providing a comprehensive training strategy for employees of the
Internal Revenue Service, including--
(1) a plan to streamline current training processes,
including an assessment of the utility of further consolidating
internal training programs, technology, and funding;
(2) a plan to develop annual training regarding taxpayer
rights, including the role of the Office of the Taxpayer
Advocate, for employees that interface with taxpayers and the
direct managers of such employees;
(3) a plan to improve technology-based training;
(4) proposals to--
(A) focus employee training on early, fair, and
efficient resolution of taxpayer disputes for employees
that interface with taxpayers and the direct managers
of such employees; and
(B) ensure consistency of skill development and
employee evaluation throughout the Internal Revenue
Service; and
(5) a thorough assessment of the funding necessary to
implement such strategy.
TITLE III--MISCELLANEOUS PROVISIONS
Subtitle A--Reform of Laws Governing Internal Revenue Service Employees
SEC. 3001. PROHIBITION ON REHIRING ANY EMPLOYEE OF THE INTERNAL REVENUE
SERVICE WHO WAS INVOLUNTARILY SEPARATED FROM
SERVICE FOR MISCONDUCT.
(a) In General.--Section 7804 is amended by adding at the end the
following new subsection:
``(d) Prohibition on Rehiring Employees Involuntarily Separated.--The
Commissioner may not hire any individual previously employed by the
Commissioner who was removed for misconduct under this subchapter or
chapter 43 or chapter 75 of title 5, United States Code, or whose
employment was terminated under section 1203 of the Internal Revenue
Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note).''.
(b) Effective Date.--The amendment made by subsection (a) shall apply
with respect to the hiring of employees after the date of the enactment
of this Act.
SEC. 3002. NOTIFICATION OF UNAUTHORIZED INSPECTION OR DISCLOSURE OF
RETURNS AND RETURN INFORMATION.
(a) In General.--Subsection (e) of section 7431 is amended by adding
at the end the following new sentences: ``The Secretary shall also
notify such taxpayer if the Internal Revenue Service or a Federal or
State agency (upon notice to the Secretary by such Federal or State
agency) proposes an administrative determination as to disciplinary or
adverse action against an employee arising from the employee's
unauthorized inspection or disclosure of the taxpayer's return or
return information. The notice described in this subsection shall
include the date of the unauthorized inspection or disclosure and the
rights of the taxpayer under such administrative determination.''.
(b) Effective Date.--The amendment made by this section shall apply
to determinations proposed after the date which is 180 days after the
date of the enactment of this Act.
Subtitle B--Provisions Relating to Exempt Organizations
SEC. 3101. MANDATORY E-FILING BY EXEMPT ORGANIZATIONS.
(a) In General.--Section 6033 is amended by redesignating subsection
(n) as subsection (o) and by inserting after subsection (m) the
following new subsection:
``(n) Mandatory Electronic Filing.--Any organization required to file
a return under this section shall file such return in electronic
form.''.
(b) Conforming Amendment.--Paragraph (7) of section 527(j) is amended
by striking ``if the organization has'' and all that follows through
``such calendar year''.
(c) Inspection of Electronically Filed Annual Returns.--Subsection
(b) of section 6104 is amended by adding at the end the following:
``Any annual return required to be filed electronically under section
6033(n) shall be made available by the Secretary to the public as soon
as practicable in a machine readable format.''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after the date of the enactment of this Act.
(2) Transitional relief.--
(A) Small organizations.--
(i) In general.--In the case of any small
organizations, or any other organizations for
which the Secretary of the Treasury or the
Secretary's delegate (hereafter referred to in
this paragraph as the ``Secretary'') determines
the application of the amendments made by this
section would cause undue burden without a
delay, the Secretary may delay the application
of such amendments, but such delay shall not
apply to any taxable year beginning on or after
the date 2 years after of the enactment of this
Act.
(ii) Small organization.--For purposes of
clause (i), the term ``small organization''
means any organization--
(I) the gross receipts of which for
the taxable year are less than
$200,000; and
(II) the aggregate gross assets of
which at the end of the taxable year
are less than $500,000.
(B) Organizations filing form 990-T.--In the case of
any organization described in section 511(a)(2) of the
Internal Revenue Code of 1986 which is subject to the
tax imposed by section 511(a)(1) of such Code on its
unrelated business taxable income, or any organization
required to file a return under section 6033 of such
Code and include information under subsection (e)
thereof, the Secretary may delay the application of the
amendments made by this section, but such delay shall
not apply to any taxable year beginning on or after the
date 2 years after of the enactment of this Act.
SEC. 3102. NOTICE REQUIRED BEFORE REVOCATION OF TAX-EXEMPT STATUS FOR
FAILURE TO FILE RETURN.
(a) In General.--Section 6033(j)(1) is amended by striking ``If an
organization'' and inserting the following:
``(A) Notice.--If an organization described in
subsection (a)(1) or (i) fails to file the annual
return or notice required under either subsection for 2
consecutive years, the Secretary shall notify the
organization--
``(i) that the Internal Revenue Service has
no record of such a return or notice from such
organization for 2 consecutive years, and
``(ii) about the revocation that will occur
under subparagraph (B) if the organization
fails to file such a return or notice by the
due date for the next such return or notice
required to be filed.
The notification under the preceding sentence shall
include information about how to comply with the filing
requirements under subsections (a)(1) and (i).
``(B) Revocation.--If an organization''.
(b) Effective Date.--The amendment made by this section shall apply
to failures to file returns or notices for 2 consecutive years if the
return or notice for the second year is required to be filed after
December 31, 2019.
Subtitle C--Revenue Provision
SEC. 3201. INCREASE IN PENALTY FOR FAILURE TO FILE.
(a) In General.--The second sentence of subsection (a) of section
6651 is amended by striking ``$205'' and inserting ``$330''.
(b) Inflation Adjustment.--Section 6651(j)(1) is amended--
(1) by striking ``2014'' and inserting ``2020'',
(2) by striking ``$205'' and inserting ``$330'', and
(3) by striking ``2013'' and inserting ``2019''.
(c) Effective Date.--The amendments made by this section shall apply
to returns required to be filed after December 31, 2019.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The Taxpayer First Act of 2019, H.R. 1957, as reported by
the Committee on Ways and Means, improves Internal Revenue
Service (``IRS'') operations and the administration of the tax
laws by strengthening taxpayer rights, enhancing customer
service, advancing information technology, and restructuring
the agency.
B. Background and Need for Legislation
The last time Congress considered comprehensive revisions
to IRS operations was the IRS Restructuring and Reform Act of
1998 (``RRA98''). Two decades later, it is time to revisit the
IRS and return the agency back to its mission: ``provide
America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying
the tax law with integrity and fairness to all.''
In RRA98, Congress directed the agency to create an
independent process for taxpayers to appeal tax disputes. While
the IRS initially established an independent process, over time
the agency has exercised its discretion to prevent certain
taxpayers from accessing the review process. Currently, some
taxpayers do not trust that the IRS's independent review
process is truly independent or accessible. Taxpayers do not
have access to the IRS case against them unless they request it
under the Freedom of Information Act. This process takes time,
and not all taxpayers are aware that it is an option.
Taxpayers frequently view the IRS as an enforcement-first
agency, not simply the agency responsible for administering the
Tax Code. The work of the Ways and Means Subcommittee on
Oversight (``Oversight Subcommittee'') revealed areas where the
IRS's use of enforcement tools exceeded Congressional intent.
For example, while the IRS has the ability to seize assets of
taxpayers suspected to be involved in criminal activity, the
IRS has used that authority to seize assets from small
businesses without proving that the taxpayers engaged in
criminal activity. Similarly, the agency used a different
seizure authority to seize and sell on the same day, property
such as bridal gowns, sports memorabilia, and workout
equipment. These needlessly accelerated sales subverted routine
notice requirements and have in some cases resulted in the
devastation of small businesses. Further, the Subcommittee's
oversight work revealed that cases assigned to the private debt
collection program were returned to IRS because the taxpayers
could not afford to pay or were on Social Security supplemental
or disability income.
The IRS currently lacks a satisfactory comprehensive
customer service strategy with metrics and benchmarks for
measuring success. Additionally, the organizational structure
of the IRS is 20 years old and needs updating. RRA98 directed
the Commissioner of Internal Revenue to restructure the IRS by
eliminating or substantially modifying the three-tier
geographic structure (national, regional, and district) in
place at the time and replacing it with an organizational
structure that features operating units serving particular
groups of taxpayers with similar needs. Given that 20 years has
passed since RRA98, the mandated organization according to
particular taxpayer groups no longer allows the IRS to organize
itself efficiently to best meet its mission and address the
cyber security and efficiency challenges it faces.
Over the past two years, the Oversight Subcommittee has
spent significant time reviewing the IRS's use of information
technology (IT). The Oversight Subcommittee found that the IRS
relies significantly on an ageing IT infrastructure, some of
which date back to the 1960s, to administer the tax system. In
addition to being expensive, outdated IRS IT systems also
negatively impact taxpayers seeking to comply with their tax
responsibilities, often resulting in frustrating, prolonged
interactions with the IRS that could be more easily and
seamlessly resolved online. In addition, as with many other
public and private entities, the IRS has been subject to
cyberattacks and fraud schemes that seek to exploit stolen
taxpayer information in order to steal tax refunds.
C. Legislative History
Background
H.R. 1957, the Taxpayer First Act of 2019, was introduced
on March 28, 2019, and was referred to the Committee on Ways
and Means and the Committee on Financial Services.
Committee action
The Committee on Ways and Means marked up H.R. 1957, the
Taxpayer First Act of 2019, on April 2, 2019, and ordered the
bill, as amended, favorably reported (with a quorum being
present).
Committee hearings
The Committee on Ways and Means continually reviews IRS
administration of the Federal tax laws. Most recently, in the
114th through the 116th Congresses, the Oversight Subcommittee
held hearings and roundtables on reforming the IRS with a focus
on improving the taxpayer experience, enhancing customer
service, limiting civil asset forfeiture authority by the
agency, and reviewing recommendations of the National Taxpayer
Advocate. Oversight Subcommittee hearings included:
February 11, 2015: Protecting Small
Businesses from IRS Abuse (Part I);
May 25, 2016: Protecting Small Businesses
from IRS Abuse (Part II);
April 26, 2017: Examining the 2017 Tax
Filing Season;
May 19, 2017: IRS Reform: Lessons Learned
from the National Taxpayer Advocate;
September 13, 2017: IRS Reform: Resolving
Taxpayer Disputes;
December 13, 2017: IRS Reform: The Taxpayer
Experience;
January 30, 2018: Member Day Hearing on
Legislation to Improve Tax Administration;
June 20, 2018: Update on IRS and DOJ Efforts
to Return Seized Funds to Taxpayers;
September 26, 2018: IRS Taxpayer
Authentication: Strengthening Security While Ensuring
Access; and
March 7, 2019: Hearing with the National
Taxpayer Advocate on the Tax Filing Season.
Roundtables included:
June 22, 2017: Reforming the IRS--Lessons
Learned from 1998, Roundtable Part I;
July 12, 2017: Reforming the IRS--Lessons
Learned from 1998, Roundtable Part II;
June 22, 2017: Reforming the IRS--Lessons
Learned from 1998, Roundtable Part I;
July 12, 2017: Reforming the IRS--Lessons
Learned from 1998, Roundtable Part II;
Oct. 12, 2017: IRS Security Summit; and
Jan. 17, 2018: Briefing on the IRS's
Technology Roadmap.
II. EXPLANATION OF THE BILL
TITLE I--PUTTING TAXPAYERS FIRST
A. Independent Appeals Process
1. ESTABLISHMENT OF INTERNAL REVENUE SERVICE INDEPENDENT OFFICE OF
APPEALS (SEC. 1001 OF THE BILL AND SEC. 7803 OF THE CODE)
PRESENT LAW
RRA98 directed the Commissioner of Internal Revenue (the
``Commissioner'') to restructure the IRS by establishing and
implementing an organizational structure that features
operating units serving particular groups of taxpayers with
similar needs and ensures an independent appeals function
within the IRS.\1\ Although the Code does not mandate the
existence of an independent office within the IRS to review
administrative determinations, it does require an independent
administrative review of certain determinations,\2\ and further
requires that the Commissioner ensure that the duties of IRS
employees are executed in a manner consistent with rights
inferred from other Code provisions.\3\
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\1\Pub. L. No. 105-206, sec. 1001(a).
\2\See, e.g., secs. 6320 (notice and opportunity for hearing upon
filing of notice of lien), 6330 (notice and opportunity for hearing
before levy), 7122 (rejection of a proposed offer-in-compromise or
installment agreement), as well as 7123 (alternative dispute resolution
procedures).
\3\Section 7803, as amended in 2015, embraces the taxpayer rights
as general principles to be included in the training and evaluation of
all employees.
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Under the general authority of the Secretary of the
Treasury (``Secretary'') to interpret the Code and that of the
Commissioner to administer the Code and to employ the persons
necessary to do so,\4\ the IRS operates an Office of Appeals
(``Appeals'') headed by a Chief, Appeals.\5\ That office
traditionally functions as the settlement arm of the IRS. In
doing so, it reviews administrative determinations arising both
from collection and examination activities, and attempts to
resolve them without need for litigation, including by using
alternative dispute resolution methods such as arbitration or
mediation. As a result, review of administrative actions is
generally available prior to payment of any tax underlying the
controversy. Exceptions occur, and include cases in which
inadequate time remains on the limitations period for
assessment and collection or those in which the only arguments
raised by the taxpayer are frivolous positions.\6\
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\4\Secs. 7803(a) (The duties and powers include the power to
administer, manage, conduct, direct, and supervise the execution and
application of the internal revenue laws or related statutes and tax
conventions to which the United States is a party, and to recommend to
the President a candidate for Chief Counsel (and recommend the removal
of the Chief Counsel)) and 7804 (The Commissioner is authorized to
employ such persons as the Commissioner deems proper for the
administration and enforcement of the internal revenue laws and is
required to issue all necessary directions, instructions, orders, and
rules applicable to such persons, including determination and
designation of posts of duty), and 7805 (Secretary authority to
interpret the Code).
\5\According to its website, the Office of Appeals and its
predecessors have existed since 1927. https://www.irs.gov/compliance/
appeals/appeals-an-independent-organization.
\6\See section 6702(c), which requires that the Secretary
periodically review and list positions that have been identified as
frivolous for purposes of the frivolous return penalty.
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Similarly, if a case has reached a point at which
litigation is initiated, the availability of consideration by
Appeals may be limited. First, authority to settle cases
referred to the Department of Justice for defense or initiation
of litigation rests solely with that Department. Therefore,
such cases are not eligible for referral to Appeals.\7\ The
terms under which a case pending in the United States Tax Court
(``Tax Court'') may be referred to Appeals are described in
published guidance that centralizes the decision to withhold a
case from Appeals to assure consistent standards are
applied.\8\
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\7\Sec. 7122.
\8\Rev. Proc. 2016-22, 26 C.F.R. sec. 601.106. Exceptions to the
general rule in favor of requiring Appeals consideration include cases
that are withheld in the interests of sound tax administration, among
other reasons.
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Employees of Appeals are compensated in accordance with the
rules governing Federal employment generally.\9\
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\9\Part III of Title 5 of the United States Code prescribes rules
for Federal employment, including employment, retention, and management
and employee issues.
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REASONS FOR CHANGE
The Committee is aware that the Code does not currently
require that all taxpayers be provided an opportunity to
contest an administrative decision in Appeals, although most
taxpayers are afforded that opportunity. To foster confidence
in the integrity of the IRS and the independence of its
administrative proceedings and to encourage voluntary
compliance, the Committee believes it is advisable to codify
the role of an independent administrative appeals function
within the IRS and provide new guidelines for procedures that
the IRS is to follow in the new office. In doing so, the
Committee seeks to reassure taxpayers of the independence of
the persons providing the administrative review.
The new administrative guidelines required by this
provision are intended to clarify the rules against ex parte
communications, thus protecting taxpayer rights, while ensuring
that employees in the new office are able to seek independent
advice from the Office of Chief Counsel when appropriate;
require that taxpayers be provided a pre-conference opportunity
to review the case file about the taxpayers; and address the
standards and processes related to denial of a taxpayer request
for administrative review of a case. With respect to the
latter, the Committee intends to restrict and provide oversight
of the procedures and standards that the IRS must follow in
denying requests for an independent administrative review to
taxpayers who receive a notice of deficiency from the IRS.\10\
Finally, the Committee intends to exercise its oversight of the
implementation of the new procedures by requiring that the IRS
submit annual written reports on the number and type of cases
that are denied independent administrative review.
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\10\Current published guidance on the availability of Appeals
consideration are discussed in Rev. Proc. 2016-22, supra.
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EXPLANATION OF PROVISION
The provision codifies the requirement of an independent
administrative appeals function by establishing within the IRS
an office to be known as the Internal Revenue Service
Independent Office of Appeals (``Independent Appeals'') and to
be headed by an official known as the Chief of Appeals, as
described below. The purposes and duties of the office as well
as the taxpayers' general right to seek consideration by that
office, subject to certain limitations, are described below.
Chief of Appeals and staff
The provision grants authority to the Commissioner to
appoint the Chief of Appeals, who is to be compensated at the
same rate as the highest rate of basic pay established for the
Senior Executive Service.\11\ The appointment is not subject to
the rules under Title 5 of the United States Code that govern
competitive service or the Senior Executive Service. The Chief
of Appeals reports directly to the Commissioner of the IRS. The
person appointed to the position is required to have experience
in a broad range of Federal tax law controversies and
management of large service organizations.
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\11\5 U.S.C. sec. 5382.
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The provision also confirms that the Chief of Appeals and
her employees are to have access to legal assistance and advice
from staff within the Office of Chief Counsel about cases
pending at Independent Appeals. Chief Counsel is responsible
for ensuring that the attorneys are able to provide independent
advice. In doing so, to the extent practicable, staff assigned
to answer inquiries from Independent Appeals should not include
those involved in advising the IRS employees working directly
on the case prior to its referral to Independent Appeals or in
preparation of the case for litigation.
Functions of Independent Appeals
Independent Appeals is intended to perform functions
similar to those of the current Appeals. Independent Appeals is
to resolve tax controversies and review administrative
decisions of the IRS in a fair and impartial manner, for the
purposes of enhancing public confidence, promoting voluntary
compliance, and ensuring consistent application and
interpretation of Federal tax laws. Resolution of tax
controversies in this manner is generally available to all
taxpayers, subject to reasonable exceptions that the Secretary
may provide. Thus, cases of a type that are referred to Appeals
under present law remain eligible for referral to Independent
Appeals.
The provision includes a savings clause that requires
application of rules similar to those in RRA98 to ensure
continuity of the validity of administrative and legal
proceedings, including legal documents related to such
proceedings and existing delegations of authority.
Enhancement of taxpayer access to Independent Appeals
In making access to Independent Appeals generally available
to all taxpayers, the establishment of the new office clarifies
the rights of taxpayers to review administrative case files and
to protest denial of access to Independent Appeals.
Taxpayer access to case files
The provision requires that the administrative case file
referred to Independent Appeals be available to certain
individual and small business taxpayers. The specified
taxpayers that are eligible are (1) individuals with adjusted
gross incomes not exceeding $400,000 and (2) entities with
gross receipts not exceeding $5 million for the taxable year to
which the dispute relates. In determining whether persons are
within the scope of the latter category, rules similar to those
used to determine whether persons should be treated as a single
employer for purposes of cash method accounting are to be
applied.\12\ Eligible taxpayers must be able to review the non-
privileged portions of materials developed by the IRS not later
than 10 days prior to the requested conference with Independent
Appeals. In providing the materials, the IRS need not produce
for the taxpayer the documents that were initially provided to
the IRS by the taxpayer. In addition, the taxpayer may elect to
waive the 10-day period and accept access to the materials on
the date of the scheduled conference.
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\12\The aggregation rules are found at section 448(c)(2).
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Cases not referred to Independent Appeals
In cases in which the IRS has issued a notice of deficiency
to a taxpayer, the Commissioner must prescribe notice and
protest procedures for taxpayers whose request for Independent
Appeals consideration is denied. Such protest procedures will
be available to taxpayers who have received a notice of
deficiency in cases other than those involving only frivolous
positions within the meaning of the Code.\13\ The procedures
must include a requirement that the Commissioner notify a
taxpayer of the denial in a written statement that includes a
statement of the facts underlying the basis for the denial of
the request together with a detailed explanation of the reasons
for denying the request for referral to Independent Appeals. In
addition, the written notice must advise the taxpayer of the
right to protest the denial of the request to the Commissioner
and include information about how to lodge such a protest.
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\13\Sec. 6702(c).
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The Commissioner must provide to Congress an annual written
report detailing the number of denials of access to Independent
Appeals and the reasons for such denials.
EFFECTIVE DATE
The provision is generally effective upon the date of
enactment, except with regard to the portion of the provision
allowing taxpayer access to case files, which is effective for
cases in which the conference occurs more than one year after
the date of enactment.
B. Improved Service
1. COMPREHENSIVE CUSTOMER SERVICE STRATEGY (SEC. 1101 OF THE BILL)
PRESENT LAW
The Code provides that the Commissioner has such duties and
powers as prescribed by the Secretary.\14\ Unless otherwise
specified by the Secretary, such duties and powers include the
power to administer, manage, conduct, direct, and supervise the
execution and application of the internal revenue laws or
related statutes. In executing these duties, the Commissioner
depends upon strategic plans that prioritize goals and manage
its resources. In the current strategic plan, adding and
enhancing tools and support to improve taxpayers and tax
professionals' interactions with the IRS to meet their tax
obligations is identified as one of the IRS's six strategic
goals.\15\
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\14\Sec. 7803(a).
\15\See Internal Revenue Service Strategic Plan FY2018-2022,
Publication 3744, available at https://www.irs.gov/pub/irs-pdf/
p3744.pdf.
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REASONS FOR CHANGE
The Committee believes that it is important for the IRS to
set priorities, align activities with mission-related goals and
objectives, assign accountability, and develop and use
information to monitor progress and evaluate results. The
Committee believes that this information will provide the IRS
with tools the IRS can use to monitor and evaluate how
efficiently and effectively programs are achieving their
intended purposes. The Committee further believes this
provision is necessary to help determine whether public
resources have been used to achieve the purposes for which they
were appropriated.
EXPLANATION OF PROVISION
The provision requires the Secretary to develop a
comprehensive strategy for customer service and to submit such
plan to Congress not later than the date which is one year
after the date of enactment. The strategy will include: (1) a
plan to determine appropriate levels of online services,
telephone call back services, and training of employees
providing customer services, based on best practices of
businesses and designed to meet reasonable customer
expectations; (2) an assessment of all services that the IRS
can co-locate with other Federal services or offer as self-
service options; (3) proposals for long-term improvements over
the next 10 fiscal years, with appropriate short-term goals
over the current and following fiscal year and mid-term goals
over the next three to five fiscal years; (4) a plan to update
guidance and training materials, including the Internal Revenue
Manual, for customer service employees of the IRS to reflect
such strategy; and (5) metrics for measuring the IRS's progress
in implementing its strategy. Within two years after the date
of enactment, the Secretary or the Secretary's delegate is
required to make public the updated guidance and training
materials in a user friendly fashion.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. IRS FREE FILE PROGRAM (SEC. 1102 OF THE BILL)
PRESENT LAW
The IRS has entered into cooperative relationships with
commercial return preparation service providers (known as the
Free File Alliance) to provide free Federal tax preparation and
electronic filing services to eligible low-income or elderly
taxpayers. Some of these providers also offer free State tax
preparation. This arrangement is commonly known as the Free
File Program. Taxpayers generally must select a designated
service provider through the IRS's website to access commercial
online software provided by the Free File Alliance companies to
prepare and file their tax returns. To qualify, taxpayers must
have adjusted gross income (AGI) of $66,000 or less (for 2018
returns). Each participating company sets its own eligibility
requirements and not all taxpayers will qualify to use the
software of all companies. There is no fee for taxpayers using
the Free File Program, and Free File Alliance companies also do
not pay any fee to the IRS to participate in the program.
REASONS FOR CHANGE
The Committee believes that the IRS Free File program
should be maintained and enhanced because the program increases
e-file participation, provides more free online options to
taxpayers, and eases tax preparation and filing. The Committee
also believes that identifying and implementing innovative new
program features will be helpful in continuing to reduce the
burden on taxpayers.
EXPLANATION OF PROVISION
The provision requires the Secretary, or the Secretary's
delegate, in cooperation with the private sector, to maintain
the current IRS Free File Program that provides free individual
income tax preparation and electronic filing services to the
lowest 70 percent of taxpayers by adjusted gross income
(``AGI'') as ranked annually by the prior year taxpayer AGI
data. The provision requires the IRS Free File Program to
continue to make available to taxpayers at all income levels a
basic, online electronic fillable forms utility. The provision
further requires the IRS Free File Program work with State
government agencies to enhance and expand the use of the
program to provide needed benefits to taxpayers while reducing
the cost of processing returns.
The provision also requires the Secretary, or the
Secretary's delegate, in cooperation with the private sector,
to identify and implement innovative new program features to
improve and simplify the taxpayer experience with completing
and filing individual tax returns.
EFFECTIVE DATE
The provision is effective on the date of enactment.
3. LOW-INCOME EXCEPTION FOR PAYMENTS OTHERWISE REQUIRED IN CONNECTION
WITH A SUBMISSION OF AN OFFER-IN-COMPROMISE (SEC. 1103 OF THE BILL AND
SEC. 7122 OF THE CODE)
PRESENT LAW
The IRS is authorized to enter into offers-in-compromise
under which the taxpayer and Federal government agree that a
tax liability may be satisfied by payment of less than the full
amount owed.\16\ An offer-in-compromise may be accepted on one
of three grounds: (1) doubt as to liability, available in cases
in which the validity of the actual tax liability is in
question; (2) doubt as to collectability based on lack of
sufficient assets from which the tax, interest, and penalties
can be paid in full; or (3) effective tax administration,
applicable in a case in which collection in full would cause
the taxpayer economic hardship such that compromise rather than
collection would better encourage tax compliance.\17\ If the
unpaid tax liabilities total $50,000 or more, an offer-in-
compromise can be accepted only if a public report is filed,
supported by a written opinion from the IRS Chief Counsel,
stating the reasons for the compromise, the amounts of assessed
tax, penalties and interest, and the amounts actually paid
pursuant to the offer-in-compromise.\18\
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\16\Sec. 7122.
\17\Treas. Reg. sec. 1.7122-1(b). For this purpose, economic
hardship is defined under Treas. Reg. sec. 301.6343-1.
\18\Sec. 7122(b); Treas. Reg. sec. 1.7122-1(e)(6). The $50,000
threshold was raised from $500 in 1996. Sec. 503 of the Taxpayer Bill
of Rights 2, Pub. L. No. 104-168.
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Taxpayers making a lump sum offer-in-compromise must
include a nonrefundable payment of 20 percent of the lump sum
with the initial offer (herein, ``upfront partial
payment'').\19\ The IRS waives this upfront partial payment
when an offer is submitted by a low-income taxpayer, defined as
an individual who falls at or below 250 percent of the poverty
guidelines published by the Department of Health and Human
Services, or such other measure that is adopted by the
Secretary (herein, ``low-income taxpayer'').\20\ Taxpayers
seeking an offer-in-compromise involving periodic payments must
provide a nonrefundable payment of the first installment that
would be due if the offer were accepted.\21\
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\19\Sec. 7122(c)(1)(A).
\20\Notice 2006-68, 2006-31 I.R.B. 105, July 31, 2006.
\21\Sec. 7122(c)(1)(B).
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In general, a taxpayer is required to provide a user fee
for processing the offer-in-compromise.\22\ However, no fee
will be charged if an offer either is based solely on doubt as
to liability or is made by a low-income taxpayer.\23\
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\22\Treas. Reg. sec. 300.3(b). The fee for processing an offer to
compromise on or after January 1, 2014, is $186. Proposed Treasury
regulations would increase the fee to $300. 81 Fed. Reg. 70654 (Nov.
28, 2016).
\23\Treas. Reg. sec. 300.3(b)(i) and (ii).
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REASONS FOR CHANGE
The Committee believes that the offer-in-compromise program
has been successful in raising revenue both from offers and by
bringing taxpayers back into the system. The Committee also
believes that certain low-income taxpayers are unable to
participate in the program because they cannot afford the user
fee or upfront payment. The Committee believes that, with the
low-income taxpayer exception, access to the program would be
substantially increased resulting in improved ability to obtain
the collectable portion of existing tax liabilities. The
Committee believes that codifying the exception helps ensure
that there will be no decrease in the number of legitimate
offers submitted, the number of offers accepted, and the number
of individuals reentering the tax system.
EXPLANATION OF PROVISION
The provision codifies the current low-income taxpayer
exception with respect to any user fee or upfront partial
payment imposed with respect to any offer-in-compromise. The
provision makes clear that the determination of low-income is
based on the individual's adjusted gross income as determined
for the most recent tax year for which such information is
available.
EFFECTIVE DATE
The provision applies to offers-in-compromise submitted
after the date of enactment.
C. Sensible Enforcement
1. INTERNAL REVENUE SERVICE SEIZURE REQUIREMENTS WITH RESPECT TO
STRUCTURING TRANSACTIONS (SEC. 1201 OF THE BILL)
PRESENT LAW
The Bank Secrecy Act of 1970 (``BSA'') mandates a reporting
and recordkeeping system that assists Federal law enforcement
and regulatory agencies in the detection, monitoring, and
tracing of certain monetary transactions.\24\ The reporting
requirements are imposed on individuals, financial
institutions, and non-financial trades and businesses that act
similar to financial institutions.\25\ The requirements include
reporting currency transactions exceeding $10,000.
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\24\The Bank Secrecy Act, 31 U.S.C. secs. 5311-5332.
\25\31 U.S.C. sec. 5312(a)(1).
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To circumvent these reporting requirements, individuals
sometimes structure cash transactions to fall below the $10,000
reporting threshold (referred to as ``structuring''). In other
words, instead of conducting a single transaction in currency
in an amount that would require a report to be filed or record
made by a financial institution, an individual conducts a
series of currency transactions, willfully keeping each
individual transaction at an amount below $10,000 to evade
reporting or recording. Structuring can be used to conceal
illegal cash-generating activities, such as the selling of
narcotics, and to conceal income earned legally in order to
evade the payment of taxes. Structuring (or attempts to
structure) for the purpose of evading the reporting and
recordkeeping requirements\26\ is subject to both civil and
criminal penalties.\27\
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\26\31 U.S.C. sec. 5324(a); 31 U.S.C. sec 5322.
\27\A person who willfully violates the law is subject to a fine of
not more than $250,000, or imprisonment for not more than five years,
or both. 31 U.S.C. sec. 5324(a); 31 U.S.C. sec. 5322.
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Present law authorizes forfeiture of property involved in
transactions or attempted transactions\28\ in violation of
these rules in accordance with the procedures governing civil
forfeitures in money laundering cases.\29\
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\28\31 U.S.C. sec. 5317(c)(2).
\29\See 18 U.S.C. sec. 981.
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The Secretary has delegated responsibility for implementing
and enforcing the BSA to the Director, Financial Crimes
Enforcement Network (``FinCEN''), who in turn re-delegated
responsibility for civil compliance with the law to various
Federal agencies including the IRS.\30\ The scope of that
delegation of authority was expanded by the USA PATRIOT Act of
2001,\31\ and includes authority to determine and enforce civil
penalties.\32\ The IRS administers its delegated authority
under the BSA through the IRS Small Business/Self-Employed
Division, with assistance from the IRS Criminal Investigation
Division (``IRS-CID'').
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\30\Treasury Order 180-01, available at https://www.treasury.gov/
about/role-of-treasury/orders-directives/Pages/to180-01.aspx,
delegating authority to FinCEN. 31 C.F.R. sec. 103.56(b)(8). At the
time of the initial delegation, FinCEN was an entity created by
regulatory action, but has since been explicitly authorized by statute.
31 U.S.C. sec. 310.
\31\Treasury Order 180-01. For a discussion of the relationship
between FinCEN and the agencies to which it re-delegated authority,
see, Office of Inspector General, ``TERRORIST FINANCING/MONEY
LAUNDERING: Responsibility for Bank Secrecy Act Is Spread Across Many
Organizations,'' OIG-08-030 (April 9, 2008), available at https://
www.treasury.gov/about/organizational-structure/ig/Documents/
oig08030.pdf.
\32\A penalty may be assessed before the end of the six-year period
beginning on the date of the transaction with respect to which the
penalty is assessed. 31 U.S.C. sec. 5321(b)(1). A civil action for
collection may be commenced within two years of the later of the date
of assessment and the date a judgment becomes final in any a related
criminal action. 31 U.S.C. sec. 5321(b)(2).
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If a person prevails in a civil forfeiture proceeding
involving seizure of currency, the United States is liable for
reasonable attorney fees and other litigation costs reasonably
incurred by the claimant, post-judgment interest, and interest
actually paid to the United States from the date of seizure or
arrest of the property that resulted from the investment of the
property in an interest-bearing account or instrument as well
as imputed interest for any period for which no interest was
paid.\33\
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\33\28 U.S.C. sec. 2465(b)(1). The imputed interest that may be
paid under that section is the amount that such currency, instruments,
or proceeds would have earned at the rate applicable to the 30-day
Treasury Bill, for any period for which no interest was paid (not
including any period when the property reasonably was in use as
evidence in an official proceeding or in conducting scientific tests
for the purpose of collecting evidence), commencing 15 days after the
property was seized by a Federal law enforcement agency, or was turned
over to a Federal law enforcement agency by a State or local law
enforcement agency.
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Prior to October 2014, the IRS provided partial relief in
structuring transactions involving a first offense, a
legitimate funding source, and no criminal conviction. The IRS
procedures also required its criminal investigation division to
consider additional mitigating or aggravating factors. On
October 17, 2014, IRS-CID issued guidance on how it will
conduct seizures and forfeitures in its structuring cases.\34\
Pursuant to this guidance, the IRS will not pursue seizure and
forfeiture of funds associated only with so-called ``legal
source'' structuring unless (1) there are exceptional
circumstances justifying the seizure and forfeiture and (2) the
case is approved by the Director of Field Operations.
---------------------------------------------------------------------------
\34\Memorandum for Special Agents in Charge Criminal Investigation,
October 17, 2014, available at http://ij.org/wp-content/uploads/2015/
07/IJ068495.pdf. Written Testimony of John A. Koskinen and Richard
Weber, House Committee on Ways and Means Subcommittee on Oversight on
"Financial Transaction Structuring," May 25, 2016, available at https:/
/www.irs.gov/uac/newsroom/written-testimony-of-john-a-koskinen-and-
richard-weber-before-the-house-committee-on-ways-and-means-
subcommittee-on-oversight-on-financial-transaction-structuring-may-25-
2016; New IRS Special Procedure to Allow Property Owners to Request
Return of Property, Funds in Specific Structuring Cases, June 16, 2016,
available at https://www.irs.gov/uac/newsroom/new-irs-special-
procedure-to-allow-property-owners-to-request-return-of-property-funds-
in-specific-structuring-cases; Letter to Chairman Roskam and Ranking
Member Lewis summarizing planned actions, June 10, 2016, available at
http://waysandmeans.house.gov/wp-content/uploads/2016/06/6.9-Roskam-
Lewis-Response-Letter-and-Enclosure.pdf.
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REASONS FOR CHANGE
The Committee is aware that people sometimes structure
series of cash transactions so that each transaction falls
below $10,000 in order to circumvent BSA reporting and
recordkeeping requirements. Structuring (or attempts to
structure) for the purpose of evading the BSA reporting and
record keeping requirements\35\ is subject to both civil and
criminal penalties because structuring may represent an attempt
to conceal illegal activities such as the selling of narcotics
or evasion of taxes, for example.
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\35\31 U.S.C. secs. 5313(a), 5324(a).
---------------------------------------------------------------------------
The Committee is also aware of numerous instances in which
the IRS seized taxpayer assets on the basis of suspected
structuring in violation of BSA reporting and recordkeeping
rules. The Committee believes it is necessary to limit the
authority of the IRS by requiring that the IRS show probable
cause that funds subject to forfeiture for structuring were
derived from an illegal source or connected to other criminal
activity before the IRS can seize funds. The Committee also
believes it is necessary to implement new procedural
protections for persons whose assets the IRS has seized in such
forfeiture actions, including a post-seizure hearing.
EXPLANATION OF PROVISION
The provision provides that in the case of a suspected
structuring violation, the IRS may only pursue seizure or
forfeiture of assets if either the property to be seized was
derived from an illegal source or the transactions were
structured for the purpose of concealing a violation of a
criminal law or regulation other than rules against
structuring.
The provision establishes post-seizure notice and review
procedures for IRS seizures based on suspected structuring
violations. The IRS must, within 30 days, make a good faith
effort to find all persons with an ownership interest in the
property seized and inform him or her of certain post-seizure
hearing rights provided under the provision. This 30-day notice
requirement may be extended an additional 30 days if the IRS
can establish to a court probable cause of an imminent threat
to national security or personal safety. If a notice recipient
requests a court hearing within 30 days of the notice, the
property is required to be returned unless the court finds that
there is probable cause to believe that a structuring violation
occurred involving such property and the property to be seized
was derived from an illegal source or the funds were structured
for the purpose of concealing the violation of a criminal law
or regulation other than the structuring provisions of the BSA.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. EXCLUSION OF INTEREST RECEIVED IN ACTION TO RECOVER PROPERTY SEIZED
BY THE INTERNAL REVENUE SERVICE BASED ON STRUCTURING TRANSACTION (SEC.
1202 OF THE BILL AND NEW SEC. 139H OF THE CODE)
PRESENT LAW
Nothing in the BSA or the administrative guidance issued by
the IRS affects the Federal tax treatment of the interest that
may be paid to a successful litigant in civil asset forfeiture
proceedings. The Code provides no specific exclusion from gross
income or deduction from adjusted gross income for interest
received by a successful litigant pursuant to an action to
recover property seized by the IRS pursuant to the BSA.
Accordingly, the interest received is includable in gross
income under the Code.
REASONS FOR CHANGE
The Committee believes interest received from the Federal
government on wrongly seized property should be exempt from
income tax if a court determines the Government must return the
funds and interest accrued to the victim of IRS abuse.
EXPLANATION OF PROVISION
The provision amends the Code to exclude from gross income
any interest received from the Federal Government in connection
with an action to recover property seized by the IRS pursuant
to a claimed violation of the structuring provisions of the
BSA.
EFFECTIVE DATE
The provision applies to interest received on or after the
date of enactment.
3. CLARIFICATION OF EQUITABLE RELIEF FROM JOINT LIABILITY (SEC. 1203
OF THE BILL AND SEC. 6015 OF THE CODE)
PRESENT LAW
If a married couple elects to file a tax return on which
they report their income jointly, they are generally jointly
and severally liable for the entire tax liability that should
have been reported on the joint return.\36\ A spouse may be
entitled to relief from joint liability, in whole or in part,
under the innocent spouse relief provisions of the Code.
---------------------------------------------------------------------------
\36\Sec. 6103(d).
---------------------------------------------------------------------------
Grounds for relief from joint liability
There are three types of relief: general innocent spouse
relief; relief for spouses no longer married or legally
separated (separation of liabilities); and equitable relief.
The grounds for relief and its scope differ among these three
types of relief. In addition, the first two types of relief
must be sought no later than two years after the date the IRS
began collection activities against the electing spouse. For
equitable relief, there is no limitations period in the
statute.
General relief from joint liability with respect to an
understatement of tax is available to all joint filers who make
a timely election for such relief and are able to establish the
following.\37\ First, the electing spouse must establish that
the underpayment is attributable to the erroneous items of the
other spouse. Second, the electing spouse must show that at the
time of signing the return, he or she did not know or have
reason to know there was an understatement of tax. Finally,
relief is granted only if it is inequitable to hold the
electing spouse liable for the deficiency in tax, based on all
facts and circumstances.
---------------------------------------------------------------------------
\37\Sec. 6015(b).
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Separation of liabilities relief from joint liability with
respect to a deficiency is available to persons who are no
longer married, are legally separated, or were no longer living
together in the 12 months ending with the date innocent spouse
relief is elected.\38\ The individual electing relief on this
basis must establish the portion of any deficiency that is
appropriately allocable to him or her. Special rules are
provided in the Code for determining allocation of items that
benefit one spouse more than the other, property transfers, and
children's liability. Relief otherwise available is not
permitted with respect to items of which a spouse was aware at
the time the return was signed and which contributed to a
deficiency.
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\38\Sec. 6015(c).
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Equitable relief from joint liability may be available to
those spouses who are ineligible under the provisions for
general relief or separation of liabilities relief.\39\ Such
relief is granted only if, taking into account all facts and
circumstances, it is inequitable to hold the individual liable
for the unpaid portion of tax or for a deficiency with respect
to the joint return.
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\39\Sec. 6015(f).
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Availability and scope of judicial review
If an individual elects to have the general relief
provision or the separation of liabilities relief provision
apply with respect to a deficiency, the individual may petition
the Tax Court to review unfavorable determinations by the IRS
with respect to the claimed relief. The Tax Court has held that
its authority to review such IRS determinations is under a de
novo standard.\40\
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\40\Sec. 6015(e)(1).
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The claim for relief from joint liability must be filed no
later than 90 days after the notice of final determination on
relief from joint liability and no earlier than the earlier of
the mailing of such notice of final determination or the date
which is six months after electing such relief. During the
pendency of the Tax Court proceeding, or during the period in
which a petition may be filed, collection action is restricted.
In contrast to claims under the general relief or
separation of liabilities provisions described above, the
extent to which a denial of a claim for equitable relief from
joint liability is also subject to judicial review by the Tax
Court, the scope of that review, and the standard for any
review have been the subject of conflicting appellate
decisions. An abuse of discretion standard based on court
review of the administrative record was held to be the correct
standard in some instances,\41\ but other courts have permitted
review of information beyond the administrative record while
applying an abuse of discretion standard.\42\ Still others have
applied a de novo standard to both the scope of the review and
the standard of review.\43\
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\41\Jonson v. Commissioner, 118 T.C. 106, 125 (2002), aff'd on
other grounds, 353 F.3d 1181 (10th Cir. 2003); Mitchell v.
Commissioner, 292 F.3d 800, 807 (D.C. Cir. 2002); Cheshire v.
Commissioner, 282 F.3d 326, 337-38 (5th Cir. 2002).
\42\Commissioner v. Neal, 557 F.3d 1262 (11th Cir. 2009).
\43\Wilson v. Commissioner, 705 F.3d 980 (9th Cir. 2013), acq'd,
I.R.B. 2013-25 (June 17, 2013); Porter v. Commissioner, 132 T.C. 203,
132 T.C. No. 11 (2009).
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REASONS FOR CHANGE
The Committee is aware that the extent to which a denial of
a claim for equitable relief from joint liability is subject to
judicial review by the Tax Court and the scope of any such
review have been the subject of conflicting appellate
decisions. As a result, persons residing in different states,
but whose circumstances are otherwise similar, may be accorded
different rights to judicial review under the Code. The
Committee believes that such disparity of treatment can be
avoided if the statute is clarified to confer a right to
judicial review in all cases, and to specify the scope of such
review.
EXPLANATION OF PROVISION
Under the provision, Tax Court review of innocent spouse
equitable relief cases is not limited to the administrative
record, but it may consider evidence that is newly discovered
or was previously unavailable. The provision also clarifies
that the Tax Court has jurisdiction to review a denial of
equitable claims for relief from joint liability, and is not
limited to a review for abuse of discretion by the IRS.
The provision allows taxpayers to request equitable relief
with respect to any unpaid liability before the expiration of
the collection period or, if paid, before the expiration of the
applicable limitations period for claiming a refund or credit.
EFFECTIVE DATE
The provision applies to petitions or requests filed or
pending on or after the date of enactment.
4. MODIFICATION OF PROCEDURES FOR ISSUANCE OF THIRD-PARTY SUMMONS (SEC.
1204 OF THE BILL AND SEC. 7609 OF THE CODE)
PRESENT LAW
The IRS has broad statutory authority to require production
of information in the course of an examination.\44\ A request
for information in the form of an administrative summons is
enforceable if the IRS establishes its good faith, as evidenced
by the factors enunciated by the Supreme Court in United States
v. Powell.\45\ The U.S. Supreme Court articulated four basic
elements necessary to establish that the government issued a
summons in good faith: (1) the investigation must be conducted
for a legitimate purpose; (2) the information sought is
relevant to and ``may shed light on'' that legitimate purpose;
(3) the requested information is not already in the possession
of the IRS; and (4) the IRS complied with all statutorily
required administrative steps.\46\ Subsequent to United States
v. Powell, the legitimacy of using an administrative summons in
furtherance of an investigation into criminal violations was
validated in United States v. LaSalle National Bank,\47\ in
which the Supreme Court determined that the dual civil and
criminal purpose was legitimate, so long as there had not yet
been a commitment to refer the case for prosecution.
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\44\Sec. 7602.
\45\United States v. Powell, 379 U.S. 48 (1964).
\46\United States v. Powell, 379 U.S. 48, pp. 57-58 (1964).
\47\437 U.S. 298 (1978); codified in section 7609(c).
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The use of this summons authority to obtain information
from third-parties is subject to certain procedural
safeguards,\48\ but otherwise the same good faith elements are
analyzed to determine whether the summons should be
enforced.\49\ When the existence of a possibly non-compliant
taxpayer is known but not his identity, as in the case of
holders of offshore bank accounts or investors in particular
abusive transactions, the IRS is able to issue a summons
(referred to as a ``John Doe'' summons) to learn the identity
of the taxpayer, but must first meet significantly greater
statutory requirements to guard against fishing expeditions.
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\48\Sec. 7609.
\49\Tiffany Fine Arts, Inc. v. United States, 479 U.S. 310 (1985).
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An effort to learn the identity of unnamed John Does
requires that the United States seek judicial review in an ex
parte proceeding prior to issuance of the John Doe summons. In
its application and supporting documents,\50\ the United States
must establish that the information sought pertains to an
ascertainable group of persons, that there is a reasonable
basis to believe that taxes have been avoided, and that the
information is not otherwise available.\51\ The reviewing court
does not determine whether the John Doe summons will ultimately
be enforceable. Once a court has determined that the predicate
for issuance of a summons is met, the summons is served, and
the summoned party served may challenge enforcement of the
summons, based on the Powell factors. It is not entitled to
judicial review of the ex parte ruling that permitted issuance
of the summons.\52\ Nevertheless, enforcement of a John Doe
summons is likely to be subject to time-consuming challenges,
possibly warranting an extension of the limitations period.
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\50\Sec. 7609(h)(2) provides that the determination will be made ex
parte, solely on the pleadings.
\51\Sec. 7609(f).
\52\United States v. Samuels, Kramer & Co., and First Western
Government Securities, Inc., 712 F.2d 1342 (9th Cir. 1983), which
affirmed a lower court determination that the issuance of the John Doe
summons was not subject to review, but reversed and remanded to permit
a limited evidentiary hearing on whether the Powell standard was met.
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REASONS FOR CHANGE
The Committee believes that the John Doe summons is a
useful tool, but that it is important that the information
sought in the summons be at least potentially relevant to the
tax liability of an ascertainable group.
The Committee also believes that the use of this important
tool has at times potentially exceeded its intended purpose. A
John Doe summons is not intended to be an opening bid for
information from the party being served nor is it intended to
be used for the purposes of a fishing expedition. Given the
IRS's past use of this authority, the Committee feels it is
necessary to clarify its intended usage.
EXPLANATION OF PROVISION
The provision prevents the Secretary from issuing a John
Doe summons unless the information sought to be obtained is
narrowly tailored and pertains to the failure (or potential
failure) of the person or group or class of persons referred to
in the statute to comply with one or more provisions of the
Code which have been identified. The provision is not intended
to change the Powell standard or otherwise affect the IRS's
burden of proof.
EFFECTIVE DATE
The provision applies to summonses served after the date
that is 45 days after the date of enactment.
5. PRIVATE DEBT COLLECTION AND SPECIAL COMPLIANCE PERSONNEL PROGRAM
(SEC. 1205 OF THE BILL AND SEC. 6306 OF THE CODE)
PRESENT LAW
Qualified tax collection contracts
The Code permits the IRS to use private debt collection
companies to locate and contact taxpayers owing outstanding tax
liabilities of any type\53\ and to arrange payment of those
taxes by the taxpayers.\54\ For this purpose, the Secretary
enters into qualified tax collection contracts for the
collection of inactive tax receivables. Under these contracts,
if the taxpayer cannot pay in full immediately, the private
debt collection company offers the taxpayer an installment
agreement providing for full payment of the taxes over a period
of as long as five years.
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\53\This provision generally applies to any type of tax imposed
under the Internal Revenue Code.
\54\Sec. 6306.
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Inactive tax receivables are defined as any tax receivable
(i) removed from the active inventory for lack of resources or
inability to locate the taxpayer, (ii) for which more than 1/3
of the applicable limitations period has lapsed and no IRS
employee has been assigned to collect the receivable; and (iii)
for which, a receivable has been assigned for collection but
more than 365 days have passed without interaction with the
taxpayer or a third party for purposes of furthering the
collection. Tax receivables are defined as any outstanding
assessment which the IRS includes in potentially collectible
inventory.
Certain tax receivables are not eligible for collection
under qualified tax collection contracts, if such receivable:
(i) is subject to a pending or active offer-in-compromise or
installment agreement; (ii) is classified as an innocent spouse
case; (iii) involves a taxpayer identified by the Secretary as
being (a) deceased, (b) under the age of 18, (c) in a
designated combat zone, or (d) a victim of tax-related identity
theft; (iv) is currently under examination, litigation,
criminal investigation, or levy; or (v) is currently subject to
a proper exercise of a right of appeal.
Special compliance personnel program
An amount not greater than 25 percent of the amount
collected under any qualified tax collection contract is to be
used to fund a special compliance personnel program. The
Secretary is required to establish an account for the hiring,
training, and employment of special compliance personnel. No
other source of funding for the program is permitted, and funds
deposited in the special account are restricted to use for the
program, including reimbursement of the IRS and other agencies
for the cost of administering the qualified debt collection
program and all costs associated with employment of special
compliance personnel and the retraining and reassignment of
other personnel as special compliance personnel. Special
compliance personnel are individuals employed by the IRS to
serve either as revenue officers performing field collection
functions, or as persons operating the automated collection
system.
REASONS FOR CHANGE
The Committee believes that an exception from the private
debt collection program is needed for certain low-income
individual taxpayers to protect such taxpayers from entering
into payment plans they cannot afford, which ultimately does
not result in an increase in actual payments recovered. The
Committee intends that by eliminating certain low-income
taxpayers from the private debt collection program efforts can
be focused on collecting debt from taxpayers with an ability to
pay and higher dollar debts.
The Committee also believes that modifying the definition
of inactive tax receivables to include those in which more than
two years has passed since assessment will result in an
increase in actual payments recovered.
The Committee further believes that codifying the current
IRS practice permitting seven-year installment agreements for
the private debt collection program will result in fairer tax
administration and an increase in actual payments received.
The Committee believes that, to ensure the special
compliance personnel program is operating effectively, a
clarification is needed to make clear that the IRS may use
funds from the special compliance personnel program account for
various program costs, including information technology
associated with implementing the program.
EXPLANATION OF PROVISION
The provision makes certain additional tax receivables of
individual taxpayers ineligible for collection under qualified
tax collection contracts. Such receivables involve a taxpayer
(1) substantially all of whose income consists of disability
insurance benefits under section 233 of the Social Security Act
(referred to as Social Security Disability Insurance or SSDI)
or supplemental security income benefits under title XVI of the
Social Security Act (referred to as Supplemental Security
Income or SSI) or (2) whose adjusted gross income, as
determined for the most recent taxable year for which
information is available, does not exceed 200 percent of the
applicable poverty level (as determined by the Secretary).
The provision also modifies the definition of inactive tax
receivable by replacing the condition that more than 1/3 of the
applicable limitations period has lapsed with the requirement
that ``more than two years has passed since assessment.'' The
provision retains the requirement that no IRS employee has been
assigned to collect the receivable.
The provision also modifies the definition of a qualified
tax collection contract to allow the private debt collection
company to offer the taxpayer an installment agreement
providing for full payment of the taxes over a period of as
long as seven years, replacing the current law period of five
years.
The provision clarifies that the IRS may use funds from the
special compliance personnel program account for various
program costs, including the costs of hiring any personnel,
communications, software, technology, and reimbursement of the
IRS or other government agencies for the cost of administering
the qualified tax collection program.
EFFECTIVE DATE
The provision to make certain tax receivables of individual
taxpayers ineligible for collection under qualified tax
collection contracts and the provision to modify the definition
of inactive tax receivables applies to tax receivables
identified by the Secretary (or the Secretary's delegate) after
December 31, 2020.
The provision to modify the definition of a qualified tax
collection contract applies to contracts entered into after the
date of enactment.
The provision relating to the use of the special compliance
personnel program account applies to amounts expended from the
account after the date of enactment.
6. REFORM OF NOTICE OF CONTACT OF THIRD PARTIES (SEC. 1206 OF THE BILL
AND SEC. 7602 OF THE CODE)
PRESENT LAW
The IRS may not contact any person other than the taxpayer
with respect to the determination or collection of the tax
liability of the taxpayer without providing reasonable notice
in advance to the taxpayer that the IRS may contact persons
other than the taxpayer. The IRS is required to provide
periodically to the taxpayer a record of persons contacted
during the prior period by the IRS with respect to the
determination or collection of that taxpayer's tax liability.
This record is also required to be provided upon request of the
taxpayer. This notice requirement does not apply to criminal
tax matters, if the collection of the tax liability is in
jeopardy, if the Secretary determines for good cause shown that
disclosure may involve reprisal against any person, or if the
taxpayer authorized the contact.
REASONS FOR CHANGE
The Committee believes that the current notification
requirement before the IRS contacts third parties regarding
examination or collection activities is insufficient.\55\ Such
contacts may have a chilling effect on the taxpayer's business
and could damage the taxpayer's reputation in the community.
The Committee believes that the provision's notification
requirements will provide taxpayers more of an opportunity to
resolve issues and volunteer information before the IRS
contacts third parties.
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\55\Testimony of Kathy Petronchak, House Committee on Ways and
Means, Subcommittee on Oversight Hearing on ``Resolving Taxpayer
Disputes,'' September 13, 2017, p. 9, available at https://
waysandmeans.house.gov/wp-content/uploads/2017/09/20170913-OS-
Testimony-Petronchak.pdf (``Such notice is useless and does not
effectively apprise taxpayers that such contact will be made, to whom
it will be made, or that the taxpayer can request a third party contact
report from the IRS.'').
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EXPLANATION OF PROVISION
The provision replaces the requirement that the IRS provide
reasonable notice in advance to the taxpayer with a requirement
that the taxpayer be provided, at least 45 days before the
beginning of the period of contact, notice that contacts with
persons other than the taxpayer are intended. The period of
contact may not be greater than one year. However, notices are
permitted to be issued to the same taxpayer with respect to the
same tax liability with periods specified that, in the
aggregate, exceed one year. The provision requires the notice
to be provided only if there is a present intent at the time
such notice is given for the IRS to make such contacts. This
intent can be met on the basis of the assumption that the
information sought to be obtained will not be obtained by other
means before such contact.
EFFECTIVE DATE
The provision applies to notices provided, and contacts
made, after the date which is 45 days after the date of
enactment.
7. MODIFICATION OF AUTHORITY TO ISSUE DESIGNATED SUMMONS (SEC. 1207 OF
THE BILL AND SEC. 6503(J) OF THE CODE)
PRESENT LAW
During an audit, the IRS may informally request that the
taxpayer provide additional information necessary to arrive at
a fair and accurate audit adjustment, if any adjustment is
warranted. Not all taxpayers cooperate with such requests,
whether by failing to respond or by providing inadequate or
incomplete responses. In such cases, if the necessary
information cannot be developed from other witnesses or
sources, the IRS seeks information by issuing an administrative
summons.\56\ If the taxpayer does not cooperate with the
request in the summons, the IRS may refer the summons to the
Department of Justice to seek and obtain an order for
enforcement in Federal court. If the summons in question was
issued to a third-party rather than the taxpayer, the taxpayer
may petition the court to quash an administrative summons.\57\
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\56\Sec. 7602.
\57\Sec. 7609.
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In United States v. Powell,\58\ the U.S. Supreme Court
articulated four basic elements necessary to establish that the
government issued a summons in good faith: (1) the
investigation must be conducted for a legitimate purpose; (2)
the information sought is relevant to and ``may shed light on''
that legitimate purpose; (3) the requested information is not
already in the possession of the IRS; and (4) the IRS complied
with all statutorily required administrative steps. All
petitions to enforce an administrative summons must include
allegations and supporting declarations to establish that the
good faith standards are met.\59\ Although the good faith
standards established in United States v. Powell apply to all
administrative summonses, they are not the sole source of
limitations on the IRS's ability to compel production of
information during an examination.\60\
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\58\United States v. Powell, 379 U.S. 48, pp. 57-58 (1964).
\59\Department of Justice, Tax Division, Summons Enforcement
Manual, (updated through July 2011), available at https://
www.justice.gov/sites/default/files/tax/legacy/2011/08/31/
SumEnfMan_July2011.pdf.
\60\See, e.g., secs. 7602 (summonses in furtherance of a criminal
investigation may be issued, provided that the IRS has not referred the
investigation to the Department of Justice for prosecution of the
taxpayer whose tax liability is the subject of the summons), 7609
(summons issued to a third-party record-keeper), 7611 (examinations of
churches), 7612 (summons for computer software). Summonses to obtain
information responsive to a request for exchange of information under a
tax treaty present special enforcement issues, both procedural and
substantive as well. Mazurek v. United States, 271 F.3d 226 (5th Cir.
2001).
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Neither service of an administrative summons nor
government-initiated action for judicial enforcement is
sufficient to suspend the limitations period.\61\ As a result,
in the case of an examination of complicated issues of a large
corporation, involving voluminous records, numerous witness
interviews, and possible expert reports, the general three-year
period for assessment may be inadequate to allow for completion
of an examination.\62\ In such cases, the limitations period is
often but not always extended by agreement of the parties. An
uncooperative taxpayer could force a premature conclusion to an
audit by delaying responses and allowing the statute to expire.
To guard against such situations in cases in which the IRS
requires additional information and time to complete its
work,\63\ the Code authorizes issuance of a designated summons
that triggers suspension of the limitations period if judicial
enforcement proceedings are initiated.
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\61\In the case of third-party summonses, the limitations period is
suspended if a taxpayer named in the summons initiates a proceeding to
quash the summons, or if compliance with the summons remains unresolved
as of the date which is six months after service of the summons.
\62\Sec. 6501 (income taxes are generally required to be assessed
within three years after a taxpayer's return is filed, whether or not
it was timely filed); sec. 6501(c) (there are several circumstances
under which the general three-year limitations period does not begin to
run, including failure to file a return or filing a false or fraudulent
return with the intent to evade tax, extensions by agreement of the
taxpayer and IRS, substantial omissions of income, or failure to
disclose or report a listed transaction as required under section 6011
on any return or statement for a taxable year); sec. 6503 (there are
also circumstances under which the three-year limitations period is
suspended, including the issuance of a designated summons).
\63\In describing the provision when it was first enacted, the
Conference report for the Omnibus Reconciliation Act of 1990 explained,
``This provision is designed to preserve the ability of the IRS to
conclude the audit and assess any taxes that may be due regardless of
the length of time that it might take to obtain judicial resolution of
the summons enforcement lawsuit.'' H. Rept. 101-964, p. 1073. Omnibus
Budget Reconciliation Act of 1990, Conf. Rept. to Accompany H.R. 5835.
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A designated summons is an administrative summons that is
issued to a large corporation (or person to whom the
corporation has transferred the requested books and records)
with respect to one or more taxable periods currently under
examination in the Coordinated Industry Case program and meets
three conditions. First, it must be reviewed and approved by
the Division Commissioner and Division Counsel of the relevant
IRS operating division or organization with jurisdiction over
the return. Second, it must be issued at least 60 days before
the expiration of the assessment limitations period (as
extended). Finally, it must clearly state that it is a
``designated summons.''\64\ No more than one designated summons
may be issued with respect to a return under examination.
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\64\Section 6503(j) refers to the regional officials and the
Coordinated Examination Program or their successors. The Division
Counsel and Commissioner of the relevant office with jurisdiction over
the return have been identified in regulation as the appropriate
successor officials. Treas. Reg. sec. 301.6503(j)-1. In addition, the
Coordinated Industry Case program is the successor to the Coordinated
Examination Program.
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If a designated summons is issued, and the taxpayer
complies without any judicial enforcement proceeding, no
suspension of the limitations period occurs. If the government
initiates enforcement proceedings, the limitations period is
suspended for the judicial enforcement period of that summons
and any related summonses, i.e., summonses relating to the same
return and issued within 30 days after the issuance of the
designated summons. If the court proceeding results in an order
to comply with the summons, the limitations period is also
suspended for a period of 120 days from the first day after the
close of the judicial enforcement period. In addition, the
limitations period expires no earlier than 60 days after the
close of the judicial enforcement period, if the court does not
order compliance with the summons.
Since enactment of the designated summons provision in
1990, few such summonses have been issued.\65\ The IRS is now
required to submit annual reports to Congress on the number of
designated summonses issued each year.\66\ Since 1995, three
have been issued, most recently in 2014.\67\
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\65\The earliest designated summons, involving a request to require
testimony from an officer of Chevron Corporation, was enforced. United
States v. Derr, 968, F.2d 943 (9th Cir. 1992). See also United States
v. Norwest, 116 F.3d 1227 (8th Cir. 1997) (court enforced IRS request
to produce tax preparation software licensed to Norwest) and United
States v. Caltex Petroleum, 12 F. Supp. 2d 545 (N.D. Tex. 1998) (denied
IRS request to produce the software code used to calculate foreign tax
credits).
\66\Sec. 1002(b) Taxpayers Bill of Rights Act 2, Pub. L. 104-168
(1996).
\67\United States v. Microsoft, Case No. C15-00102-RSM (W.D. Wash.
May 5, 2017) (in ruling on validity of privileges, the Court ordered
further document production in compliance with the designated summons
and related summonses, pursuant to the earlier opinion enforcing the
designated summons, at United States v. Microsoft, 154 F. Supp. 3d 1134
(W.D. Wash. 2015)).
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REASONS FOR CHANGE
The Committee recognizes that issuance of a designated
summons is a serious step in the examination of a tax return,
given the fact that litigation over the summons would suspend
the running of the period for assessing additional tax against
the taxpayer under audit. The Committee also recognizes that
the mere threat of the use of this tool can cause concern for
taxpayers. The Committee is also cognizant that these
summonses, though rarely issued, are needed due to the
complexity of audits and lack of cooperation that the IRS may
face in some of the largest and most complex cases. In
recognition of these competing concerns, the Committee believes
that the administrative process for approval and review of such
summons should be tightened by requiring that a written
statement be attached to the summons, in which the IRS
establishes the need for the summons and that the summons was
approved by a Division Commissioner and the Chief Counsel. The
latter may delegate the authority to review, but not below the
level of the executive in the Office of Chief Counsel who is
the counterpart to the Division Commissioner. The Committee
does not intend that strengthening the administrative steps
required in issuing the summons be construed to disturb the
good-faith standards of United States v. Powell for determining
whether the summons is enforceable.
EXPLANATION OF PROVISION
Under the provision, issuance of a designated summons must
be preceded by review and written approval of the summons by
the head of the relevant operating division and the Chief
Counsel. The written approval must state facts establishing
that the IRS had previously made reasonable requests for the
information and must be attached to the summons. In subsequent
judicial proceedings concerning the enforceability of the
summons, the IRS must establish that the prior reasonable
requests for information were made.
EFFECTIVE DATE
The provision applies to summonses issued after the date
that is 45 days after the date of enactment.
8. LIMITATION ON ACCESS OF NON-INTERNAL REVENUE SERVICE EMPLOYEES TO
RETURNS AND RETURN INFORMATION (SEC. 1208 OF THE BILL AND SEC. 7602 OF
THE CODE)
PRESENT LAW
Returns and return information
General rule of confidentiality
As a general rule, returns and return information are
confidential and cannot be disclosed unless authorized by the
Code.\68\ The definition of return information is very broad
and generally includes any information received or collected by
the IRS with respect to liability under the Code of any person
for any tax, penalty, interest or offense. The term ``return
information'' includes, among other items:
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\68\Sec. 6103(a).
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a taxpayer's identity, the nature, source, or amount
of his income, payments, receipts, deductions,
exemptions, credits, assets, liabilities, net worth,
tax liability, tax withheld, deficiencies,
overassessments, or tax payments, whether the
taxpayer's return was, is being, or will be examined or
subject to other investigation or processing, or any
other data, received by, recorded by, prepared by,
furnished to, or collected by the Secretary with
respect to a return or with respect to the
determination of the existence, or possible existence,
of liability (or the amount thereof) of any person
under this title for any tax, penalty, interest, fine,
forfeiture, or other imposition, or offense . . . .\69\
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\69\Sec. 6103(b)(2)(A).
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Disclosure exception for tax administration contracts
(section 6103(n))
There are several exceptions to the general rule of
confidentiality. One exception permits the disclosure of
returns and return information in connection with written
contracts or agreements for the acquisition of property or
services for tax administration purposes (``tax administration
contractor'').\70\
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\70\Sec. 6103(n).
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Summons authority
In general
For the purposes of ascertaining the correctness of any
return, making a return when none has been made, determining
the liability of any person for any internal revenue tax, and
certain other purposes, the Secretary is authorized to examine
any books, records, or other data which may be relevant or
material to such inquiry, and to take such testimony of the
person concerned, under oath, as may be relevant or material to
such inquiry. The Secretary also is authorized to issue
summonses to appear before the Secretary at the time and place
named in the summons to produce books, records and other data
and to give testimony, under oath, as may be relevant or
material to such inquiry.
Summons interview regulations
Under the Treasury regulations, a person authorized to
receive returns and return information as a tax administration
contractor may receive and examine books, papers, records, or
other data produced to comply with the summons, and, in the
presence and under the guidance of an IRS officer or employee,
participate fully in the interview of a witness summoned by the
IRS to provide testimony under oath.\71\
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\71\Treas. Reg. sec. 301.7602-1(b)(3).
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Proposed Treasury regulations would narrow this authority
by excluding non-government attorneys from receiving summoned
books, papers, records, or other data, or from participating in
the interview of a witness summoned by the IRS to provide
testimony under oath.\72\ An exception to this general
exclusion is provided with respect to non-government attorneys
hired for their expertise in an area other than Federal tax
law. The proposed regulations would allow the IRS to hire an
attorney who has specialized knowledge of foreign, state, or
local law, including tax law, or in non-tax substantive law,
such as patent law, property law, or environmental law. It
would not permit the IRS to hire an attorney for non-
substantive specialized knowledge, such as civil litigation
skills. These changes are proposed to be effective for
examinations begun and summonses served by the IRS on or after
March 27, 2018.
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\72\Prop. Treas. Reg. sec. 301.7602-1(b)(3), 83 Fed. Reg. 13206
(March 28, 2018).
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REASONS FOR CHANGE
The IRS's ability to hire outside attorneys as contractors
and have them question witnesses during a summons interview has
raised many concerns. While the Committee recognizes the IRS's
need for specialized expertise in certain substantive areas,
the Committee is concerned that the statutorily prescribed
roles of Chief Counsel and the Department of Justice may be
circumvented when outside lawyers are permitted to conduct the
questioning of summoned witnesses on behalf of the government.
Such questioning is a government function that should be
performed by government employees. The Committee believes that
only IRS employees or employees of the Office of Chief Counsel
should question summoned witnesses on behalf of the government
and restricts the contractor authority accordingly.
EXPLANATION OF PROVISION
The provision provides that the Secretary shall not, under
the authority of section 6103(n) (relating to tax
administration contracts), provide to a tax administration
contractor any books, papers, records or other data obtained by
summons, except when such person requires such information for
the sole purpose of providing expert evaluation and assistance
to the IRS (including, for example, access to such information
by translators). Further, no person other than an officer or
employee of the IRS or Office of Chief Counsel may on behalf of
the Secretary question a witness under oath whose testimony was
obtained by summons. The provision is not intended to restrict
the Office of Chief Counsel's ability to use court reporters,
translators or interpreters, photocopy services, and other
similar ancillary contractors.
EFFECTIVE DATE
The provision takes effect on the date of enactment and
shall not fail to apply to a contract in effect under section
6103(n) merely because such contract was in effect before the
date of enactment.
D. Organizational Modernization
1. OFFICE OF THE NATIONAL TAXPAYER ADVOCATE (SEC. 1301 OF THE BILL AND
SEC. 7803(C) OF THE CODE)
PRESENT LAW
In general
The Office of the Taxpayer Advocate (``OTA'') is expected
to represent taxpayer interests independently in disputes with
the IRS. The National Taxpayer Advocate (``NTA'') supervises
the OTA. The NTA reports directly to the Commissioner and is
entitled to compensation at the same rate as the highest rate
of basic pay established for the Senior Executive Service under
section 5382 of Title 5 of the United States Code, or if the
Secretary so determines, at a rate fixed under section 9503 of
such title.
The OTA has four principal functions:
1. to assist taxpayers in resolving problems with the
IRS;
2. to identify areas in which taxpayers have problems
in dealing with the IRS;
3. to propose changes in the administrative practices
of the IRS to mitigate problems identified in (2); and
4. to identify potential legislative changes that may
be appropriate to mitigate such problems.
Taxpayer Assistance Orders
A taxpayer can request a Taxpayer Assistance Order
(``TAO'') if the taxpayer is suffering or about to suffer a
``significant hardship'' as a result of the manner in which the
internal revenue laws are being administered by the IRS.\73\ A
TAO may require the IRS within a specified time period, to
release property of the taxpayer that has been levied upon, or
to cease any action, take any action as permitted by law, or
refrain from taking any action with respect to the taxpayer
under specified provisions.\74\
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\73\Sec. 7811(a)(1)(A). Significant hardship is deemed to occur if
one of four factors exists: (1) there is an immediate threat of adverse
action; (2) there has been a delay of more than 30 days in resolving
the taxpayer's problems; (3) the taxpayer will have to pay significant
costs (including fees for professional services) if relief is not
granted; or (4) the taxpayer will suffer irreparable injury, or a long
term adverse impact if relief is not granted. Sec. 7811(a)(2). The NTA
may also issue a TAO if the taxpayer meets requirements to be set forth
in regulations. Sec. 7811(a)(1)(B).
\74\Sec. 7811(b). The provisions specified in 7811(b) are: (1)
chapter 64 (relating to collection), (2) subchapter B of chapter 70
(relating to bankruptcy and receiverships), chapter 78 (relating to
discovery of liability and enforcement of title) or any other provision
of law which is specifically described by the NTA in such order. A TAO
or action taken by the NTA applies to persons performing services under
a qualified tax collection contract to the same extent and to the same
manner as such order applies to the IRS.
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The Commissioner, or the Deputy Commissioner may rescind a
TAO issued by the NTA, only if a written explanation of the
reasons for the modification or rescission is provided to the
NTA.\75\
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\75\Sec. 7811(c). The NTA also may modify or rescind a TAO issued
by the NTA.
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Taxpayer Assistance Directives
While a TAO is specific to a particular taxpayer, a
Taxpayer Assistance Directive (``TAD'') is systemic, intended
to address groups of taxpayers. Delegation Order 13-3
authorizes the NTA to issue TADs to mandate administrative or
procedural changes to improve the operation of a functional
process or to grant relief to groups of taxpayers (or all
taxpayers) when implementation will protect the rights of
taxpayers, prevent undue burden, ensure equitable treatment or
provide an essential service to taxpayers.\76\ The authority to
modify or rescind a TAD is delegated to Deputy Commissioner for
Operations Support, Deputy Commissioner for Services and
Enforcement, and to the NTA.
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\76\Delegation Order 13-3, Internal Revenue Manual 1.2.50.4
(January 17, 2001).
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Annual reports
The NTA is required to submit two reports annually to the
House Committee on Ways and Means and to the Senate Finance
Committee.\77\ One report, due June 30 of each year, covers the
OTA's objectives for the fiscal year beginning in that calendar
year. Besides statistical information, the report must contain
a full and substantive analysis of the objectives.
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\77\Sec. 7803(c)(2)(B).
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The other report, due December 31 of each year, concerns
the activities of the OTA. The content of this report is set by
statute.\78\ Generally, the report must cover initiatives taken
to improve taxpayer services and problems encountered, as well
as the actions taken to resolve them and the results.
Specifically, the report must cover the 20 most serious
problems experienced by taxpayers. The report also must
identify the 10 most litigated issues for each category of
taxpayer and the areas of the tax law that impose significant
compliance burdens on taxpayers or the IRS. Recommendations
received from individuals with the authority to issue TAOs, and
any TAO not promptly honored by the IRS, must also be included
in the report. The report must also set forth recommendations
for administrative and legislative action to resolve problems
encountered by taxpayers.
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\78\Sec.7803(c)(2)(B)(ii)(I) through (XI).
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The NTA, is required by statute to submit the reports
directly to the Congressional committees without prior review
of the Commissioner, the Secretary, or any officer or employee
of the Treasury, the Oversight Board, or the Office of
Management and Budget (``OMB'').\79\
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\79\Sec. 7803(c)(2)(B)(iii).
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REASONS FOR CHANGE
The Committee appreciates the work of the Taxpayer Advocate
Service (``TAS''), under the direction of the NTA, and its role
in elevating both taxpayer-specific and systemic problems to
the attention of the Commissioner. The Committee is aware that
the NTA has raised concerns about the extent to which issues
identified by the NTA are given adequate attention, especially
in the case of Taxpayer Advocate Directives. In order to
evaluate the responsiveness of the agency to such concerns, to
help ensure that the research underlying some proposals and
issues identified in the NTA annual report to Congress is
supported by appropriate statistical methodology, and to ensure
that oversight is not unnecessarily duplicative or burdensome,
the Committee proposes several changes. First, it modifies the
handling of Taxpayer Advocate Directives to require greater
transparency and ensure timely responses to concerns raised by
the Taxpayer Advocate. Next, the Committee believes that the
IRS Statistics of Income should assist the NTA in her work to
provide meaningful statistics. Further, the Committee notes
that there are several entities overseeing the IRS, namely
Congress, the Government Accountability Office, and the
Treasury Inspector General for Tax Administration (``TIGTA'').
To avoid duplication of efforts, the Committee believes it is
appropriate to require the NTA to coordinate with TIGTA. To
further streamline and focus the NTA annual report, the
Congress believes it is appropriate that the annual report
discuss the 10 most serious problems encountered by taxpayers.
EXPLANATION OF PROVISION
Taxpayer Advocate Directives
In the case of any TAD issued by the NTA pursuant to a
delegation of authority from the Commissioner, the Commissioner
or Deputy Commissioner shall modify, rescind or ensure
compliance with such directive not later than 90 days after
issuance of such directive. If the TAD is modified or rescinded
by a Deputy Commissioner, the NTA may (not later than 90 days
after such modification or rescission) appeal to the
Commissioner and the Commissioner must (not later than 90 days
after such appeal is made) either (1) ensure compliance with
such directive as issued by the NTA, or (2) provide the NTA
with the reasons for any modification or rescission made or
upheld by the Commissioner pursuant to such appeal.
The NTA's annual report is to identify any TAD that is not
honored by the IRS in a timely manner.
Annual reports to Congress
The provision modifies requirements of the annual report on
NTA activities to require a summary of the 10 most serious
problems encountered by taxpayers. Before beginning any
research or study, the NTA is required to coordinate with the
TIGTA to ensure that the NTA does not duplicate any action that
TIGTA has already undertaken or has a detailed plan to
undertake. The provision requires the IRS provide the NTA, upon
request and to the extent practicable, with statistical support
in connection with the preparation of the annual report on NTA
activities. Such support is to include statistical studies,
compilations and the review of information provided by the NTA
for statistical validity and sound statistical methodology.
With respect to any statistical information included in such
report, the report is to include a statement of whether such
statistical information was reviewed or provided by the IRS,
and if so whether the IRS determined such information to be
statistically valid and based on sound statistical methodology.
The IRS's review and provision of statistical support does not
violate the requirement that the report be submitted directly
without prior review or comment from any officer or employee of
the Department of the Treasury or specified other persons.
Salary of the National Taxpayer Advocate
The provision eliminates the provision relating to the
determination of the NTA's salary under section 9503 of Title 5
of the United States Code. As under present law, the NTA is
entitled to compensation at the same rate as the highest rate
of basic pay established for the Senior Executive Service under
section 5382 of Title 5 of the United States Code.
EFFECTIVE DATE
The provision is generally effective on the date of
enactment. The provision as it relates to the salary of the NTA
applies to appointments to the position of the NTA made after
March 31, 2019.
2. MODERNIZATION OF INTERNAL REVENUE SERVICE ORGANIZATIONAL STRUCTURE
(SEC. 1302 OF THE BILL)
PRESENT LAW
RRA98 directed the Commissioner to restructure the IRS by
eliminating or substantially modifying the three-tier
geographic structure (national, regional, and district) in
place at the time and replacing it with an organizational
structure that features operating units serving particular
groups of taxpayers with similar needs.\80\
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\80\Pub. L. No. 105-206, sec. 1001(a).
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REASONS FOR CHANGE
The Committee believes that the current IRS organizational
structure is one of the factors contributing to the inability
of the IRS to properly serve taxpayers. The Committee believes
that the current structure needs to be modernized and
streamlined to help enable the IRS to better serve taxpayers
and provide the necessary level of services and accountability
to taxpayers in an efficient manner. Accordingly, the Committee
believes it appropriate to require the IRS to submit a
comprehensive reorganization plan. The Committee believes that
the revised structure should ensure taxpayers' rights are
protected, information is kept secure, and that the IRS is
approachable for taxpayers to ask questions and get assistance.
Thus, the Committee seeks to provide flexibility to the IRS to
reorganize its operations after the Commissioner determines
that another organizational structure, different from past
structures, would better serve taxpayers.
EXPLANATION OF PROVISION
The Secretary (or the Secretary's delegate) is required to
submit to Congress by September 30, 2020, a comprehensive
written plan to redesign the organization of the IRS. The
comprehensive plan will (1) ensure the successful
implementation of the priorities specified by Congress in this
bill; (2) prioritize taxpayer services to ensure that all
taxpayers easily and readily receive the assistance they need;
(3) streamline the structure of the agency including minimizing
the duplication of services and responsibilities; (4) best
position the IRS to combat cybersecurity and other threats to
the IRS; and (5) address whether the Criminal Division of the
IRS should report directly to the Commissioner.
Beginning one year after the date on which a comprehensive
plan to modify the organization of the IRS is submitted to
Congress, the provision removes the RRA98 requirement of an
organizational structure that features operating units serving
particular groups of taxpayers with similar needs.
EFFECTIVE DATE
The provision is effective on the date of enactment.
E. Other Provisions
1. RETURN PREPARATION PROGRAMS FOR APPLICABLE TAXPAYERS (SEC. 1401 OF
THE BILL AND NEW SEC. 7526A OF THE CODE)
PRESENT LAW
The Code provides that the Secretary may allocate up to $6
million per year for matching grants to certain qualified low-
income taxpayer clinics.\81\ Eligible clinics are those that
charge no more than a nominal fee to either represent low-
income taxpayers in controversies with the IRS or provide tax
information to individuals for whom English is a second
language. No clinic can receive more than $100,000 per year.
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\81\Sec. 7526.
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A qualified low-income taxpayer clinic includes (1) a
clinical program at an accredited law, business, or accounting
school, in which students represent low-income taxpayers, or
(2) an organization exempt from tax under Code section 501(c)
that either represents low-income taxpayers or provides
referral to qualified representatives. A clinic is treated as
representing low-income taxpayers if (i) at least 90 percent of
the taxpayers represented by the clinic have income that does
not exceed 250 percent of the poverty level, as determined in
accordance with criteria established by the Director of the
OMB,\82\ and (ii) the amount in controversy for any taxable
year is $50,000 or less.\83\
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\82\For a family of four, the 2019 income limit in the 48
contiguous states, Puerto Rico, and the District of Columbia is
$64,375, available at https://www.irs.gov/advocate/low-income-taxpayer-
clinics/low-income-taxpayer-clinic-income-eligibility-guidelines.
\83\Sec. 7463.
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While the Code does not provide funding for matching
grants, funding for such grants was provided by the
Consolidated Appropriations Act, 2019.\84\ Congress
appropriated approximately $2.492 billion to the IRS for
taxpayer services, of which not less than $18 million is to be
made available for a Community Volunteer Income Tax Assistance
(``VITA'') matching grants program for tax return preparation
assistance. VITA is a program created by the IRS in 1969 that
utilizes volunteers to provide tax return preparation and
filing service assistance to certain low-income taxpayers and
members of underserved populations.
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\84\Pub. L. No. 116-6, Div. D, Title I (February 15, 2019).
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REASONS FOR CHANGE
The Committee believes that it is important for the IRS to
continue to provide matching grants for authorized programs
that effectively assist low-income taxpayers and members of
underserved populations in preparing their Federal income tax
returns at no cost. The Committee also believes that these
programs, which rely on the participation of trained
volunteers, provide qualifying taxpayers with reliable and
competent assistance that helps to ensure the accuracy and
timeliness of the tax returns filed.
EXPLANATION OF PROVISION
The provision codifies the VITA program and provides that
the Secretary, unless otherwise provided by specific
appropriation, may allocate from otherwise appropriated funds
up to $30 million per year in matching grants to qualified
entities for the development, expansion, or continuation of
qualified tax return preparation programs assisting applicable
taxpayers and members of underserved populations. The Secretary
is authorized to award a multi-year grant not to exceed three
years.
The grant funds may be used for ordinary and necessary
operation costs (including for wages or salaries of persons
coordinating the activities of the program, to develop training
materials, conduct training, and perform quality reviews of the
returns for which assistance has been provided under the
program, for equipment purchases, and for vehicle-related
expenses associated with remote or rural tax preparation
services), outreach and educational activities relating to the
eligibility and availability of income supports available
through the Code, and services related to financial education
and capability, asset development, and the establishment of
savings accounts in connection with tax return preparation.
Matching funds are required to be provided on a dollar-for-
dollar basis for all grants provided. Matching funds may
include: (1) the salary (including fringe benefits) of
individuals performing services for the program; (2) the cost
of equipment used in the program; and (3) other ordinary and
necessary costs that may be associated with the program.
Indirect expenses, including general overhead of any entity
administering the program, are not counted as matching funds.
In awarding grants, priority is given to applications that
(1) demonstrate assistance to certain applicable taxpayers with
an emphasis on outreach, (2) demonstrate taxpayer outreach and
education around available income supports available through
the Code, and (3) demonstrate specific outreach and focus on
one or more underserved populations.
The provision requires the Secretary to establish
procedures for periodic site visits not less than once every
five calendar years (i) to ensure the program is carrying out
the stated purpose and (ii) to determine whether the VITA grant
program meets certain program adherence standards as the
Secretary will require. If any qualified return preparation
program is awarded a grant and is subsequently determined not
to meet the adherence standards or not to be carrying out the
stated purposes, such program will not be eligible for
additional grants unless the program provides sufficient
documentation of corrective measures established to address any
deficiencies determined.
Qualified return preparation program means any program (1)
that provides assistance to individuals, at least 90 percent of
whom are applicable taxpayers, in preparing and filing Federal
income tax returns, (2) that is administered by a qualified
entity, (3) in which all volunteers who assist in the
preparation of Federal income tax returns meet the training
requirements prescribed by the Secretary, and (4) that uses a
quality review process which reviews 100 percent of all
returns. Qualified entity means any entity that (1) is an
eligible organization (as defined), (2) is in compliance with
Federal tax filing and payment requirements, (3) is not
debarred or suspended from Federal contracts, grants, or
cooperative agreements, and (4) agrees to provide documentation
to substantiate any matching funds provided under the VITA
grant program. Eligible organization means (1) an institution
of higher education described in section 102 (other than
subsection (a)(1)(C) thereof) of the Higher Education Act of
1965, as in effect on the date of enactment, and that has not
been disqualified from participating in a program under Title
IV of such Act, (2) an exempt organization described in Code
section 501(c), (3) a local government agency, including a
county or municipal government agency, and an Indian tribe, as
defined in section 4(13) of the Native American Housing
Assistance and Self-Determination Act of 1996 (``Act''),
including any tribally designated housing entity (as defined in
such Act), tribal subsidiary, subdivision, or other wholly
owned tribal entity, or (4) a local, State, regional, or
national coalition (with one lead organization that meets the
eligibility requirements described above acting as the
applicant organization). If no eligible organization is
available to assist the targeted population or community, the
eligible organization includes a State government agency and a
Cooperative Extension Service office.
Applicable taxpayer means a taxpayer who has income for the
taxable year that does not exceed an amount equal to the
completed phaseout amount under section 32(b) for a married
couple filing a joint return with three or more qualifying
children, as determined in a revenue procedure or other
published guidance.\85\ Underserved population includes
populations of persons with disabilities, persons with limited
English proficiency, Native Americans, individuals living in
rural areas, members of the Armed Forces and their spouses, and
the elderly.
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\85\For 2019, the amount is $55,952. Rev. Proc. 2018-57, 2018-49,
I.R.B. 827, 832, December 3, 2018.
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The provision allows the IRS to use mass communications and
other means to promote the benefits and encourage the use of
the program. The Secretary can provide taxpayers information
regarding qualified return preparation programs receiving
grants and those programs are encouraged to advise taxpayers of
the availability of, and eligibility requirements for
receiving, advice and assistance from local or regional low-
income taxpayer clinics. The programs are also encouraged to
provide taxpayers information regarding the location and
contact information for the low-income taxpayer clinics.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. PROVISION OF INFORMATION REGARDING LOW-INCOME TAXPAYER CLINICS (SEC.
1402 OF THE BILL AND SEC. 7526 OF THE CODE)
PRESENT LAW
The Code provides that the Secretary is authorized to
provide up to $6 million per year in matching grants to certain
qualified low-income taxpayer clinics.\86\ Eligible clinics are
those that charge no more than a nominal fee to either
represent low-income taxpayers in controversies with the IRS or
provide tax information to individuals for whom English is a
second language. No clinic can receive more than $100,000 per
year.
---------------------------------------------------------------------------
\86\Sec. 7526.
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A qualified low-income taxpayer clinic includes (1) a
clinical program at an accredited law, business, or accounting
school, in which students represent low-income taxpayers, or
(2) an organization exempt from tax under Code section 501(c)
that either represents low-income taxpayers or provides
referral to qualified representatives. A low-income taxpayer is
an individual whose income does not exceed 250 percent of the
poverty level, as determined in accordance with criteria
established by the Director of the OMB.
The Department of the Treasury prohibits its officers and
employees from referring taxpayers to qualified low-income
taxpayer clinics for advice and assistance.\87\
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\87\5 C.F.R. sec. 3101.106(a).
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REASONS FOR CHANGE
The Committee believes that qualified low-income taxpayer
clinics contribute to compliance with the tax laws by providing
representation to taxpayers who might otherwise be uncertain
about their rights and obligations under the law and lack the
means to secure adequate representation. Accordingly, the
Committee believes that officers and employees of the
Department of the Treasury should be permitted to inform
taxpayers of the existence of these clinics and refer taxpayers
to such clinics for assistance.
EXPLANATION OF PROVISION
The provision allows officers and employees of the
Department of the Treasury to advise taxpayers of the
availability of, and eligibility requirements for receiving,
advice and assistance from qualified low-income taxpayer
clinics that receive funding under the Code, and to provide
location and contact information for such clinics.
EFFECTIVE DATE
The provision is effective on the date of enactment.
3. NOTICE FROM IRS REGARDING CLOSURE OF TAXPAYER ASSISTANCE CENTERS
(SEC. 1403 OF THE BILL)
PRESENT LAW
The IRS operates Taxpayer Assistance Centers (``TAC'')
around the country to provide face-to-face assistance with
preparing tax returns and understanding tax laws.
The IRS is not currently required to publish information to
the public or give notice to Congress before closing a TAC.
REASONS FOR CHANGE
The Committee is concerned about taxpayers who are unaware
of the scheduled closure of a local TAC and may need to access
in-person services. The Committee intends that the IRS provide
information about TAC closures in advance both to the public
and to Congress. The information should also include
alternative sources of assistance for taxpayers.
EXPLANATION OF PROVISION
The provision requires the IRS to publish (including by
non-electronic means such as local press and other media), 90
days in advance, a notice containing information identifying
the TAC proposed for closure, the date of the proposed closure,
and the relevant alternative sources of assistance that may be
utilized by affected taxpayers. The provision also requires the
IRS to provide, 90 days in advance, a report to Congress
containing the information in the notice, the reasons for a
proposed closure of the TAC, and other information as the
Secretary may find appropriate.
EFFECTIVE DATE
The provision is effective on the date of enactment.
4. RULES FOR SEIZURE AND SALE OF PERISHABLE GOODS RESTRICTED TO ONLY
PERISHABLE GOODS (SEC. 1404 OF THE BILL AND SEC. 6336 OF THE CODE)
PRESENT LAW
Under the Code, if it is determined that any tangible
property seized to satisfy unpaid taxes (1) is liable to
perish, (2) is liable to become greatly reduced in price or
value by keeping, or (3) cannot be kept without great expense,
the property may be sold after it has been appraised and the
owner has been given an opportunity to pay the appraised value
or furnish bond for payment.\88\ The general procedures
governing the sale of seized property that are set forth in the
Code (e.g., requiring 10-day notice before sale and the
determination of a minimum bid) are not applicable to sales of
perishables.\89\ Instead, the streamlined procedures referred
to above apply to the sale of perishable goods.\90\
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\88\Sec. 6336.
\89\Sec. 6335.
\90\Sec. 6336; Treas. Reg. sec. 301.6336-1.
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REASONS FOR CHANGE
The Committee believes that the IRS has in several
instances incorrectly invoked the streamlined procedures
described above. To prevent future abuses, the Committee
believes that it is necessary to limit the streamlined
procedures to goods that are liable to perish.
EXPLANATION OF PROVISION
The provision limits the property that may be sold pursuant
to the streamlined procedures to property that is liable to
perish.
EFFECTIVE DATE
The provision applies to property seized after the date of
enactment.
5. WHISTLEBLOWER REFORMS (SEC. 1405 OF THE BILL AND SEC. 6103 OF THE
CODE)
PRESENT LAW
In general
Under section 7623, individuals who submit information
leading to detection of underpayment of tax or to detection,
trial, and punishment of persons guilty of violating internal
revenue laws, may file a claim for an award of 15 to 30 percent
of recovered funds resulting from such action.
Disclosure rules for whistleblowers
Section 6103 provides a general rule of confidentiality for
returns and return information: ``returns and return
information shall be confidential and except as authorized by
this Title . . . [none of the specified recipients] shall
disclose any return or return information obtained by him . . .
.''\91\ One of the exceptions to the general rule of
confidentiality permits the IRS to make investigative
disclosures of return information to third parties. The
disclosures, subject to the conditions provided in regulations,
are to be made to the extent necessary to obtain information,
which is not otherwise reasonably available, with respect to
the correct determination of tax, liability for tax, the amount
to be collected, or with respect to the enforcement of any
provision of Title 26.\92\ The third party recipient of the
return information furnished during an investigative disclosure
is not subject to the general rule of confidentiality provided
by section 6103.
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\91\Sec. 6103(a).
\92\Treas. Reg. sec. 301.6103(k)(6)-1.
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There is no provision of section 6103 to provide
whistleblowers with status updates regarding what the IRS has
done with the information provided by the whistleblower. Such
status information would be the return information of the
taxpayer being audited/investigated for additional tax
liability.
A taxpayer can file or sue for civil damages for the
unauthorized disclosure and/or inspection of returns and return
information.\93\ In addition, criminal penalties apply for the
willful unauthorized disclosure or inspection of returns and
return information.\94\
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\93\Sec.7431.
\94\Sec.7213 and 7213A.
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Protection against retaliation
Though other statutes such as the False Claims Act\95\
currently protect some individuals from employer retaliation,
those who file claims under the Code are not explicitly
afforded these same protections.
---------------------------------------------------------------------------
\95\31 U.S.C. sec. 3730(h)(2).
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REASONS FOR CHANGE
The Committee believes that modifications to the disclosure
rules are necessary to improve communication with IRS
whistleblowers so that they are appropriately informed of their
claim and future whistleblowers are not discouraged from coming
forward. ``The Committee also believes it is important that in
appropriate cases the IRS fully utilize the whistleblower as a
resource during the course of an investigation.'' The Committee
further believes it is important to ensure that any additional
taxpayer information received by whistleblowers under this
provision is fully protected. The Committee additionally
believes that by affording whistleblowers protections against
retaliation from employers an employee will be more willing to
come forward to report instances of tax shelters and fraud.
EXPLANATION OF PROVISION
This provision amends section 6103 to: (1) allow the IRS to
exchange information with whistleblowers to the extent
disclosure is necessary in obtaining information, which is not
otherwise reasonably available, with respect to the correct
determination of tax liability or the amount to be collected
with respect to the enforcement of any other provision of the
Code; and (2) require the Secretary to notify the whistleblower
as to the status of their case not later than 60 days after:
(i) the case has been referred for an audit or examination; and
(ii) the taxpayer makes a payment of tax with respect to the
tax liability to which the information provided by the
whistleblower relates. Subject to such requirements and
conditions prescribed by the Secretary, upon written request by
the whistleblower and so long as the disclosure would not
seriously impair Federal tax administration, the Secretary is
to provide information on the status and stage of any
investigation, and in the case of a determination of the amount
of any award, the reasons for such determination. To ensure
taxpayer information is protected, whistleblowers receiving
information under this provision are subject to the general
rule of confidentiality and criminal penalties for unauthorized
disclosure of taxpayer information.
The provision adds to section 7623, anti-retaliation
whistleblower protections for employees. A person who alleges
discharge or other reprisal by any person in violation of these
protections may file a complaint with the Secretary of Labor
(within 180 days after the date on which the violation occurs),
and if the Secretary of Labor has not issued a final decision
on such complaint within 180 days (and the delay is not due to
the bad faith of the claimant), an action may be brought in the
appropriate district court. The remedies provided are
consistent with those currently available under the False
Claims Act, including compensatory damages or reinstatement,
200 percent of back pay and all lost benefits, with interest,
and compensation for other special damages including litigation
costs, expert witness fees, and reasonable attorney fees.
EFFECTIVE DATE
The modifications made to the disclosure rules apply to
disclosures made after the date of enactment. The protections
from retaliation are effective on the date of enactment.
6. CUSTOMER SERVICE INFORMATION (SEC. 1406 OF THE BILL)
PRESENT LAW
The Code provides that the Commissioner has such duties and
powers as prescribed by the Secretary.\96\ Unless otherwise
specified by the Secretary, such duties and powers include the
power to administer, manage, conduct, direct, and supervise the
execution and application of the internal revenue laws or
related statutes. In executing these duties, the Commissioner
depends upon strategic plans that prioritize goals and manage
IRS's resources. In the current strategic plan, empowering and
enabling all taxpayers to meet their tax obligations is
identified as one of the IRS's six strategic goals.\97\
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\96\ Sec. 7803(a).
\97\ See Internal Revenue Service Strategic Plan FY2018--2022,
Publication 3744, available at https://www.irs.gov/pub/irs-pdf/
p3744.pdf.
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REASONS FOR CHANGE
The Committee believes that it is important for the IRS to
provide quality customer service to taxpayers whose identities
have been stolen and used to commit tax-related fraud. The IRS
initially established the Identity Protection Specialized Unit
(``IPSU'') to assist victims of identity theft, but taxpayers
also were referred to other operating units of the IRS to deal
with various aspects of their cases.\98\ The IRS then
established the Identity Theft Victim Assistance (``IDTVA'')
organization, which is staffed with specially trained employees
who are able to assess each case, identify issues, and assist
the taxpayer in getting the correct return filed, refunds
issued, etc.\99\ In addition to these measures, the Committee
believes providing information to the taxpayer about common tax
scams, directions on where and how to report such activity, and
tips on how to protect against identity theft and tax scams
will improve customer service to taxpayers affected by tax-
related identity theft.
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\98\Treasury Inspector General for Tax Administration, Department
of the Treasury, Most Taxpayers Whose Identities Have Been Stolen to
Commit Refund Fraud Do Not Receive Quality Customer Service (TIGTA
2012-40-050), May 2012.
\99\A description of the services provided by the IDTVA
organization is available at https://www.irs.gov/uac/Newsroom/IRS-
Identity-Theft-Victim-Assistance-How-It-Works.
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EXPLANATION OF PROVISION
The provision requires the IRS to provide the following
information over the telephone, while taxpayers are on hold
with the IRS's call center: information about common tax scams,
direction to the taxpayer on where and how to report such
activity, and tips on how to protect against identity theft and
tax scams.
EFFECTIVE DATE
The provision is effective on the date of enactment.
7. MISDIRECTED TAX REFUND DEPOSITS (SEC. 1407 OF THE BILL AND SEC. 6402
OF THE CODE)
PRESENT LAW
The Internal Revenue Manual (``IRM'') defines an erroneous
refund as the receipt of any money from the IRS to which the
recipient is not entitled. The IRM provides procedures for IRS
employees to identify and recover such erroneous refunds.\100\
In addition, the IRS website provides information to taxpayers
who wish to return an erroneous refund that was issued to them,
either by paper check or direct deposit.\101\
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\100\Internal Revenue Service, Internal Revenue Manual, Erroneous
Refunds, Ch. 21.4, sec. 21.4.5.2 (October 9, 2015).
\101\Internal Revenue Service, Topic Number 161--Returning an
Erroneous Refund--Paper Check or Direct Deposit, last updated January
28, 2019, available at https://www.irs.gov/taxtopics/tc161.
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The Code provides that any tax refunds which are
erroneously made may be recovered by civil action brought in
the name of the United States.\102\ Recovery of an erroneous
refund by civil action is allowed if the action is begun within
two years after the refund is made, or five years if it appears
that any part of the refund was induced by fraud or
misrepresentation.\103\
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\102\Sec. 7405.
\103\Sec. 6532(b).
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REASONS FOR CHANGE
The Committee believes that a comprehensive customer
service strategy includes allowing taxpayers to report
instances in which refunds made by electronic funds transfer
are made incorrectly, recovering misdirected payments, and
delivering them to the correct accounts of taxpayers.
EXPLANATION OF PROVISION
The provision requires the Secretary to prescribe
regulations within six months of the date of enactment of this
Act to establish procedures to allow taxpayers to report
instances in which a refund made by the Secretary by electronic
funds transfer was not transferred to the account of the
taxpayer, to coordinate with financial institutions to identify
and recover these payments, and to deliver refunds to the
correct accounts of taxpayers.
EFFECTIVE DATE
The provision is effective on the date of enactment.
TITLE II--21ST CENTURY IRS
A. Cybersecurity and Identity Protection
1. PUBLIC-PRIVATE PARTNERSHIP TO ADDRESS IDENTITY THEFT TAX REFUND
FRAUD (SEC. 2001 OF THE BILL)
PRESENT LAW
The Security Summit, formed in 2015, is a partnership of
the IRS, State tax agencies, and the private-sector tax
industry to address tax refund fraud caused by identity theft.
In 2016, the Security Summit group members identified and
agreed to share more than 20 data components relating to
Federal and State returns to improve fraud detection and
prevention. For example, group members are sharing computer
device identification data tied to the return's origin, as well
as the improper or repetitive use of the numbers that identify
the internet address from where the return originates.\104\ Tax
software providers agreed to enhance identity requirements and
strengthen validation procedures for new and returning
customers to protect their accounts from theft. Along with the
IRS, 40 State departments of revenue, and 21 tax industry
members have signed onto a Memorandum of Understanding
regarding roles, responsibilities and information sharing
pathways among the IRS, States and industry.\105\ In 2017, the
IRS reported there was a 40 percent decline in the number of
taxpayers reporting to the IRS that they are victims of
identity theft, attributing the decline to the initiatives of
the Security Summit.\106\
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\104\Internal Revenue Service, 2016 Security Summit: Protecting
Taxpayers from Identity Theft Tax Refund Fraud (June 2016) p. 3,
available at https://www.irs.gov/pub/newsroom/
6_2016_security_summit_report.pdf.
\105\Ibid.
\106\Internal Revenue Service, IR-2018-21, Key IRS Identity Theft
Indicators Continue Dramatic Decline in 2017; Security Summit Marks
2017 Progress Against Identity Theft (February 8, 2018).
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REASONS FOR CHANGE
The Committee believes the Security Summit has been a
successful and productive venue for governmental and private
organizations to work together to address the growing problem
of identity theft tax refund fraud. The Committee is encouraged
by the proactive steps that the IRS has taken to address this
issue and wants to ensure that these efforts continue going
forward.
EXPLANATION OF PROVISION
The provision requires the Secretary (or the Secretary's
delegate) to work collaboratively with the public and private
sectors to protect taxpayers from identity theft tax refund
fraud.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. RECOMMENDATIONS OF ELECTRONIC TAX ADMINISTRATION ADVISORY COMMITTEE
REGARDING IDENTITY THEFT REFUND FRAUD (SEC. 2002 OF THE BILL)
PRESENT LAW
RRA98 authorized the Electronic Tax Administration Advisory
Committee (``ETAAC''). ETAAC was intended to provide input to
the IRS on electronic tax administration. ETAAC's
responsibilities involve researching, analyzing, and making
recommendations on a variety of electronic tax administration
issues. Pursuant to RRA98, ETAAC reports to Congress annually
concerning:
IRS's progress on reaching its goal to
electronically receive 80 percent of tax and
information returns;
Legislative changes assisting the IRS in
meeting the 80 percent goal;
Status of the IRS's strategic plan for
electronic tax administration; and
Effects of e-filing tax and information
returns on small businesses and the self-employed.
ETAAC members come from State departments of revenue, large
tax preparation companies, solo tax practitioners, tax software
companies, financial services industry and low income and
consumer advocacy groups.\107\
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\107\Electronic Tax Administration Advisory Committee, Publication
3415, Annual Report to Congress (June 2018), Appendix B, available at
https://www.irs.gov/pub/irs-pdf/p3415.pdf.
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REASONS FOR CHANGE
ETAAC's focus on electronic tax administration issues makes
it a suitable entity to examine and make recommendations
regarding methods to address identity theft and refund fraud
after evaluating various stakeholder viewpoints. ETAAC already
has amended its charter to focus on the issue of identity theft
and refund fraud. This provision codifies the recent changes to
ETAAC's charter and ensures that ETAAC will continue to examine
this issue going forward. The Committee also finds ETAAC's
annual reports to Congress, which include recommendations to
improve the work of the Security Summit, to be valuable sources
of information and would like to ensure that this work
continues.
EXPLANATION OF PROVISION
In addition to the requirements under present law, the
provision requires ETAAC to study (including through organized
public forums) and make recommendations to the Secretary
regarding methods to prevent identity theft and refund fraud.
EFFECTIVE DATE
The provision is effective on the date of enactment.
3. INFORMATION SHARING AND ANALYSIS CENTER (SEC. 2003 OF THE BILL AND
SEC. 6103 OF THE CODE)
PRESENT LAW
Information Sharing and Analysis Center
The Security Summit, formed in 2015, is a partnership of
the IRS, State tax agencies, and the private-sector tax
industry to address tax refund fraud caused by identity theft.
In 2016, the Security Summit created an Identity Theft Tax
Refund Fraud Information Sharing and Analysis Center
(``ISAC'').\108\ The ISAC is a secure, web-based venue for
States, industry and the IRS to share and exchange information.
The ISAC enables the IRS and the States to work together with
external third parties to serve as an early warning system for
tax refund fraud, identity theft schemes, and cybersecurity
issues. A third-party contractor hosts, maintains, and
facilitates the web-based leads reporting and information
sharing process for the ISAC.
---------------------------------------------------------------------------
\108\Internal Revenue Service, 2016 Security Summit: Protecting
Taxpayers from Identity Theft Tax Refund Fraud (June 2016), available
at https://www.irs.gov/pub/newsroom/
6_2016_security_summit_report.pdf.sec.
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Confidentiality and disclosure of return information
As a general rule, returns and return information are
confidential and cannot be disclosed unless authorized by the
Code.\109\ The definition of return information is very broad
and generally includes any information received or collected by
the IRS with respect to liability under the Code of any person
for any tax, penalty, interest or offense. The term ``return
information'' includes, among other items:
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\109\Sec. 6103(a).
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a taxpayer's identity, the nature, source, or amount of
his income, payments, receipts, deductions, exemptions,
credits, assets, liabilities, net worth, tax liability,
tax withheld, deficiencies, overassessments, or tax
payments, whether the taxpayer's return was, is being,
or will be examined or subject to other investigation
or processing, or any other data, received by, recorded
by, prepared by, furnished to, or collected by the
Secretary with respect to a return or with respect to
the determination of the existence, or possible
existence, of liability (or the amount thereof) of any
person under this title for any tax, penalty, interest,
fine, forfeiture, or other imposition, or offense . . .
.\110\
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\110\Sec. 6103(b)(2)(A).
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There are several exceptions to the general rule of
confidentiality. Such exceptions include provisions to permit
disclosures to State tax administration officials, for IRS
employees and officers to make investigative disclosures, and
rules to allow one authorized party to disclose to another
authorized party with the permission of the Commissioner.\111\
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\111\Sec. 6103(d) (disclosures to States), 6103(k)(6)(investigative
disclosures) and the Treasury regulations under sec. 6103(p)(2)(B).
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The IRS exchanges confidential information with State tax
agencies under the authority of section 6103(d). The
disclosures are made pursuant to written request from the head
of the State tax agency, which designates the State tax
officials who can receive the information. The information can
only be used for State tax purposes, not for general State
civil or criminal law enforcement. The State officials can
redisclose the information to other officers and employees of
the State tax agency, the agency's legal representative, or the
agency's contractors (but only for State tax administration
purposes). The IRS uses this authority to alert State tax
administration officials to tax refund fraud schemes.
IRS officers and employees may disclose return information
to the extent that such disclosure is necessary in obtaining
information, which is not otherwise reasonably available, with
respect to the correct determination of tax, liability for tax,
or the amount to be collected, or with respect to the
enforcement of any other provision of Title 26. Such
disclosures are to be made only in such situations and under
such conditions as the Secretary may prescribe by
regulation.\112\ This provision generally cannot be used to
provide confidential return information on an industry-wide
basis to alert return preparers to potential fraud schemes.
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\112\Sec. 6103(k)(6); Treas. Reg. sec. 301.6103(k)(6)-1.
---------------------------------------------------------------------------
Under the Treasury regulations, returns or return
information that have been obtained by a Federal, State, or
local agency, or its agents or contractors, in accordance with
section 6103 (the first recipient) may be disclosed by the
first recipient to another recipient authorized to receive such
returns or return information under section 6103 (the second
recipient).\113\ The disclosure must be approved by the
Commissioner. The second recipient may receive only such
returns or return information as authorized by the provision of
section 6103 applicable to such recipient and only for a
purpose authorized by and subject to any conditions imposed by
section 6103, including applicable safeguards.
---------------------------------------------------------------------------
\113\Treas. Reg. sec. 301.6103(p)(2)(B)-1.
---------------------------------------------------------------------------
Preparer disclosure penalties
The Code provides for a civil penalty for a tax return
preparer who (i) discloses any information furnished to the
preparer for, or in connection with, the preparation of such
return or (ii) uses such information for any purpose other than
to prepare or assist in preparing any such return.\114\ There
is a corresponding criminal penalty under section 7216 of the
Code for knowing or reckless conduct. The same exceptions from
the imposition of the criminal penalty apply for purposes of
the civil penalty. In general, the penalty does not apply for
disclosures permitted by the Code or pursuant to an order of a
court. Further, the penalty does not apply to the use of
information in the preparation of, or in connection with the
preparation of State and local tax returns and declarations of
estimated tax of the person to whom the information relates.
The Code also permits the Secretary to provide additional
exceptions through regulations. The Secretary has prescribed by
regulation the circumstances not involving tax preparation in
which disclosure and use of a taxpayer's information by a tax
return preparer is permitted.\115\
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\114\Sec. 6713.
\115\Treas. Reg. secs. 301.7216-1, 301.7216-2 and 301.7216-3.
---------------------------------------------------------------------------
Penalties for the unauthorized disclosure or inspection of return
information
The unauthorized disclosure of a return or return
information is a felony punishable by fine of up to $5,000,
five years imprisonment or both. Unauthorized inspection is a
misdemeanor, punishable by a fine of up to $1,000, one year
imprisonment, or both.
REASONS FOR CHANGE
As the profitability and ease of identity theft grows, the
threat to the tax system from fraudulent tax refund filings
increases. While the IRS has traditionally been more
reactionary to external threats, the Committee is encouraged to
see the IRS look for new and alternative ways to combat
identity theft tax refund fraud, particularly through its
participation in the ISAC pilot. The Committee believes there
is a need for all parts of the tax system, including the IRS,
State tax administrators, and return preparers, to work
proactively together to combat identity theft tax refund fraud.
To be effective in this collaboration, stakeholders with the
ability to guard the tax system need to be able to receive the
necessary information about potential risks quickly. Therefore,
the Committee believes it is appropriate to provide a narrowly
tailored exception to the general rules of confidentiality to
facilitate alerts of potential tax refund fraud schemes and
cyber security threats to the IRS.
EXPLANATION OF PROVISION
ISAC participation and performance metrics
The provision provides that the Secretary (or the
Secretary's delegate) may participate in an information sharing
and analysis center. The purpose of such participation is to
centralize, standardize and enhance data compilation and
analysis to facilitate sharing actionable data and information
with respect to identity theft tax refund fraud. The provision
requires the Secretary (or the Secretary's delegate) to develop
metrics for measuring the success of such center in detecting
and preventing identity theft tax refund fraud.
Disclosure of return information to certain ISAC participants
In general
The provision authorizes the disclosure of specified return
information to ISAC participants who have entered into a
written information sharing agreement with the Secretary. Under
such procedures and subject to such conditions as the Secretary
may prescribe, the Secretary may disclose specified return
information to specified ISAC participants if such disclosure
is in furtherance of effective Federal tax administration
relating to the following: (1) the detection or prevention of
identity theft tax refund fraud; (2) validation of taxpayer
identity; (3) authentication of taxpayer returns; or (4) the
detection or prevention of cybersecurity threats to the IRS.
Terminology
Specified ISAC participant
The term ``specified ISAC participant'' means any person
designated by the Secretary as having primary responsibility
for a function performed by the ISAC and any return preparer
(or other person) subject to section 7216 and who is a
participant in the ISAC. A person is only a specified ISAC
participant if such person has entered into a written
information sharing agreement with the Secretary. The
information sharing agreement must set forth the terms and
conditions for the disclosure of information to such person,
including the requirements imposed on such person for the
protection and safeguarding of such information. The
information sharing agreement must require that recipients of
return information under the provision are required to
affirmatively report to TIGTA any unauthorized access or
disclosure of information and any breaches of any system
holding the information.
Specified return information
For purposes of the provision, the term ``specified return
information'' means, in the case of a return filed
electronically, which is in connection with a case of potential
identity theft tax refund fraud, return information related to
the electronic filing characteristics of such return. Such
characteristics include: internet protocol address, device
identification, email domain name, speed of completion, method
of authentication, refund method, and such other return
information relating to the electronic filing characteristics
of such return as the Secretary may identify. In addition, with
respect to a return prepared by a tax return preparer in
connection with a case of potential identity theft refund
fraud, ``specified return information'' also includes
identifying information with respect to such tax return
preparer, including the preparer taxpayer identification number
(``PTIN'') and electronic filer identification number
(``EFIN'') of such preparer.
With respect to a return for which identity theft refund
fraud has been confirmed by the Secretary (pursuant to such
procedures as the Secretary may provide), ``specified return
information'' also includes the name and taxpayer
identification number of the taxpayer as it appears on the
return, and any bank account and routing information provided
for making a refund in connection with such return.
Finally, in the case of any cybersecurity threat to the
IRS, information similar to that associated with cases of
potential identity theft refund fraud (e.g., electronic
characteristics and preparer identifying information) are
considered specified return information with respect to such
threat.
Restriction on use of disclosed information
Any return information received by a specified ISAC
participant under the provision is to be used only for the
purposes of and to the extent necessary in (1) performing the
function the person is designated to perform with respect to
the ISAC, (2) facilitating authorized disclosures to return
preparers who are specified ISAC participants, and (3)
facilitating disclosures authorized under section 6103(d) to
State tax authorities who are participants in the ISAC. Return
information received by specified ISAC participants who are
return preparers is treated for purposes of section 7216 as
information furnished to such person for, or in connection
with, the preparation of a return of tax.
Data protection, safeguards, penalties
As noted above, to be a specified ISAC participant, the
person must enter into an information sharing agreement that
includes, among other responsibilities, requirements for the
protection and safeguarding of information received under the
provision. The return information disclosed under the provision
is subject to such protections and safeguards as the Secretary
may require by regulations, other guidance, or written
information sharing agreement. Recipients of return information
under the provision are subject to civil and criminal penalties
for the unauthorized disclosure or inspection of returns or
return information.
EFFECTIVE DATE
The provision is generally effective on the date of
enactment. The disclosure provisions are effective for
disclosures made on or after the date of enactment.
4. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY SAFEGUARDS (SEC. 2004
OF THE BILL AND SEC. 6103 OF THE CODE)
PRESENT LAW
Section 6103 permits the disclosure of returns and return
information to State agencies, as well as to other Federal
agencies for specified purposes. Section 6103(p)(4) requires,
as a condition of receiving returns and return information,
that State agencies (and others) provide safeguards as
prescribed by the Secretary of the Treasury by regulation that
are necessary or appropriate to protect the confidentiality of
returns or return information.\116\ It also requires that a
report be furnished to the Secretary at such time and
containing such information as prescribed by the Secretary
regarding the procedures established and utilized for ensuring
the confidentiality of returns and return information.\117\
After an administrative review, the Secretary may take such
actions as are necessary to ensure these requirements are met,
including the refusal to disclose returns and return
information.\118\
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\116\Sec. 6103(p)(4)(D).
\117\Sec. 6103(p)(4)(E).
\118\Sec. 6103(p)(4) (flush language) and (7); Treas. Reg. sec.
301.6103(p)(7)-1.
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Under present law, employees of a State tax agency may
disclose returns and return information to contractors for tax
administration purposes.\119\ These disclosures can be made
only to the extent necessary to procure contractually
equipment, other property, or services, related to tax
administration.\120\ The contractors can make redisclosures of
returns and return information to their employees as necessary
to accomplish the tax administration purposes of the contract,
but only to contractor personnel whose duties require
disclosure.\121\ Treasury regulations prohibit redisclosure to
anyone other than contractor personnel without the written
approval of the IRS.\122\
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\119\Sec. 6103(n) and Treas. Reg. sec. 301.6103(n)-1(a). ``Tax
administration'' includes ``the administration, management, conduct,
direction, and supervision of the execution and application of internal
revenue laws or related statutes (or equivalent laws and statutes of a
State). . .'' Sec. 6103(b)(4).
\120\Treas. Reg. sec. 301.6013(n)-1(a). Such services include the
processing, storage, transmission or reproduction of such returns or
return information, the programming, maintenance, repair, or testing of
equipment or other property, or the providing of other services for
purposes of tax administration.
\121\Treas. Reg. sec. 301.6103(n)-1(a) and (b). A disclosure is
necessary if such procurement or the performance of such services
cannot otherwise be reasonably, properly, or economically accomplished
without such disclosure. Treas. Reg. sec. 301.6103(n)-1(b). The
regulations limit the quantity of information to that needed to perform
the contract.
\122\Treas. Reg. sec. 301.6103(n)-1(a).
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By regulation, all contracts must provide that the
contractor will comply with all applicable restrictions and
conditions for protecting confidentiality prescribed by
regulation, published rules or procedures, or written
communication to the contractor.\123\ Failure to comply with
such restrictions or conditions may cause the IRS to terminate
or suspend the duties under the contract or the disclosures of
returns and return information to the contractor.\124\ In
addition, the IRS can suspend disclosures to the State tax
agency until the IRS determines that the conditions are or will
be satisfied.\125\ The IRS may take such other actions as are
deemed necessary to ensure that such conditions or requirements
are or will be satisfied.\126\
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\123\Treas. Reg. sec. 301.6103(n)-1(e)(3).
\124\Treas. Reg. sec. 301.6103(n)-1(e)(4).
\125\Ibid.
\126\Ibid.
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REASONS FOR CHANGE
The Committee notes the increasing use of contractors by
government agencies to perform the work of the government. In
the Committee's view, the IRS has insufficient resources to
monitor the compliance of every contractor in addition to its
other duties. Further, the Committee finds that it is
appropriate to require that Federal, State, and local agency
recipients of tax information monitor and certify that their
contractors and other agents have in place adequate safeguards
to protect this information.
EXPLANATION OF PROVISION
The provision requires that a State, local, or Federal
agency conduct on-site reviews every three years of all of its
contractors or other agents receiving Federal returns and
return information. If the duration of the contract or
agreement is less than three years, a review is required at the
mid-point of the contract. The purpose of the review is to
assess the contractor's efforts to safeguard Federal returns
and return information. This review is intended to cover secure
storage, restricting access, computer security, and other
safeguards deemed appropriate by the Secretary. Under the
provision, the State, local, or Federal agency is required to
submit a report of its findings to the IRS and certify annually
that such contractors and other agents are in compliance with
the requirements to safeguard the confidentiality of Federal
returns and return information. The certification is required
to include the name and address of each contractor or other
agent with the agency, the duration of the contract, and a
description of the contract or agreement with the State, local,
or Federal agency.
The provision does not apply to contracts for purposes of
Federal tax administration. The provision does not alter or
affect in any way the right of the IRS to conduct safeguard
reviews of State, local, or Federal agency contractors or other
agents. It also does not affect the right of the IRS to
initially approve the safeguard language in the contract or
agreement and the safeguards in place prior to any disclosures
made in connection with such contracts or agreements.
EFFECTIVE DATE
The provision is effective for disclosures made after
December 31, 2022.
5. REPORT ON ELECTRONIC PAYMENTS (SEC. 2005 OF THE BILL)
PRESENT LAW
The Secretary is not currently required by Congress to
examine expansion of electronic fund transfers.
REASONS FOR CHANGE
The Committee is interested in creating secure, efficient,
and innovative ways for taxpayers to receive their federal
income tax refunds electronically. The Committee believes that
the report will be helpful in accomplishing these goals.
EXPLANATION OF PROVISION
Not later than two years after the date of the enactment,
the Secretary, or the Secretary's delegate, in coordination
with the Bureau of Fiscal Service and the IRS, and in
consultation with private sector financial institutions, is
required to submit a written report to Congress describing how
the IRS can utilize new payment platforms to increase the
number of tax refunds paid by electronic funds transfer. The
report is required to consider the interests of reducing
identity theft tax refund fraud, reducing the IRS's costs in
delivering tax refunds, the costs and any associated fees
charged to taxpayers (including monthly and point-of-service
fees) to access their tax refunds, the impact on individuals
who do not have access to financial accounts or institutions,
and ensuring payments are made to accounts that comply with the
Bank Secrecy Act\127\ and the USA PATRIOT Act of 2001.\128\ The
report is required to include legislative recommendations
necessary to accomplish these goals.
---------------------------------------------------------------------------
\127\31 U.S.C. secs. 5311-5332.
\128\Pub. L. No. 107-56.
---------------------------------------------------------------------------
EFFECTIVE DATE
The provision is effective on the date of enactment.
6. IDENTITY PROTECTION PERSONAL IDENTIFICATION NUMBERS (SEC. 2006 OF
THE BILL)
PRESENT LAW
In 2011, the IRS launched a pilot program to test the
Identity Protection Personal Identification Number (``IP
PIN''). The IP PIN is a unique six-digit identifier that
authenticates a return filer as the legitimate taxpayer at the
time the return is filed. The IP PIN allows taxpayers affected
by identity theft to avoid delays in filing returns and
receiving refunds. The IRS verifies the presence of the IP PIN
at the time of filing, and rejects returns associated with a
taxpayer's account where an IP PIN has been assigned but is
missing. For the 2018 filing season, the IRS issued IP PINs to
almost 3.5 million taxpayers who had identity theft markers on
their tax accounts.\129\
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\129\Inspector General for Tax Administration, Department of the
Treasury, Results of the 2018 Filing Season (TIGTA 2019-40-013),
December 19, 2018, available at https://www.treasury.gov/tigta/
auditreports/2019reports/201940013fr.pdf.
---------------------------------------------------------------------------
In January 2014, the IRS also started a limited pilot
program under which taxpayers who obtained an electronic filing
PIN through an IRS authentication website and live in the
District of Columbia, Florida, or Georgia were provided an
opportunity to obtain an IP PIN.\130\ These locations were
selected because they had the highest per capita rate of tax-
related identity theft when the initiative was piloted.
Residents in these places do not need to be identity theft
victims to participate. Recently, the IRS expanded the program
to allow taxpayer who filed their federal tax return last year
as a resident of Michigan, California, Maryland, Nevada,
Delaware, Illinois, or Rhode Island to be eligible for an IP
PIN.
---------------------------------------------------------------------------
\130\Internal Revenue Service, FAQs about the Identity Protection
Personal Identification Number (IP PIN), available at https://
www.irs.gov/identity-theft-fraud-scams/frequently-asked-questions-
about-the-identity-protection-personal-identification-number-ip-pin#q2.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee is aware that the use of an IP PIN is an
effective means of preventing identity theft refund fraud via
an electronically filed return. The Committee believes that the
success of the pilot program for IP PINs warrants expansion of
the program beyond the residents of the District of Columbia,
Florida, and Georgia, and more recently Michigan, California,
Maryland, Nevada, Delaware, Illinois, and Rhode Island, and
persons who have already been subject to identity theft.
EXPLANATION OF PROVISION
Within five years of the date of enactment, the Secretary
or the Secretary's delegate is required to establish a program
to issue an IP PIN to any individual residing in the United
States who requests one to assist the Secretary in verifying
the individual's true identity. For each calendar year
beginning after the date of enactment, the Secretary is
required to expand the issuance of IP PINs to individuals
residing in such States as the Secretary deems appropriate,
provided that the total number of States served by the program
continues to increase.
EFFECTIVE DATE
The provision is effective on the date of enactment.
7. SINGLE POINT OF CONTACT FOR TAX-RELATED IDENTITY THEFT VICTIMS (SEC.
2007 OF THE BILL)
PRESENT LAW
Tax-related identity theft generally takes one of two
forms: refund fraud or employment fraud. In refund fraud, a
perpetrator may obtain a taxpayer's identifying information,
submit an individual income tax return using a falsified Form
W-2, Wage and Tax Statement, and fraudulently claim a refund.
In employment fraud, the stolen identifying information is used
in order to obtain employment. The returns then filed using the
stolen identity may be based on the actual wages and
withholding of the identity thief. Victims of the employment
fraud include the individuals whose identifying information was
stolen as well as the businesses whose systems may have been
breached to obtain that personal information.
The IRS describes its procedures for addressing both types
of fraud in the Internal Revenue Manual.\131\ The IRS initially
established the Identity Protection Specialized Unit (``IPSU'')
to assist victims of identity theft, but taxpayers were also
referred to other operating units of the IRS to deal with
various aspects of their cases.\132\ Subsequently reorganized
and renamed the Identity Theft Victim Assistance (``IDTVA'')
organization, the unit is staffed with specially trained
employees who are able to assess each case, identify issues,
and assist the taxpayer in getting the correct return filed,
refunds issued, etc.\133\ The IDTVA organization's work is
coordinated by the IRS's Identity Protection Program through
the auspices of an oversight office within the Wage and
Investment Operating Division.\134\
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\131\Internal Revenue Service, Internal Revenue Manual, Identity
Protection and Victim Assistance, Ch. 23, sec. 25.23.1 et seq. (October
2018).
\132\Inspector General for Tax Administration, Department of the
Treasury, Most Taxpayers Whose Identities Have Been Stolen to Commit
Refund Fraud Do Not Receive Quality Customer Service (TIGTA 2012-40-
050), May 2012.
\133\A description of the services provided by the IDTVA
organization is available at https://www.irs.gov/uac/Newsroom/IRS-
Identity-Theft-Victim-Assistance-How-It-Works.
\134\Internal Revenue Service, Internal Revenue Manual, Identity
Protection and Victim Assistance, Ch. 23, sec. 25.23.1 et seq. (October
2018).
---------------------------------------------------------------------------
If a victim thinks he or she is not being properly served
by the IRS or the IDTVA organization, the victim may be
eligible for assistance from the TAS. In such instances, the
TAS will assign a case advocate to the taxpayer's account.
REASONS FOR CHANGE
The Committee is concerned that taxpayers who are
victimized by identity thieves experience delays in obtaining
their tax refunds and find it difficult to work with multiple
offices within the IRS. Requiring a single point of contact at
the IRS to provide assistance to these victims is a common-
sense measure that will simplify the resolution of cases for
taxpayers. Although the IRS has shown flexibility in adapting
new procedures for handling identity theft cases, the Committee
believes that a single point of contact for an identity theft
victim is necessary.
EXPLANATION OF PROVISION
The provision requires the Secretary to establish
procedures to implement a single point of contact for taxpayers
adversely affected by identity theft. The single point of
contact consists of a team of specially trained employees who
can work across functions within the IRS to resolve problems
for the victim and who are accountable for handling the case to
completion. The makeup of the team may change as required to
meet IRS's needs, but the procedures must ensure continuity of
records and case history and may require notice to the taxpayer
in appropriate instances.
EFFECTIVE DATE
The provision is effective on the date of enactment.
8. NOTIFICATION OF SUSPECTED IDENTITY THEFT (SEC. 2008 OF THE BILL AND
NEW SEC. 7529 OF THE CODE)
PRESENT LAW
Section 6103 provides that returns and return information
are confidential and may not be disclosed by the IRS, other
Federal employees, State employees, and certain others having
access to the information except as provided in the Code.\135\
The definition of ``return information'' is very broad and
includes any information gathered by the IRS with respect to a
person's liability or possible liability under the Code for any
tax, penalty, interest, fine, forfeiture, or other imposition
or offense.\136\ Thus, information gathered by the IRS in
connection with an investigation of a person for a Title 26
offense, such as fraud, is the return information of the person
being investigated and is subject to the confidentiality
restrictions of section 6103.
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\135\Sec. 6103(a).
\136\Sec. 6103(b)(2).
---------------------------------------------------------------------------
As an exception to section 6103's general rule of
confidentiality, the Code permits a taxpayer to receive his or
her own tax return, and also can receive his or her return
information if the Secretary determines that such disclosure
would not seriously impair Federal tax administration.\137\
With respect to fraudulent tax returns, if the victim's name
and Social Security number (``SSN'') are listed as either the
primary or secondary taxpayer on a fraudulent return, a victim
of identity theft, or a person authorized to obtain the
identity theft victim's tax information, may request a redacted
copy (one with some information blacked-out) of a fraudulent
return that was filed and accepted by the IRS using the
identity theft victim's name and SSN.\138\
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\137\Sec. 6103(e)(1) and (7). The Code also permits the disclosure
of returns and return information to such persons or persons the
taxpayer may designate, if the request meets the requirements of the
Treasury regulations and if it is determined that such disclosure would
not seriously impair Federal tax administration. Sec. 6103(c).
\138\See Internal Revenue Service, Instructions for Requesting Copy
of Fraudulent Returns (March 18, 2019), available at https://
www.irs.gov/individuals/instructions-for-requesting-copy-of-fraudulent-
returns.
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In cases not involving violations of Title 26, under a
Privacy Act Notice, TIGTA is allowed to disclose information to
complainants, victims, or their representatives (defined to be
a complainant's or victim's legal counsel or a Senator or
Representative whose assistance the complainant or victim has
solicited) concerning the status and/or results of an
investigation or case arising from the matters of which they
complained and/or of which they were a victim, including, once
the investigative subject has exhausted all reasonable appeals,
any action taken. Information concerning the status of the
investigation or case is limited strictly to whether the
investigation or case is open or closed. Information concerning
the results of the investigation or case is limited strictly to
whether the allegations made in the complaint were
substantiated or were not substantiated and, if the subject has
exhausted all reasonable appeals, any action taken.\139\
---------------------------------------------------------------------------
\139\See 75 Fed. Reg. 20715 (April 20, 2010) (relating to TIGTA
Office of Investigation files).
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REASONS FOR CHANGE
The Committee notes that victims of identity theft are
often unaware that their identity has been stolen or
compromised. As a result, they are unable to take timely
measures to limit damage from the theft and to secure their
identity against further compromise. The Committee also notes
that successful prosecution of identity thieves requires that
the investigators exercise discretion in disclosing information
to victims about an ongoing investigation. However, the
Committee believes that victims must be provided an opportunity
to safeguard their financial information and assets as soon as
practicable.
The Committee is aware that the unauthorized use of the
identity of an individual to obtain employment causes severe
hardship for the victims of this theft, including accusations
of underreporting income and the loss of income-related
benefits. Accordingly, to help protect these victims, in making
a determination as to whether there has been or may have been
an unauthorized use of identity for purposes of notifying the
victim, the IRS is required to review information obtained from
both its own internal processes on data mismatches as well as
the information provided to the IRS by the Social Security
Administration.
EXPLANATION OF PROVISION
If the Secretary determines that there has been or may have
been an unauthorized use of the identity of any individual, the
provision requires the Secretary to, without jeopardizing an
investigation relating to tax administration, as soon as
practicable, notify the individual of such determination, and:
(1) provide instructions to the individual about filing a
report with law enforcement; (2) identify any steps to be taken
by the individual to allow investigating law enforcement
officials to access the taxpayer's personal information; (3)
provide information regarding actions the individual may take
to protect themselves from harm relating to the unauthorized
use; and (4) offer identity protection measures to the
individual, such as the use of an identity protection personal
identification number.
At the time this information is provided (or, if not
available at such time, as soon as practicable thereafter), the
Secretary shall issue additional notifications to such
individual (or such individual's designee) regarding: (1)
whether an investigation has been initiated in regards to such
unauthorized use; (2) whether the investigation substantiated
an unauthorized use of the taxpayer's identity; and (3) whether
any action has been taken with respect to the individual who
committed the substantiated violation, including whether any
referral has been made for criminal prosecution of such
individual, and, to the extent such information is available,
whether such person has been criminally charged by indictment
or information.
For purposes of this provision, the unauthorized use of the
identity of an individual includes the unauthorized use of the
identity of the individual to obtain employment (herein
``employment-related identity theft''). In making a
determination as to whether there may have been an unauthorized
use of the identity of an individual to obtain employment, the
Secretary shall review certain information returns, as well as
information provided to the IRS by the SSA, which indicates
that the SSN used does not correspond with either the name on
the information return or the name on the tax return reporting
the income. This provision requires the Secretary to examine
the statements, information returns, and tax returns described
in the provision for any evidence of employment-related
identity theft, regardless of whether such statements or
returns are submitted electronically or on paper. The provision
amends the Social Security Act to require the Commissioner of
Social Security to request information described in the
provision not less than annually. The provision also requires
that the IRS establish procedures to ensure that income
reported in connection with the unauthorized use of a
taxpayer's identity is not taken into account in determining
any penalty for underreporting of income by the victim of
identity theft.
EFFECTIVE DATE
The provision applies to determinations made after the date
that is 6 months after the date of enactment.
9. GUIDELINES FOR STOLEN IDENTITY THEFT REFUND FRAUD CASES (SEC. 2009
OF THE BILL)
PRESENT LAW
Disparate elements in the tax laws and administration are
implicated in identity theft. The tax aspects of identity theft
can generally occur in one of two ways. In refund fraud, a
perpetrator obtains someone else's identifying information and
submits an individual income tax return using the name and
Social Security number of the victim, with a falsified Form W-
2, Wage and Tax Statement, and fraudulently claims a refund. In
other cases, the stolen identifying information is used in
order to obtain employment; the returns then filed by the
persons employed using the stolen identity may be based on the
actual wages and withholding. Victims of the fraud include the
individuals whose identifying information was stolen as well as
the businesses whose systems may have been breached to obtain
that personal information.
The IRS describes its procedures for addressing both types
of fraud in its manual. Its work is coordinated by the IRS's
Identity Protection Program through the auspices of an
oversight office.\140\
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\140\Internal Revenue Service, Internal Revenue Manual, Identity
Protection and Victim Assistance, Ch. 23, sec. 25.23.1 et seq. (October
2018).
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In the 2014 Annual Report to Congress, the NTA included a
review of fraudulent refund claims that included the theft of a
taxpayer's identity.\141\ The review found that such cases
involved multiple issues requiring coordination among several
business units of the IRS and took approximately six months to
resolve. Identity theft victims were required to deal with
multiple persons within the IRS to resolve the issues, either
because a case involved multiple business units or was
transferred among multiple employees within a business unit.
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\141\National Taxpayer Advocate, ``Identity Theft Case Review
Report: A Statistical Analysis of Identity Theft Cases Closed in June
2014,'' 2014 Annual Report to Congress, available at http://
www.taxpayeradvocate.irs.gov/reports-to-congress/2014-annual-report-to-
congress/research-studies.
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REASONS FOR CHANGE
As the profitability and ease of identity theft grows, the
threat to the tax system from fraudulent tax refund filings
increases. The Committee believes there is a need to reduce the
administrative burden on victims of tax-related identity theft,
even as the IRS works proactively to combat such fraud.
EXPLANATION OF PROVISION
The provision requires the Secretary (or the Secretary's
delegate), in consultation with the NTA, to develop and
implement publicly available casework guidelines for the
handling of refund fraud cases that would have the effect of
reducing the administrative burdens on victims of identity
theft. The guidelines may address both procedures and metrics
for determining whether the procedures are successfully
implemented. Among the issues to be considered are the
standards for opening, assigning, reassigning or closing a
case; the average length of time in which a case with an
identity theft issue should be resolved; the average length of
time a victim entitled to a tax refund may have to wait to
receive such refund; and the number of IRS offices and
employees with whom a victim should interact to resolve a case.
EFFECTIVE DATE
The provision is effective on the date of enactment, with
guidelines to be implemented within one year of the date of
enactment.
10. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF INFORMATION BY
PREPARERS OF RETURNS (SEC. 2010 OF THE BILL AND SEC. 6713 OF THE CODE)
PRESENT LAW
The Code provides both civil and criminal penalties for a
tax return preparer who discloses any information furnished to
the preparer for, or in connection with, the preparation of
such return or uses such information for any purpose other than
to prepare or assist in preparing, any such return. The civil
penalty is $250 for each unauthorized disclosure or use up to
$10,000 per calendar year.\142\ The corresponding criminal
penalty under section 7216 provides that knowing or reckless
conduct is a misdemeanor, subject to a fine up to $1,000, one
year of imprisonment, or both, together with the costs of
prosecution.
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\142\Sec. 6713.
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Section 6103(b)(6) defines ``taxpayer identity'' as the
name of the person with respect to whom a return is filed, his
mailing address, his taxpayer identifying number or a
combination thereof.
REASONS FOR CHANGE
The Committee believes that taxpayer confidence in the
trustworthiness of tax return preparers is an important element
in tax administration. Those who are entrusted with the
sensitive personal data of taxpayers should be held to a high
standard, and violation of that trust when a return preparer
uses or discloses a client's return information should be
punished accordingly. The Committee does not believe that the
current civil or criminal penalties adequately punishes the
breach of trust involved in such disclosure.
EXPLANATION OF PROVISION
The provision increases the civil penalty on the
unauthorized disclosure or use of information by tax return
preparers from $250 to $1,000 for cases in which the disclosure
or use is made in connection with a crime relating to the
misappropriation of another person's taxpayer identity
(``taxpayer identity theft''). The provision also increases the
calendar year limitation from $10,000 to $50,000. The calendar
year limitation is applied separately with respect to
disclosures or uses made in connection with taxpayer identity
theft.
The provision also increases the criminal penalty for
knowing or reckless conduct to $100,000 in the case of
disclosures or uses in connection with taxpayer identity theft.
EFFECTIVE DATE
The provision applies to disclosures or uses on or after
the date of enactment.
B. Development of Information Technology
1. MANAGEMENT OF IRS INFORMATION TECHNOLOGY (SEC. 2101 OF THE BILL AND
SEC. 7803 OF THE CODE)
PRESENT LAW
The Code describes duties and responsibilities for the
Commissioner, the Chief Counsel, and the OTA of the IRS.\143\
It does not presently enumerate duties and responsibilities of
an IRS Chief Information Officer (``IRS CIO'').
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\143\Sec. 7803.
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Also, the Code does not explicitly provide for development
and implementation of a multiyear strategic plan for the
information technology needs of the IRS, and does not require
verification and validation of major acquisitions of
information technology by the IRS, including the Customer
Account Data Engine 2 (``CADE 2'') and the Enterprise Case
Management System (``ECM'').
REASONS FOR CHANGE
The Committee believes it is important for the IRS to
afford taxpayers peace of mind that their most sensitive
information is being responsibly protected by their government,
using the latest technology. The Committee believes the
appointment of an IRS CIO with operational control of all
information technology infrastructure for the IRS, and
responsibility for the development and implementation of
realistic multiyear strategic plans, in conjunction with the
verification and validation of major acquisitions of
information technology, are important components in the
development, maintenance, and implementation of information
technology that is secure and integrated.
The Committee also has concerns about audits from the IRS's
oversight bodies, which report that offices or divisions within
the IRS, other than the office of information technology, have
procured solutions that the Committee considers to be within
the definition of information technology, but for which the
office of information technology was not notified or consulted.
The Committee believes that strengthening of the roles and
responsibilities of the CIO and clarifying the definition of
``information technology'' will assist the IRS in better
administering and overseeing its information technology.
The Committee believes that it is important to mandate the
independent verification and validation of CADE 2 and ECM plans
to ensure that the planning for each of these projects is
reasonable and achievable. The Committee notes that the IRS has
struggled for years to complete both of these projects. CADE 2,
the IRS's replacement for the Individual Master File that
houses individuals' tax account data, initially began
development in 2009 with an estimated completion in 2015.
However, to date, the IRS has spent almost $2 billion on this
project and is not able to provide a completion date for all
phases of the project. While the IRS initiated the ECM project
in 2015, after initially selecting and procuring an ECM
solution, the IRS later determined that this solution could not
be deployed enterprise-wide. Both of these systems are central
to the success of the IRS in meeting its mission. If Congress
is to continue to support and fund these programs, certainty is
needed that the IRS will be able to plan for and implement
these programs.
EXPLANATION OF PROVISION
Under the provision, the Commissioner is required to
appoint an IRS CIO. The Commissioner and the Secretary will act
through the IRS CIO with respect to the development,
implementation, and maintenance of information technology for
the IRS. The IRS CIO will be responsible for the development,
implementation, and maintenance of information technology for
the IRS, for ensuring that the information technology of the
IRS is secure and integrated, for maintaining operational
control of all information technology for the IRS, for acting
as the principal advocate for the information technology needs
of the IRS, and for consulting with the Chief Procurement
Officer of the IRS to ensure that the information technology
acquired for the IRS is consistent with the strategic plan,
described below.
The IRS CIO will also be responsible for developing and
implementing a multiyear strategic plan for the information
technology needs of the IRS. This plan should include
performance measures of such technology and its implementation,
and a plan for an integrated enterprise architecture of the
information technology of the IRS. It should take into account
the resources needed to accomplish such a plan, as well as
planned major acquisitions of information technology by the
IRS. The plan should also align with the needs and strategic
plan of the IRS. The IRS CIO will review and update this plan
at least once a year, taking into account the development of
new information technology and the needs of the IRS.
Under the provision, the Commissioner will develop plans
for each phase of CADE 2, except phase one, and enter into a
contract with an independent reviewer to verify and validate
implementation plans developed for each phase, except phase
one, and for the ECM. Furthermore, the Chief Procurement
Officer of the IRS is directed to regularly consult with the
IRS CIO and to identify all significant IRS information
technology acquisitions in excess of $1,000,000, providing
written notification to the IRS CIO of each such acquisition in
advance of acquisition.
The verification and validation of phase two of CADE 2 and
the ECM are to be completed within one year after the date of
enactment. The development of plans for all subsequent phases
of CADE 2 should be completed within one year after the date of
enactment and the verification and validation of each phase
should be completed within one year after the date on which the
plan for such phase is completed.
EFFECTIVE DATE
The provision is generally effective on the date of
enactment.
2. INTERNET PLATFORM FOR FORM 1099 FILINGS
(SEC. 2102 OF THE BILL)
PRESENT LAW
The Code does not presently require the IRS to make
available an internet platform for the preparation or filing of
information returns, such as the Form 1099 series.
REASONS FOR CHANGE
The Committee believes that it is desirable to provide a
simple and secure manner for small businesses to file critical
tax information returns electronically. The Committee further
believes that such a secure manner of filing can be modeled on
an existing online platform, Social Security Administration
(``SSA'') Business Services Online. The Committee believes that
an online platform for submitting information returns to the
IRS, similar to SSA Business Services Online, could improve
compliance of small business taxpayers while reducing their
administrative burden. Businesses would be able to prepare and
file information returns such as IRS Form 1099-MISC,
Miscellaneous Income, online while preparing the payee
statements and creating necessary business records.
EXPLANATION OF PROVISION
The provision requires the Secretary of the Treasury (or
his or her delegate) to make available, by January 1, 2023, an
internet website or other electronic medium (the ``website''),
with a user interface and functionality similar to the Business
Services Online Suite of Services provided by the Social
Security Administration.\144\ The website will allow persons,
with access to resources and guidance provided by the IRS, to
prepare, file, and distribute Forms 1099, and maintain a record
of completed, filed, and distributed Forms 1099. The Secretary
is required to ensure that the services provided on the website
are not a replacement for services currently provided by the
IRS, and that the website comply with applicable security
standards.
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\144\Available at http://www.ssa.gov/bso/bsowelcome.htm.
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EFFECTIVE DATE
The provision is effective on the date of enactment.
3. STREAMLINED CRITICAL PAY AUTHORITY FOR INFORMATION TECHNOLOGY
POSITIONS (SEC. 2103 OF THE BILL AND NEW SEC. 7812 OF THE CODE)
PRESENT LAW
The IRS is currently subject to the personnel rules and
procedures set forth in Title 5 of the United States Code.
Under these rules, IRS employees generally are classified under
the General Schedule or the Senior Executive Service.
The RRA98 provided the IRS with certain personnel
flexibilities, one of which was the streamlined critical pay
authority.\145\ This authority was originally provided for 10
years; it was extended on two occasions and ultimately expired
on September 30, 2013.\146\
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\145\Pub. L. No. 105-206, 112 Stat. 712 (1998).
\146\In December 2007, the Consolidated Appropriations Act, 2008,
Pub. L. No. 110-161, 121 Stat. 1844, (2008), extended the original
deadline to July 23, 2013. Subsequently, the Consolidated and Further
Continuing Appropriations Act 2013, Pub. L. No. 113-6, 127 Stat. 198
(2013), extended the deadline to September 30, 2013.
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Under RRA98, the Secretary of the Treasury, or his
delegate, was authorized to fix the compensation of, and
appoint up to 40 individuals to, designated critical technical
and professional positions, provided that: (1) the positions
require expertise of an extremely high level in a technical or
professional field and are critical to the IRS; (2) exercise of
the authority is necessary to recruit or retain an individual
exceptionally well qualified for the position; (3) designation
of such positions is approved by the Secretary; (4) the terms
of such appointments are limited to no more than four years;
(5) appointees to such positions are not IRS employees
immediately prior to such appointment; and (6) the total annual
compensation for any position (including performance bonuses)
does not exceed the rate of pay of the Vice President of the
United States.
These appointments would not be subject to the otherwise
applicable requirements under Title 5. All such appointments
would be excluded from the collective bargaining unit and the
appointments would not be subject to approval of the OMB or the
Office of Personnel Management.
Also, OMB was authorized to approve increases in the pay
level for certain critical pay positions requested by the
Secretary. These critical pay positions would be critical,
technical and professional positions other than those
designated under the streamlined authority described above. OMB
was authorized to approve requests for critical position pay up
to the highest total compensation that does not exceed the rate
of pay of the Vice President of the United States.
According to TIGTA, during the years in which it had
streamlined critical pay authority, the IRS exercised that
authority to fill 168 positions, the majority of which were in
the Information Technology function of the IRS.\147\
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\147\TIGTA, The Internal Revenue Service's Use of its Streamlined
Critical Pay Authority,'' Ref. No. 2015-IE-R001 (December 5, 2014),
available at https://www.treasury.gov/tigta/iereports/2015reports/
2015ier001fr.pdf.
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REASONS FOR CHANGE
The Committee is aware that, in order to identify and
prevent identity theft or refund fraud, the IRS has focused on
improving its efforts in cybersecurity, by providing continuous
monitoring of systems, replacing old technology, developing new
authentication measures, and working with the private sector to
identify best practices. To do so, the IRS must be able to
recruit and retain experts from the private sector in highly
specialized areas of information technology. The Committee
believes that the IRS's ability to recruit such experts was
aided by the now-expired streamlined critical pay authority,
and believes that reauthorization is appropriate.
EXPLANATION OF PROVISION
The provision reinstates streamlined critical pay authority
at IRS for positions in its information technology operations
that are necessary to ensure the functionality of such
operations. Such authority is reinstated during the period
beginning on the date of the enactment of section 7812 of the
Code, and ending on September 30, 2025, for appointees to such
positions who were not IRS employees prior to the date of
enactment of this Act.
The provision reinstates the ability to provide payment for
recruitment, retention, relocation incentives, and relocation
expenses for positions in information technology operations at
the IRS. Such authority is reinstated during the period
beginning on the date of the enactment of section 7812 of the
Code, and ending on September 30, 2025.
The provision also reinstates the ability to pay
performance bonuses for senior executives who have program
management responsibility over the information technology
operations at the IRS. Such authority is reinstated during the
period beginning on the date of the enactment of section 7812
of the Code, and ending on September 30, 2025.
EFFECTIVE DATE
The provision is effective for payments made on or after
the date of enactment.
C. Modernization of Consent-Based Income Verification System
1. DISCLOSURE OF TAXPAYER INFORMATION FOR THIRD-PARTY INCOME
VERIFICATION (SEC. 2201 OF THE BILL AND SEC. 6103 OF THE CODE)
PRESENT LAW
Disclosure of return information with consent of the taxpayer
As a general rule, returns and return information are
confidential and cannot be disclosed unless authorized by Title
26.\148\ Under section 6103(c), the IRS may disclose the return
or return information of a taxpayer to a third party designated
by the taxpayer in a request for or consent to such disclosure.
Treasury regulations set forth the requirements for such
consent.\149\ A request for consent to disclosure in written
form must be a separate written document pertaining solely to
the authorized disclosure. At the time the consent is signed
and dated by the taxpayer, the written document must indicate:
(1) the taxpayer's taxpayer identity information; (2) the
identity of the person(s) to whom disclosure is to be made; (3)
the type of return (or specified portion of the return) or
return information (and the particular data) that is to be
disclosed; and (4) the taxable year(s) covered by the return or
return information. The regulations also require that the
consent be submitted within 120 days of the date signed and
dated by the taxpayer.
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\148\Sec. 6103(a).
\149\Treas. Reg. sec. 301.6103(c)-1. The regulations also specify
the requirements for a nonwritten request for information or consent to
disclosure to allow a third party to provide information or assistance
relating to the taxpayer's return or to a transaction or other contact
between the taxpayer and the IRS.
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Income Verification Express Service (IVES)
Mortgage lenders and others in the financial community use
the IRS's Income Verification Express Service (IVES) to confirm
the income of a borrower during the processing of a loan
application.\150\ Customers of IVES fax to a specified IRS
office a signed Form 4506-T (``Request for Transcript of Tax
Return'') or Form 4506T-EZ (``Short Form Request for Individual
Tax Return Transcript''). The IRS provides three types of
transcript information as part of the IVES program: (1) a
return transcript; (2) Form W-2 (``Wage and Tax Statement'')
transcript information; and (3) Form 1099\151\ transcript
information.
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\150\Internal Revenue Service, Income Verification Express Service,
https://www.irs.gov/individuals/international-taxpayers/income-
verification-express-service (January 31, 2019).
\151\There are various Forms 1099: Form 1099-B, Proceeds From
Broker or Barter Exchange Transactions; Form 1099-DIV, Dividends and
Distributions; 1099-INT, Interest Income; 1099-MISC, Miscellaneous
Income; 1099-OID, Original Issue Discount; or 1099-R, Distributions
From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.
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The IRS imposes a $2.00 fee for each transcript requested.
The requested transcript information is delivered to a secure
mailbox on the IRS's e-Services electronic platform, generally
within two to three business days.
To participate in the IVES program, companies must register
and identify employees to act as agents to receive transcripts
on the company's behalf.\152\ According to the Form 13803
(``Application to Participate in the Income Verification
Express Services (IVES) Program''), the IRS conducts a
suitability check on the applicant and all the principals
listed on the application to determine the applicant's
suitability to be an IVES participant. After an applicant
passes the suitability check and the IRS completes processing
the application, the IRS notifies the applicant of acceptance
to participate in the program.
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\152\Applicants also must choose one or more of the reasons listed
on the form as the basis for using the IVES program: mortgage services,
background check, credit check, banking service, licensing requirement,
or other (must be specified).
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REASONS FOR CHANGE
The Committee believes that fully automating the IVES
program to allow for electronic submissions, as well as
electronic responses, will reduce operational costs and reduce
paperwork burdens for borrowers. The Committee also believes
that automating the IVES program will increase small business
access to capital, thereby making borrowing more affordable,
easier, and safer for consumers and small business. The
Committee intends that the automated process be as close to
real time as possible while providing the same data fields
currently provided by the non-automated version. While
convenience is important, the Committee also wants to emphasize
that convenience should not compromise the security of
information within the system. Therefore, the Committee
believes it is appropriate that the Secretary ensure that the
program comply with applicable security standards, such as
regulations and guidance provided by the National Institute of
Standards and Technology.
EXPLANATION OF PROVISION
As noted above, the current IVES program requires that
transcript information requests be submitted to the IRS by fax
and then the transcripts are furnished electronically to a
secure mailbox. After a specified time period, the provision
requires the Secretary (or his delegate) to implement a
qualified disclosure program that is fully automated,
accomplished through the Internet, and through which
disclosures are accomplished in as close to real-time as is
practicable. The program is to comply with applicable security
standards and guidelines. The term ``qualified disclosure''
means a disclosure made pursuant to section 6103(c) to a person
seeking to verify the income of a taxpayer who is a borrower in
the process of a loan application. ``Qualified disclosure'' is
intended as a reference to the types of disclosures made under
the current IVES program. The provision is not intended to
exclude current uses of the IVES program.
To cover the costs of implementing such a program, for a
two-year period beginning six months after the date of
enactment, the Secretary is authorized to assess and collect a
fee for qualified disclosures at such rates as the Secretary
determines are sufficient to cover the costs related to
implementing the program, including the costs of any necessary
infrastructure or technology. Such fees are in addition to any
other fee assessed and collected for such disclosures. The
amounts received from the fees assessed and collected are to be
deposited in and credited to an account solely for the purpose
of carrying out the activities associated with implementing the
qualified disclosure program. Not later than one year after the
close of the two-year period, the Secretary is required to
implement the program.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. LIMIT REDISCLOSURES AND USES OF CONSENT-BASED DISCLOSURES OF TAX
RETURN INFORMATION (SEC. 2202 OF THE BILL AND SEC. 6103 OF THE CODE)
PRESENT LAW
In general
As a general rule, returns and return information are
confidential and cannot be disclosed unless authorized by Title
26.\153\ Under section 6103(c), a taxpayer may designate in a
request or consent to the disclosure by the IRS of his or her
return or return information to a third party. Treasury
regulations set forth the requirements for such consent.\154\
The request or consent may be in written or non-written form.
The Treasury regulations require that the taxpayer sign and
date a written consent. At the time the consent is signed and
dated by the taxpayer, the written document must indicate (1)
the taxpayer's identity information; (2) the identity of the
person to whom disclosure is to be made; (3) the type of return
(or specified portion of the return) or return information (and
the particular data) that is to be disclosed; and (4) the
taxable year covered by the return or return information. The
regulations also require that the consent be submitted within
120 days of the date signed and dated by the taxpayer. Present
law does not require that a recipient receiving returns or
return information by consent maintain the confidentiality of
the information received. Under present law, the recipient is
also free to use the information for purposes other than for
which the information was solicited from the taxpayer.
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\153\Sec. 6103(a).
\154\Treas. Reg. sec. 301.6103(c)-1.
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Criminal penalties
Under section 7206, it is a felony to willfully make and
subscribe any document that contains or is verified by a
written declaration that it is made under penalties of perjury
and which such person does not believe to be true and correct
as to every material matter.\155\ Upon conviction, such person
may be fined up to $100,000 ($500,000 in the case of a
corporation) or imprisoned up to three years, or both, together
with the costs of prosecution.
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\155\Sec. 7206(1).
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Under section 7213, criminal penalties apply to: (1)
willful unauthorized disclosures of returns and return
information by Federal and State employees and other persons;
(2) the offering of any item of material value in exchange for
a return or return information and the receipt of such
information pursuant to such an offer; and (3) the unauthorized
disclosure of return information received by certain
shareholders under the material interest provision of section
6103. Under section 7213, a court can impose a fine up to
$5,000, up to five years imprisonment, or both, together with
the costs of prosecution. If the offense is committed by a
Federal employee or officer, the employee or officer will be
discharged from office upon conviction.
Under section 7213A, the willful and unauthorized
inspection of returns and return information can subject
Federal and State employees and others to a maximum fine of
$1,000, up to a year in prison, or both, in addition to the
costs of prosecution. If the offense is committed by a Federal
employee or officer, the employee or officer will be discharged
from office upon conviction.
Civil damage remedies for unauthorized disclosure or inspection
If a Federal employee makes an unauthorized disclosure or
inspection, a taxpayer can bring suit against the United States
in Federal district court. If a person other than a Federal
employee makes an unauthorized disclosure or inspection, suit
may be brought directly against such person. No liability
results from a disclosure based on a good faith, but erroneous,
interpretation of section 6103. A disclosure or inspection made
at the request of the taxpayer will also relieve liability.
Upon a finding of liability, a taxpayer can recover the
greater of $1,000 per act of unauthorized disclosure (or
inspection), or the sum of actual damages plus, in the case of
an inspection or disclosure that was willful or the result of
gross negligence, punitive damages. The taxpayer may also
recover the costs of the action and, if found to be a
prevailing party, reasonable attorney fees.
The taxpayer has two years from the date of the discovery
of the unauthorized inspection or disclosure to bring suit. The
IRS is required to notify a taxpayer of an unauthorized
inspection or disclosure as soon as practicable after any
person is criminally charged by indictment or information for
unlawful inspection or disclosure.
REASONS FOR CHANGE
The Committee is concerned that information obtained by
consent is not subject to the same protection and limits on use
as currently applies to other taxpayer information. The
Committee believes that this provision addresses the numerous
privacy concerns raised by current law.
EXPLANATION OF PROVISION
Under the provision, persons designated by the taxpayer to
receive return information shall not use the information for
any purpose other than the express purpose for which consent
was granted and shall not disclose return information to any
other person without the express permission of, or request by,
the taxpayer.
EFFECTIVE DATE
The provision is effective for disclosures made six months
after the date of enactment.
D. Expanded Use of Electronic Systems
1. ELECTRONIC FILING OF RETURNS (SEC. 2301 OF THE BILL AND SEC. 6011 OF
THE CODE)
PRESENT LAW
RRA98 states a Congressional policy to promote the
paperless filing of Federal tax returns. Section 2001(a) of
RRA98 set a goal for the IRS to have at least 80 percent of all
Federal tax and information returns filed electronically by
2007.\156\ Section 2001(b) of RRA98 requires the IRS to
establish a 10-year strategic plan to eliminate barriers to
electronic filing.
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\156\The Electronic Tax Administration Advisory Committee, the body
charged with oversight of IRS progress in reaching that goal, projected
an overall e-filing rate of 80.1 percent in the 2017 filing season
based on all Federal returns. See Electronic Tax Administration
Advisory Committee, Annual Report to Congress, June 2017, IRS Pub.
3415, page 5.
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Present law requires the Secretary to issue regulations
regarding electronic filing and specifies certain limitations
on the rules that may be included in such regulations.\157\ The
statute requires that Federal income tax returns prepared by
specified tax return preparers be filed electronically,\158\
and further requires that all partnerships with more than 100
partners be required to file electronically. For taxpayers
other than partnerships, the statute prohibits any requirement
that persons who file fewer than 250 returns during a calendar
year file electronically. With respect to individuals, estates,
and trusts, the Secretary may permit, but generally cannot
require, electronic filing of income tax returns. In crafting
any of these required regulations, the Secretary must take into
account the ability of taxpayers to comply at a reasonable
cost.
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\157\Sec. 6011(e). Sec. 6011(e) uses the term ``magnetic media''
and Treasury regulation section 301.6011-2 defines this term to include
electronic filing.
\158\Section 6011(e)(3)(B) defines a ``specified tax return
preparer'' as any return preparer who reasonably expects to file more
than 10 individual income tax returns during a calendar year.
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The regulations require corporations that have assets of
$10 million or more and file at least 250 returns during a
calendar year to file electronically their Form 1120/1120S
income tax returns (U.S. Corporation Income Tax Return/U.S.
Income Tax Return for an S Corporation) and Form 990
information returns (Return of Organization Exempt from Income
Tax) for tax years ending on or after December 31, 2006.\159\
In determining whether the 250 returns threshold is met, income
tax, excise tax, employment tax and information returns filed
within one calendar year are counted.
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\159\Treas. Reg. secs. 301.6011-5 and 301.6033-4.
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The Code provides that failure to comply with information
reporting requirements is subject to a failure to file correct
information return penalty but provides a de minimis exception
for failures that are attributable solely to noncompliance with
the electronic filing requirements. Under the de minimis
exception, failure to satisfy the electronic filing
requirements results in imposition of a failure to file
penalty\160\ if a failure arises with respect to (1) more than
250 information returns; (2) more than 100 information returns
in the case of a partnership having more than 100 partners; or
(3) a return described in Section 6011(e)(4).\161\ Accordingly,
there is a penalty waiver on the electronic filing requirements
on the first 250 information returns or in the case of the
first 100 information returns in partnerships with more than
100 partners.
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\160\Sec. 6721.
\161\Sec. 6724.
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REASONS FOR CHANGE
Consistent with the policy expressed in RRA98, the
Committee supports paperless filing as the preferred and most
convenient means of filing Federal tax and information returns.
Electronic filing produces a number of benefits both for
taxpayers and the IRS, including shorter processing times,
fewer errors, and better data. The Committee believes that the
efficiencies and cost savings achieved through electronic
filing justify expanding such requirements. The Committee is
aware that present law restricts the IRS's ability to expand
the scope of returns that are required to be filed
electronically. The Committee believes that the widespread
adoption of computer technology since RRA98 has reduced the
additional burden that mandatory e-filing imposes on taxpayers.
EXPLANATION OF PROVISION
The provision relaxes the current restrictions on the
authority of the Secretary to mandate electronic filing based
on the number of returns required to be filed by a taxpayer in
a given taxable period. First, it phases in a reduction in the
threshold requirement that taxpayers have an obligation to file
a specified number of returns and statements during a calendar
year in order to be subject to a regulatory mandate. That
threshold is reduced from 250 to 100 in the case of calendar
year 2021, and from 100 to 10 in the case of calendar years
after 2021. Notwithstanding these thresholds, in the case of a
partnership the applicable number is 200 in the case of
calendar year 2018, 150 in the case of calendar year 2019, 100
in the case of calendar year 2020, and 50 in the case of
calendar year 2021.\162\
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\162\There is no change to the requirement that partnerships having
more than 100 partners must file electronic returns notwithstanding
these thresholds.
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The provision authorizes the Secretary to waive the
requirement that a Federal income tax return prepared by a
specified tax return preparer be filed electronically if a tax
return preparer applies for a waiver and demonstrates that the
inability to file electronically is due to lack of internet
availability (other than dial-up or satellite service) in the
geographic location in which the return preparation business is
operated.
The provision modifies the special rule for failure to meet
magnetic media requirements to conform to the changes made
above.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. UNIFORM STANDARDS FOR THE USE OF ELECTRONIC SIGNATURES FOR
DISCLOSURE AUTHORIZATIONS TO, AND OTHER AUTHORIZATIONS OF,
PRACTITIONERS (SEC. 2302 OF THE BILL AND SEC. 6061 OF THE CODE)
PRESENT LAW
Disclosure of return information by consent of the taxpayer
As a general rule, returns and return information are
confidential and cannot be disclosed unless authorized by the
Code.\163\ Under section 6103(c), the IRS may disclose the
return or return information of a taxpayer to a third party
designated by the taxpayer in a request for or consent to such
disclosure. Treasury regulations set forth the requirements for
such consent.\164\ A request for consent to disclosure in
written form must be a separate written document pertaining
solely to the authorized disclosure. At the time the consent is
signed and dated by the taxpayer, the written document must
indicate (1) the taxpayer's taxpayer identity information; (2)
the identity of the person(s) to whom disclosure is to be made;
and (3) sufficient facts underlying the request for information
or assistance to enable the IRS to determine the nature and
extent of the information or assistance requested and the
return or return information to be disclosed in order to comply
with the taxpayer's request. The regulations also require that
the consent be submitted within 120 days of the date signed and
dated by the taxpayer.
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\163\Sec. 6103(a).
\164\Treas. Reg. sec. 301.6103(c)-1.
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Electronic signatures
The Secretary is required to develop procedures for the
acceptance of signatures in digital and other electronic
form.\165\ Until such time as such procedures are in place, the
Secretary may waive the requirement of a signature for, or
provide for alternative methods of signing or subscribing, a
particular type or class of return, declaration, statement or
other document required or permitted to be made or written
under the internal revenue laws and regulations. The Secretary
is required to publish guidance as appropriate to define and
implement any waiver of the signature requirements or
alternative method of signing or subscribing. The IRS currently
accepts electronic signatures for some applications, such as
the Income Verification Express Services (``IVES'')
program.\166\
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\165\Sec. 6061.
\166\Internal Revenue Service, Income Verification Express Services
(IVES) Electronic Signature Requirements (August 2, 2018), available at
https://www.irs.gov/individuals/international-taxpayers/income-
verification-express-services-ives-electronic-signature-requirements.
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Section 12.101 of the Federal Acquisition Regulations
require all Federal agencies to consider commercially available
items in the acquisition process.\167\
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\167\Specifically, section 12.101 provides that agencies: (1)
conduct market research to determine whether commercial items or
nondevelopmental items are available that could meet the agency's
requirements; (2) acquire commercial items or nondevelopmental items
when they are available to meet the needs of the agency; and (3)
require prime contractors and subcontractors at all tiers to
incorporate, to the maximum extent practicable, commercial items or
nondevelopmental items as components of items supplied to the agency.
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IRS forms
Form 2848 (Power of Attorney and Declaration of
Representative) is used to authorize an individual to represent
the taxpayer before the IRS. The individual must be eligible to
practice before the IRS.
Form 8821 (Tax Information Authorization) authorizes an
individual or organization to request and inspect a taxpayer's
confidential tax return information. Form 4506-T (Request for
Transcript of Tax Return) authorizes an individual or
organization to request and inspect transcripts of a taxpayer's
confidential return information. These forms do not authorize
an individual to represent the taxpayer before the IRS.
REASONS FOR CHANGE
In the private sector, electronic signatures are widely
accepted, and there are many commercially available options to
facilitate the acceptance of electronic signatures. The
Committee believes that the establishment of uniform guidance
for verification of electronic signatures will reduce
operational costs and facilitate practitioner representation.
The Committee expects the IRS to apply a uniform approach to
electronic signatures across IRS programs.
EXPLANATION OF PROVISION
For a request for disclosure to a practitioner with consent
of the taxpayer, or for any power of attorney granted by a
taxpayer to a practitioner, the provision requires the
Secretary to publish guidance to establish uniform standards
and procedures for the acceptance of taxpayers' signatures
appearing in electronic form with respect to such requests or
power of attorney. Such guidance must be published within six
months of the date of enactment. For purposes of the provision,
a ``practitioner'' means an individual in good standing who is
regulated under 31 U.S.C. sec. 330 (relating to practice before
the Department of the Treasury).
EFFECTIVE DATE
The provision is effective on the date of enactment.
3. PAYMENT OF TAXES BY DEBIT AND CREDIT CARDS (SEC. 2303 OF THE BILL
AND SEC. 6311 OF THE CODE)
PRESENT LAW
The Code generally permits the payment of taxes by
commercially acceptable means such as credit cards.\168\ The
Secretary may not pay any fee or provide any other
consideration in connection with the use of credit, debit, or
charge cards for the payment of income taxes.\169\
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\168\Sec. 6311.
\169\Sec. 6311(d)(2).
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REASONS FOR CHANGE
The Committee believes that removing the prohibition on the
Secretary paying any fees or providing any other consideration
in connection with the use of credit, debit, or charge cards
will allow the IRS to realize benefits similar to those
realized by any business that accepts payment by credit card,
including a guarantee that the funds will be paid over and a
reduction in the costs of handling paper checks. The Committee
believes that the provision could result in increased
collections by allowing taxpayers to more easily make a payment
by credit card over the telephone without having to wait for
the IRS to connect them to third party providers.
EXPLANATION OF PROVISION
The provision removes the prohibition on paying any fees or
providing any other consideration in connection with the use of
credit, debit, or charge cards for the payment of income taxes
to the extent taxpayers paying in this manner are fully
responsible for any fees or consideration incurred. The
provision requires the Secretary to seek to minimize the amount
of any fee or other consideration that the Secretary pays under
any contract.
EFFECTIVE DATE
The provision is effective on the date of enactment.
4. AUTHENTICATION OF USERS OF ELECTRONIC SERVICES ACCOUNTS (SEC. 2304
OF THE BILL)
PRESENT LAW
The IRS has developed a suite of web-based products, called
e-Services Online Tools for Tax Professionals, which provides
multiple electronic products and services to tax professionals.
REASONS FOR CHANGE
The Committee is aware that multi-factor authentication of
the identity of users of online accounts increases the security
of datasets. The Committee also believes that taxpayers are
entitled to demand that the IRS carefully guard the sensitive
information entrusted by taxpayers to the IRS.
EXPLANATION OF PROVISION
The provision requires the IRS to verify the identity of
any individual opening an e-Services account before he or she
is able to use such services.
EFFECTIVE DATE
The provision is effective not later than 180 days after
the date of enactment.
F. Other Provisions
1. REPEAL OF PROVISION REGARDING CERTAIN TAX COMPLIANCE PROCEDURES AND
REPORTS (SEC. 2401 OF THE BILL)
PRESENT LAW
Under present law, taxpayers generally are required to
calculate their own tax liabilities and submit returns showing
their calculations.\170\ Section 2004 of RRA98 requires the
Secretary of the Treasury or his delegate (``Secretary'') to
study the feasibility of, and develop procedures for, the
implementation of a return-free tax system for appropriate
individuals for taxable years beginning after 2007.\171\ The
Secretary is required annually to report to the tax-writing
committees on the progress of the development of such system.
The Secretary was required to make the first report on the
development of the return-free filing system to the tax-writing
committees by June 30, 2000.
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\170\Sec. 6012.
\171\Pub. L. No. 105-206, sec. 2004.
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REASONS FOR CHANGE
The Committee believes the reports required under RRA98 are
unnecessary and that the Secretary's limited resources are
better spent elsewhere.
EXPLANATION OF PROVISION
The provision repeals section 2004 of RRA98.
EFFECTIVE DATE
The provision is effective on the date of enactment.
2. COMPREHENSIVE TRAINING STRATEGY (SEC. 2402 OF THE BILL)
PRESENT LAW
The Code provides that the Commissioner has such duties and
powers as prescribed by the Secretary.\172\ Unless otherwise
specified by the Secretary, such duties and powers include the
power to administer, manage, conduct, direct, and supervise the
execution and application of the internal revenue laws or
related statutes. In executing these duties, the Commissioner
depends upon strategic plans that prioritize goals and manage
its resources. In the current strategic plan, cultivating a
well-equipped, diverse, flexible and engaged workforce is
identified as one of the IRS's six strategic goals.\173\
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\172\Sec. 7803(a).
\173\See Internal Revenue Service Strategic Plan FY2018-2022,
Publication 3744, available at https://www.irs.gov/pub/irs-pdf/
p3744.pdf.
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Within the IRS, the OTA is expected to represent taxpayer
interests independently in disputes with the IRS. The OTA has
four principal functions: (1) to assist taxpayers in resolving
problems with the IRS; (2) to identify areas in which taxpayers
have problems in dealing with the IRS; (3) to propose changes
in the administrative practices of the IRS to mitigate problems
in areas in which taxpayers have issues in dealing with the
IRS; and (4) to identify potential legislative changes which
may be appropriate to mitigate such problems.\174\ The NTA
supervises the OTA. The NTA reports directly to the
Commissioner.
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\174\Sec. 7803(c).
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REASONS FOR CHANGE
The Committee believes that a well-trained IRS workforce is
an important element of the ability of the IRS to provide
taxpayers with top-quality service, helping them understand and
meet their tax responsibilities, and enforcing the law with
integrity and fairness. By requiring that the Commissioner
submit a report to Congress outlining a comprehensive training
strategy for IRS employees, the Committee hopes to encourage
the IRS to consider possible additions and improvements to
current processes.
EXPLANATION OF PROVISION
The provision requires that the Commissioner submit to
Congress a written report providing a comprehensive training
strategy for employees of the IRS. The report is to be
submitted not later than one year after the date of enactment
of this Act, and is to include: a plan to streamline current
training processes, including an assessment of the utility of
further consolidating internal training programs, technology,
and funding; a plan to develop annual training regarding
taxpayer rights, including the role of the OTA, for employees
that interface with taxpayers and the direct managers of such
employees; a plan to improve technology-based training;
proposals to focus employee training on early, fair, and
efficient resolution of taxpayer disputes for employees that
interface with taxpayers and the direct managers of such
employees, as well as ensure consistency of skill development
and employee evaluation throughout the IRS; and a thorough
assessment of the funding necessary to implement such a
strategy.
EFFECTIVE DATE
The provision is effective on the date of enactment.
TITLE III--MISCELLANEOUS PROVISIONS
A. Reform of Laws Governing Internal Revenue Service Employees
1. PROHIBITION ON REHIRING ANY EMPLOYEE OF THE INTERNAL REVENUE
SERVICE WHO WAS INVOLUNTARILY SEPARATED FROM SERVICE FOR MISCONDUCT
(SEC. 3001 OF THE BILL AND SEC. 7804 OF THE CODE)
PRESENT LAW
Employees of the IRS are subject to rules governing Federal
employment generally, as well as rules of conduct specific to
Department of the Treasury and the IRS.\175\ Standards of
Ethical Conduct for Employees of the Executive Branch are
supplemented by additional rules applicable to employees of the
Department of the Treasury.\176\
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\175\Part III of Title 5 of the United States Code prescribes rules
for Federal employment, including employment, retention, and management
and employee issues.
\176\Standards of Ethical Conduct for Employees of the Executive
Branch, 5 C.F.R. Part 2635; Supplemental Standards of Ethical Conduct
for Employees of the Department of the Treasury, 5 C.F.R. Part 3101;
Department of the Treasury Employee Rules of Conduct, 31 C.F.R. Part 0.
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The Code provides that the Commissioner has such duties and
powers as prescribed by the Secretary.\177\ Unless otherwise
specified by the Secretary, such duties and powers include the
power to administer, manage, conduct, direct, and supervise the
execution and application of the internal revenue laws or
related statutes and tax conventions to which the United States
is a party, and to recommend to the President a candidate for
Chief Counsel (and recommend any removal of the Chief Counsel).
Unless otherwise specified by the Secretary, the Commissioner
is authorized to employ such persons as the Commissioner deems
proper for the administration and enforcement of the internal
revenue laws and is required to issue all necessary directions,
instructions, orders, and rules applicable to such
persons,\178\ including determination and designation of posts
of duty.
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\177\Sec. 7803(a).
\178\Sec. 7804.
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RRA98 requires the IRS to terminate an employee for certain
proven violations committed by the employee in connection with
the performance of official duties.\179\ The violations
include: (1) willful failure to obtain the required approval
signatures on documents authorizing the seizure of a taxpayer's
home, personal belongings, or business assets; (2) providing a
false statement under oath material to a matter involving a
taxpayer; (3) with respect to a taxpayer, taxpayer
representative, or other IRS employee, the violation of any
right under the U.S. Constitution, or any civil right
established under Titles VI or VII of the Civil Rights Act of
1964, Title IX of the Educational Amendments of 1972, the Age
Discrimination in Employment Act of 1967, the Age
Discrimination Act of 1975, sections 501 or 504 of the
Rehabilitation Act of 1973 and Title I of the Americans with
Disabilities Act of 1990; (4) falsifying or destroying
documents to conceal mistakes made by any employee with respect
to a matter involving a taxpayer or a taxpayer representative;
(5) assault or battery on a taxpayer or other IRS employee, but
only if there is a criminal conviction or a final judgment by a
court in a civil case, with respect to the assault or battery;
(6) violations of the Code, Treasury Regulations, or policies
of the IRS (including the Internal Revenue Manual) for the
purpose of retaliating or harassing a taxpayer or other IRS
employee; (7) willful misuse of section 6103 for the purpose of
concealing data from a Congressional inquiry; (8) willful
failure to file any tax return required under the Code on or
before the due date (including extensions) unless failure is
due to reasonable cause; (9) willful understatement of Federal
tax liability, unless such understatement is due to reasonable
cause; and (10) threatening to audit a taxpayer for the purpose
of extracting personal gain or benefit.
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\179\Pub. L. No. 105-206, sec. 1203(b), July 22, 1998.
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RRA98 provides non-delegable authority to the Commissioner
to determine that mitigating factors exist, that, in the
Commissioner's sole discretion, mitigate against terminating
the employee. The Act also provides that the Commissioner, in
his sole discretion, may establish a procedure to determine
whether an individual should be referred for such a
determination by the Commissioner. TIGTA is required to track
employee terminations and terminations that would have occurred
had the Commissioner not determined that there were mitigation
factors and include such information in TIGTA's annual report
to Congress.
REASONS FOR CHANGE
TIGTA reported that between October 2009 and September 2013
the IRS had rehired 141 former employees who had previously
been dismissed involuntarily for cause.\180\ The types of
misconduct that led to the involuntary dismissals included
willful failure to file tax returns, unauthorized access to
confidential tax information, falsification of official forms,
abuse of leave, and other violations of IRS policies. The
Committee believes that rehiring persons who were fired for
such misconduct is improper and poses a serious risk to the
confidentiality of the information entrusted to the IRS and
erodes trust in the IRS. In order to restore trust in the
integrity of IRS employees, and hold IRS officials accountable
for their hiring practices, it is necessary to ban rehiring
persons who were dismissed for cause.
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\180\Inspector General for Tax Administration, Department of the
Treasury, Additional Consideration of Prior Conduct and Performance
Issues Is Needed When Hiring Former Employees (TIGTA 2015-10-006),
December 30, 2014, available at https://www.treasury.gov/tigta/
auditreports/2015reports/201510006fr.pdf.
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EXPLANATION OF PROVISION
Under the provision, a former employee of the IRS who was
involuntarily separated due to misconduct under subchapter A of
Chapter 80 of the Code, under chapters 43 or 75 of Title 5 of
the United States Code, or whose employment was terminated
under section 1203 of RRA98, cannot be reemployed by the IRS.
EFFECTIVE DATE
The provision is effective with respect to the hiring of
employees after the date of enactment.
2. NOTIFICATION OF UNAUTHORIZED INSPECTION OR DISCLOSURE OF RETURNS
AND RETURN INFORMATION (SEC. 3002 OF THE BILL AND SEC. 7431 OF THE
CODE)
PRESENT LAW
Section 7431 provides for civil damages resulting from an
unauthorized disclosure of inspection of return information. If
a Federal employee makes an unauthorized disclosure or
inspection, a taxpayer can bring suit against the United States
in Federal district court. If a person other than a Federal
employee makes an unauthorized disclosure or inspection, suit
may be brought directly against such person. No liability
results from a disclosure based on a good faith, but erroneous,
interpretation of section 6103. A disclosure or inspection made
at the request of the taxpayer will also relieve liability.
Upon a finding of liability, a taxpayer can recover the
greater of $1,000 per act of unauthorized disclosure (or
inspection), or the sum of actual damages plus, in the case of
an inspection or disclosure that was willful or the result of
gross negligence, punitive damages. The taxpayer may also
recover the costs of the action and, if found to be a
prevailing party, reasonable attorney fees.
The taxpayer has two years from the date of the discovery
of the unauthorized inspection or disclosure to bring suit. The
IRS is required to notify a taxpayer of an unauthorized
inspection or disclosure as soon as practicable after any
person is criminally charged by indictment or information for
unlawful inspection or disclosure.
REASONS FOR CHANGE
The Committee believes that current law requiring the
Secretary to notify a taxpayer about unauthorized inspection or
disclosure only if the offending party is criminally charged is
insufficient. The Committee believes the notification required
under this provision is necessary to enhance the ability of a
taxpayer to exercise his or her rights under the Code to bring
a civil action for unauthorized inspection or disclosure.
EXPLANATION OF PROVISION
The provision requires the Secretary to notify a taxpayer
if the IRS or a Federal or State agency (upon notice to the
Secretary by such Federal or State agency) proposes an
administrative determination as to disciplinary or adverse
action against an employee arising from the employee's
unauthorized inspection or disclosure of the taxpayer's return
or return information. The provision requires the notice to
include the date of the unauthorized inspection or disclosure
and the rights of the taxpayer as a result of such
administrative determination.
EFFECTIVE DATE
The provision is effective for determinations proposed
after 180 days after the date of enactment.
B. Provisions Relating to Exempt Organizations
1. MANDATORY E-FILING BY EXEMPT ORGANIZATIONS (SEC. 3101 OF THE BILL
AND SECS. 6033 AND 6104 OF THE CODE)
PRESENT LAW
In general
RRA98 states a Congressional policy to promote the
paperless filing of Federal tax returns. Section 2001(a) of
RRA98 set a goal for the IRS to have at least 80 percent of all
Federal tax and information returns filed electronically by
2007.\181\ Section 2001(b) of RRA98 requires the IRS to
establish a 10-year strategic plan to eliminate barriers to
electronic filing.
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\181\The Electronic Tax Administration Advisory Committee, the body
charged with oversight of IRS progress in reaching that goal projected
an overall e-filing rate of 80.1 percent in the 2017 filing season
based on all Federal returns. See Electronic Tax Administration
Advisory Committee, Annual Report to Congress, June 2017, IRS Pub.
3415, page 5.
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Present law requires the Secretary to issue regulations
regarding electronic filing and specifies certain limitations
on the rules that may be included in such regulations.\182\ The
statute requires that Federal income tax returns prepared by
specified tax return preparers be filed electronically,\183\
and that all partnerships with more than 100 partners file
electronically. For taxpayers other than partnerships, the
statute prohibits any requirement that persons who file fewer
than 250 returns during a calendar year file electronically.
With respect to individuals, estates, and trusts, the Secretary
may permit, but generally cannot require, electronic filing of
income tax returns. In crafting any of these required
regulations, the Secretary must take into account the ability
of taxpayers to comply at reasonable cost.
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\182\Sec. 6011(e). Section 6011(e) uses the term ``magnetic
media,'' which the Treasury regulation section 301.6011-2 defines to
include electronic filing.
\183\Section 6011(e)(3)(B) defines a ``specified tax return
preparer'' as any return preparer who reasonably expects to file more
than 10 individual income tax returns during a calendar year.
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The regulations require corporations that have assets of
$10 million or more and file at least 250 returns during a
calendar year to file electronically their Form 1120/1120S
income tax returns and Form 990 information returns for tax
years ending on or after December 31, 2006.\184\ In determining
whether the 250 return threshold is met, income tax,
information, excise tax, and employment tax returns filed
within one calendar year are counted.
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\184\Treas. Reg. secs. 301.6011-5 and 301.6033-4.
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Tax-exempt organizations
Most tax-exempt organizations are required to file an
annual information return or notice in the Form 990 series.
Since 2007, the smallest organizations--generally, those with
gross receipts of less than $50,000--may provide an abbreviated
notice on Form 990-N, sometimes referred to as an ``e-
postcard.'' Which form to file depends on the annual receipts,
value of assets, and types of activities of the exempt
organization. The public can view electronic images of Forms
990, 990-EZ, and 990-PF online, or purchase hard or soft copies
from the IRS.\185\
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\185\See https://www.irs.gov/charities-non-profits/copies-of-eo-
returns-available, last updated August 16, 2018.
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In general, only the largest and smallest tax-exempt
organizations are required to electronically file their annual
information returns. First, as indicated above, tax-exempt
corporations that have assets of $10 million or more and that
file at least 250 returns during a calendar year must
electronically file their Form 990 information returns. Private
foundations and charitable trusts, regardless of asset size,
that file at least 250 returns during a calendar year are
required to file electronically their Form 990-PF information
returns.\186\ Finally, organizations that file Form 990-N (the
e-postcard) also must electronically file.\187\
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\186\Taxpayers can request waivers of the electronic filing
requirement if they cannot meet that requirement due to technological
constraints, or if compliance with the requirement would result in
undue financial burden on the taxpayer. Treas. Sec. 301.6033-4.
\187\See Form 990-N, ``Electronic Notice for Tax-exempt
Organizations Not Required to File a Form 990 or 990-EZ.''
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REASONS FOR CHANGE
The Committee believes that mandatory electronic filing by
all tax-exempt organizations required to file information
returns will improve efficiency, reduce costs and generally
improve oversight of tax-exempt organizations. Electronic
filing generally increases efficiency because it enables the
IRS to make use of its computer infrastructure to identify
returns with audit potential. This focus, in turn, allows the
IRS to utilize its resources in areas in which such efforts
would be most fruitful. Moreover, the reduction in processing
costs incurred by the IRS as a result of electronic filing
initiatives is well documented.
The Committee believes it is important to increase the
transparency of, and enhance public access to information
about, tax-exempt organizations, particularly charitable
organizations. Present law enables the public to know whether
an entity purporting to be an exempt organization is in
compliance with the Code by mandating that the IRS make certain
documents available to the public. In complying with its
obligation to release returns, the IRS makes the returns
available in read-only format. Although many tax-exempt
organizations already file their required returns
electronically, a significant number of entities continue to
file on paper. Because the IRS generally releases all returns
in the same read-only format regardless of whether they were
filed electronically or on paper, the IRS expends time and
resources to conform all returns to a uniform format. The
Committee believes that a broader requirement for electronic
filing and the addition of a requirement that the information
be released in machine-readable format will expedite the
publication of the information that is required to be disclosed
by the IRS and enhance its usability by stakeholders attempting
to exercise oversight of tax-exempt organizations. Such
stakeholders include not only members of the public who may
support or donate to an organization, but also state and local
officials charged with oversight responsibilities and
responsibility for prosecuting fraudulent charities.
EXPLANATION OF PROVISION
The provision extends the requirement to e-file to all tax-
exempt organizations required to file statements or returns in
the Form 990 series or Form 8872 (``Political Organization
Report of Contributions and Expenditures''). The provision also
requires that the IRS make the information provided on the
forms available to the public (consistent with the disclosure
rules of section 6104 of the Code) in a machine-readable format
as soon as practicable.
EFFECTIVE DATE
The provision generally is effective for taxable years
beginning after the date of enactment. Transition relief is
provided for certain organizations. First, for certain small
organizations or other organizations for which the Secretary
determines that application of the e-filing requirement would
constitute an undue hardship in the absence of additional
transitional time, the requirement to file electronically must
be implemented not later than taxable years beginning two years
following the date of enactment. For this purpose, small
organization means any organization: (1) the gross receipts of
which for the taxable year are less than $200,000; and (2) the
aggregate gross assets of which at the end of the taxable year
are less than $500,000. In addition, the provision grants IRS
the discretion to delay the effective date not later than
taxable years beginning two years after the date of enactment
for the filing of Form 990-T (reports of unrelated business
taxable income or the payment of proxy tax under section
6033(e)).
2. NOTICE REQUIRED BEFORE REVOCATION OF TAX-EXEMPT STATUS FOR FAILURE
TO FILE RETURN (SEC. 3102 OF THE BILL AND SEC. 6033(J) OF THE CODE)
PRESENT LAW
Applications for tax exemption
Section 501(c)(3) organizations
Section 501(c)(3) organizations (with certain exceptions)
are required to seek formal recognition of tax-exempt status by
filing an application with the IRS (Form 1023 (Application for
Recognition of Exemption under Section 501(c)(3) of the
Internal Revenue Code) or Form 1023-EZ (Streamlined Application
for Recognition of Exemption under Section 501(c)(3) of the
Internal Revenue Code)).\188\ In response to the application,
the IRS issues a determination letter or ruling either
recognizing the applicant as tax-exempt or not. Certain
organizations are not required to apply for recognition of tax-
exempt status in order to qualify as tax-exempt under section
501(c)(3) but may do so. These organizations include churches,
certain church-related organizations, organizations (other than
private foundations) the gross receipts of which in each
taxable year are normally not more than $5,000, and
organizations (other than private foundations) subordinate to
another tax-exempt organization that are covered by a group
exemption letter.
---------------------------------------------------------------------------
\188\See sec. 508(a).
---------------------------------------------------------------------------
A favorable determination by the IRS on an application for
recognition of tax-exempt status generally will be retroactive
to the date that the section 501(c)(3) organization was created
if it files a completed Form 1023 within 15 months of the end
of the month in which it was formed.\189\ If the organization
does not file Form 1023 or files a late application, it will
not be treated as tax-exempt under section 501(c)(3) for any
period prior to the filing of an application for recognition of
tax exemption.\190\ Contributions to section 501(c)(3)
organizations that are subject to the requirement that the
organization apply for recognition of tax-exempt status
generally are not deductible from income, gift, or estate tax
until the organization receives a determination letter from the
IRS.\191\
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\189\Pursuant to Treas. Reg. sec. 301.9100-2(a)(2)(iv),
organizations are allowed an automatic 12-month extension as long as
the application for recognition of tax exemption is filed within the
extended, i.e., 27-month, period. The IRS also may grant an extension
beyond the 27-month period if the organization is able to establish
that it acted reasonably and in good faith and that granting relief
will not prejudice the interests of the government. Treas. Reg. secs.
301.9100-1 and 301.9100-3.
\190\Treas. Reg. sec. 1.508-1(a)(1).
\191\Sec. 508(d)(2)(B). Contributions made prior to receipt of a
favorable determination letter may be deductible prior to the
organization's receipt of such favorable determination letter if the
organization has timely filed its application to be recognized as tax-
exempt. Treas. Reg. secs. 1.508-1(a) and 1.508-2(b)(1)(i)(b).
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Other section 501(c) organizations
Most other types of section 501(c) organizations--including
organizations described within sections 501(c)(4) (social
welfare organizations, etc.), 501(c)(5) (labor organizations,
etc.), or 501(c)(6) (business leagues, etc.)--are not required
to apply for recognition of tax-exempt status. Rather,
organizations are exempt under these subsections if they
satisfy the requirements applicable to such organizations.
However, an organization that intends to operate as a section
501(c)(4) organization must notify the Secretary no later than
60 days after its formation that it is operating as such by
filing form 8976 (Notice of Intent to Operate Under Section
501(c)(4)). In addition, in order to obtain certain benefits
such as public recognition of tax-exempt status, exemption from
certain State taxes, and nonprofit mailing privileges, such
organizations voluntarily may request a formal recognition of
exempt status by filing a Form 1024 (Application for
Recognition of Exemption under Section 501(a)) or Form 1024-A
(Application for Recognition of Exemption under Section
501(c)(4) of the Internal Revenue Code).
Annual information returns
Exempt organizations are required to file an annual
information return, Form 990 (Return of Organization Exempt
From Income Tax), stating specifically the items of gross
income, receipts, disbursements, and such other information as
the Secretary may prescribe.\192\ Exempt from the requirement
are churches, their integrated auxiliaries, and conventions or
associations of churches; the exclusively religious activities
of any religious order; certain institutions whose income is
excluded from gross income under section 115; an interchurch
organization of local units of a church; certain mission
societies; certain church-affiliated elementary and high
schools; and certain other organizations, including some that
the IRS has relieved from the filing requirement pursuant to
its statutory discretionary authority.\193\
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\192\Sec. 6033(a). An organization that has not received a
determination of its tax-exempt status, but that claims tax-exempt
status under section 501(a), is subject to the same annual reporting
requirements and exceptions as organizations that have received a tax-
exemption determination.
\193\Sec. 6033(a)(3); Treas. Reg. secs. 1.6033-2(a)(2)(i) and
(g)(1).
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An organization that is required to file an information
return, but that has gross receipts of less than $200,000
during its taxable year, and total assets of less than $500,000
at the end of its taxable year, may file Form 990-EZ. If an
organization normally has gross receipts of $50,000 or less, it
must file Form 990-N (``e-postcard''), if it chooses not to
file Form 990 or Form 990-EZ. Private foundations are required
to file Form 990-PF rather than Form 990.
Revocation of exempt status
In general
An organization that has received a favorable tax-exemption
determination from the IRS generally may continue to rely on
the determination as long as ``there are no substantial changes
in the organization's character, purposes, or methods of
operation.''\194\ A ruling or determination letter concluding
that an organization is exempt from tax may, however, be
revoked or modified: (1) by notice from the IRS to the
organization to which the ruling or determination letter was
originally issued; (2) by enactment of legislation or
ratification of a tax treaty; (3) by a decision of the United
States Supreme Court; (4) by issuance of temporary or final
Regulations by the Treasury Department; (5) by issuance of a
revenue ruling, a revenue procedure, or other statement in the
Internal Revenue Bulletin; or (6) automatically, in the event
the organization fails to file a required annual return or
notice for three consecutive years (discussed in greater detail
below).\195\ A revocation or modification of a determination
letter or ruling may be retroactive if, for example, there has
been a change in the applicable law, the organization omitted
or misstated a material fact, or the organization has operated
in a manner materially different from that originally
represented.\196\ Upon revocation of tax-exemption or change in
the classification of an organization (e.g., from public
charity to private foundation status), the IRS publishes an
announcement of such revocation or change in the Internal
Revenue Bulletin.
---------------------------------------------------------------------------
\194\Treas. Reg. sec. 1.501(a)-1(a)(2).
\195\Rev. Proc. 2019-5, sec. 12, 2019-1 I.R.B. 230, at p. 257
(January 2, 2019).
\196\Ibid. at p. 258.
---------------------------------------------------------------------------
Automatic revocation for failure to file information
returns
If an organization fails to file a required Form 990-series
return or notice for three consecutive years, the
organization's tax-exempt status is automatically revoked.\197\
A revocation for failure to file is effective from the date
that the Secretary determines was the last day the organization
could have timely filed the third required information return
or notice. To again be recognized as tax-exempt, the
organization must apply to the Secretary for recognition of
tax-exemption, irrespective of whether the organization was
required to make an application for recognition of tax-
exemption in order to gain tax-exemption originally.\198\
---------------------------------------------------------------------------
\197\Sec. 6033(j)(1).
\198\Sec. 6033(j)(2).
---------------------------------------------------------------------------
If, upon application for tax-exempt status after an
automatic revocation for failure to file an information return
or notice, the organization shows to the satisfaction of the
Secretary reasonable cause for failing to file the required
returns or notices, the organization's tax-exempt status may,
in the discretion of the Secretary, be reinstated retroactive
to the date of revocation.\199\ An organization may not
challenge under the Code's declaratory judgment procedures
(section 7428) a revocation of tax-exemption made for failure
to file annual information returns.
---------------------------------------------------------------------------
\199\Sec. 6033(j)(3); Rev. Proc. 2014-11, 2014-3 I.R.B. 411
(January 13, 2014).
---------------------------------------------------------------------------
The Secretary is authorized to publish a list of
organizations whose exempt status is automatically revoked.
REASONS FOR CHANGE
Present law does not require the IRS to notify an
organization that already has failed to file a Form 990-series
return or notice for two consecutive years that it is at risk
of revocation if it fails to file for a third consecutive year.
Many of the affected organizations are small and poorly funded,
yet face increasing demand for their services from the
communities they serve. As a result, revocation can pose a
significant financial burden on these organizations and their
communities. The Committee therefore believes it is appropriate
to require the IRS to notify organizations that are at risk of
losing tax-exempt status for failure to file Form 990-series
returns or notices and to provide information to help the
organization prevent the loss of its tax-exempt status.
EXPLANATION OF PROVISION
The provision requires that the IRS provide notice to an
organization that fails to file a Form 990-series return or
notice for two consecutive years. The notice must state that
the IRS has no record of having received such a return or
notice from the organization for two consecutive years and
inform the organization about the revocation of the
organization's tax-exempt status that will occur if the
organization fails to file such a return or notice by the due
date for the next such return or notice. The notice must also
contain information about how to comply with the annual
information return and notice requirements under sections
6033(a)(1) and 6033(i).
EFFECTIVE DATE
The provision applies to failures to file returns or
notices for two consecutive years if the return or notice for
the second year is required to be filed after December 31,
2019.
C. Revenue Provision
1. INCREASE IN PENALTY FOR FAILURE TO FILE (SEC. 3201 OF THE BILL AND
SEC. 6651(A) OF THE CODE)
PRESENT LAW
The Federal tax system is one of ``self-assessment,'' i.e.,
taxpayers are required to declare their income, expenses, and
ultimate tax due, while the IRS has the ability to propose
subsequent changes. This voluntary system requires that
taxpayers comply with deadlines and adhere to the filing
requirements. While taxpayers may obtain extensions of time in
which to file their returns, the Federal tax system consists of
specific due dates of returns. In order to foster compliance in
meeting these deadlines, Congress has enacted a penalty for the
failure to timely file tax returns.\200\
---------------------------------------------------------------------------
\200\See United States v. Boyle, 469 U.S. 241, 245 (1985).
---------------------------------------------------------------------------
A taxpayer who fails to file a tax return on or before its
due date is subject to a penalty equal to five percent of the
net amount of tax due for each month that the return is not
filed, up to a maximum of 25 percent of the net amount.\201\ If
the failure to file a return is fraudulent, the taxpayer is
subject to a penalty equal to 15 percent of the net amount of
tax due for each month the return is not filed, up to a maximum
of 75 percent of the net amount.\202\ The net amount of tax due
is the amount of tax required to be shown on the return reduced
by the amount of any part of the tax that is paid on or before
the date prescribed for payment of the tax and by the amount of
any credits against tax that may be claimed on the return.\203\
The penalty will not apply if it is shown that the failure to
file was due to reasonable cause and not willful neglect.\204\
---------------------------------------------------------------------------
\201\Sec. 6651(a)(1).
\202\Sec. 6651(f).
\203\Sec. 6651(b)(1).
\204\Sec. 6651(a)(1).
---------------------------------------------------------------------------
If a return is filed more than 60 days after its due date,
and unless it is shown that such failure is due to reasonable
cause, then the failure to file penalty may not be less than
the lesser of $205\205\ or 100 percent of the amount required
to be shown as tax on the return.\206\ If a penalty for failure
to file and a penalty for failure to pay tax shown on a return
both apply for the same month, the amount of the penalty for
failure to file for such month is reduced by the amount of the
penalty for failure to pay tax shown on a return.\207\ If a
return is filed more than 60 days after its due date, then the
penalty for failure to pay tax shown on a return may not reduce
the penalty for failure to file below the lesser of $205 or 100
percent of the amount required to be shown on the return.\208\
---------------------------------------------------------------------------
\205\The $205 amount is adjusted for inflation.
\206\Sec. 6651(a)(1) (flush language). For this minimum penalty to
apply, the Tax Court has held, and the IRS acquiesced, that there must
be an underpayment of tax. See Patronik-Holder v. Commissioner, 100
T.C. 374 (1993) (citing the Conference Report to the Tax Equity and
Fiscal Responsibility Act of 1982), AOD 1994-03, 1993-2 C.B. 1.
\207\Sec. 6651(c)(1).
\208\Ibid.
---------------------------------------------------------------------------
The failure to file penalty applies to all returns required
to be filed under subchapter A of Chapter 61 (relating to
income tax returns of an individual, fiduciary of an estate or
trust, or corporation; self-employment tax returns, and estate
and gift tax returns), subchapter A of chapter 51 (relating to
distilled spirits, wines, and beer), subchapter A of chapter 52
(relating to tobacco, cigars, cigarettes, and cigarette papers
and tubes), and subchapter A of chapter 53 (relating to machine
guns and certain other firearms).\209\ The failure to file
penalty is adjusted annually to account for inflation. The
failure to file penalty does not apply to any failure to pay
estimated tax required to be paid by sections 6654 or
6655.\210\
---------------------------------------------------------------------------
\209\Sec. 6651(a)(1).
\210\Sec. 6651(e).
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee notes that the penalties for failing to file
tax returns have not been increased in several years. The
Committee believes that increasing the penalties will encourage
the filing of timely and accurate information returns, which,
in turn, will improve overall tax administration.
EXPLANATION OF PROVISION
Under the provision, if a return is filed more than 60 days
after its due date, then the failure to file penalty may not be
less than the lesser of $330 (adjusted for inflation) or 100
percent of the amount required to be shown as tax on the
return.
EFFECTIVE DATE
The provision applies to returns with filing due dates
(including extensions) after December 31, 2019.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 1957, the Taxpayer First Act of 2019, on
April 2, 2019.
The Chairman's amendment in the nature of a substitute was
adopted by a voice vote (with a quorum being present).
The bill, H.R. 1957, as amended, was ordered favorably
reported to the House of Representatives by a voice vote (with
a quorum being present).
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 1957, as
reported.
The bill, as reported, is estimated to increase Federal
fiscal year budget receipts by $3 million dollars for the
period 2019 through 2029.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-reducing tax
provision relating to the private debt collection and special
compliance personnel program does not involve a new tax
expenditure while the revenue-reducing tax provision relating
to the exclusion of interest received in an action to recover
property seized by the IRS based on a structuring transaction
involves a new tax expenditure.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 5, 2019.
Hon. Richard Neal,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1957, the Taxpayer
First Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Bayard
Meiser.
Sincerely,
Keith Hall,
Director.
Enclosure.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Bill summary: H.R. 1957 would change many of the rules that
govern the Internal Revenue Service (IRS). The aim would be
improving customer service and the process for assisting
taxpayers with appeals and to combat identity theft and fraud.
Provisions of the bill would restrict certain IRS enforcement
activities, modify the agency's organization, change the
operations of the U.S. tax court, create an automated system to
verify taxpayer information for authorized users, modernize
information technology systems in the IRS, and expand the use
of electronic information systems within the agency.
Estimated Federal cost: The estimated budgetary effect of
H.R. 1957 is shown in Table 1. The costs of the legislation
fall within budget function 800 (general government).
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1957
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
-----------------------------------------------------------------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2019-2024 2019-2029
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Increases or Decreases (-) in Revenues
Title I. Putting Taxpayers First............................ 0 0 -8 -32 -48 -52 -54 -56 -58 -60 -62 -140 -431
Title II. 21st Century IRS.................................. * * * * * * * * * * * * *
Title III. Miscellaneous Provisions......................... * 5 21 22 22 23 24 24 25 26 27 93 219
Total Revenues.......................................... * 5 13 -10 -26 -29 -30 -32 -33 -34 -35 -47 -212
Decreases in Direct Spending
Title I. Putting Taxpayers First:
Estimated Budget Authority.............................. 0 0 -4 -16 -24 -26 -27 -28 -29 -30 -31 -70 -215
Estimated Outlays....................................... 0 0 -4 -16 -24 -26 -27 -28 -29 -30 -31 -70 -215
Net Increase or Decrease (-) in the Deficit From Changes in Direct Spending and Revenues
Effect on the Deficit....................................... * -5 -17 -6 -2 3 3 4 4 4 4 -23 -3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding; * = between -$500,000 and $500,000.
Basis of estimate: The Congressional Budget Act of 1974, as
amended, stipulates that revenue estimates provided by the
staff of the Joint Committee on Taxation (JCT) are the official
estimates for all tax legislation considered by the Congress.
CBO therefore incorporates those estimates into its cost
estimates of the effects of legislation. Virtually all of the
estimates for the provisions of H.R. 1957 were provided by
JCT.\1\
---------------------------------------------------------------------------
\1\For JCT's estimates of the provisions, which include detail
beyond the summary presented below, see Joint Committee on Taxation,
Estimated Revenue Effects of Revenue Provisions of the ``Taxpayer First
Act of 2019,'' JCX-17-19 (April 2, 2019), https://go.usa.gov/xmxpy.
---------------------------------------------------------------------------
Revenues
On net, JCT estimates, enacting the bill would decrease
revenues by $212 million.
Title I. Putting Taxpayers First. Title I would change the
management and oversight of the IRS to improve customer service
and the process of providing taxpayers with assistance for
appeals, restrict certain IRS enforcement activities, and
modify the agency's organization. JCT estimates that those
provisions would, on net, reduce revenues by $431 million over
the 2019-2029 period. CBO has not completed an estimate of the
bill's costs that are subject to annual appropriation.
Title II. 21st Century IRS. Title II would combat identity
theft and tax refund fraud, create an automated system to
verify taxpayer information for authorized users, modernize
information technology systems within the IRS, and expand the
use of electronic information systems within the IRS. JCT
estimates that those provisions would increase revenues by less
than $500,000 over the 2019-2029 period.
Title III. Miscellaneous Provisions. Title III would make
other changes to the laws governing the IRS, change the
organization of the tax court, and increase the penalty for a
return filed 60 days after its due date. JCT estimates that
this provision would increase revenues by $219 million over the
2019-2029 period.
Direct spending
Title 1 of H.R. 1957 would prohibit the IRS from using
private debt collectors in certain cases, which would reduce
direct spending. Currently, the IRS contracts with private
companies to collect delinquent federal taxes. Under those
contracts, the IRS may allow businesses to retain up to 25
percent of their collections; another 25 percent is available
to the IRS to spend on enforcement. CBO and JCT estimate that
repealing the private debt collection authority and allowing
the current contracts to expire would reduce direct spending by
$215 million over the 2019-2029 period, or 50 percent of the
estimated reduction in revenues stemming from this provision.
Spending subject to appropriation
CBO has not completed an estimate of the bill's costs that
are subject to annual appropriation.
Uncertainty
These budgetary estimates are uncertain because they rely
on underlying projections and other estimates that are
uncertain. Specifically, they are based in part on CBO's
economic projections for the next decade under current law, and
on estimates changes in taxpayers' behavior in response to
changes in tax rules.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown above in
Table 1.
Increase in long-term deficits: JCT estimates that enacting
H.R. 1957 would not increase on-budget deficits by more than $5
billion in any of the four consecutive 10-year periods
beginning in 2030.
Mandates: JCT has reviewed H.R. 1957 and determined that it
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act.
Estimate prepared by: Revenues: Staff of the Joint
Committee on Taxation and Bayard Meiser; Federal costs: Matthew
Pickford; Mandates: Staff of the Joint Committee on Taxation
and Andrew Laughlin.
Estimate reviewed by: Joshua Shakin, Chief, Revenue
Estimating Unit; Kim Cawley, Chief, Natural and Physical
Resources Cost Estimating Unit; H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis; John McClelland,
Assistant Director for Tax Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated into
the description portions of this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI clause 5(b) of the Rules of the House of
Representatives provides, in part, that ``It shall not be in
order to consider a bill, joint resolution, amendment, or
conference report carrying a retroactive Federal income tax
rate increase.'' The Committee has carefully reviewed the bill
and states that the bill does not involve any retroactive
Federal income tax rate increases within the meaning of the
rule.
E. Tax Complexity Analysis
Section 4022(b) of RRA98 requires the staff of the Joint
Committee on Taxation (in consultation with the Internal
Revenue Service and the Treasury Department) to provide a tax
complexity analysis. The complexity analysis is required for
all legislation reported by the Senate Committee on Finance,
the House Committee on Ways and Means, or any committee of
conference if the legislation includes a provision that
directly or indirectly amends the Internal Revenue Code of 1986
and has widespread applicability to individuals or small
businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of RRA98 because the bill
contains no provisions that amend the Internal Revenue Code of
1986 and that have ``widespread applicability'' to individuals
or small businesses, within the meaning of the rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program, (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139, or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to section 6104 of
title 31, United States Code.
H. Hearings
In compliance with Sec. 103(i) of H. Res. 6 (116th
Congress) the following hearing was used to develop or consider
H.R. 1957: Subcommittee on Oversight, Committee on Ways and
Means, Hearing with the National Taxpayer Advocate on the Tax
Filing Season, held on March 7, 2019
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
A. Text of Existing Law Amended or Repealed by the Bill, as Reported
In compliance with clause 3(e)(1)(A) of rule XIII of the
Rules of the House of Representatives, the text of each section
proposed to be amended or repealed by the bill, as reported, is
shown below:
B. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italics, existing law in
which no change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--COMPUTATION OF TAXABLE INCOME
* * * * * * *
PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Sec. 101. Certain death payments.
* * * * * * *
Sec. 139G. Assignments to Alaska Native Settlement Trusts.
Sec. 139H. Interest received in action to recover property seized by the
Internal Revenue Service based on structuring transaction.
Sec. 140. Cross references to other Acts.
* * * * * * *
SEC. 139H. INTEREST RECEIVED IN ACTION TO RECOVER PROPERTY SEIZED BY
THE INTERNAL REVENUE SERVICE BASED ON STRUCTURING
TRANSACTION.
Gross income shall not include any interest received from the
Federal Government in connection with an action to recover
property seized by the Internal Revenue Service pursuant to
section 5317(c)(2) of title 31, United States Code, by reason
of a claimed violation of section 5324 of such title.
* * * * * * *
Subchapter F--EXEMPT ORGANIZATIONS
* * * * * * *
PART VI--POLITICAL ORGANIZATIONS
* * * * * * *
SEC. 527. POLITICAL ORGANIZATIONS.
(a) General rule.--A political organization shall be subject
to taxation under this subtitle only to the extent provided in
this section. A political organization shall be considered an
organization exempt from income taxes for the purpose of any
law which refers to organizations exempt from income taxes.
(b) Tax imposed.--A tax is hereby imposed for each taxable
year on the political organization taxable income of every
political organization. Such tax shall be computed by
multiplying the political organization taxable income by the
highest rate of tax specified in section 11(b).
(c) Political organization taxable income defined.--
(1) Taxable income defined.--For purposes of this
section, the political organization taxable income of
any organization for any taxable year is an amount
equal to the excess (if any) of--
(A) the gross income for the taxable year
(excluding any exempt function income), over
(B) the deductions allowed by this chapter
which are directly connected with the
production of the gross income (excluding
exempt function income), computed with the
modifications provided in paragraph (2).
(2) Modifications.--For purposes of this subsection--
(A) there shall be allowed a specific
deduction of $100,
(B) no net operating loss deduction shall be
allowed under section 172, and
(C) no deduction shall be allowed under part
VIII of subchapter B (relating to special
deductions for corporations).
(3) Exempt function income.--For purposes of this
subsection, the term ``exempt function income'' means
any amount received as--
(A) a contribution of money or other
property,
(B) membership dues, a membership fee or
assessment from a member of the political
organization,
(C) proceeds from a political fundraising or
entertainment event, or proceeds from the sale
of political campaign materials, which are not
received in the ordinary course of any trade or
business, or
(D) proceeds from the conducting of any bingo
game (as defined in section 513(f)(2)),
to the extent such amount is segregated for use only
for the exempt function of the political organization.
(d) Certain uses not treated as income to candidate.--For
purposes of this title, if any political organization--
(1) contributes any amount to or for the use of any
political organization which is treated as exempt from
tax under subsection (a) of this section,
(2) contributes any amount to or for the use of any
organization described in paragraph (1) or (2) of
section 509(a) which is exempt from tax under section
501(a), or
(3) deposits any amount in the general fund of the
Treasury or in the general fund of any State or local
government,
such amount shall be treated as an amount not diverted for the
personal use of the candidate or any other person. No deduction
shall be allowed under this title for the contribution or
deposit of any amount described in the preceding sentence.
(e) Other definitions.--For purposes of this section--
(1) Political organization.--The term ``political
organization'' means a party, committee, association,
fund, or other organization (whether or not
incorporated) organized and operated primarily for the
purpose of directly or indirectly accepting
contributions or making expenditures, or both, for an
exempt function.
(2) Exempt function.--The term ``exempt function''
means the function of influencing or attempting to
influence the selection, nomination, election, or
appointment of any individual to any Federal, State, or
local public office or office in a political
organization, or the election of Presidential or Vice-
Presidential electors, whether or not such individual
or electors are selected, nominated, elected, or
appointed. Such term includes the making of
expenditures relating to an office described in the
preceding sentence which, if incurred by the
individual, would be allowable as a deduction under
section 162(a).
(3) Contributions.--The term ``contributions'' has
the meaning given to such term by section 271(b)(2).
(4) Expenditures.--The term ``expenditures'' has the
meaning given to such term by section 271(b)(3).
(5) Qualified State or local political
organization.--
(A) In general.--The term ``qualified State
or local political organization'' means a
political organization--
(i) all the exempt functions of which
are solely for the purposes of
influencing or attempting to influence
the selection, nomination, election, or
appointment of any individual to any
State or local public office or office
in a State or local political
organization,
(ii) which is subject to State law
that requires the organization to
report (and it so reports)--
(I) information regarding
each separate expenditure from
and contribution to such
organization, and
(II) information regarding
the person who makes such
contribution or receives such
expenditure,
which would otherwise be required to be
reported under this section, and
(iii) with respect to which the
reports referred to in clause (ii) are
(I) made public by the agency with
which such reports are filed, and (II)
made publicly available for inspection
by the organization in the manner
described in section 6104(d).
(B) Certain State law differences
disregarded.--An organization shall not be
treated as failing to meet the requirements of
subparagraph (A)(ii) solely by reason of 1 or
more of the following:
(i) The minimum amount of any
expenditure or contribution required to
be reported under State law is not more
than $300 greater than the minimum
amount required to be reported under
subsection (j).
(ii) The State law does not require
the organization to identify 1 or more
of the following:
(I) The employer of any
person who makes contributions
to the organization.
(II) The occupation of any
person who makes contributions
to the organization.
(III) The employer of any
person who receives
expenditures from the
organization.
(IV) The occupation of any
person who receives
expenditures from the
organization.
(V) The purpose of any
expenditure of the
organization.
(VI) The date any
contribution was made to the
organization.
(VII) The date of any
expenditure of the
organization.
(C) De minimis errors.--An organization shall
not fail to be treated as a qualified State or
local political organization solely because
such organization makes de minimis errors in
complying with the State reporting requirements
and the public inspection requirements
described in subparagraph (A) as long as the
organization corrects such errors within a
reasonable period after the organization
becomes aware of such errors.
(D) Participation of Federal candidate or
office holder.--The term ``qualified State or
local political organization'' shall not
include any organization otherwise described in
subparagraph (A) if a candidate for nomination
or election to Federal elective public office
or an individual who holds such office--
(i) controls or materially
participates in the direction of the
organization,
(ii) solicits contributions to the
organization (unless the Secretary
determines that such solicitations
resulted in de minimis contributions
and were made without the prior
knowledge and consent, whether explicit
or implicit, of the organization or its
officers, directors, agents, or
employees), or
(iii) directs, in whole or in part,
disbursements by the organization.
(f) Exempt organization, which is not political organization,
must include certain amounts in gross income.--
(1) In general.--If an organization described in
section 501(c) which is exempt from tax under section
501(a) expends any amount during the taxable year
directly (or through another organization) for an
exempt function (within the meaning of subsection
(e)(2)), then, notwithstanding any other provision of
law, there shall be included in the gross income of
such organization for the taxable year, and shall be
subject to tax under subsection (b) as if it
constituted political organization taxable income, an
amount equal to the lesser of--
(A) the net investment income of such
organization for the taxable year, or
(B) the aggregate amount so expended during
the taxable year for such an exempt function.
(2) Net investment income.--For purposes of this
subsection, the term ``net investment income'' means
the excess of--
(A) the gross amount of income from interest,
dividends, rents, and royalties, plus the
excess (if any) of gains from the sale or
exchange of assets over the losses from the
sale or exchange of assets, over
(B) the deductions allowed by this chapter
which are directly connected with the
production of the income referred to in
subparagraph (A).
For purposes of the preceding sentence, there shall not
be taken into account items taken into account for
purposes of the tax imposed by section 511 (relating to
tax on unrelated business income).
(3) Certain separate segregated funds.--For purposes
of this subsection and subsection (e)(1), a separate
segregated fund (within the meaning of section 610 of
title 18 or of any similar State statute, or within the
meaning of any State statute which permits the
segregation of dues moneys for exempt functions (within
the meaning of subsection (e)(2))) which is maintained
by an organization described in section 501(c) which is
exempt from tax under section 501(a) shall be treated
as a separate organization.
(g) Treatment of newsletter funds.--
(1) In general.--For purposes of this section, a fund
established and maintained by an individual who holds,
has been elected to, or is a candidate (within the
meaning of paragraph (3)) for nomination or election
to, any Federal, State, or local elective public
office, for use by such individual exclusively for the
preparation and circulation of such individual's
newsletter shall, except as provided in paragraph (2),
be treated as if such fund constituted a political
organization.
(2) Additional modifications.--In the case of any
fund described in paragraph (1)--
(A) the exempt function shall be only the
preparation and circulation of the newsletter,
and
(B) the specific deduction provided by
subsection (c)(2)(A) shall not be allowed.
(3) Candidate.--For purposes of paragraph (1), the
term ``candidate'' means, with respect to any Federal,
State, or local elective public office, an individual
who--
(A) publicly announces that he is a candidate
for nomination or election to such office, and
(B) meets the qualifications prescribed by
law to hold such office.
(h) Special rule for principal campaign committees.--
(1) In general.--In the case of a political
organization, which is a principal campaign committee,
paragraph (1) of subsection (b) shall be applied by
substituting ``the appropriate rates'' for ``the
highest rate''.
(2) Principal campaign committee defined.--
(A) In general.--For purposes of this
subsection, the term ``principal campaign
committee'' means the political committee
designated by a candidate for Congress as his
principal campaign committee for purposes of--
(i) section 302(e) of the Federal
Election Campaign Act of 1971 (52
U.S.C. 30102(e)), and
(ii) this subsection.
(B) Designation.--A candidate may have only 1
designation in effect under subparagraph
(A)(ii) at any time and such designation--
(i) shall be made at such time and in
such manner as the Secretary may
prescribe by regulations, and
(ii) once made, may be revoked only
with the consent of the Secretary.
Nothing in this subsection shall be construed
to require any designation where there is only
one political committee with respect to a
candidate.
(i) Organizations must notify Secretary that they are section
527 organizations.--
(1) In general.--Except as provided in paragraph (5),
an organization shall not be treated as an organization
described in this section--
(A) unless it has given notice to the
Secretary electronically that it is to be so
treated, or
(B) if the notice is given after the time
required under paragraph (2), the organization
shall not be so treated for any period before
such notice is given or, in the case of any
material change in the information required
under paragraph (3), for the period beginning
on the date on which the material change occurs
and ending on the date on which such notice is
given.
(2) Time to give notice.--The notice required under
paragraph (1) shall be transmitted not later than 24
hours after the date on which the organization is
established or, in the case of any material change in
the information required under paragraph (3), not later
than 30 days after such material change.
(3) Contents of notice.--The notice required under
paragraph (1) shall include information regarding--
(A) the name and address of the organization
(including any business address, if different)
and its electronic mailing address,
(B) the purpose of the organization,
(C) the names and addresses of its officers,
highly compensated employees, contact person,
custodian of records, and members of its Board
of Directors,
(D) the name and address of, and relationship
to, any related entities (within the meaning of
section 168(h)(4)),
(E) whether the organization intends to claim
an exemption from the requirements of
subsection (j) or section 6033, and
(F) such other information as the Secretary
may require to carry out the internal revenue
laws.
(4) Effect of failure.--In the case of an
organization failing to meet the requirements of
paragraph (1) for any period, the taxable income of
such organization shall be computed by taking into
account any exempt function income (and any deductions
directly connected with the production of such income)
or, in the case of a failure relating to a material
change, by taking into account such income and
deductions only during the period beginning on the date
on which the material change occurs and ending on the
date on which notice is given under this subsection.
For purposes of the preceding sentence, the term
``exempt function income'' means any amount described
in a subparagraph of subsection (c)(3), whether or not
segregated for use for an exempt function.
(5) Exceptions.--This subsection shall not apply to
any organization--
(A) to which this section applies solely by
reason of subsection (f)(1),
(B) which reasonably anticipates that it will
not have gross receipts of $25,000 or more for
any taxable year, or
(C) which is a political committee of a State
or local candidate or which is a State or local
committee of a political party.
(6) Coordination with other requirements.--This
subsection shall not apply to any person required
(without regard to this subsection) to report under the
Federal Election Campaign Act of 1971 (52 U.S.C. 30101
et seq.) as a political committee.
(j) Required disclosure of expenditures and contributions.--
(1) Penalty for failure.--In the case of--
(A) a failure to make the required
disclosures under paragraph (2) at the time and
in the manner prescribed therefor, or
(B) a failure to include any of the
information required to be shown by such
disclosures or to show the correct information,
there shall be paid by the organization an amount equal
to the rate of tax specified in subsection (b)(1)
multiplied by the amount to which the failure relates.
For purposes of subtitle F, the amount imposed by this
paragraph shall be assessed and collected in the same
manner as penalties imposed by section 6652(c).
(2) Required disclosure.--A political organization
which accepts a contribution, or makes an expenditure,
for an exempt function during any calendar year shall
file with the Secretary either--
(A)(i) in the case of a calendar year in
which a regularly scheduled election is held--
(I) quarterly reports,
beginning with the first
quarter of the calendar year in
which a contribution is
accepted or expenditure is
made, which shall be filed not
later than the fifteenth day
after the last day of each
calendar quarter, except that
the report for the quarter
ending on December 31 of such
calendar year shall be filed
not later than January 31 of
the following calendar year,
(II) a pre-election report,
which shall be filed not later
than the twelfth day before (or
posted by registered or
certified mail not later than
the fifteenth day before) any
election with respect to which
the organization makes a
contribution or expenditure,
and which shall be complete as
of the twentieth day before the
election, and
(III) a post-general election
report, which shall be filed
not later than the thirtieth
day after the general election
and which shall be complete as
of the twentieth day after such
general election, and
(ii) in the case of any other
calendar year, a report covering the
period beginning January 1 and ending
June 30, which shall be filed no later
than July 31 and a report covering the
period beginning July 1 and ending
December 31, which shall be filed no
later than January 31 of the following
calendar year, or
(B) monthly reports for the calendar year,
beginning with the first month of the calendar
year in which a contribution is accepted or
expenditure is made, which shall be filed not
later than the twentieth day after the last day
of the month and shall be complete as if the
last day of the month, except that, in lieu of
filing the reports otherwise due in November
and December of any year in which a regularly
scheduled general election is held, a pre-
general election report shall be filed in
accordance with subparagraph (A)(i)(II), a
post-general election report shall be filed in
accordance with subparagraph (A)(i)(III), and a
year end report shall be filed not later than
January 31 of the following calendar year.
(3) Contents of report.--A report required under
paragraph (2) shall contain the following information:
(A) The amount, date, and purpose of each
expenditure made to a person if the aggregate
amount of expenditures to such person during
the calendar year equals or exceeds $500 and
the name and address of the person (in the case
of an individual, including the occupation and
name of employer of such individual).
(B) The name and address (in the case of an
individual, including the occupation and name
of employer of such individual) of all
contributors which contributed an aggregate
amount of $200 or more to the organization
during the calendar year and the amount and
date of the contribution.
Any expenditure or contribution disclosed in a previous
reporting period is not required to be included in the
current reporting period.
(4) Contracts to spend or contribute.--For purposes
of this subsection, a person shall be treated as having
made an expenditure or contribution if the person has
contracted or is otherwise obligated to make the
expenditure or contribution.
(5) Coordination with other requirements.--This
subsection shall not apply--
(A) to any person required (without regard to
this subsection) to report under the Federal
Election Campaign Act of 1971 (52 U.S.C. 30101
et seq.) as a political committee,
(B) to any State or local committee of a
political party or political committee of a
State or local candidate,
(C) to any organization which is a qualified
State or local political organization,
(D) to any organization which reasonably
anticipates that it will not have gross
receipts of $25,000 or more for any taxable
year,
(E) to any organization to which this section
applies solely by reason of subsection (f)(1),
or
(F) with respect to any expenditure which is
an independent expenditure (as defined in
section 301 of such Act).
(6) Election.--For purposes of this subsection, the
term ``election'' means--
(A) a general, special, primary, or runoff
election for a Federal office,
(B) a convention or caucus of a political
party which has authority to nominate a
candidate for Federal office,
(C) a primary election held for the selection
of delegates to a national nominating
convention of a political party, or
(D) a primary election held for the
expression of a preference for the nomination
of individuals for election to the office of
President.
(7) Electronic filing.--Any report required under
paragraph (2) with respect to any calendar year shall
be filed in electronic form [if the organization has,
or has reason to expect to have, contributions
exceeding $50,000 or expenditures exceeding $50,000 in
such calendar year].
(k) Public availability of notices and reports.--
(1) In general.--The Secretary shall make any notice
described in subsection (i)(1) or report described in
subsection (j)(7) available for public inspection on
the Internet not later than 48 hours after such notice
or report has been filed (in addition to such public
availability as may be made under section 6104(d)(7)).
(2) Access.--The Secretary shall make the entire
database of notices and reports which are made
available to the public under paragraph (1) searchable
by the following items (to the extent the items are
required to be included in the notices and reports):
(A) Names, States, zip codes, custodians of
records, directors, and general purposes of the
organizations.
(B) Entities related to the organizations.
(C) Contributors to the organizations.
(D) Employers of such contributors.
(E) Recipients of expenditures by the
organizations.
(F) Ranges of contributions and expenditures.
(G) Time periods of the notices and reports.
Such database shall be downloadable.
(l) Authority to waive.--The Secretary may waive all or any
portion of the--
(1) tax assessed on an organization by reason of the
failure of the organization to comply with the
requirements of subsection (i), or
(2) amount imposed under subsection (j) for a failure
to comply with the requirements thereof,
on a showing that such failure was due to reasonable cause and
not due to willful neglect.
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 61--INFORMATION AND RETURNS
* * * * * * *
Subchapter A--RETURNS AND RECORDS
PART II--TAX RETURNS OR STATEMENTS
* * * * * * *
Subpart A--GENERAL REQUIREMENT
* * * * * * *
SEC. 6011. GENERAL REQUIREMENT OF RETURN, STATEMENT, OR LIST.
(a) General rule.--When required by regulations prescribed by
the Secretary any person made liable for any tax imposed by
this title, or with respect to the collection thereof, shall
make a return or statement according to the forms and
regulations prescribed by the Secretary. Every person required
to make a return or statement shall include therein the
information required by such forms or regulations.
(b) Identification of taxpayer.--The Secretary is authorized
to require such information with respect to persons subject to
the taxes imposed by chapter 21 or chapter 24 as is necessary
or helpful in securing proper identification of such persons.
(c) Returns, etc., of DISCS and former DISCS and former
FSC's.--
(1) Records and information.--A DISC, former DISC, or
former FSC (as defined in section 922 as in effect
before its repeal by the FSC Repeal and
Extraterritorial Income Exclusion Act of 2000) shall
for the taxable year--
(A) furnish such information to persons who
were shareholders at any time during such
taxable year, and to the Secretary, and
(B) keep such records, as may be required by
regulations prescribed by the Secretary.
(2) Returns.--A DISC shall file for the taxable year
such returns as may be prescribed by the Secretary by
forms or regulations.
(d) Authority to require information concerning section 912
allowances.--The Secretary may by regulations require any
individual who receives allowances which are excluded from
gross income under section 912 for any taxable year to include
on his return of the taxes imposed by subtitle A for such
taxable year such information with respect to the amount and
type of such allowances as the Secretary determines to be
appropriate.
(e) Regulations requiring returns on magnetic media, etc..--
(1) In general.--The Secretary shall prescribe
regulations providing standards for determining which
returns must be filed on magnetic media or in other
machine-readable form. Except as provided in paragraph
(3), the Secretary may not require returns of any tax
imposed by subtitle A on individuals, estates, and
trusts to be other than on paper forms supplied by the
Secretary.
(2) Requirements of regulations.--In prescribing
regulations under paragraph (1), the Secretary--
(A) shall not require any person to file
returns on magnetic media unless such person is
required to file at least [250] the applicable
number of returns during the calendar year, and
(B) shall take into account (among other
relevant factors) the ability of the taxpayer
to comply at reasonable cost with the
requirements of such regulations.
(3) Special rule for tax return preparers.--
(A) In general.--The Secretary shall require
that any individual income tax return prepared
by a tax return preparer be filed on magnetic
media if--
(i) such return is filed by such tax
return preparer, and
(ii) such tax return preparer is a
specified tax return preparer for the
calendar year during which such return
is filed.
(B) Specified tax return preparer.--For
purposes of this paragraph, the term
``specified tax return preparer'' means, with
respect to any calendar year, any tax return
preparer unless such preparer reasonably
expects to file 10 or fewer individual income
tax returns during such calendar year.
(C) Individual income tax return.--For
purposes of this paragraph, the term
``individual income tax return'' means any
return of the tax imposed by subtitle A on
individuals, estates, or trusts.
(D) Exception for certain preparers located
in areas without internet access.--The
Secretary may waive the requirement of
subparagraph (A) if the Secretary determines,
on the basis of an application by the tax
return preparer, that the preparer cannot meet
such requirement by reason of being located in
a geographic area which does not have access to
internet service (other than dial-up or
satellite service).
(4) Special rule for returns filed by financial
institutions with respect to withholding on foreign
transfers.--The numerical limitation under paragraph
(2)(A) shall not apply to any return filed by a
financial institution (as defined in section
1471(d)(5)) with respect to tax for which such
institution is made liable under section 1461 or
1474(a).
[(5) Special rules for partnerships.--
[(A) Partnerships permitted to be required to
file on magnetic media.--In the case of a
partnership, paragraph (2)(A) shall be applied
by substituting for ``250'' the following
amount:
[(i) In the case of returns and
statements relating to calendar year
2018, ``200''.
[(ii) In the case of returns and
statements relating to calendar year
2019, ``150''.
[(iii) In the case of returns and
statements relating to calendar year
2020, ``100''.
[(iv) In the case of returns and
statements relating to calendar year
2021, ``50''.
[(v) In the case of returns and
statements relating to calendar years
after 2021, ``20''.
[(B) Partnerships required to file on
magnetic media.--Notwithstanding subparagraph
(A) and paragraph (2)(A), the Secretary shall
require partnerships having more than 100
partners to file returns on magnetic media.]
(5) Applicable number.--
(A) In general.--For purposes of paragraph
(2)(A), the applicable number shall be--
(i) except as provided in
subparagraph (B), in the case of
calendar years before 2021, 250,
(ii) in the case of calendar year
2021, 100, and
(iii) in the case of calendar years
after 2021, 10.
(B) Special rule for partnerships for 2018,
2019, 2020, and 2021.--In the case of a
partnership, for any calendar year before 2022,
the applicable number shall be--
(i) in the case of calendar year
2018, 200,
(ii) in the case of calendar year
2019, 150,
(iii) in the case of calendar year
2020, 100, and
(iv) in the case of calendar year
2021, 50.
(6) Partnerships required to file on magnetic
media.--Notwithstanding paragraph (2)(A), the Secretary
shall require partnerships having more than 100
partners to file returns on magnetic media.
(f) Promotion of electronic filing.--
(1) In general.--The Secretary is authorized to
promote the benefits of and encourage the use of
electronic tax administration programs, as they become
available, through the use of mass communications and
other means.
(2) Incentives.--The Secretary may implement
procedures to provide for the payment of appropriate
incentives for electronically filed returns.
(g) Disclosure of reportable transaction to tax-exempt
entity.--Any taxable party to a prohibited tax shelter
transaction (as defined in section 4965(e)(1)) shall by
statement disclose to any tax-exempt entity (as defined in
section 4965(c)) which is a party to such transaction that such
transaction is such a prohibited tax shelter transaction.
(h) Income, estate, and gift taxes.--For requirement that
returns of income, estate, and gift taxes be made whether or
not there is tax liability, see subparts B and C.
Subpart B--INCOME TAX RETURNS
* * * * * * *
SEC. 6015. RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT RETURN.
(a) In general.--Notwithstanding section 6013(d)(3)--
(1) an individual who has made a joint return may
elect to seek relief under the procedures prescribed
under subsection (b); and
(2) if such individual is eligible to elect the
application of subsection (c), such individual may, in
addition to any election under paragraph (1), elect to
limit such individual's liability for any deficiency
with respect to such joint return in the manner
prescribed under subsection (c).
Any determination under this section shall be made without
regard to community property laws.
(b) Procedures for relief from liability applicable to all
joint filers.--
(1) In general.--Under procedures prescribed by the
Secretary, if--
(A) a joint return has been made for a
taxable year;
(B) on such return there is an understatement
of tax attributable to erroneous items of one
individual filing the joint return;
(C) the other individual filing the joint
return establishes that in signing the return
he or she did not know, and had no reason to
know, that there was such understatement;
(D) taking into account all the facts and
circumstances, it is inequitable to hold the
other individual liable for the deficiency in
tax for such taxable year attributable to such
understatement; and
(E) the other individual elects (in such form
as the Secretary may prescribe) the benefits of
this subsection not later than the date which
is 2 years after the date the Secretary has
begun collection activities with respect to the
individual making the election,
then the other individual shall be relieved of
liability for tax (including interest, penalties, and
other amounts) for such taxable year to the extent such
liability is attributable to such understatement.
(2) Apportionment of relief.--If an individual who,
but for paragraph (1)(C), would be relieved of
liability under paragraph (1), establishes that in
signing the return such individual did not know, and
had no reason to know, the extent of such
understatement, then such individual shall be relieved
of liability for tax (including interest, penalties,
and other amounts) for such taxable year to the extent
that such liability is attributable to the portion of
such understatement of which such individual did not
know and had no reason to know.
(3) Understatement.--For purposes of this subsection,
the term ``understatement'' has the meaning given to
such term by section 6662(d)(2)(A).
(c) Procedures to limit liability for taxpayers no longer
married or taxpayers legally separated or not living
together.--
(1) In general.--Except as provided in this
subsection, if an individual who has made a joint
return for any taxable year elects the application of
this subsection, the individual's liability for any
deficiency which is assessed with respect to the return
shall not exceed the portion of such deficiency
properly allocable to the individual under subsection
(d).
(2) Burden of proof.--Except as provided in
subparagraph (A)(ii) or (C) of paragraph (3), each
individual who elects the application of this
subsection shall have the burden of proof with respect
to establishing the portion of any deficiency allocable
to such individual.
(3) Election.--
(A) Individuals eligible to make election.--
(i) In general.--An individual shall
only be eligible to elect the
application of this subsection if--
(I) at the time such election
is filed, such individual is no
longer married to, or is
legally separated from, the
individual with whom such
individual filed the joint
return to which the election
relates; or
(II) such individual was not
a member of the same household
as the individual with whom
such joint return was filed at
any time during the 12-month
period ending on the date such
election is filed.
(ii) Certain taxpayers ineligible to
elect.--If the Secretary demonstrates
that assets were transferred between
individuals filing a joint return as
part of a fraudulent scheme by such
individuals, an election under this
subsection by either individual shall
be invalid (and section 6013(d)(3)
shall apply to the joint return).
(B) Time for election.--An election under
this subsection for any taxable year may be
made at any time after a deficiency for such
year is asserted but not later than 2 years
after the date on which the Secretary has begun
collection activities with respect to the
individual making the election.
(C) Election not valid with respect to
certain deficiencies.--If the Secretary
demonstrates that an individual making an
election under this subsection had actual
knowledge, at the time such individual signed
the return, of any item giving rise to a
deficiency (or portion thereof) which is not
allocable to such individual under subsection
(d), such election shall not apply to such
deficiency (or portion). This subparagraph
shall not apply where the individual with
actual knowledge establishes that such
individual signed the return under duress.
(4) Liability increased by reason of transfers of
property to avoid tax.--
(A) In general.--Notwithstanding any other
provision of this subsection, the portion of
the deficiency for which the individual
electing the application of this subsection is
liable (without regard to this paragraph) shall
be increased by the value of any disqualified
asset transferred to the individual.
(B) Disqualified asset.--For purposes of this
paragraph--
(i) In general.--The term
``disqualified asset'' means any
property or right to property
transferred to an individual making the
election under this subsection with
respect to a joint return by the other
individual filing such joint return if
the principal purpose of the transfer
was the avoidance of tax or payment of
tax.
(ii) Presumption.--
(I) In general.--For purposes
of clause (i), except as
provided in subclause (II), any
transfer which is made after
the date which is 1 year before
the date on which the first
letter of proposed deficiency
which allows the taxpayer an
opportunity for administrative
review in the [Internal Revenue
Service Office of Appeals]
Internal Revenue Service
Independent Office of Appeals
is sent shall be presumed to
have as its principal purpose
the avoidance of tax or payment
of tax.
(II) Exceptions.--Subclause
(I) shall not apply to any
transfer pursuant to a decree
of divorce or separate
maintenance or a written
instrument incident to such a
decree or to any transfer which
an individual establishes did
not have as its principal
purpose the avoidance of tax or
payment of tax.
(d) Allocation of deficiency.--For purposes of subsection
(c)--
(1) In general.--The portion of any deficiency on a
joint return allocated to an individual shall be the
amount which bears the same ratio to such deficiency as
the net amount of items taken into account in computing
the deficiency and allocable to the individual under
paragraph (3) bears to the net amount of all items
taken into account in computing the deficiency.
(2) Separate treatment of certain items.--If a
deficiency (or portion thereof) is attributable to--
(A) the disallowance of a credit; or
(B) any tax (other than tax imposed by
section 1 or 55) required to be included with
the joint return;
and such item is allocated to one individual under
paragraph (3), such deficiency (or portion) shall be
allocated to such individual. Any such item shall not
be taken into account under paragraph (1).
(3) Allocation of items giving rise to the
deficiency.--For purposes of this subsection--
(A) In general.--Except as provided in
paragraphs (4) and (5), any item giving rise to
a deficiency on a joint return shall be
allocated to individuals filing the return in
the same manner as it would have been allocated
if the individuals had filed separate returns
for the taxable year.
(B) Exception where other spouse benefits.--
Under rules prescribed by the Secretary, an
item otherwise allocable to an individual under
subparagraph (A) shall be allocated to the
other individual filing the joint return to the
extent the item gave rise to a tax benefit on
the joint return to the other individual.
(C) Exception for fraud.--The Secretary may
provide for an allocation of any item in a
manner not prescribed by subparagraph (A) if
the Secretary establishes that such allocation
is appropriate due to fraud of one or both
individuals.
(4) Limitations on separate returns disregarded.--If
an item of deduction or credit is disallowed in its
entirety solely because a separate return is filed,
such disallowance shall be disregarded and the item
shall be computed as if a joint return had been filed
and then allocated between the spouses appropriately. A
similar rule shall apply for purposes of section 86.
(5) Child's liability.--If the liability of a child
of a taxpayer is included on a joint return, such
liability shall be disregarded in computing the
separate liability of either spouse and such liability
shall be allocated appropriately between the spouses.
(e) Petition for review by Tax Court.--
(1) In general.--In the case of an individual against
whom a deficiency has been asserted and who elects to
have subsection (b) or (c) apply, or in the case of an
individual who requests equitable relief under
subsection (f)--
(A) In general.--In addition to any other
remedy provided by law, the individual may
petition the Tax Court (and the Tax Court shall
have jurisdiction) to determine the appropriate
relief available to the individual under this
section if such petition is filed--
(i) at any time after the earlier
of--
(I) the date the Secretary
mails, by certified or
registered mail to the
taxpayer's last known address,
notice of the Secretary's final
determination of relief
available to the individual, or
(II) the date which is 6
months after the date such
election is filed or request is
made with the Secretary, and
(ii) not later than the close of the
90th day after the date described in
clause (i)(I).
(B) Restrictions applicable to collection of
assessment.--
(i) In general.--Except as otherwise
provided in section 6851 or 6861, no
levy or proceeding in court shall be
made, begun, or prosecuted against the
individual making an election under
subsection (b) or (c) or requesting
equitable relief under subsection (f)
for collection of any assessment to
which such election or request relates
until the close of the 90th day
referred to in subparagraph (A)(ii),
or, if a petition has been filed with
the Tax Court under subparagraph (A),
until the decision of the Tax Court has
become final. Rules similar to the
rules of section 7485 shall apply with
respect to the collection of such
assessment.
(ii) Authority to enjoin collection
actions.--Notwithstanding the
provisions of section 7421(a), the
beginning of such levy or proceeding
during the time the prohibition under
clause (i) is in force may be enjoined
by a proceeding in the proper court,
including the Tax Court. The Tax Court
shall have no jurisdiction under this
subparagraph to enjoin any action or
proceeding unless a timely petition has
been filed under subparagraph (A) and
then only in respect of the amount of
the assessment to which the election
under subsection (b) or (c) relates or
to which the request under subsection
(f) relates.
(2) Suspension of running of period of limitations.--
The running of the period of limitations in section
6502 on the collection of the assessment to which the
petition under paragraph (1)(A) relates shall be
suspended--
(A) for the period during which the Secretary
is prohibited by paragraph (1)(B) from
collecting by levy or a proceeding in court and
for 60 days thereafter, and
(B) if a waiver under paragraph (5) is made,
from the date the claim for relief was filed
until 60 days after the waiver is filed with
the Secretary.
(3) Limitation on Tax Court jurisdiction.--If a suit
for refund is begun by either individual filing the
joint return pursuant to section 6532--
(A) the Tax Court shall lose jurisdiction of
the individual's action under this section to
whatever extent jurisdiction is acquired by the
district court or the United States Court of
Federal Claims over the taxable years that are
the subject of the suit for refund, and
(B) the court acquiring jurisdiction shall
have jurisdiction over the petition filed under
this subsection.
(4) Notice to other spouse.--The Tax Court shall
establish rules which provide the individual filing a
joint return but not making the election under
subsection (b) or (c) or the request for equitable
relief under subsection (f) with adequate notice and an
opportunity to become a party to a proceeding under
either such subsection.
(5) Waiver.--An individual who elects the application
of subsection (b) or (c) or who requests equitable
relief under subsection (f) (and who agrees with the
Secretary's determination of relief) may waive in
writing at any time the restrictions in paragraph
(1)(B) with respect to collection of the outstanding
assessment (whether or not a notice of the Secretary's
final determination of relief has been mailed).
(6) Suspension of running of period for filing
petition in title 11 cases.--In the case of a person
who is prohibited by reason of a case under title 11,
United States Code, from filing a petition under
paragraph (1)(A) with respect to a final determination
of relief under this section, the running of the period
prescribed by such paragraph for filing such a petition
with respect to such final determination shall be
suspended for the period during which the person is so
prohibited from filing such a petition, and for 60 days
thereafter.
(7) Standard and scope of review.--Any review of a
determination made under this section shall be reviewed
de novo by the Tax Court and shall be based upon--
(A) the administrative record established at
the time of the determination, and
(B) any additional newly discovered or
previously unavailable evidence.
[(f) Equitable relief.--Under procedures prescribed by the
Secretary, if--
[(1) taking into account all the facts and
circumstances, it is inequitable to hold the individual
liable for any unpaid tax or any deficiency (or any
portion of either); and
[(2) relief is not available to such individual under
subsection (b) or (c),
the Secretary may relieve such individual of such liability.]
(f) Equitable Relief.--
(1) In general.--Under procedures prescribed by the
Secretary, if--
(A) taking into account all the facts and
circumstances, it is inequitable to hold the
individual liable for any unpaid tax or any
deficiency (or any portion of either), and
(B) relief is not available to such
individual under subsection (b) or (c),
the Secretary may relieve such individual of such
liability.
(2) Limitation.--A request for equitable relief under
this subsection may be made with respect to any portion
of any liability that--
(A) has not been paid, provided that such
request is made before the expiration of the
applicable period of limitation under section
6502, or
(B) has been paid, provided that such request
is made during the period in which the
individual could submit a timely claim for
refund or credit of such payment.
(g) Credits and refunds.--
(1) In general.--Except as provided in paragraphs (2)
and (3), notwithstanding any other law or rule of law
(other than section 6511, 6512(b), 7121, or 7122),
credit or refund shall be allowed or made to the extent
attributable to the application of this section.
(2) Res judicata.--In the case of any election under
subsection (b) or (c) or of any request for equitable
relief under subsection (f), if a decision of a court
in any prior proceeding for the same taxable year has
become final, such decision shall be conclusive except
with respect to the qualification of the individual for
relief which was not an issue in such proceeding. The
exception contained in the preceding sentence shall not
apply if the court determines that the individual
participated meaningfully in such prior proceeding.
(3) Credit and refund not allowed under subsection
(c).--No credit or refund shall be allowed as a result
of an election under subsection (c).
(h) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the provisions of
this section, including--
(1) regulations providing methods for allocation of
items other than the methods under subsection (d)(3);
and
(2) regulations providing the opportunity for an
individual to have notice of, and an opportunity to
participate in, any administrative proceeding with
respect to an election made under subsection (b) or (c)
or a request for equitable relief made under subsection
(f) by the other individual filing the joint return.
* * * * * * *
PART III--INFORMATION RETURNS
* * * * * * *
Subpart A--INFORMATION CONCERNING PERSONS SUBJECT TO SPECIAL PROVISIONS
* * * * * * *
SEC. 6033. RETURNS BY EXEMPT ORGANIZATIONS.
(a) Organizations required to file.--
(1) In general.--Except as provided in paragraph (3),
every organization exempt from taxation under section
501(a) shall file an annual return, stating
specifically the items of gross income, receipts, and
disbursements, and such other information for the
purpose of carrying out the internal revenue laws as
the Secretary may by forms or regulations prescribe,
and shall keep such records, render under oath such
statements, make such other returns, and comply with
such rules and regulations as the Secretary may from
time to time prescribe; except that, in the discretion
of the Secretary, any organization described in section
401(a) may be relieved from stating in its return any
information which is reported in returns filed by the
employer which established such organization.
(2) Being a party to certain reportable
transactions.--Every tax-exempt entity described in
section 4965(c) shall file (in such form and manner and
at such time as determined by the Secretary) a
disclosure of--
(A) such entity's being a party to any
prohibited tax shelter transaction (as defined
in section 4965(e)), and
(B) the identity of any other party to such
transaction which is known by such tax-exempt
entity.
(3) Exceptions from filing.--
(A) Mandatory exceptions.--Paragraph (1)
shall not apply to--
(i) churches, their integrated
auxiliaries, and conventions or
associations of churches,
(ii) any organization (other than a
private foundation, as defined in
section 509(a)) described in
subparagraph (C), the gross receipts of
which in each taxable year are normally
not more than $5,000, or
(iii) the exclusively religious
activities of any religious order.
(B) Discretionary exceptions.--The Secretary
may relieve any organization required under
paragraph (1) (other than an organization
described in section 509(a)(3)) to file an
information return from filing such a return
where he determines that such filing is not
necessary to the efficient administration of
the internal revenue laws.
(C) Certain organizations.--The organizations
referred to in subparagraph (A)(ii) are--
(i) a religious organization
described in section 501(c)(3);
(ii) an educational organization
described in section 170(b)(1)(A)(ii);
(iii) a charitable organization, or
an organization for the prevention of
cruelty to children or animals,
described in section 501(c)(3), if such
organization is supported, in whole or
in part, by funds contributed by the
United States or any State or political
subdivision thereof, or is primarily
supported by contributions of the
general public;
(iv) an organization described in
section 501(c)(3), if such organization
is operated, supervised, or controlled
by or in connection with a religious
organization described in clause (i);
(v) an organization described in
section 501(c)(8); and
(vi) an organization described in
section 501(c)(1), if such organization
is a corporation wholly owned by the
United States or any agency or
instrumentality thereof, or a wholly-
owned subsidiary of such a corporation.
(b) Certain organizations described in section 501(c)(3).--
Every organization described in section 501(c)(3) which is
subject to the requirements of subsection (a) shall furnish
annually information, at such time and in such manner as the
Secretary may by forms or regulations prescribe, setting
forth--
(1) its gross income for the year,
(2) its expenses attributable to such income and
incurred within the year,
(3) its disbursements within the year for the
purposes for which it is exempt,
(4) a balance sheet showing its assets, liabilities,
and net worth as of the beginning of such year,
(5) the total of the contributions and gifts received
by it during the year, and the names and addresses of
all substantial contributors,
(6) the names and addresses of its foundation
managers (within the meaning of section 4946(b)(1)) and
highly compensated employees,
(7) the compensation and other payments made during
the year to each individual described in paragraph (6),
(8) in the case of an organization with respect to
which an election under section 501(h) is effective for
the taxable year, the following amounts for such
organization for such taxable year:
(A) the lobbying expenditures (as defined in
section 4911(c)(1)),
(B) the lobbying nontaxable amount (as
defined in section 4911(c)(2)),
(C) the grass roots expenditures (as defined
in section 4911(c)(3)), and
(D) the grass roots nontaxable amount (as
defined in section 4911(c)(4)),
(9) such other information with respect to direct or
indirect transfers to, and other direct or indirect
transactions and relationships with, other
organizations described in section 501(c) (other than
paragraph (3) thereof) or section 527 as the Secretary
may require to prevent--
(A) diversion of funds from the
organization's exempt purpose, or
(B) misallocation of revenues or expenses,
(10) the respective amounts (if any) of the taxes
imposed on the organization, or any organization
manager of the organization, during the taxable year
under any of the following provisions (and the
respective amounts (if any) of reimbursements paid by
the organization during the taxable year with respect
to taxes imposed on any such organization manager under
any of such provisions):
(A) section 4911 (relating to tax on excess
expenditures to influence legislation),
(B) section 4912 (relating to tax on
disqualifying lobbying expenditures of certain
organizations),
(C) section 4955 (relating to taxes on
political expenditures of section 501(c)(3)
organizations), except to the extent that, by
reason of section 4962, the taxes imposed under
such section are not required to be paid or are
credited or refunded, and
(D) section 4959 (relating to taxes on
failures by hospital organizations),
(11) the respective amounts (if any) of--
(A) the taxes imposed with respect to the
organization on any organization manager, or
any disqualified person, during the taxable
year under section 4958 (relating to taxes on
private excess benefit from certain charitable
organizations), and
(B) reimbursements paid by the organization
during the taxable year with respect to taxes
imposed under such section,
except to the extent that, by reason of section 4962,
the taxes imposed under such section are not required
to be paid or are credited or refunded,
(12) such information as the Secretary may require
with respect to any excess benefit transaction (as
defined in section 4958),
(13) such information with respect to disqualified
persons as the Secretary may prescribe,
(14) such information as the Secretary may require
with respect to disaster relief activities,
(15) in the case of an organization to which the
requirements of section 501(r) apply for the taxable
year--
(A) a description of how the organization is
addressing the needs identified in each
community health needs assessment conducted
under section 501(r)(3) and a description of
any such needs that are not being addressed
together with the reasons why such needs are
not being addressed, and
(B) the audited financial statements of such
organization (or, in the case of an
organization the financial statements of which
are included in a consolidated financial
statement with other organizations, such
consolidated financial statement), and
(16) such other information for purposes of carrying
out the internal revenue laws as the Secretary may
require.
For purposes of paragraph (8), if section 4911(f) applies to
the organization for the taxable year, such organization shall
furnish the amounts with respect to the affiliated group as
well as with respect to such organization.
(c) Additional provisions relating to private foundations.--
In the case of an organization which is a private foundation
(within the meaning of section 509(a))--
(1) the Secretary shall by regulations provide that
the private foundation shall include in its annual
return under this section such information (not
required to be furnished by subsection (b) or the forms
or regulations prescribed thereunder) as would have
been required to be furnished under section 6056
(relating to annual reports by private foundations) as
such section 6056 was in effect on January 1, 1979, and
(2) the foundation managers shall furnish copies of
the annual return under this section to such State
officials, at such times, and under such conditions, as
the Secretary may by regulations prescribe.
Nothing in paragraph (1) shall require the inclusion of the
name and address of any recipient (other than a disqualified
person within the meaning of section 4946) of 1 or more
charitable gifts or grants made by the foundation to such
recipient as an indigent or needy person if the aggregate of
such gifts or grants made by the foundation to such recipient
during the year does not exceed $1,000.
(d) Section to apply to nonexempt charitable trusts and
nonexempt private foundations.--The following organizations
shall comply with the requirements of this section in the same
manner as organizations described in section 501(c)(3) which
are exempt from tax under section 501(a):
(1) Nonexempt charitable trusts.--A trust described
in section 4947(a)(1) (relating to nonexempt charitable
trusts).
(2) Nonexempt private foundations.--A private
foundation which is not exempt from tax under section
501(a).
(e) Special rules relating to lobbying activities.--
(1) Reporting requirements.--
(A) In general.--If this subsection applies
to an organization for any taxable year, such
organization--
(i) shall include on any return
required to be filed under subsection
(a) for such year information setting
forth the total expenditures of the
organization to which section 162(e)(1)
applies and the total amount of the
dues or other similar amounts paid to
the organization to which such
expenditures are allocable, and
(ii) except as provided in paragraphs
(2)(A)(i) and (3), shall, at the time
of assessment or payment of such dues
or other similar amounts, provide
notice to each person making such
payment which contains a reasonable
estimate of the portion of such dues or
other similar amounts to which such
expenditures are so allocable.
(B) Organizations to which subsection
applies.--
(i) In general.--This subsection
shall apply to any organization which
is exempt from taxation under section
501 other than an organization
described in section 501(c)(3).
(ii) Special rule for in-house
expenditures.--This subsection shall
not apply to the in-house expenditures
(within the meaning of section
162(e)(4)(B)(ii)) of an organization
for a taxable year if such expenditures
do not exceed $2,000. In determining
whether a taxpayer exceeds the $2,000
limit under this clause, there shall
not be taken into account overhead
costs otherwise allocable to activities
described in subparagraphs (A) and (D)
of section 162(e)(1).
(iii) Coordination with section
527(f).--This subsection shall not
apply to any amount on which tax is
imposed by reason of section 527(f).
(C) Allocation.--For purposes of this
paragraph--
(i) In general.--Expenditures to
which section 162(e)(1) applies shall
be treated as paid out of dues or other
similar amounts to the extent thereof.
(ii) Carryover of lobbying
expenditures in excess of dues.--If
expenditures to which section 162(e)(1)
applies exceed the dues or other
similar amounts for any taxable year,
such excess shall be treated as
expenditures to which section 162(e)(1)
applies which are paid or incurred by
the organization during the following
taxable year.
(2) Tax imposed where organization does not notify.--
(A) In general.--If an organization--
(i) elects not to provide the notices
described in paragraph (1)(A) for any
taxable year, or
(ii) fails to include in such notices
the amount allocable to expenditures to
which section 162(e)(1) applies
(determined on the basis of actual
amounts rather than the reasonable
estimates under paragraph (1)(A)(ii)),
then there is hereby imposed on such
organization for such taxable year a tax in an
amount equal to the product of the highest rate
of tax imposed by section 11 for the taxable
year and the aggregate amount not included in
such notices by reason of such election or
failure.
(B) Waiver where future adjustments made.--
The Secretary may waive the tax imposed by
subparagraph (A)(ii) for any taxable year if
the organization agrees to adjust its estimates
under paragraph (1)(A)(ii) for the following
taxable year to correct any failures.
(C) Tax treated as income tax.--For purposes
of this title, the tax imposed by subparagraph
(A) shall be treated in the same manner as a
tax imposed by chapter 1 (relating to income
taxes).
(3) Exception where dues generally nondeductible.--
Paragraph (1)(A) shall not apply to an organization
which establishes to the satisfaction of the Secretary
that substantially all of the dues or other similar
amounts paid by persons to such organization are not
deductible without regard to section 162(e).
(f) Certain organizations described in section 501(c)(4).--
Every organization described in section 501(c)(4) which is
subject to the requirements of subsection (a) shall include on
the return required under subsection (a)--
(1) the information referred to in paragraphs (11),
(12) and (13) of subsection (b) with respect to such
organization, and
(2) in the case of the first such return filed by
such an organization after submitting a notice to the
Secretary under section 506(a), such information as the
Secretary shall by regulation require in support of the
organization's treatment as an organization described
in section 501(c)(4).
(g) Returns required by political organizations.--
(1) In general.--This section shall apply to a
political organization (as defined by section
527(e)(1)) which has gross receipts of $25,000 or more
for the taxable year. In the case of a political
organization which is a qualified State or local
political organization (as defined in section
527(e)(5)), the preceding sentence shall be applied by
substituting ``$100,000'' for ``$25,000''.
(2) Annual returns.--Political organizations
described in paragraph (1) shall file an annual
return--
(A) containing the information required, and
complying with the other requirements, under
subsection (a)(1) for organizations exempt from
taxation under section 501(a), with such
modifications as the Secretary considers
appropriate to require only information which
is necessary for the purposes of carrying out
section 527, and
(B) containing such other information as the
Secretary deems necessary to carry out the
provisions of this subsection.
(3) Mandatory exceptions from filing.--Paragraph (2)
shall not apply to an organization--
(A) which is a State or local committee of a
political party, or political committee of a
State or local candidate,
(B) which is a caucus or association of State
or local officials,
(C) which is an authorized committee (as
defined in section 301(6) of the Federal
Election Campaign Act of 1971) of a candidate
for Federal office,
(D) which is a national committee (as defined
in section 301(14) of the Federal Election
Campaign Act of 1971) of a political party,
(E) which is a United States House of
Representatives or United States Senate
campaign committee of a political party
committee,
(F) which is required to report under the
Federal Election Campaign Act of 1971 as a
political committee (as defined in section
301(4) of such Act), or
(G) to which section 527 applies for the
taxable year solely by reason of subsection
(f)(1) of such section.
(4) Discretionary exception.--The Secretary may
relieve any organization required under paragraph (2)
to file an information return from filing such a return
if the Secretary determines that such filing is not
necessary to the efficient administration of the
internal revenue laws.
(h) Controlling organizations.--Each controlling organization
(within the meaning of section 512(b)(13)) which is subject to
the requirements of subsection (a) shall include on the return
required under subsection (a)--
(1) any interest, annuities, royalties, or rents
received from each controlled entity (within the
meaning of section 512(b)(13)),
(2) any loans made to each such controlled entity,
and
(3) any transfers of funds between such controlling
organization and each such controlled entity.
(i) Additional notification requirements.--Any organization
the gross receipts of which in any taxable year result in such
organization being referred to in subsection (a)(3)(A)(ii) or
(a)(3)(B)--
(1) shall furnish annually, in electronic form, and
at such time and in such manner as the Secretary may by
regulations prescribe, information setting forth--
(A) the legal name of the organization,
(B) any name under which such organization
operates or does business,
(C) the organization's mailing address and
Internet web site address (if any),
(D) the organization's taxpayer
identification number,
(E) the name and address of a principal
officer, and
(F) evidence of the continuing basis for the
organization's exemption from the filing
requirements under subsection (a)(1), and
(2) upon the termination of the existence of the
organization, shall furnish notice of such termination.
(j) Loss of exempt status for failure to file return or
notice.--
(1) In general.--[If an organization]
(A) Notice._If an organization described in
subsection (a)(1) or (i) fails to file the
annual return or notice required under either
subsection for 2 consecutive years, the
Secretary shall notify the organization--
(i) that the Internal Revenue Service
has no record of such a return or
notice from such organization for 2
consecutive years, and
(ii) about the revocation that will
occur under subparagraph (B) if the
organization fails to file such a
return or notice by the due date for
the next such return or notice required
to be filed.
The notification under the preceding sentence shall
include information about how to comply with the filing
requirements under subsections (a)(1) and (i).
(B) Revocation._If an organization described
in subsection (a)(1) or (i) fails to file an
annual return or notice required under either
subsection for 3 consecutive years, such
organization's status as an organization exempt
from tax under section 501(a) shall be
considered revoked on and after the date set by
the Secretary for the filing of the third
annual return or notice. The Secretary shall
publish and maintain a list of any organization
the status of which is so revoked.
(2) Application necessary for reinstatement.--Any
organization the tax-exempt status of which is revoked
under paragraph (1) must apply in order to obtain
reinstatement of such status regardless of whether such
organization was originally required to make such an
application.
(3) Retroactive reinstatement if reasonable cause
shown for failure.--If, upon application for
reinstatement of status as an organization exempt from
tax under section 501(a), an organization described in
paragraph (1) can show to the satisfaction of the
Secretary evidence of reasonable cause for the failure
described in such paragraph, the organization's exempt
status may, in the discretion of the Secretary, be
reinstated effective from the date of the revocation
under such paragraph.
(k) Additional provisions relating to sponsoring
organizations.--Every organization described in section
4966(d)(1) shall, on the return required under subsection (a)
for the taxable year--
(1) list the total number of donor advised funds (as
defined in section 4966(d)(2)) it owns at the end of
such taxable year,
(2) indicate the aggregate value of assets held in
such funds at the end of such taxable year, and
(3) indicate the aggregate contributions to and
grants made from such funds during such taxable year.
(l) Additional provisions relating to supporting
organizations.--Every organization described in section
509(a)(3) shall, on the return required under subsection (a)--
(1) list the supported organizations (as defined in
section 509(f)(3)) with respect to which such
organization provides support,
(2) indicate whether the organization meets the
requirements of clause (i), (ii), or (iii) of section
509(a)(3)(B), and
(3) certify that the organization meets the
requirements of section 509(a)(3)(C).
(m) Additional information required from CO-OP insurers.--An
organization described in section 501(c)(29) shall include on
the return required under subsection (a) the following
information:
(1) The amount of the reserves required by each State
in which the organization is licensed to issue
qualified health plans.
(2) The amount of reserves on hand.
(n) Mandatory Electronic Filing.--Any organization required
to file a return under this section shall file such return in
electronic form.
[(n)] (o) Cross references.--For provisions relating to
statements, etc., regarding exempt status of organizations, see
section 6001.
For reporting requirements as to certain liquidations,
dissolutions, terminations, and contractions, see section
6043(b). For provisions relating to penalties for failure to
file a return required by this section, see section 6652(c).
For provisions relating to information required in connection
with certain plans of deferred compensation, see section 6058.
* * * * * * *
PART IV--SIGNING AND VERIFYING OF RETURNS AND OTHER DOCUMENTS
* * * * * * *
SEC. 6061. SIGNING OF RETURNS AND OTHER DOCUMENTS.
(a) General rule.--Except as otherwise provided by subsection
(b) and sections 6062 and 6063, any return, statement, or other
document required to be made under any provision of the
internal revenue laws or regulations shall be signed in
accordance with forms or regulations prescribed by the
Secretary.
(b) Electronic signatures.--
(1) In general.--The Secretary shall develop
procedures for the acceptance of signatures in digital
or other electronic form. Until such time as such
procedures are in place, the Secretary may--
(A) waive the requirement of a signature for;
or
(B) provide for alternative methods of
signing or subscribing,
a particular type or class of return, declaration,
statement, or other document required or permitted to
be made or written under internal revenue laws and
regulations.
(2) Treatment of alternative methods.--
Notwithstanding any other provision of law, any return,
declaration, statement, or other document filed and
verified, signed, or subscribed under any method
adopted under paragraph (1)(B) shall be treated for all
purposes (both civil and criminal, including penalties
for perjury) in the same manner as though signed or
subscribed.
[(3) Published guidance.--The Secretary shall publish
guidance as appropriate to define and implement any
waiver of the signature requirements or any method
adopted under paragraph (1).]
(3) Published guidance.--
(A) In general.--The Secretary shall publish
guidance as appropriate to define and implement
any waiver of the signature requirements or any
method adopted under paragraph (1).
(B) Electronic signatures for disclosure
authorizations to, and other authorizations of,
practitioners.--Not later than 6 months after
the date of the enactment of this subparagraph,
the Secretary shall publish guidance to
establish uniform standards and procedures for
the acceptance of taxpayers' signatures
appearing in electronic form with respect to
any request for disclosure of a taxpayer's
return or return information under section
6103(c) to a practitioner or any power of
attorney granted by a taxpayer to a
practitioner.
(C) Practitioner.--For purposes of
subparagraph (B), the term ``practitioner''
means any individual in good standing who is
regulated under section 330 of title 31, United
States Code.
* * * * * * *
Subchapter B--MISCELLANEOUS PROVISIONS
* * * * * * *
SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN
INFORMATION.
(a) General rule.--Returns and return information shall be
confidential, and except as authorized by this title--
(1) no officer or employee of the United States,
(2) no officer or employee of any State, any local
law enforcement agency receiving information under
subsection (i)(1)(C) or (7)(A), any local child support
enforcement agency, or any local agency administering a
program listed in subsection (l)(7)(D) who has or had
access to returns or return information under this
section or section 6104(c), and
(3) no other person (or officer or employee thereof)
who has or had access to returns or return information
under subsection (c), subsection (e)(1)(D)(iii),
[subsection (k)(10)] paragraph (10), (13), or (14) of
subsection (k), paragraph (6), (10), (12), (16), (19),
(20), or (21) of subsection (l), paragraph (2) or
(4)(B) of subsection (m), or subsection (n),
shall disclose any return or return information obtained by him
in any manner in connection with his service as such an officer
or an employee or otherwise or under the provisions of this
section. For purposes of this subsection, the term ``officer or
employee'' includes a former officer or employee.
(b) Definitions.--For purposes of this section--
(1) Return.--The term ``return'' means any tax or
information return, declaration of estimated tax, or
claim for refund required by, or provided for or
permitted under, the provisions of this title which is
filed with the Secretary by, on behalf of, or with
respect to any person, and any amendment or supplement
thereto, including supporting schedules, attachments,
or lists which are supplemental to, or part of, the
return so filed.
(2) Return information.--The term ``return
information'' means--
(A) a taxpayer's identity, the nature,
source, or amount of his income, payments,
receipts, deductions, exemptions, credits,
assets, liabilities, net worth, tax liability,
tax withheld, deficiencies, overassessments, or
tax payments, whether the taxpayer's return
was, is being, or will be examined or subject
to other investigation or processing, or any
other data, received by, recorded by, prepared
by, furnished to, or collected by the Secretary
with respect to a return or with respect to the
determination of the existence, or possible
existence, of liability (or the amount thereof)
of any person under this title for any tax,
penalty, interest, fine, forfeiture, or other
imposition, or offense,
(B) any part of any written determination or
any background file document relating to such
written determination (as such terms are
defined in section 6110(b)) which is not open
to public inspection under section 6110,
(C) any advance pricing agreement entered
into by a taxpayer and the Secretary and any
background information related to such
agreement or any application for an advance
pricing agreement, and
(D) any agreement under section 7121, and any
similar agreement, and any background
information related to such an agreement or
request for such an agreement,
but such term does not include data in a form which
cannot be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer. Nothing
in the preceding sentence, or in any other provision of
law, shall be construed to require the disclosure of
standards used or to be used for the selection of
returns for examination, or data used or to be used for
determining such standards, if the Secretary determines
that such disclosure will seriously impair assessment,
collection, or enforcement under the internal revenue
laws.
(3) Taxpayer return information.--The term ``taxpayer
return information'' means return information as
defined in paragraph (2) which is filed with, or
furnished to, the Secretary by or on behalf of the
taxpayer to whom such return information relates.
(4) Tax administration.--The term ``tax
administration''--
(A) means--
(i) the administration, management,
conduct, direction, and supervision of
the execution and application of the
internal revenue laws or related
statutes (or equivalent laws and
statutes of a State) and tax
conventions to which the United States
is a party, and
(ii) the development and formulation
of Federal tax policy relating to
existing or proposed internal revenue
laws, related statutes, and tax
conventions, and
(B) includes assessment, collection,
enforcement, litigation, publication, and
statistical gathering functions under such
laws, statutes, or conventions.
(5) State.--
(A) In general.--The term ``State'' means--
(i) any of the 50 States, the
District of Columbia, the Commonwealth
of Puerto Rico, the Virgin Islands,
Guam, American Samoa, and the
Commonwealth of the Northern Mariana
Islands,
(ii) for purposes of subsections
(a)(2), (b)(4), (d)(1), (h)(4), and
(p), any municipality--
(I) with a population in
excess of 250,000 (as
determined under the most
recent decennial United States
census data available),
(II) which imposes a tax on
income or wages, and
(III) with which the
Secretary (in his sole
discretion) has entered into an
agreement regarding disclosure,
and
(iii) for purposes of subsections
(a)(2), (b)(4), (d)(1), (h)(4), and
(p), any governmental entity--
(I) which is formed and
operated by a qualified group
of municipalities, and
(II) with which the Secretary
(in his sole discretion) has
entered into an agreement
regarding disclosure.
(B) Regional income tax agencies.--For
purposes of subparagraph (A)(iii)--
(i) Qualified group of
municipalities.--The term ``qualified
group of municipalities'' means, with
respect to any governmental entity, 2
or more municipalities--
(I) each of which imposes a
tax on income or wages,
(II) each of which, under the
authority of a State statute,
administers the laws relating
to the imposition of such taxes
through such entity, and
(III) which collectively have
a population in excess of
250,000 (as determined under
the most recent decennial
United States census data
available).
(ii) References to State law, etc..--
For purposes of applying subparagraph
(A)(iii) to the subsections referred to
in such subparagraph, any reference in
such subsections to State law,
proceedings, or tax returns shall be
treated as references to the law,
proceedings, or tax returns, as the
case may be, of the municipalities
which form and operate the governmental
entity referred to in such
subparagraph.
(iii) Disclosure to contractors and
other agents.--Notwithstanding any
other provision of this section, no
return or return information shall be
disclosed to any contractor or other
agent of a governmental entity referred
to in subparagraph (A)(iii) unless such
entity, to the satisfaction of the
Secretary--
(I) has requirements in
effect which require each such
contractor or other agent which
would have access to returns or
return information to provide
safeguards (within the meaning
of subsection (p)(4)) to
protect the confidentiality of
such returns or return
information,
(II) agrees to conduct an on-
site review every 3 years (or a
mid-point review in the case of
contracts or agreements of less
than 3 years in duration) of
each contractor or other agent
to determine compliance with
such requirements,
(III) submits the findings of
the most recent review
conducted under subclause (II)
to the Secretary as part of the
report required by subsection
(p)(4)(E), and
(IV) certifies to the
Secretary for the most recent
annual period that such
contractor or other agent is in
compliance with all such
requirements.
The certification required by subclause (IV)
shall include the name and address of each
contractor and other agent, a description of
the contract or agreement with such contractor
or other agent, and the duration of such
contract or agreement. The requirements of this
clause shall not apply to disclosures pursuant
to subsection (n) for purposes of Federal tax
administration and a rule similar to the rule
of subsection (p)(8)(B) shall apply for
purposes of this clause.
(6) Taxpayer identity.--The term ``taxpayer
identity'' means the name of a person with respect to
whom a return is filed, his mailing address, his
taxpayer identifying number (as described in section
6109), or a combination thereof.
(7) Inspection.--The terms ``inspected'' and
``inspection'' mean any examination of a return or
return information.
(8) Disclosure.--The term ``disclosure'' means the
making known to any person in any manner whatever a
return or return information.
(9) Federal agency.--The term ``Federal agency''
means an agency within the meaning of section 551(1) of
title 5, United States Code.
(10) Chief executive officer.--The term ``chief
executive officer'' means, with respect to any
municipality, any elected official and the chief
official (even if not elected) of such municipality.
(11) Terrorist incident, threat, or activity.--The
term ``terrorist incident, threat, or activity'' means
an incident, threat, or activity involving an act of
domestic terrorism (as defined in section 2331(5) of
title 18, United States Code) or international
terrorism (as defined in section 2331(1) of such
title).
(c) Disclosure of returns and return information to designee
of taxpayer.--The Secretary may, subject to such requirements
and conditions as he may prescribe by regulations, disclose the
return of any taxpayer, or return information with respect to
such taxpayer, to such person or persons as the taxpayer may
designate in a request for or consent to such disclosure, or to
any other person at the taxpayer's request to the extent
necessary to comply with a request for information or
assistance made by the taxpayer to such other person. However,
return information shall not be disclosed to such person or
persons if the Secretary determines that such disclosure would
seriously impair Federal tax administration. Persons designated
by the taxpayer under this subsection to receive return
information shall not use the information for any purpose other
than the express purpose for which consent was granted and
shall not disclose return information to any other person
without the express permission of, or request by, the taxpayer.
(d) Disclosure to State tax officials and State and local law
enforcement agencies.--
(1) In general.--Returns and return information with
respect to taxes imposed by chapters 1, 2, 6, 11, 12,
21, 23, 24, 31, 32, 44, 51, and 52 and subchapter D of
chapter 36 shall be open to inspection by, or
disclosure to, any State agency, body, or commission,
or its legal representative, which is charged under the
laws of such State with responsibility for the
administration of State tax laws for the purpose of,
and only to the extent necessary in, the administration
of such laws, including any procedures with respect to
locating any person who may be entitled to a refund.
Such inspection shall be permitted, or such disclosure
made, only upon written request by the head of such
agency, body, or commission, and only to the
representatives of such agency, body, or commission
designated in such written request as the individuals
who are to inspect or to receive the returns or return
information on behalf of such agency, body, or
commission. Such representatives shall not include any
individual who is the chief executive officer of such
State or who is neither an employee or legal
representative of such agency, body, or commission nor
a person described in subsection (n). However, such
return information shall not be disclosed to the extent
that the Secretary determines that such disclosure
would identify a confidential informant or seriously
impair any civil or criminal tax investigation.
(2) Disclosure to State audit agencies.--
(A) In general.--Any returns or return
information obtained under paragraph (1) by any
State agency, body, or commission may be open
to inspection by, or disclosure to, officers
and employees of the State audit agency for the
purpose of, and only to the extent necessary
in, making an audit of the State agency, body,
or commission referred to in paragraph (1).
(B) State audit agency.--For purposes of
subparagraph (A), the term ``State audit
agency'' means any State agency, body, or
commission which is charged under the laws of
the State with the responsibility of auditing
State revenues and programs.
(3) Exception for reimbursement under section 7624.--
Nothing in this section shall be construed to prevent
the Secretary from disclosing to any State or local law
enforcement agency which may receive a payment under
section 7624 the amount of the recovered taxes with
respect to which such a payment may be made.
(4) Availability and use of death information.--
(A) In general.--No returns or return
information may be disclosed under paragraph
(1) to any agency, body, or commission of any
State (or any legal representative thereof)
during any period during which a contract
meeting the requirements of subparagraph (B) is
not in effect between such State and the
Secretary of Health and Human Services.
(B) Contractual requirements.--A contract
meets the requirements of this subparagraph
if--
(i) such contract requires the State
to furnish the Secretary of Health and
Human Services information concerning
individuals with respect to whom death
certificates (or equivalent documents
maintained by the State or any
subdivision thereof) have been
officially filed with it, and
(ii) such contract does not include
any restriction on the use of
information obtained by such Secretary
pursuant to such contract, except that
such contract may provide that such
information is only to be used by the
Secretary (or any other Federal agency)
for purposes of ensuring that Federal
benefits or other payments are not
erroneously paid to deceased
individuals.
Any information obtained by the Secretary of
Health and Human Services under such a contract
shall be exempt from disclosure under section
552 of title 5, United States Code, and from
the requirements of section 552a of such title
5.
(C) Special exception.--The provisions of
subparagraph (A) shall not apply to any State
which on July 1, 1993, was not, pursuant to a
contract, furnishing the Secretary of Health
and Human Services information concerning
individuals with respect to whom death
certificates (or equivalent documents
maintained by the State or any subdivision
thereof) have been officially filed with it.
(5) Disclosure for combined employment tax
reporting.--
(A) In general.--The Secretary may disclose
taxpayer identity information and signatures to
any agency, body, or commission of any State
for the purpose of carrying out with such
agency, body, or commission a combined Federal
and State employment tax reporting program
approved by the Secretary. Subsections (a)(2)
and (p)(4) and sections 7213 and 7213A shall
not apply with respect to disclosures or
inspections made pursuant to this paragraph.
(B) Termination.--The Secretary may not make
any disclosure under this paragraph after
December 31, 2007.
(6) Limitation on disclosure regarding regional
income tax agencies treated as States.--For purposes of
paragraph (1), inspection by or disclosure to an entity
described in subsection (b)(5)(A)(iii) shall be for the
purpose of, and only to the extent necessary in, the
administration of the laws of the member municipalities
in such entity relating to the imposition of a tax on
income or wages. Such entity may not redisclose any
return or return information received pursuant to
paragraph (1) to any such member municipality.
(e) Disclosure to persons having material interest.--
(1) In general.--The return of a person shall, upon
written request, be open to inspection by or disclosure
to--
(A) in the case of the return of an
individual--
(i) that individual,
(ii) the spouse of that individual if
the individual and such spouse have
signified their consent to consider a
gift reported on such return as made
one-half by him and one-half by the
spouse pursuant to the provisions of
section 2513; or
(iii) the child of that individual
(or such child's legal representative)
to the extent necessary to comply with
the provisions of section 1(g);
(B) in the case of an income tax return filed
jointly, either of the individuals with respect
to whom the return is filed;
(C) in the case of the return of a
partnership, any person who was a member of
such partnership during any part of the period
covered by the return;
(D) in the case of the return of a
corporation or a subsidiary thereof--
(i) any person designated by
resolution of its board of directors or
other similar governing body,
(ii) any officer or employee of such
corporation upon written request signed
by any principal officer and attested
to by the secretary or other officer,
(iii) any bona fide shareholder of
record owning 1 percent or more of the
outstanding stock of such corporation,
(iv) if the corporation was an S
corporation, any person who was a
shareholder during any part of the
period covered by such return during
which an election under section 1362(a)
was in effect, or
(v) if the corporation has been
dissolved, any person authorized by
applicable State law to act for the
corporation or any person who the
Secretary finds to have a material
interest which will be affected by
information contained therein;
(E) in the case of the return of an estate--
(i) the administrator, executor, or
trustee of such estate, and
(ii) any heir at law, next of kin, or
beneficiary under the will, of the
decedent, but only if the Secretary
finds that such heir at law, next of
kin, or beneficiary has a material
interest which will be affected by
information contained therein; and
(F) in the case of the return of a trust--
(i) the trustee or trustees, jointly
or separately, and
(ii) any beneficiary of such trust,
but only if the Secretary finds that
such beneficiary has a material
interest which will be affected by
information contained therein.
(2) Incompetency.--If an individual described in
paragraph (1) is legally incompetent, the applicable
return shall, upon written request, be open to
inspection by or disclosure to the committee, trustee,
or guardian of his estate.
(3) Deceased individuals.--The return of a decedent
shall, upon written request, be open to inspection by
or disclosure to--
(A) the administrator, executor, or trustee
of his estate, and
(B) any heir at law, next of kin, or
beneficiary under the will, of such decedent,
or a donee of property, but only if the
Secretary finds that such heir at law, next of
kin, beneficiary, or donee has a material
interest which will be affected by information
contained therein.
(4) Title 11 cases and receivership proceedings.--
If--
(A) there is a trustee in a title 11 case in
which the debtor is the person with respect to
whom the return is filed, or
(B) substantially all of the property of the
person with respect to whom the return is filed
is in the hands of a receiver,
such return or returns for prior years of such person
shall, upon written request, be open to inspection by
or disclosure to such trustee or receiver, but only if
the Secretary finds that such trustee or receiver, in
his fiduciary capacity, has a material interest which
will be affected by information contained therein.
(5) Individual's title 11 case.--
(A) In general.--In any case to which section
1398 applies (determined without regard to
section 1398(b)(1)), any return of the debtor
for the taxable year in which the case
commenced or any preceding taxable year shall,
upon written request, be open to inspection by
or disclosure to the trustee in such case.
(B) Return of estate available to debtor.--
Any return of an estate in a case to which
section 1398 applies shall, upon written
request, be open to inspection by or disclosure
to the debtor in such case.
(C) Special rule for involuntary cases.--In
an involuntary case, no disclosure shall be
made under subparagraph (A) until the order for
relief has been entered by the court having
jurisdiction of such case unless such court
finds that such disclosure is appropriate for
purposes of determining whether an order for
relief should be entered.
(6) Attorney in fact.--Any return to which this
subsection applies shall, upon written request, also be
open to inspection by or disclosure to the attorney in
fact duly authorized in writing by any of the persons
described in paragraph (1), (2), (3), (4), (5), (8), or
(9) to inspect the return or receive the information on
his behalf, subject to the conditions provided in such
paragraphs.
(7) Return information.--Return information with
respect to any taxpayer may be open to inspection by or
disclosure to any person authorized by this subsection
to inspect any return of such taxpayer if the Secretary
determines that such disclosure would not seriously
impair Federal tax administration.
(8) Disclosure of collection activities with respect
to joint return.--If any deficiency of tax with respect
to a joint return is assessed and the individuals
filing such return are no longer married or no longer
reside in the same household, upon request in writing
by either of such individuals, the Secretary shall
disclose in writing to the individual making the
request whether the Secretary has attempted to collect
such deficiency from such other individual, the general
nature of such collection activities, and the amount
collected. The preceding sentence shall not apply to
any deficiency which may not be collected by reason of
section 6502.
(9) Disclosure of certain information where more than
1 person subject to penalty under section 6672.--If the
Secretary determines that a person is liable for a
penalty under section 6672(a) with respect to any
failure, upon request in writing of such person, the
Secretary shall disclose in writing to such person--
(A) the name of any other person whom the
Secretary has determined to be liable for such
penalty with respect to such failure, and
(B) whether the Secretary has attempted to
collect such penalty from such other person,
the general nature of such collection
activities, and the amount collected.
(10) Limitation on certain disclosures under this
subsection.--In the case of an inspection or disclosure
under this subsection relating to the return of a
partnership, S corporation, trust, or an estate, the
information inspected or disclosed shall not include
any supporting schedule, attachment, or list which
includes the taxpayer identity information of a person
other than the entity making the return or the person
conducting the inspection or to whom the disclosure is
made.
(11) Disclosure of information regarding status of
investigation of violation of this section.--In the
case of a person who provides to the Secretary
information indicating a violation of section 7213,
7213A, or 7214 with respect to any return or return
information of such person, the Secretary may disclose
to such person (or such person's designee)--
(A) whether an investigation based on the
person's provision of such information has been
initiated and whether it is open or closed,
(B) whether any such investigation
substantiated such a violation by any
individual, and
(C) whether any action has been taken with
respect to such individual (including whether a
referral has been made for prosecution of such
individual).
(f) Disclosure to Committees of Congress.--
(1) Committee on Ways and Means, Committee on
Finance, and Joint Committee on Taxation.--Upon written
request from the chairman of the Committee on Ways and
Means of the House of Representatives, the chairman of
the Committee on Finance of the Senate, or the chairman
of the Joint Committee on Taxation, the Secretary shall
furnish such committee with any return or return
information specified in such request, except that any
return or return information which can be associated
with, or otherwise identify, directly or indirectly, a
particular taxpayer shall be furnished to such
committee only when sitting in closed executive session
unless such taxpayer otherwise consents in writing to
such disclosure.
(2) Chief of Staff of Joint Committee on Taxation.--
Upon written request by the Chief of Staff of the Joint
Committee on Taxation, the Secretary shall furnish him
with any return or return information specified in such
request. Such Chief of Staff may submit such return or
return information to any committee described in
paragraph (1), except that any return or return
information which can be associated with, or otherwise
identify, directly or indirectly, a particular taxpayer
shall be furnished to such committee only when sitting
in closed executive session unless such taxpayer
otherwise consents in writing to such disclosure.
(3) Other committees.--Pursuant to an action by, and
upon written request by the chairman of, a committee of
the Senate or the House of Representatives (other than
a committee specified in paragraph (1)) specially
authorized to inspect any return or return information
by a resolution of the Senate or the House of
Representatives or, in the case of a joint committee
(other than the joint committee specified in paragraph
(1)) by concurrent resolution, the Secretary shall
furnish such committee, or a duly authorized and
designated subcommittee thereof, sitting in closed
executive session, with any return or return
information which such resolution authorizes the
committee or subcommittee to inspect. Any resolution
described in this paragraph shall specify the purpose
for which the return or return information is to be
furnished and that such information cannot reasonably
be obtained from any other source.
(4) Agents of committees and submission of
information to Senate or House of Representatives.--
(A) Committees described in paragraph (1).--
Any committee described in paragraph (1) or the
Chief of Staff of the Joint Committee on
Taxation shall have the authority, acting
directly, or by or through such examiners or
agents as the chairman of such committee or
such chief of staff may designate or appoint,
to inspect returns and return information at
such time and in such manner as may be
determined by such chairman or chief of staff.
Any return or return information obtained by or
on behalf of such committee pursuant to the
provisions of this subsection may be submitted
by the committee to the Senate or the House of
Representatives, or to both. The Joint
Committee on Taxation may also submit such
return or return information to any other
committee described in paragraph (1), except
that any return or return information which can
be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer
shall be furnished to such committee only when
sitting in closed executive session unless such
taxpayer otherwise consents in writing to such
disclosure.
(B) Other committees.--Any committee or
subcommittee described in paragraph (3) shall
have the right, acting directly, or by or
through no more than four examiners or agents,
designated or appointed in writing in equal
numbers by the chairman and ranking minority
member of such committee or subcommittee, to
inspect returns and return information at such
time and in such manner as may be determined by
such chairman and ranking minority member. Any
return or return information obtained by or on
behalf of such committee or subcommittee
pursuant to the provisions of this subsection
may be submitted by the committee to the Senate
or the House of Representatives, or to both,
except that any return or return information
which can be associated with, or otherwise
identify, directly or indirectly, a particular
taxpayer, shall be furnished to the Senate or
the House of Representatives only when sitting
in closed executive session unless such
taxpayer otherwise consents in writing to such
disclosure.
(5) Disclosure by whistleblower.--Any person who
otherwise has or had access to any return or return
information under this section may disclose such return
or return information to a committee referred to in
paragraph (1) or any individual authorized to receive
or inspect information under paragraph (4)(A) if such
person believes such return or return information may
relate to possible misconduct, maladministration, or
taxpayer abuse.
(g) Disclosure to President and certain other persons.--
(1) In general.--Upon written request by the
President, signed by him personally, the Secretary
shall furnish to the President, or to such employee or
employees of the White House Office as the President
may designate by name in such request, a return or
return information with respect to any taxpayer named
in such request. Any such request shall state--
(A) the name and address of the taxpayer
whose return or return information is to be
disclosed,
(B) the kind of return or return information
which is to be disclosed,
(C) the taxable period or periods covered by
such return or return information, and
(D) the specific reason why the inspection or
disclosure is requested.
(2) Disclosure of return information as to
Presidential appointees and certain other Federal
Government appointees.--The Secretary may disclose to a
duly authorized representative of the Executive Office
of the President or to the head of any Federal agency,
upon written request by the President or head of such
agency, or to the Federal Bureau of Investigation on
behalf of and upon written request by the President or
such head, return information with respect to an
individual who is designated as being under
consideration for appointment to a position in the
executive or judicial branch of the Federal Government.
Such return information shall be limited to whether
such individual--
(A) has filed returns with respect to the
taxes imposed under chapter 1 for not more than
the immediately preceding 3 years;
(B) has failed to pay any tax within 10 days
after notice and demand, or has been assessed
any penalty under this title for negligence, in
the current year or immediately preceding 3
years;
(C) has been or is under investigation for
possible criminal offenses under the internal
revenue laws and the results of any such
investigation; or
(D) has been assessed any civil penalty under
this title for fraud.
Within 3 days of the receipt of any request for any
return information with respect to any individual under
this paragraph, the Secretary shall notify such
individual in writing that such information has been
requested under the provisions of this paragraph.
(3) Restriction on disclosure.--The employees to whom
returns and return information are disclosed under this
subsection shall not disclose such returns and return
information to any other person except the President or
the head of such agency without the personal written
direction of the President or the head of such agency.
(4) Restriction on disclosure to certain employees.--
Disclosure of returns and return information under this
subsection shall not be made to any employee whose
annual rate of basic pay is less than the annual rate
of basic pay specified for positions subject to section
5316 of title 5, United States Code.
(5) Reporting requirements.--Within 30 days after the
close of each calendar quarter, the President and the
head of any agency requesting returns and return
information under this subsection shall each file a
report with the Joint Committee on Taxation setting
forth the taxpayers with respect to whom such requests
were made during such quarter under this subsection,
the returns or return information involved, and the
reasons for such requests. The President shall not be
required to report on any request for returns and
return information pertaining to an individual who was
an officer or employee of the executive branch of the
Federal Government at the time such request was made.
Reports filed pursuant to this paragraph shall not be
disclosed unless the Joint Committee on Taxation
determines that disclosure thereof (including
identifying details) would be in the national interest.
Such reports shall be maintained by the Joint Committee
on Taxation for a period not exceeding 2 years unless,
within such period, the Joint Committee on Taxation
determines that a disclosure to the Congress is
necessary.
(h) Disclosure to certain Federal officers and employees for
purposes of tax administration, etc..--
(1) Department of the Treasury.--Returns and return
information shall, without written request, be open to
inspection by or disclosure to officers and employees
of the Department of the Treasury whose official duties
require such inspection or disclosure for tax
administration purposes.
(2) Department of Justice.--In a matter involving tax
administration, a return or return information shall be
open to inspection by or disclosure to officers and
employees of the Department of Justice (including
United States attorneys) personally and directly
engaged in, and solely for their use in, any proceeding
before a Federal grand jury or preparation for any
proceeding (or investigation which may result in such a
proceeding) before a Federal grand jury or any Federal
or State court, but only if--
(A) the taxpayer is or may be a party to the
proceeding, or the proceeding arose out of, or
in connection with, determining the taxpayer's
civil or criminal liability, or the collection
of such civil liability in respect of any tax
imposed under this title;
(B) the treatment of an item reflected on
such return is or may be related to the
resolution of an issue in the proceeding or
investigation; or
(C) such return or return information relates
or may relate to a transactional relationship
between a person who is or may be a party to
the proceeding and the taxpayer which affects,
or may affect, the resolution of an issue in
such proceeding or investigation.
(3) Form of request.--In any case in which the
Secretary is authorized to disclose a return or return
information to the Department of Justice pursuant to
the provisions of this subsection--
(A) if the Secretary has referred the case to
the Department of Justice, or if the proceeding
is authorized by subchapter B of chapter 76,
the Secretary may make such disclosure on his
own motion, or
(B) if the Secretary receives a written
request from the Attorney General, the Deputy
Attorney General, or an Assistant Attorney
General for a return of, or return information
relating to, a person named in such request and
setting forth the need for the disclosure, the
Secretary shall disclose return or return the
information so requested.
(4) Disclosure in judicial and administrative tax
proceedings.--A return or return information may be
disclosed in a Federal or State judicial or
administrative proceeding pertaining to tax
administration, but only--
(A) if the taxpayer is a party to the
proceeding, or the proceeding arose out of, or
in connection with, determining the taxpayer's
civil or criminal liability, or the collection
of such civil liability, in respect of any tax
imposed under this title;
(B) if the treatment of an item reflected on
such return is directly related to the
resolution of an issue in the proceeding;
(C) if such return or return information
directly relates to a transactional
relationship between a person who is a party to
the proceeding and the taxpayer which directly
affects the resolution of an issue in the
proceeding; or
(D) to the extent required by order of a
court pursuant to section 3500 of title 18,
United States Code, or rule 16 of the Federal
Rules of Criminal Procedure, such court being
authorized in the issuance of such order to
give due consideration to congressional policy
favoring the confidentiality of returns and
return information as set forth in this title.
However, such return or return information shall not be
disclosed as provided in subparagraph (A), (B), or (C)
if the Secretary determines that such disclosure would
identify a confidential informant or seriously impair a
civil or criminal tax investigation.
(5) Withholding of tax from social security
benefits.--Upon written request of the payor agency,
the Secretary may disclose available return information
from the master files of the Internal Revenue Service
with respect to the address and status of an individual
as a nonresident alien or as a citizen or resident of
the United States to the Social Security Administration
or the Railroad Retirement Board (whichever is
appropriate) for purposes of carrying out its
responsibilities for withholding tax under section 1441
from social security benefits (as defined in section
86(d)).
(6) Internal Revenue Service Oversight Board.--
(A) In general.--Notwithstanding paragraph
(1), and except as provided in subparagraph
(B), no return or return information may be
disclosed to any member of the Oversight Board
described in subparagraph (A) or (D) of section
7802(b)(1) or to any employee or detailee of
such Board by reason of their service with the
Board. Any request for information not
permitted to be disclosed under the preceding
sentence, and any contact relating to a
specific taxpayer, made by any such individual
to an officer or employee of the Internal
Revenue Service shall be reported by such
officer or employee to the Secretary, the
Treasury Inspector General for Tax
Administration, and the Joint Committee on
Taxation.
(B) Exception for reports to the Board.--If--
(i) the Commissioner or the Treasury
Inspector General for Tax
Administration prepares any report or
other matter for the Oversight Board in
order to assist the Board in carrying
out its duties; and
(ii) the Commissioner or such
Inspector General determines it is
necessary to include any return or
return information in such report or
other matter to enable the Board to
carry out such duties,
such return or return information (other than
information regarding taxpayer identity) may be
disclosed to members, employees, or detailees
of the Board solely for the purpose of carrying
out such duties.
(i) Disclosure to Federal officers or employees for
administration of Federal laws not relating to tax
administration.--
(1) Disclosure of returns and return information for
use in criminal investigations.--
(A) In general.--Except as provided in
paragraph (6), any return or return information
with respect to any specified taxable period or
periods shall, pursuant to and upon the grant
of an ex parte order by a Federal district
court judge or magistrate judge under
subparagraph (B), be open (but only to the
extent necessary as provided in such order) to
inspection by, or disclosure to, officers and
employees of any Federal agency who are
personally and directly engaged in--
(i) preparation for any judicial or
administrative proceeding pertaining to
the enforcement of a specifically
designated Federal criminal statute
(not involving tax administration) to
which the United States or such agency
is or may be a party, or pertaining to
the case of a missing or exploited
child,
(ii) any investigation which may
result in such a proceeding, or
(iii) any Federal grand jury
proceeding pertaining to enforcement of
such a criminal statute to which the
United States or such agency is or may
be a party, or to such a case of a
missing or exploited child,
solely for the use of such officers and
employees in such preparation, investigation,
or grand jury proceeding.
(B) Application for order.--The Attorney
General, the Deputy Attorney General, the
Associate Attorney General, any Assistant
Attorney General, any United States attorney,
any special prosecutor appointed under section
593 of title 28, United States Code, or any
attorney in charge of a criminal division
organized crime strike force established
pursuant to section 510 of title 28, United
States Code, may authorize an application to a
Federal district court judge or magistrate
judge for the order referred to in subparagraph
(A). Upon such application, such judge or
magistrate judge may grant such order if he
determines on the basis of the facts submitted
by the applicant that--
(i) there is reasonable cause to
believe, based upon information
believed to be reliable, that a
specific criminal act has been
committed,
(ii) there is reasonable cause to
believe that the return or return
information is or may be relevant to a
matter relating to the commission of
such act, and
(iii) the return or return
information is sought exclusively for
use in a Federal criminal investigation
or proceeding concerning such act (or
any criminal investigation or
proceeding, in the case of a matter
relating to a missing or exploited
child), and the information sought to
be disclosed cannot reasonably be
obtained, under the circumstances, from
another source.
(C) Disclosure to state and local law
enforcement agencies in the case of matters
pertaining to a missing or exploited child.--
(i) In general.--In the case of an
investigation pertaining to a missing
or exploited child, the head of any
Federal agency, or his designee, may
disclose any return or return
information obtained under subparagraph
(A) to officers and employees of any
State or local law enforcement agency,
but only if--
(I) such State or local law
enforcement agency is part of a
team with the Federal agency in
such investigation, and
(II) such information is
disclosed only to such officers
and employees who are
personally and directly engaged
in such investigation.
(ii) Limitation on use of
information.--Information disclosed
under this subparagraph shall be solely
for the use of such officers and
employees in locating the missing
child, in a grand jury proceeding, or
in any preparation for, or
investigation which may result in, a
judicial or administrative proceeding.
(iii) Missing child.--For purposes of
this subparagraph, the term ``missing
child'' shall have the meaning given
such term by section 403 of the Missing
Children's Assistance Act (42 U.S.C.
5772).
(iv) Exploited child.--For purposes
of this subparagraph, the term
``exploited child'' means a minor with
respect to whom there is reason to
believe that a specified offense
against a minor (as defined by section
111(7) of the Sex Offender Registration
and Notification Act (42 U.S.C.
16911(7))) 1 has or is
occurring.
(2) Disclosure of return information other than
taxpayer return information for use in criminal
investigations.--
(A) In general.--Except as provided in
paragraph (6), upon receipt by the Secretary of
a request which meets the requirements of
subparagraph (B) from the head of any Federal
agency or the Inspector General thereof, or, in
the case of the Department of Justice, the
Attorney General, the Deputy Attorney General,
the Associate Attorney General, any Assistant
Attorney General, the Director of the Federal
Bureau of Investigation, the Administrator of
the Drug Enforcement Administration, any United
States attorney, any special prosecutor
appointed under section 593 of title 28, United
States Code, or any attorney in charge of a
criminal division organized crime strike force
established pursuant to section 510 of title
28, United States Code, the Secretary shall
disclose return information (other than
taxpayer return information) to officers and
employees of such agency who are personally and
directly engaged in--
(i) preparation for any judicial or
administrative proceeding described in
paragraph (1)(A)(i),
(ii) any investigation which may
result in such a proceeding, or
(iii) any grand jury proceeding
described in paragraph (1)(A)(iii),
solely for the use of such officers and
employees in such preparation, investigation,
or grand jury proceeding.
(B) Requirements.--A request meets the
requirements of this subparagraph if the
request is in writing and sets forth--
(i) the name and address of the
taxpayer with respect to whom the
requested return information relates;
(ii) the taxable period or periods to
which such return information relates;
(iii) the statutory authority under
which the proceeding or investigation
described in subparagraph (A) is being
conducted; and
(iv) the specific reason or reasons
why such disclosure is, or may be,
relevant to such proceeding or
investigation.
(C) Taxpayer identity.--For purposes of this
paragraph, a taxpayer's identity shall not be
treated as taxpayer return information.
(3) Disclosure of return information to apprise
appropriate officials of criminal or terrorist
activities or emergency circumstances.--
(A) Possible violations of Federal criminal
law.--
(i) In general.--Except as provided
in paragraph (6), the Secretary may
disclose in writing return information
(other than taxpayer return
information) which may constitute
evidence of a violation of any Federal
criminal law (not involving tax
administration) to the extent necessary
to apprise the head of the appropriate
Federal agency charged with the
responsibility of enforcing such law.
The head of such agency may disclose
such return information to officers and
employees of such agency to the extent
necessary to enforce such law.
(ii) Taxpayer identity.--If there is
return information (other than taxpayer
return information) which may
constitute evidence of a violation by
any taxpayer of any Federal criminal
law (not involving tax administration),
such taxpayer's identity may also be
disclosed under clause (i).
(B) Emergency circumstances.--
(i) Danger of death or physical
injury.--Under circumstances involving
an imminent danger of death or physical
injury to any individual, the Secretary
may disclose return information to the
extent necessary to apprise appropriate
officers or employees of any Federal or
State law enforcement agency of such
circumstances.
(ii) Flight from Federal
prosecution.--Under circumstances
involving the imminent flight of any
individual from Federal prosecution,
the Secretary may disclose return
information to the extent necessary to
apprise appropriate officers or
employees of any Federal law
enforcement agency of such
circumstances.
(C) Terrorist activities, etc..--
(i) In general.--Except as provided
in paragraph (6), the Secretary may
disclose in writing return information
(other than taxpayer return
information) that may be related to a
terrorist incident, threat, or activity
to the extent necessary to apprise the
head of the appropriate Federal law
enforcement agency responsible for
investigating or responding to such
terrorist incident, threat, or
activity. The head of the agency may
disclose such return information to
officers and employees of such agency
to the extent necessary to investigate
or respond to such terrorist incident,
threat, or activity.
(ii) Disclosure to the Department of
Justice.--Returns and taxpayer return
information may also be disclosed to
the Attorney General under clause (i)
to the extent necessary for, and solely
for use in preparing, an application
under paragraph (7)(D).
(iii) Taxpayer identity.--For
purposes of this subparagraph, a
taxpayer's identity shall not be
treated as taxpayer return information.
(4) Use of certain disclosed returns and return
information in judicial or administrative
proceedings.--
(A) Returns and taxpayer return
information.--Except as provided in
subparagraph (C), any return or taxpayer return
information obtained under paragraph (1) or
(7)(C) may be disclosed in any judicial or
administrative proceeding pertaining to
enforcement of a specifically designated
Federal criminal statute or related civil
forfeiture (not involving tax administration)
to which the United States or a Federal agency
is a party--
(i) if the court finds that such
return or taxpayer return information
is probative of a matter in issue
relevant in establishing the commission
of a crime or the guilt or liability of
a party, or
(ii) to the extent required by order
of the court pursuant to section 3500
of title 18, United States Code, or
rule 16 of the Federal Rules of
Criminal Procedure.
(B) Return information (other than taxpayer
return information).--Except as provided in
subparagraph (C), any return information (other
than taxpayer return information) obtained
under paragraph (1), (2), (3)(A) or (C), or (7)
may be disclosed in any judicial or
administrative proceeding pertaining to
enforcement of a specifically designated
Federal criminal statute or related civil
forfeiture (not involving tax administration)
to which the United States or a Federal agency
is a party.
(C) Confidential informant; impairment of
investigations.--No return or return
information shall be admitted into evidence
under subparagraph (A)(i) or (B) if the
Secretary determines and notifies the Attorney
General or his delegate or the head of the
Federal agency that such admission would
identify a confidential informant or seriously
impair a civil or criminal tax investigation.
(D) Consideration of confidentiality
policy.--In ruling upon the admissibility of
returns or return information, and in the
issuance of an order under subparagraph
(A)(ii), the court shall give due consideration
to congressional policy favoring the
confidentiality of returns and return
information as set forth in this title.
(E) Reversible error.--The admission into
evidence of any return or return information
contrary to the provisions of this paragraph
shall not, as such, constitute reversible error
upon appeal of a judgment in the proceeding.
(5) Disclosure to locate fugitives from justice.--
(A) In general.--Except as provided in
paragraph (6), the return of an individual or
return information with respect to such
individual shall, pursuant to and upon the
grant of an ex parte order by a Federal
district court judge or magistrate judge under
subparagraph (B), be open (but only to the
extent necessary as provided in such order) to
inspection by, or disclosure to, officers and
employees of any Federal agency exclusively for
use in locating such individual.
(B) Application for order.--Any person
described in paragraph (1)(B) may authorize an
application to a Federal district court judge
or magistrate judge for an order referred to in
subparagraph (A). Upon such application, such
judge or magistrate judge may grant such order
if he determines on the basis of the facts
submitted by the applicant that--
(i) a Federal arrest warrant relating
to the commission of a Federal felony
offense has been issued for an
individual who is a fugitive from
justice,
(ii) the return of such individual or
return information with respect to such
individual is sought exclusively for
use in locating such individual, and
(iii) there is reasonable cause to
believe that such return or return
information may be relevant in
determining the location of such
individual.
(6) Confidential informants; impairment of
investigations.--The Secretary shall not disclose any
return or return information under paragraph (1), (2),
(3)(A) or (C), (5), (7), or (8) if the Secretary
determines (and, in the case of a request for
disclosure pursuant to a court order described in
paragraph (1)(B) or (5)(B), certifies to the court)
that such disclosure would identify a confidential
informant or seriously impair a civil or criminal tax
investigation.
(7) Disclosure upon request of information relating
to terrorist activities, etc..--
(A) Disclosure to law enforcement agencies.--
(i) In general.--Except as provided
in paragraph (6), upon receipt by the
Secretary of a written request which
meets the requirements of clause (iii),
the Secretary may disclose return
information (other than taxpayer return
information) to officers and employees
of any Federal law enforcement agency
who are personally and directly engaged
in the response to or investigation of
any terrorist incident, threat, or
activity.
(ii) Disclosure to State and local
law enforcement agencies.--The head of
any Federal law enforcement agency may
disclose return information obtained
under clause (i) to officers and
employees of any State or local law
enforcement agency but only if such
agency is part of a team with the
Federal law enforcement agency in such
response or investigation and such
information is disclosed only to
officers and employees who are
personally and directly engaged in such
response or investigation.
(iii) Requirements.--A request meets
the requirements of this clause if--
(I) the request is made by
the head of any Federal law
enforcement agency (or his
delegate) involved in the
response to or investigation of
any terrorist incident, threat,
or activity, and
(II) the request sets forth
the specific reason or reasons
why such disclosure may be
relevant to a terrorist
incident, threat, or activity.
(iv) Limitation on use of
information.--Information disclosed
under this subparagraph shall be solely
for the use of the officers and
employees to whom such information is
disclosed in such response or
investigation.
(v) Taxpayer identity.--For purposes
of this subparagraph, a taxpayer's
identity shall not be treated as
taxpayer return information.
(B) Disclosure to intelligence agencies.--
(i) In general.--Except as provided
in paragraph (6), upon receipt by the
Secretary of a written request which
meets the requirements of clause (ii),
the Secretary may disclose return
information (other than taxpayer return
information) to those officers and
employees of the Department of Justice,
the Department of the Treasury, and
other Federal intelligence agencies who
are personally and directly engaged in
the collection or analysis of
intelligence and counterintelligence
information or investigation concerning
any terrorist incident, threat, or
activity. For purposes of the preceding
sentence, the information disclosed
under the preceding sentence shall be
solely for the use of such officers and
employees in such investigation,
collection, or analysis.
(ii) Requirements.--A request meets
the requirements of this subparagraph
if the request--
(I) is made by an individual
described in clause (iii), and
(II) sets forth the specific
reason or reasons why such
disclosure may be relevant to a
terrorist incident, threat, or
activity.
(iii) Requesting individuals.--An
individual described in this
subparagraph is an individual--
(I) who is an officer or
employee of the Department of
Justice or the Department of
the Treasury who is appointed
by the President with the
advice and consent of the
Senate or who is the Director
of the United States Secret
Service, and
(II) who is responsible for
the collection and analysis of
intelligence and
counterintelligence information
concerning any terrorist
incident, threat, or activity.
(iv) Taxpayer identity.--For purposes
of this subparagraph, a taxpayer's
identity shall not be treated as
taxpayer return information.
(C) Disclosure under ex parte orders.--
(i) In general.--Except as provided
in paragraph (6), any return or return
information with respect to any
specified taxable period or periods
shall, pursuant to and upon the grant
of an ex parte order by a Federal
district court judge or magistrate
under clause (ii), be open (but only to
the extent necessary as provided in
such order) to inspection by, or
disclosure to, officers and employees
of any Federal law enforcement agency
or Federal intelligence agency who are
personally and directly engaged in any
investigation, response to, or analysis
of intelligence and counterintelligence
information concerning any terrorist
incident, threat, or activity. Return
or return information opened to
inspection or disclosure pursuant to
the preceding sentence shall be solely
for the use of such officers and
employees in the investigation,
response, or analysis, and in any
judicial, administrative, or grand jury
proceedings, pertaining to such
terrorist incident, threat, or
activity.
(ii) Application for order.--The
Attorney General, the Deputy Attorney
General, the Associate Attorney
General, any Assistant Attorney
General, or any United States attorney
may authorize an application to a
Federal district court judge or
magistrate for the order referred to in
clause (i). Upon such application, such
judge or magistrate may grant such
order if he determines on the basis of
the facts submitted by the applicant
that--
(I) there is reasonable cause
to believe, based upon
information believed to be
reliable, that the return or
return information may be
relevant to a matter relating
to such terrorist incident,
threat, or activity, and
(II) the return or return
information is sought
exclusively for use in a
Federal investigation,
analysis, or proceeding
concerning any terrorist
incident, threat, or activity.
(D) Special rule for ex parte disclosure by
the IRS.--
(i) In general.--Except as provided
in paragraph (6), the Secretary may
authorize an application to a Federal
district court judge or magistrate for
the order referred to in subparagraph
(C)(i). Upon such application, such
judge or magistrate may grant such
order if he determines on the basis of
the facts submitted by the applicant
that the requirements of subparagraph
(C)(ii)(I) are met.
(ii) Limitation on use of
information.--Information disclosed
under clause (i)--
(I) may be disclosed only to
the extent necessary to apprise
the head of the appropriate
Federal law enforcement agency
responsible for investigating
or responding to a terrorist
incident, threat, or activity,
and
(II) shall be solely for use
in a Federal investigation,
analysis, or proceeding
concerning any terrorist
incident, threat, or activity.
The head of such Federal agency may disclose
such information to officers and employees of
such agency to the extent necessary to
investigate or respond to such terrorist
incident, threat, or activity.
(8) Comptroller General.--
(A) Returns available for inspection.--Except
as provided in subparagraph (C), upon written
request by the Comptroller General of the
United States, returns and return information
shall be open to inspection by, or disclosure
to, officers and employees of the Government
Accountability Office for the purpose of, and
to the extent necessary in, making--
(i) an audit of the Internal Revenue
Service, the Bureau of Alcohol,
Tobacco, Firearms, and Explosives,
Department of Justice, or the Tax and
Trade Bureau, Department of the
Treasury, which may be required by
section 713 of title 31, United States
Code, or
(ii) any audit authorized by
subsection (p)(6),
except that no such officer or employee shall,
except to the extent authorized by subsection
(f) or (p)(6), disclose to any person, other
than another officer or employee of such office
whose official duties require such disclosure,
any return or return information described in
section 4424(a) in a form which can be
associated with, or otherwise identify,
directly or indirectly, a particular taxpayer,
nor shall such officer or employee disclose any
other return or return information, except as
otherwise expressly provided by law, to any
person other than such other officer or
employee of such office in a form which can be
associated with, or otherwise identify,
directly or indirectly, a particular taxpayer.
(B) Audits of other agencies.--
(i) In general.--Nothing in this
section shall prohibit any return or
return information obtained under this
title by any Federal agency (other than
an agency referred to in subparagraph
(A)) or by a Trustee as defined in the
District of Columbia Retirement
Protection Act of 1997, for use in any
program or activity from being open to
inspection by, or disclosure to,
officers and employees of the
Government Accountability Office if
such inspection or disclosure is--
(I) for purposes of, and to
the extent necessary in, making
an audit authorized by law of
such program or activity, and
(II) pursuant to a written
request by the Comptroller
General of the United States to
the head of such Federal
agency.
(ii) Information from Secretary.--If
the Comptroller General of the United
States determines that the returns or
return information available under
clause (i) are not sufficient for
purposes of making an audit of any
program or activity of a Federal agency
(other than an agency referred to in
subparagraph (A)), upon written request
by the Comptroller General to the
Secretary, returns and return
information (of the type authorized by
subsection (l) or (m) to be made
available to the Federal agency for use
in such program or activity) shall be
open to inspection by, or disclosure
to, officers and employees of the
Government Accountability Office for
the purpose of, and to the extent
necessary in, making such audit.
(iii) Requirement of notification
upon completion of audit.--Within 90
days after the completion of an audit
with respect to which returns or return
information were opened to inspection
or disclosed under clause (i) or (ii),
the Comptroller General of the United
States shall notify in writing the
Joint Committee on Taxation of such
completion. Such notice shall include--
(I) a description of the use
of the returns and return
information by the Federal
agency involved,
(II) such recommendations
with respect to the use of
returns and return information
by such Federal agency as the
Comptroller General deems
appropriate, and
(III) a statement on the
impact of any such
recommendations on
confidentiality of returns and
return information and the
administration of this title.
(iv) Certain restrictions made
applicable.--The restrictions contained
in subparagraph (A) on the disclosure
of any returns or return information
open to inspection or disclosed under
such subparagraph shall also apply to
returns and return information open to
inspection or disclosed under this
subparagraph.
(C) Disapproval by Joint Committee on
Taxation.--Returns and return information shall
not be open to inspection or disclosed under
subparagraph (A) or (B) with respect to an
audit--
(i) unless the Comptroller General of
the United States notifies in writing
the Joint Committee on Taxation of such
audit, and
(ii) if the Joint Committee on
Taxation disapproves such audit by a
vote of at least two-thirds of its
members within the 30-day period
beginning on the day the Joint
Committee on Taxation receives such
notice.
(j) Statistical use.--
(1) Department of Commerce.--Upon request in writing
by the Secretary of Commerce, the Secretary shall
furnish--
(A) such returns, or return information
reflected thereon, to officers and employees of
the Bureau of the Census, and
(B) such return information reflected on
returns of corporations to officers and
employees of the Bureau of Economic Analysis,
as the Secretary may prescribe by regulation for the
purpose of, but only to the extent necessary in, the
structuring of censuses and national economic accounts
and conducting related statistical activities
authorized by law.
(2) Federal Trade Commission.--Upon request in
writing by the Chairman of the Federal Trade
Commission, the Secretary shall furnish such return
information reflected on any return of a corporation
with respect to the tax imposed by chapter 1 to
officers and employees of the Division of Financial
Statistics of the Bureau of Economics of such
commission as the Secretary may prescribe by regulation
for the purpose of, but only to the extent necessary
in, administration by such division of legally
authorized economic surveys of corporations.
(3) Department of Treasury.--Returns and return
information shall be open to inspection by or
disclosure to officers and employees of the Department
of the Treasury whose official duties require such
inspection or disclosure for the purpose of, but only
to the extent necessary in, preparing economic or
financial forecasts, projections, analyses, and
statistical studies and conducting related activities.
Such inspection or disclosure shall be permitted only
upon written request which sets forth the specific
reason or reasons why such inspection or disclosure is
necessary and which is signed by the head of the bureau
or office of the Department of the Treasury requesting
the inspection or disclosure.
(4) Anonymous form.--No person who receives a return
or return information under this subsection shall
disclose such return or return information to any
person other than the taxpayer to whom it relates
except in a form which cannot be associated with, or
otherwise identify, directly or indirectly, a
particular taxpayer.
(5) Department of Agriculture.--Upon request in
writing by the Secretary of Agriculture, the Secretary
shall furnish such returns, or return information
reflected thereon, as the Secretary may prescribe by
regulation to officers and employees of the Department
of Agriculture whose official duties require access to
such returns or information for the purpose of, but
only to the extent necessary in, structuring,
preparing, and conducting the census of agriculture
pursuant to the Census of Agriculture Act of 1997
(Public Law 105-113).
(6) Congressional Budget Office.--Upon written
request by the Director of the Congressional Budget
Office, the Secretary shall furnish to officers and
employees of the Congressional Budget Office return
information for the purpose of, but only to the extent
necessary for, long-term models of the social security
and medicare programs.
(k) Disclosure of certain returns and return information for
tax administration purposes.--
(1) Disclosure of accepted offers-in-compromise.--
Return information shall be disclosed to members of the
general public to the extent necessary to permit
inspection of any accepted offer-in-compromise under
section 7122 relating to the liability for a tax
imposed by this title.
(2) Disclosure of amount of outstanding lien.--If a
notice of lien has been filed pursuant to section
6323(f), the amount of the outstanding obligation
secured by such lien may be disclosed to any person who
furnishes satisfactory written evidence that he has a
right in the property subject to such lien or intends
to obtain a right in such property.
(3) Disclosure of return information to correct
misstatements of fact.--The Secretary may, but only
following approval by the Joint Committee on Taxation,
disclose such return information or any other
information with respect to any specific taxpayer to
the extent necessary for tax administration purposes to
correct a misstatement of fact published or disclosed
with respect to such taxpayer's return or any
transaction of the taxpayer with the Internal Revenue
Service.
(4) Disclosure to competent authority under tax
convention.--A return or return information may be
disclosed to a competent authority of a foreign
government which has an income tax or gift and estate
tax convention, or other convention or bilateral
agreement relating to the exchange of tax information,
with the United States but only to the extent provided
in, and subject to the terms and conditions of, such
convention or bilateral agreement.
(5) State agencies regulating tax return preparers.--
Taxpayer identity information with respect to any tax
return preparer, and information as to whether or not
any penalty has been assessed against such tax return
preparer under section 6694, 6695, or 7216, may be
furnished to any agency, body, or commission lawfully
charged under any State or local law with the
licensing, registration, or regulation of tax return
preparers. Such information may be furnished only upon
written request by the head of such agency, body, or
commission designating the officers or employees to
whom such information is to be furnished. Information
may be furnished and used under this paragraph only for
purposes of the licensing, registration, or regulation
of tax return preparers.
(6) Disclosure by certain officers and employees for
investigative purposes.--An internal revenue officer or
employee and an officer or employee of the Office of
Treasury Inspector General for Tax Administration may,
in connection with his official duties relating to any
audit, collection activity, or civil or criminal tax
investigation or any other offense under the internal
revenue laws, disclose return information to the extent
that such disclosure is necessary in obtaining
information, which is not otherwise reasonably
available, with respect to the correct determination of
tax, liability for tax, or the amount to be collected
or with respect to the enforcement of any other
provision of this title. Such disclosures shall be made
only in such situations and under such conditions as
the Secretary may prescribe by regulation. This
paragraph shall not apply to any disclosure to an
individual providing information relating to any
purpose described in paragraph (1) or (2) of section
7623(a) which is made under paragraph (13)(A).
(7) Disclosure of excise tax registration
information.--To the extent the Secretary determines
that disclosure is necessary to permit the effective
administration of subtitle D, the Secretary may
disclose--
(A) the name, address, and registration
number of each person who is registered under
any provision of subtitle D (and, in the case
of a registered terminal operator, the address
of each terminal operated by such operator),
and
(B) the registration status of any person.
(8) Levies on certain government payments.--
(A) Disclosure of return information in
levies on Financial Management Service.--In
serving a notice of levy, or release of such
levy, with respect to any applicable government
payment, the Secretary may disclose to officers
and employees of the Financial Management
Service--
(i) return information, including
taxpayer identity information,
(ii) the amount of any unpaid
liability under this title (including
penalties and interest), and
(iii) the type of tax and tax period
to which such unpaid liability relates.
(B) Restriction on use of disclosed
information.--Return information disclosed
under subparagraph (A) may be used by officers
and employees of the Financial Management
Service only for the purpose of, and to the
extent necessary in, transferring levied funds
in satisfaction of the levy, maintaining
appropriate agency records in regard to such
levy or the release thereof, notifying the
taxpayer and the agency certifying such payment
that the levy has been honored, or in the
defense of any litigation ensuing from the
honor of such levy.
(C) Applicable government payment.--For
purposes of this paragraph, the term
``applicable government payment'' means--
(i) any Federal payment (other than a
payment for which eligibility is based
on the income or assets (or both) of a
payee) certified to the Financial
Management Service for disbursement,
and
(ii) any other payment which is
certified to the Financial Management
Service for disbursement and which the
Secretary designates by published
notice.
(9) Disclosure of information to administer section
6311.--The Secretary may disclose returns or return
information to financial institutions and others to the
extent the Secretary deems necessary for the
administration of section 6311. Disclosures of
information for purposes other than to accept payments
by checks or money orders shall be made only to the
extent authorized by written procedures promulgated by
the Secretary.
(10) Disclosure of certain returns and return
information to certain prison officials.--
(A) In general.--Under such procedures as the
Secretary may prescribe, the Secretary may
disclose to officers and employees of the
Federal Bureau of Prisons and of any State
agency charged with the responsibility for
administration of prisons any returns or return
information with respect to individuals
incarcerated in Federal or State prison systems
whom the Secretary has determined may have
filed or facilitated the filing of a false or
fraudulent return to the extent that the
Secretary determines that such disclosure is
necessary to permit effective Federal tax
administration.
(B) Disclosure to contractor-run prisons.--
Under such procedures as the Secretary may
prescribe, the disclosures authorized by
subparagraph (A) may be made to contractors
responsible for the operation of a Federal or
State prison on behalf of such Bureau or
agency.
(C) Restrictions on use of disclosed
information.--Any return or return information
received under this paragraph shall be used
only for the purposes of and to the extent
necessary in taking administrative action to
prevent the filing of false and fraudulent
returns, including administrative actions to
address possible violations of administrative
rules and regulations of the prison facility
and in administrative and judicial proceedings
arising from such administrative actions.
(D) Restrictions on redisclosure and
disclosure to legal representatives.--
Notwithstanding subsection (h)--
(i) Restrictions on redisclosure.--
Except as provided in clause (ii), any
officer, employee, or contractor of the
Federal Bureau of Prisons or of any
State agency charged with the
responsibility for administration of
prisons shall not disclose any
information obtained under this
paragraph to any person other than an
officer or employee or contractor of
such Bureau or agency personally and
directly engaged in the administration
of prison facilities on behalf of such
Bureau or agency.
(ii) Disclosure to legal
representatives.--The returns and
return information disclosed under this
paragraph may be disclosed to the duly
authorized legal representative of the
Federal Bureau of Prisons, State
agency, or contractor charged with the
responsibility for administration of
prisons, or of the incarcerated
individual accused of filing the false
or fraudulent return who is a party to
an action or proceeding described in
subparagraph (C), solely in preparation
for, or for use in, such action or
proceeding.
(11) Disclosure of return information to Department
of State for purposes of passport revocation under
section 7345.--
(A) In general.--The Secretary shall, upon
receiving a certification described in section
7345, disclose to the Secretary of State return
information with respect to a taxpayer who has
a seriously delinquent tax debt described in
such section. Such return information shall be
limited to--
(i) the taxpayer identity information
with respect to such taxpayer, and
(ii) the amount of such seriously
delinquent tax debt.
(B) Restriction on disclosure.--Return
information disclosed under subparagraph (A)
may be used by officers and employees of the
Department of State for the purposes of, and to
the extent necessary in, carrying out the
requirements of section 32101 of the FAST Act.
(12) Qualified tax collection contractors.--Persons
providing services pursuant to a qualified tax
collection contract under section 6306 may, if speaking
to a person who has identified himself or herself as
having the name of the taxpayer to which a tax
receivable (within the meaning of such section)
relates, identify themselves as contractors of the
Internal Revenue Service and disclose the business name
of the contractor, and the nature, subject, and reason
for the contact. Disclosures under this paragraph shall
be made only in such situations and under such
conditions as have been approved by the Secretary.
(13) Disclosure to whistleblowers.--
(A) In general.--The Secretary may disclose,
to any individual providing information
relating to any purpose described in paragraph
(1) or (2) of section 7623(a), return
information related to the investigation of any
taxpayer with respect to whom the individual
has provided such information, but only to the
extent that such disclosure is necessary in
obtaining information, which is not otherwise
reasonably available, with respect to the
correct determination of tax liability for tax,
or the amount to be collected with respect to
the enforcement of any other provision of this
title.
(B) Updates on whistleblower
investigations.--The Secretary shall disclose
to an individual providing information relating
to any purpose described in paragraph (1) or
(2) of section 7623(a) the following:
(i) Not later than 60 days after a
case for which the individual has
provided information has been referred
for an audit or examination, a notice
with respect to such referral.
(ii) Not later than 60 days after a
taxpayer with respect to whom the
individual has provided information has
made a payment of tax with respect to
tax liability to which such information
relates, a notice with respect to such
payment.
(iii) Subject to such requirements
and conditions as are prescribed by the
Secretary, upon a written request by
such individual--
(I) information on the status
and stage of any investigation
or action related to such
information, and
(II) in the case of a
determination of the amount of
any award under section
7623(b), the reasons for such
determination.
Clause (iii) shall not apply to any information
if the Secretary determines that disclosure of
such information would seriously impair Federal
tax administration. Information described in
clauses (i), (ii), and (iii) may be disclosed
to a designee of the individual providing such
information in accordance with guidance
provided by the Secretary.
(14) Disclosure of return information for purposes of
cybersecurity and the prevention of identity theft tax
refund fraud.--
(A) In general.--Under such procedures and
subject to such conditions as the Secretary may
prescribe, the Secretary may disclose specified
return information to specified ISAC
participants to the extent that the Secretary
determines such disclosure is in furtherance of
effective Federal tax administration relating
to the detection or prevention of identity
theft tax refund fraud, validation of taxpayer
identity, authentication of taxpayer returns,
or detection or prevention of cybersecurity
threats.
(B) Specified isac participants.--For
purposes of this paragraph--
(i) In general.--The term ``specified
ISAC participant'' means--
(I) any person designated by
the Secretary as having primary
responsibility for a function
performed with respect to the
information sharing and
analysis center described in
section 2003(a) of the Taxpayer
First Act of 2019, and
(II) any person subject to
the requirements of section
7216 and which is a participant
in such information sharing and
analysis center.
(ii) Information sharing agreement.--
Such term shall not include any person
unless such person has entered into a
written agreement with the Secretary
setting forth the terms and conditions
for the disclosure of information to
such person under this paragraph,
including requirements regarding the
protection and safeguarding of such
information by such person.
(C) Specified return information.--For
purposes of this paragraph, the term
``specified return information'' means--
(i) in the case of a return which is
in connection with a case of potential
identity theft refund fraud--
(I) in the case of such
return filed electronically,
the internet protocol address,
device identification, email
domain name, speed of
completion, method of
authentication, refund method,
and such other return
information related to the
electronic filing
characteristics of such return
as the Secretary may identify
for purposes of this subclause,
and
(II) in the case of such
return prepared by a tax return
preparer, identifying
information with respect to
such tax return preparer,
including the preparer taxpayer
identification number and
electronic filer identification
number of such preparer,
(ii) in the case of a return which is
in connection with a case of a identity
theft refund fraud which has been
confirmed by the Secretary (pursuant to
such procedures as the Secretary may
provide), the information referred to
in subclauses (I) and (II) of clause
(i), the name and taxpayer
identification number of the taxpayer
as it appears on the return, and any
bank account and routing information
provided for making a refund in
connection with such return, and
(iii) in the case of any
cybersecurity threat to the Internal
Revenue Service, information similar to
the information described in subclauses
(I) and (II) of clause (i) with respect
to such threat.
(D) Restriction on use of disclosed
information.--
(i) Designated third parties.--Any
return information received by a person
described in subparagraph (B)(i)(I)
shall be used only for the purposes of
and to the extent necessary in--
(I) performing the function
such person is designated to
perform under such
subparagraph,
(II) facilitating disclosures
authorized under subparagraph
(A) to persons described in
subparagraph (B)(i)(II), and
(III) facilitating
disclosures authorized under
subsection (d) to participants
in such information sharing and
analysis center.
(ii) Return preparers.--Any return
information received by a person
described in subparagraph (B)(i)(II)
shall be treated for purposes of
section 7216 as information furnished
to such person for, or in connection
with, the preparation of a return of
the tax imposed under chapter 1.
(E) Data protection and safeguards.--Return
information disclosed under this paragraph
shall be subject to such protections and
safeguards as the Secretary may require in
regulations or other guidance or in the written
agreement referred to in subparagraph (B)(ii).
Such written agreement shall include a
requirement that any unauthorized access to
information disclosed under this paragraph, and
any breach of any system in which such
information is held, be reported to the
Treasury Inspector General for Tax
Administration.
(l) Disclosure of returns and return information for purposes
other than tax administration.--
(1) Disclosure of certain returns and return
information to Social Security Administration and
Railroad Retirement Board.--The Secretary may, upon
written request, disclose returns and return
information with respect to--
(A) taxes imposed by chapters 2, 21, and 24,
to the Social Security Administration for
purposes of its administration of the Social
Security Act;
(B) a plan to which part I of subchapter D of
chapter 1 applies, to the Social Security
Administration for purposes of carrying out its
responsibility under section 1131 of the Social
Security Act, limited, however to return
information described in section 6057(d); and
(C) taxes imposed by chapter 22, to the
Railroad Retirement Board for purposes of its
administration of the Railroad Retirement Act.
(2) Disclosure of returns and return information to
the Department of Labor and Pension Benefit Guaranty
Corporation.--The Secretary may, upon written request,
furnish returns and return information to the proper
officers and employees of the Department of Labor and
the Pension Benefit Guaranty Corporation for purposes
of, but only to the extent necessary in, the
administration of titles I and IV of the Employee
Retirement Income Security Act of 1974.
(3) Disclosure that applicant for Federal loan has
tax delinquent account.--
(A) In general.--Upon written request, the
Secretary may disclose to the head of the
Federal agency administering any included
Federal loan program whether or not an
applicant for a loan under such program has a
tax delinquent account.
(B) Restriction on disclosure.--Any
disclosure under subparagraph (A) shall be made
only for the purpose of, and to the extent
necessary in, determining the creditworthiness
of the applicant for the loan in question.
(C) Included Federal loan program defined.--
For purposes of this paragraph, the term
``included Federal loan program'' means any
program under which the United States or a
Federal agency makes, guarantees, or insures
loans.
(4) Disclosure of returns and return information for
use in personnel or claimant representative matters.--
The Secretary may disclose returns and return
information--
(A) upon written request--
(i) to an employee or former employee
of the Department of the Treasury, or
to the duly authorized legal
representative of such employee or
former employee, who is or may be a
party to any administrative action or
proceeding affecting the personnel
rights of such employee or former
employee; or
(ii) to any person, or to the duly
authorized legal representative of such
person, whose rights are or may be
affected by an administrative action or
proceeding under section 330 of title
31, United States Code,
solely for use in the action or proceeding, or
in preparation for the action or proceeding,
but only to the extent that the Secretary
determines that such returns or return
information is or may be relevant and material
to the action or proceeding; or
(B) to officers and employees of the
Department of the Treasury for use in any
action or proceeding described in subparagraph
(A), or in preparation for such action or
proceeding, to the extent necessary to advance
or protect the interests of the United States.
(5) Social Security Administration.--Upon written
request by the Commissioner of Social Security, the
Secretary may disclose information returns filed
pursuant to part III of subchapter A of chapter 61 of
this subtitle for the purpose of--
(A) carrying out, in accordance with an
agreement entered into pursuant to section 232
of the Social Security Act, an effective return
processing program; or
(B) providing information regarding the
mortality status of individuals for
epidemiological and similar research in
accordance with section 1106(d) of the Social
Security Act.
(6) Disclosure of return information to Federal,
State, and local child support enforcement agencies.--
(A) Return information from Internal Revenue
Service.--The Secretary may, upon written
request, disclose to the appropriate Federal,
State, or local child support enforcement
agency--
(i) available return information from
the master files of the Internal
Revenue Service relating to the social
security account number (or numbers, if
the individual involved has more than
one such number), address, filing
status, amounts and nature of income,
and the number of dependents reported
on any return filed by, or with respect
to, any individual with respect to whom
child support obligations are sought to
be established or enforced pursuant to
the provisions of part D of title IV of
the Social Security Act and with
respect to any individual to whom such
support obligations are owing, and
(ii) available return information
reflected on any return filed by, or
with respect to, any individual
described in clause (i) relating to the
amount of such individual's gross
income (as defined in section 61) or
consisting of the names and addresses
of payors of such income and the names
of any dependents reported on such
return, but only if such return
information is not reasonably available
from any other source.
(B) Disclosure to certain agents.--The
following information disclosed to any child
support enforcement agency under subparagraph
(A) with respect to any individual with respect
to whom child support obligations are sought to
be established or enforced may be disclosed by
such agency to any agent of such agency which
is under contract with such agency to carry out
the purposes described in subparagraph (C):
(i) The address and social security
account number (or numbers) of such
individual.
(ii) The amount of any reduction
under section 6402(c) (relating to
offset of past-due support against
overpayments) in any overpayment
otherwise payable to such individual.
(C) Restriction on disclosure.--Information
may be disclosed under this paragraph only for
purposes of, and to the extent necessary in,
establishing and collecting child support
obligations from, and locating, individuals
owing such obligations.
(7) Disclosure of return information to Federal,
State, and local agencies administering certain
programs under the Social Security Act, the Food and
Nutrition Act of 2008, or title 38, United States Code,
or certain housing assistance programs.--
(A) Return information from Social Security
Administration.--The Commissioner of Social
Security shall, upon written request, disclose
return information from returns with respect to
net earnings from self-employment (as defined
in section 1402), wages (as defined in section
3121(a) or 3401(a)), and payments of retirement
income, which have been disclosed to the Social
Security Administration as provided by
paragraph (1) or (5) of this subsection, to any
Federal, State, or local agency administering a
program listed in subparagraph (D).
(B) Return information from Internal Revenue
Service.--The Secretary shall, upon written
request, disclose current return information
from returns with respect to unearned income
from the Internal Revenue Service files to any
Federal, State, or local agency administering a
program listed in subparagraph (D).
(C) Restriction on disclosure.--The
Commissioner of Social Security and the
Secretary shall disclose return information
under subparagraphs (A) and (B) only for
purposes of, and to the extent necessary in,
determining eligibility for, or the correct
amount of, benefits under a program listed in
subparagraph (D).
(D) Programs to which rule applies.--The
programs to which this paragraph applies are:
(i) a State program funded under part
A of title IV of the Social Security
Act;
(ii) medical assistance provided
under a State plan approved under title
XIX of the Social Security Act or
subsidies provided under section 1860D-
14 of such Act;
(iii) supplemental security income
benefits provided under title XVI of
the Social Security Act, and federally
administered supplementary payments of
the type described in section 1616(a)
of such Act (including payments
pursuant to an agreement entered into
under section 212(a) of Public Law 93-
66);
(iv) any benefits provided under a
State plan approved under title I, X,
XIV, or XVI of the Social Security Act
(as those titles apply to Puerto Rico,
Guam, and the Virgin Islands);
(v) unemployment compensation
provided under a State law described in
section 3304 of this title;
(vi) assistance provided under the
Food and Nutrition Act of 2008;
(vii) State-administered
supplementary payments of the type
described in section 1616(a) of the
Social Security Act (including payments
pursuant to an agreement entered into
under section 212(a) of Public Law 93-
66);
(viii)(I) any needs-based pension
provided under chapter 15 of title 38,
United States Code, or under any other
law administered by the Secretary of
Veterans Affairs;
(II) parents' dependency and
indemnity compensation provided
under section 1315 of title 38,
United States Code;
(III) health-care services
furnished under sections
1710(a)(2)(G), 1710(a)(3), and
1710(b) of such title; and
(IV) compensation paid under
chapter 11 of title 38, United
States Code, at the 100 percent
rate based solely on
unemployability and without
regard to the fact that the
disability or disabilities are
not rated as 100 percent
disabling under the rating
schedule; and
(ix) any housing assistance program
administered by the Department of
Housing and Urban Development that
involves initial and periodic review of
an applicant's or participant's income,
except that return information may be
disclosed under this clause only on
written request by the Secretary of
Housing and Urban Development and only
for use by officers and employees of
the Department of Housing and Urban
Development with respect to applicants
for and participants in such programs.
Only return information from returns with
respect to net earnings from self-employment
and wages may be disclosed under this paragraph
for use with respect to any program described
in clause (viii)(IV).
(8) Disclosure of certain return information by
Social Security Administration to Federal, State, and
local child support enforcement agencies.--
(A) In general.--Upon written request, the
Commissioner of Social Security shall disclose
directly to officers and employees of a Federal
or State or local child support enforcement
agency return information from returns with
respect to social security account numbers, net
earnings from self-employment (as defined in
section 1402), wages (as defined in section
3121(a) or 3401(a)), and payments of retirement
income which have been disclosed to the Social
Security Administration as provided by
paragraph (1) or (5) of this subsection.
(B) Restriction on disclosure.--The
Commissioner of Social Security shall disclose
return information under subparagraph (A) only
for purposes of, and to the extent necessary
in, establishing and collecting child support
obligations from, and locating, individuals
owing such obligations. For purposes of the
preceding sentence, the term ``child support
obligations'' only includes obligations which
are being enforced pursuant to a plan described
in section 454 of the Social Security Act which
has been approved by the Secretary of Health
and Human Services under part D of title IV of
such Act.
(C) State or local child support enforcement
agency.--For purposes of this paragraph, the
term ``State or local child support enforcement
agency'' means any agency of a State or
political subdivision thereof operating
pursuant to a plan described in subparagraph
(B).
(9) Disclosure of alcohol fuel producers to
administrators of State alcohol laws.--Notwithstanding
any other provision of this section, the Secretary may
disclose--
(A) the name and address of any person who is
qualified to produce alcohol for fuel use under
section 5181, and
(B) the location of any premises to be used
by such person in producing alcohol for fuel,
to any State agency, body, or commission, or its legal
representative, which is charged under the laws of such
State with responsibility for administration of State
alcohol laws solely for use in the administration of
such laws.
(10) Disclosure of certain information to agencies
requesting a reduction under subsection (c), (d), (e),
or (f) of section 6402.--
(A) Return information from Internal Revenue
Service.--The Secretary may, upon receiving a
written request, disclose to officers and
employees of any agency seeking a reduction
under subsection (c), (d), (e), or (f) of
section 6402, to officers and employees of the
Department of Labor for purposes of
facilitating the exchange of data in connection
with a notice submitted under subsection
(f)(5)(C) of section 6402, and to officers and
employees of the Department of the Treasury in
connection with such reduction--
(i) taxpayer identity information
with respect to the taxpayer against
whom such a reduction was made or not
made and with respect to any other
person filing a joint return with such
taxpayer,
(ii) the fact that a reduction has
been made or has not been made under
such subsection with respect to such
taxpayer,
(iii) the amount of such reduction,
(iv) whether such taxpayer filed a
joint return, and
(v) the fact that a payment was made
(and the amount of the payment) to the
spouse of the taxpayer on the basis of
a joint return.
(B) Restriction on use of disclosed
information.--(i) Any officers and employees of
an agency receiving return information under
subparagraph (A) shall use such information
only for the purposes of, and to the extent
necessary in, establishing appropriate agency
records, locating any person with respect to
whom a reduction under subsection (c), (d),
(e), or (f) of section 6402 is sought for
purposes of collecting the debt with respect to
which the reduction is sought, or in the
defense of any litigation or administrative
procedure ensuing from a reduction made under
subsection (c), (d), (e), or (f) of section
6402.
(ii) Notwithstanding clause (i),
return information disclosed to
officers and employees of the
Department of Labor may be accessed by
agents who maintain and provide
technological support to the Department
of Labor's Interstate Connection
Network (ICON) solely for the purpose
of providing such maintenance and
support.
(11) Disclosure of return information to carry out
Federal Employees' Retirement System.--
(A) In general.--The Commissioner of Social
Security shall, on written request, disclose to
the Office of Personnel Management return
information from returns with respect to net
earnings from self-employment (as defined in
section 1402), wages (as defined in section
3121(a) or 3401(a)), and payments of retirement
income, which have been disclosed to the Social
Security Administration as provided by
paragraph (1) or (5).
(B) Restriction on disclosure.--The
Commissioner of Social Security shall disclose
return information under subparagraph (A) only
for purposes of, and to the extent necessary
in, the administration of chapters 83 and 84 of
title 5, United States Code.
(12) Disclosure of certain taxpayer identity
information for verification of employment status of
medicare beneficiary and spouse of medicare
beneficiary.--
(A) Return information from Internal Revenue
Service.--The Secretary shall, upon written
request from the Commissioner of Social
Security, disclose to the Commissioner
available filing status and taxpayer identity
information from the individual master files of
the Internal Revenue Service relating to
whether any medicare beneficiary identified by
the Commissioner was a married individual (as
defined in section 7703) for any specified year
after 1986, and, if so, the name of the spouse
of such individual and such spouse's TIN.
(B) Return information from Social Security
Administration.--The Commissioner of Social
Security shall, upon written request from the
Administrator of the Centers for Medicare &
Medicaid Services, disclose to the
Administrator the following information:
(i) The name and TIN of each medicare
beneficiary who is identified as having
received wages (as defined in section
3401(a)), above an amount (if any)
specified by the Secretary of Health
and Human Services, from a qualified
employer in a previous year.
(ii) For each medicare beneficiary
who was identified as married under
subparagraph (A) and whose spouse is
identified as having received wages,
above an amount (if any) specified by
the Secretary of Health and Human
Services, from a qualified employer in
a previous year--
(I) the name and TIN of the
medicare beneficiary, and
(II) the name and TIN of the
spouse.
(iii) With respect to each such
qualified employer, the name, address,
and TIN of the employer and the number
of individuals with respect to whom
written statements were furnished under
section 6051 by the employer with
respect to such previous year.
(C) Disclosure by Centers for Medicare &
Medicaid Services.--With respect to the
information disclosed under subparagraph (B),
the Administrator of the Centers for Medicare &
Medicaid Services may disclose--
(i) to the qualified employer
referred to in such subparagraph the
name and TIN of each individual
identified under such subparagraph as
having received wages from the employer
(hereinafter in this subparagraph
referred to as the ``employee'') for
purposes of determining during what
period such employee or the employee's
spouse may be (or have been) covered
under a group health plan of the
employer and what benefits are or were
covered under the plan (including the
name, address, and identifying number
of the plan),
(ii) to any group health plan which
provides or provided coverage to such
an employee or spouse, the name of such
employee and the employee's spouse (if
the spouse is a medicare beneficiary)
and the name and address of the
employer, and, for the purpose of
presenting a claim to the plan--
(I) the TIN of such employee
if benefits were paid under
title XVIII of the Social
Security Act with respect to
the employee during a period in
which the plan was a primary
plan (as defined in section
1862(b)(2)(A) of the Social
Security Act), and
(II) the TIN of such spouse
if benefits were paid under
such title with respect to the
spouse during such period, and
(iii) to any agent of such
Administrator the information referred
to in subparagraph (B) for purposes of
carrying out clauses (i) and (ii) on
behalf of such Administrator.
(D) Special rules.--
(i) Restrictions on disclosure.--
Information may be disclosed under this
paragraph only for purposes of, and to
the extent necessary in, determining
the extent to which any medicare
beneficiary is covered under any group
health plan.
(ii) Timely response to requests.--
Any request made under subparagraph (A)
or (B) shall be complied with as soon
as possible but in no event later than
120 days after the date the request was
made.
(E) Definitions.--For purposes of this
paragraph--
(i) Medicare beneficiary.--The term
``medicare beneficiary'' means an
individual entitled to benefits under
part A, or enrolled under part B, of
title XVIII of the Social Security Act,
but does not include such an individual
enrolled in part A under section 1818.
(ii) Group health plan.--The term
``group health plan'' means any group
health plan (as defined in section
5000(b)(1)).
(iii) Qualified employer.--The term
``qualified employer'' means, for a
calendar year, an employer which has
furnished written statements under
section 6051 with respect to at least
20 individuals for wages paid in the
year.
(13) Disclosure of return information to carry out
income contingent repayment of student loans.--
(A) In general.--The Secretary may, upon
written request from the Secretary of
Education, disclose to officers and employees
of the Department of Education return
information with respect to a taxpayer who has
received an applicable student loan and whose
loan repayment amounts are based in whole or in
part on the taxpayer's income. Such return
information shall be limited to--
(i) taxpayer identity information
with respect to such taxpayer,
(ii) the filing status of such
taxpayer, and
(iii) the adjusted gross income of
such taxpayer.
(B) Restriction on use of disclosed
information.--Return information disclosed
under subparagraph (A) may be used by officers
and employees of the Department of Education
only for the purposes of, and to the extent
necessary in, establishing the appropriate
income contingent repayment amount for an
applicable student loan.
(C) Applicable student loan.--For purposes of
this paragraph, the term ``applicable student
loan'' means--
(i) any loan made under the program
authorized under part D of title IV of
the Higher Education Act of 1965, and
(ii) any loan made under part B or E
of title IV of the Higher Education Act
of 1965 which is in default and has
been assigned to the Department of
Education.
(D) Termination.--This paragraph shall not
apply to any request made after December 31,
2007.
(14) Disclosure of return information to United
States Customs Service.--The Secretary may, upon
written request from the Commissioner of the United
States Customs Service, disclose to officers and
employees of the Department of the Treasury such return
information with respect to taxes imposed by chapters 1
and 6 as the Secretary may prescribe by regulations,
solely for the purpose of, and only to the extent
necessary in--
(A) ascertaining the correctness of any entry
in audits as provided for in section 509 of the
Tariff Act of 1930 (19 U.S.C. 1509), or
(B) other actions to recover any loss of
revenue, or to collect duties, taxes, and fees,
determined to be due and owing pursuant to such
audits.
(15) Disclosure of returns filed under section
6050I.--The Secretary may, upon written request,
disclose to officers and employees of--
(A) any Federal agency,
(B) any agency of a State or local
government, or
(C) any agency of the government of a foreign
country,
information contained on returns filed under section
6050I. Any such disclosure shall be made on the same
basis, and subject to the same conditions, as apply to
disclosures of information on reports filed under
section 5313 of title 31, United States Code; except
that no disclosure under this paragraph shall be made
for purposes of the administration of any tax law.
(16) Disclosure of return information for purposes of
administering the District of Columbia Retirement
Protection Act of 1997.--
(A) In general.--Upon written request
available return information (including such
information disclosed to the Social Security
Administration under paragraph (1) or (5) of
this subsection), relating to the amount of
wage income (as defined in section 3121(a) or
3401(a)), the name, address, and identifying
number assigned under section 6109, of payors
of wage income, taxpayer identity (as defined
in section 6103(b)(6)), and the occupational
status reflected on any return filed by, or
with respect to, any individual with respect to
whom eligibility for, or the correct amount of,
benefits under the District of Columbia
Retirement Protection Act of 1997, is sought to
be determined, shall be disclosed by the
Commissioner of Social Security, or to the
extent not available from the Social Security
Administration, by the Secretary, to any duly
authorized officer or employee of the
Department of the Treasury, or a Trustee or any
designated officer or employee of a Trustee (as
defined in the District of Columbia Retirement
Protection Act of 1997), or any actuary engaged
by a Trustee under the terms of the District of
Columbia Retirement Protection Act of 1997,
whose official duties require such disclosure,
solely for the purpose of, and to the extent
necessary in, determining an individual's
eligibility for, or the correct amount of,
benefits under the District of Columbia
Retirement Protection Act of 1997.
(B) Disclosure for use in judicial or
administrative proceedings.--Return information
disclosed to any person under this paragraph
may be disclosed in a judicial or
administrative proceeding relating to the
determination of an individual's eligibility
for, or the correct amount of, benefits under
the District of Columbia Retirement Protection
Act of 1997.
(17) Disclosure to National Archives and Records
Administration.--The Secretary shall, upon written
request from the Archivist of the United States,
disclose or authorize the disclosure of returns and
return information to officers and employees of the
National Archives and Records Administration for
purposes of, and only to the extent necessary in, the
appraisal of records for destruction or retention. No
such officer or employee shall, except to the extent
authorized by subsection (f), (i)(8), or (p), disclose
any return or return information disclosed under the
preceding sentence to any person other than to the
Secretary, or to another officer or employee of the
National Archives and Records Administration whose
official duties require such disclosure for purposes of
such appraisal.
(18) Disclosure of return information for purposes of
carrying out a program for advance payment of credit
for health insurance costs of eligible individuals.--
The Secretary may disclose to providers of health
insurance for any certified individual (as defined in
section 7527(c)) return information with respect to
such certified individual only to the extent necessary
to carry out the program established by section 7527
(relating to advance payment of credit for health
insurance costs of eligible individuals).
(19) Disclosure of return information for purposes of
providing transitional assistance under medicare
discount card program.--
(A) In general.--The Secretary, upon written
request from the Secretary of Health and Human
Services pursuant to carrying out section
1860D-31 of the Social Security Act, shall
disclose to officers, employees, and
contractors of the Department of Health and
Human Services with respect to a taxpayer for
the applicable year--
(i)(I) whether the adjusted gross
income, as modified in accordance with
specifications of the Secretary of
Health and Human Services for purposes
of carrying out such section, of such
taxpayer and, if applicable, such
taxpayer's spouse, for the applicable
year, exceeds the amounts specified by
the Secretary of Health and Human
Services in order to apply the 100 and
135 percent of the poverty lines under
such section, (II) whether the return
was a joint return, and (III) the
applicable year, or
(ii) if applicable, the fact that
there is no return filed for such
taxpayer for the applicable year.
(B) Definition of applicable year.--For the
purposes of this subsection, the term
``applicable year'' means the most recent
taxable year for which information is available
in the Internal Revenue Service's taxpayer data
information systems, or, if there is no return
filed for such taxpayer for such year, the
prior taxable year.
(C) Restriction on use of disclosed
information.--Return information disclosed
under this paragraph may be used only for the
purposes of determining eligibility for and
administering transitional assistance under
section 1860D-31 of the Social Security Act.
(20) Disclosure of return information to carry out
Medicare part B premium subsidy adjustment and part D
base beneficiary premium increase.--
(A) In general.--The Secretary shall, upon
written request from the Commissioner of Social
Security, disclose to officers, employees, and
contractors of the Social Security
Administration return information of a taxpayer
whose premium (according to the records of the
Secretary) may be subject to adjustment under
section 1839(i) or increase under section
1860D-13(a)(7) of the Social Security Act. Such
return information shall be limited to--
(i) taxpayer identity information
with respect to such taxpayer,
(ii) the filing status of such
taxpayer,
(iii) the adjusted gross income of
such taxpayer,
(iv) the amounts excluded from such
taxpayer's gross income under sections
135 and 911 to the extent such
information is available,
(v) the interest received or accrued
during the taxable year which is exempt
from the tax imposed by chapter 1 to
the extent such information is
available,
(vi) the amounts excluded from such
taxpayer's gross income by sections 931
and 933 to the extent such information
is available,
(vii) such other information relating
to the liability of the taxpayer as is
prescribed by the Secretary by
regulation as might indicate in the
case of a taxpayer who is an individual
described in subsection (i)(4)(B)(iii)
of section 1839 of the Social Security
Act that the amount of the premium of
the taxpayer under such section may be
subject to adjustment under subsection
(i) of such section or increase under
section 1860D-13(a)(7) of such Act and
the amount of such adjustment, and
(viii) the taxable year with respect
to which the preceding information
relates.
(B) Restriction on use of disclosed
information.--
(i) In general.--Return information
disclosed under subparagraph (A) may be
used by officers, employees, and
contractors of the Social Security
Administration only for the purposes
of, and to the extent necessary in,
establishing the appropriate amount of
any premium adjustment under such
section 1839(i) or increase under such
section 1860D-13(a)(7) or for the
purpose of resolving taxpayer appeals
with respect to any such premium
adjustment or increase.
(ii) Disclosure to other agencies.--
Officers, employees, and contractors of
the Social Security Administration may
disclose--
(I) the taxpayer identity
information and the amount of
the premium subsidy adjustment
or premium increase with
respect to a taxpayer described
in subparagraph (A) to
officers, employees, and
contractors of the Centers for
Medicare and Medicaid Services,
to the extent that such
disclosure is necessary for the
collection of the premium
subsidy amount or the increased
premium amount,
(II) the taxpayer identity
information and the amount of
the premium subsidy adjustment
or the increased premium amount
with respect to a taxpayer
described in subparagraph (A)
to officers and employees of
the Office of Personnel
Management and the Railroad
Retirement Board, to the extent
that such disclosure is
necessary for the collection of
the premium subsidy amount or
the increased premium amount,
(III) return information with
respect to a taxpayer described
in subparagraph (A) to officers
and employees of the Department
of Health and Human Services to
the extent necessary to resolve
administrative appeals of such
premium subsidy adjustment or
increased premium, and
(IV) return information with
respect to a taxpayer described
in subparagraph (A) to officers
and employees of the Department
of Justice for use in judicial
proceedings to the extent
necessary to carry out the
purposes described in clause
(i).
(21) Disclosure of return information to carry out
eligibility requirements for certain programs.--
(A) In general.--The Secretary, upon written
request from the Secretary of Health and Human
Services, shall disclose to officers,
employees, and contractors of the Department of
Health and Human Services return information of
any taxpayer whose income is relevant in
determining any premium tax credit under
section 36B or any cost-sharing reduction under
section 1402 of the Patient Protection and
Affordable Care Act or eligibility for
participation in a State medicaid program under
title XIX of the Social Security Act, a State's
children's health insurance program under title
XXI of the Social Security Act, or a basic
health program under section 1331 of Patient
Protection and Affordable Care Act. Such return
information shall be limited to--
(i) taxpayer identity information
with respect to such taxpayer,
(ii) the filing status of such
taxpayer,
(iii) the number of individuals for
whom a deduction is allowed under
section 151 with respect to the
taxpayer (including the taxpayer and
the taxpayer's spouse),
(iv) the modified adjusted gross
income (as defined in section 36B) of
such taxpayer and each of the other
individuals included under clause (iii)
who are required to file a return of
tax imposed by chapter 1 for the
taxable year,
(v) such other information as is
prescribed by the Secretary by
regulation as might indicate whether
the taxpayer is eligible for such
credit or reduction (and the amount
thereof), and
(vi) the taxable year with respect to
which the preceding information relates
or, if applicable, the fact that such
information is not available.
(B) Information to exchange and State
agencies.--The Secretary of Health and Human
Services may disclose to an Exchange
established under the Patient Protection and
Affordable Care Act or its contractors, or to a
State agency administering a State program
described in subparagraph (A) or its
contractors, any inconsistency between the
information provided by the Exchange or State
agency to the Secretary and the information
provided to the Secretary under subparagraph
(A).
(C) Restriction on use of disclosed
information.--Return information disclosed
under subparagraph (A) or (B) may be used by
officers, employees, and contractors of the
Department of Health and Human Services, an
Exchange, or a State agency only for the
purposes of, and to the extent necessary in--
(i) establishing eligibility for
participation in the Exchange, and
verifying the appropriate amount of,
any credit or reduction described in
subparagraph (A),
(ii) determining eligibility for
participation in the State programs
described in subparagraph (A).
(22) Disclosure of return information to Department
of Health and Human Services for purposes of enhancing
Medicare program integrity.--
(A) In general.--The Secretary shall, upon
written request from the Secretary of Health
and Human Services, disclose to officers and
employees of the Department of Health and Human
Services return information with respect to a
taxpayer who has applied to enroll, or
reenroll, as a provider of services or supplier
under the Medicare program under title XVIII of
the Social Security Act. Such return
information shall be limited to--
(i) the taxpayer identity information
with respect to such taxpayer;
(ii) the amount of the delinquent tax
debt owed by that taxpayer; and
(iii) the taxable year to which the
delinquent tax debt pertains.
(B) Restriction on disclosure.--Return
information disclosed under subparagraph (A)
may be used by officers and employees of the
Department of Health and Human Services for the
purposes of, and to the extent necessary in,
establishing the taxpayer's eligibility for
enrollment or reenrollment in the Medicare
program, or in any administrative or judicial
proceeding relating to, or arising from, a
denial of such enrollment or reenrollment, or
in determining the level of enhanced oversight
to be applied with respect to such taxpayer
pursuant to section 1866(j)(3) of the Social
Security Act.
(C) Delinquent tax debt.--For purposes of
this paragraph, the term ``delinquent tax
debt'' means an outstanding debt under this
title for which a notice of lien has been filed
pursuant to section 6323, but the term does not
include a debt that is being paid in a timely
manner pursuant to an agreement under section
6159 or 7122, or a debt with respect to which a
collection due process hearing under section
6330 is requested, pending, or completed and no
payment is required.
(m) Disclosure of taxpayer identity information.--
(1) Tax refunds.--The Secretary may disclose taxpayer
identity information to the press and other media for
purposes of notifying persons entitled to tax refunds
when the Secretary, after reasonable effort and lapse
of time, has been unable to locate such persons.
(2) Federal claims.--
(A) In general.--Except as provided in
subparagraph (B), the Secretary may, upon
written request, disclose the mailing address
of a taxpayer for use by officers, employees,
or agents of a Federal agency for purposes of
locating such taxpayer to collect or compromise
a Federal claim against the taxpayer in
accordance with sections 3711, 3717, and 3718
of title 31.
(B) Special rule for consumer reporting
agency.--In the case of an agent of a Federal
agency which is a consumer reporting agency
(within the meaning of section 603(f) of the
Fair Credit Reporting Act (15 U.S.C.
1681a(f))), the mailing address of a taxpayer
may be disclosed to such agent under
subparagraph (A) only for the purpose of
allowing such agent to prepare a commercial
credit report on the taxpayer for use by such
Federal agency in accordance with sections
3711, 3717, and 3718 of title 31.
(3) National Institute for Occupational Safety and
Health.--Upon written request, the Secretary may
disclose the mailing address of taxpayers to officers
and employees of the National Institute for
Occupational Safety and Health solely for the purpose
of locating individuals who are, or may have been,
exposed to occupational hazards in order to determine
the status of their health or to inform them of the
possible need for medical care and treatment.
(4) Individuals who owe an overpayment of Federal
Pell Grants or who have defaulted on student loans
administered by the Department of Education.--
(A) In general.--Upon written request by the
Secretary of Education, the Secretary may
disclose the mailing address of any taxpayer--
(i) who owes an overpayment of a
grant awarded to such taxpayer under
subpart 1 of part A of title IV of the
Higher Education Act of 1965, or
(ii) who has defaulted on a loan--
(I) made under part B, D, or
E of title IV of the Higher
Education Act of 1965, or
(II) made pursuant to section
3(a)(1) of the Migration and
Refugee Assistance Act of 1962
to a student at an institution
of higher education,
for use only by officers, employees, or agents
of the Department of Education for purposes of
locating such taxpayer for purposes of
collecting such overpayment or loan.
(B) Disclosure to educational institutions,
etc..--Any mailing address disclosed under
subparagraph (A)(i) may be disclosed by the
Secretary of Education to--
(i) any lender, or any State or
nonprofit guarantee agency, which is
participating under part B or D of
title IV of the Higher Education Act of
1965, or
(ii) any educational institution with
which the Secretary of Education has an
agreement under subpart 1 of part A, or
part D or E, of title IV of such Act,
for use only by officers, employees, or agents
of such lender, guarantee agency, or
institution whose duties relate to the
collection of student loans for purposes of
locating individuals who have defaulted on
student loans made under such loan programs for
purposes of collecting such loans.
(5) Individuals who have defaulted on student loans
administered by the Department of Health and Human
Services.--
(A) In general.--Upon written request by the
Secretary of Health and Human Services, the
Secretary may disclose the mailing address of
any taxpayer who has defaulted on a loan made
under part C 1 of title VII of the
Public Health Service Act or under subpart II
of part B of title VIII of such Act, for use
only by officers, employees, or agents of the
Department of Health and Human Services for
purposes of locating such taxpayer for purposes
of collecting such loan.
(B) Disclosure to schools and eligible
lenders.--Any mailing address disclosed under
subparagraph (A) may be disclosed by the
Secretary of Health and Human Services to--
(i) any school with which the
Secretary of Health and Human Services
has an agreement under subpart II
1 of part C of title VII of
the Public Health Service Act or
subpart II 1 of part B of
title VIII of such Act, or
(ii) any eligible lender (within the
meaning of section 737(4) 1
of such Act) participating under
subpart I 1 of part C of
title VII of such Act,
for use only by officers, employees, or agents
of such school or eligible lender whose duties
relate to the collection of student loans for
purposes of locating individuals who have
defaulted on student loans made under such
subparts for the purposes of collecting such
loans.
(6) Blood Donor Locator Service.--
(A) In general.--Upon written request
pursuant to section 1141 of the Social Security
Act, the Secretary shall disclose the mailing
address of taxpayers to officers and employees
of the Blood Donor Locator Service in the
Department of Health and Human Services.
(B) Restriction on disclosure.--The Secretary
shall disclose return information under
subparagraph (A) only for purposes of, and to
the extent necessary in, assisting under the
Blood Donor Locator Service authorized persons
(as defined in section 1141(h)(1) of the Social
Security Act) in locating blood donors who, as
indicated by donated blood or products derived
therefrom or by the history of the subsequent
use of such blood or blood products, have or
may have the virus for acquired immune
deficiency syndrome, in order to inform such
donors of the possible need for medical care
and treatment.
(C) Safeguards.--The Secretary shall destroy
all related blood donor records (as defined in
section 1141(h)(2) of the Social Security Act)
in the possession of the Department of the
Treasury upon completion of their use in making
the disclosure required under subparagraph (A),
so as to make such records undisclosable.
(7) Social security account statement furnished by
Social Security Administration.--Upon written request
by the Commissioner of Social Security, the Secretary
may disclose the mailing address of any taxpayer who is
entitled to receive a social security account statement
pursuant to section 1143(c) of the Social Security Act,
for use only by officers, employees or agents of the
Social Security Administration for purposes of mailing
such statement to such taxpayer.
(n) Certain other persons.--Pursuant to regulations
prescribed by the Secretary, returns and return information may
be disclosed to any person, including any person described in
section 7513(a), to the extent necessary in connection with the
processing, storage, transmission, and reproduction of such
returns and return information, the programming, maintenance,
repair, testing, and procurement of equipment, and the
providing of other services, for purposes of tax
administration.
(o) Disclosure of returns and return information with respect
to certain taxes.--
(1) Taxes imposed by subtitle E.--
(A) In general.--Returns and return
information with respect to taxes imposed by
subtitle E (relating to taxes on alcohol,
tobacco, and firearms) shall be open to
inspection by or disclosure to officers and
employees of a Federal agency whose official
duties require such inspection or disclosure.
(B) Use in certain proceedings.--Returns and
return information disclosed to a Federal
agency under subparagraph (A) may be used in an
action or proceeding (or in preparation for
such action or proceeding) brought under
section 625 of the American Jobs Creation Act
of 2004 for the collection of any unpaid
assessment or penalty arising under such Act.
(2) Taxes imposed by chapter 35.--Returns and return
information with respect to taxes imposed by chapter 35
(relating to taxes on wagering) shall, notwithstanding
any other provision of this section, be open to
inspection by or disclosure only to such person or
persons and for such purpose or purposes as are
prescribed by section 4424.
(p) Procedure and recordkeeping.--
(1) Manner, time, and place of inspections.--Requests
for the inspection or disclosure of a return or return
information and such inspection or disclosure shall be
made in such manner and at such time and place as shall
be prescribed by the Secretary.
(2) Procedure.--
(A) Reproduction of returns.--A reproduction
or certified reproduction of a return shall,
upon written request, be furnished to any
person to whom disclosure or inspection of such
return is authorized under this section. A
reasonable fee may be prescribed for furnishing
such reproduction or certified reproduction.
(B) Disclosure of return information.--Return
information disclosed to any person under the
provisions of this title may be provided in the
form of written documents, reproductions of
such documents, films or photoimpressions, or
electronically produced tapes, disks, or
records, or by any other mode or means which
the Secretary determines necessary or
appropriate. A reasonable fee may be prescribed
for furnishing such return information.
(C) Use of reproductions.--Any reproduction
of any return, document, or other matter made
in accordance with this paragraph shall have
the same legal status as the original, and any
such reproduction shall, if properly
authenticated, be admissible in evidence in any
judicial or administrative proceeding as if it
were the original, whether or not the original
is in existence.
(3) Records of inspection and disclosure.--
(A) System of recordkeeping.--Except as
otherwise provided by this paragraph, the
Secretary shall maintain a permanent system of
standardized records or accountings of all
requests for inspection or disclosure of
returns and return information (including the
reasons for and dates of such requests) and of
returns and return information inspected or
disclosed under this section and section
6104(c). Notwithstanding the provisions of
section 552a(c) of title 5, United States Code,
the Secretary shall not be required to maintain
a record or accounting of requests for
inspection or disclosure of returns and return
information, or of returns and return
information inspected or disclosed, under the
authority of subsection (c), (e), (f)(5),
(h)(1), (3)(A), or (4), (i)(4), or (8)(A)(ii),
(k)(1), (2), (6), (8), or (9), (l)(1), (4)(B),
(5), (7), (8), (9), (10), (11), (12), (13),
(14), (15), (16), (17), or (18), (m), or (n).
The records or accountings required to be
maintained under this paragraph shall be
available for examination by the Joint
Committee on Taxation or the Chief of Staff of
such joint committee. Such record or accounting
shall also be available for examination by such
person or persons as may be, but only to the
extent, authorized to make such examination
under section 552a(c)(3) of title 5, United
States Code.
(B) Report by the Secretary.--The Secretary
shall, within 90 days after the close of each
calendar year, furnish to the Joint Committee
on Taxation a report with respect to, or
summary of, the records or accountings
described in subparagraph (A) in such form and
containing such information as such joint
committee or the Chief of Staff of such joint
committee may designate. Such report or summary
shall not, however, include a record or
accounting of any request by the President
under subsection (g) for, or the disclosure in
response to such request of, any return or
return information with respect to any
individual who, at the time of such request,
was an officer or employee of the executive
branch of the Federal Government. Such report
or summary, or any part thereof, may be
disclosed by such joint committee to such
persons and for such purposes as the joint
committee may, by record vote of a majority of
the members of the joint committee, determine.
(C) Public report on disclosures.--The
Secretary shall, within 90 days after the close
of each calendar year, furnish to the Joint
Committee on Taxation for disclosure to the
public a report with respect to the records or
accountings described in subparagraph (A)
which--
(i) provides with respect to each
Federal agency, each agency, body, or
commission described in subsection (d),
(i)(3)(B)(i) or (7)(A)(ii), or (l)(6),
and the Government Accountability
Office the number of--
(I) requests for disclosure
of returns and return
information,
(II) instances in which
returns and return information
were disclosed pursuant to such
requests or otherwise,
(III) taxpayers whose
returns, or return information
with respect to whom, were
disclosed pursuant to such
requests, and
(ii) describes the general purposes
for which such requests were made.
(4) Safeguards.--Any Federal agency described in
subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or
(7), (j)(1), (2), or (5), (k)(8), (10), or (11),
(l)(1), (2), (3), (5), (10), (11), (13), (14), (17), or
(22) or (o)(1)(A), the Government Accountability
Office, the Congressional Budget Office, or any agency,
body, or commission described in subsection (d),
(i)(1)(C), (3)(B)(i), or (7)(A)(ii), or (k)(10),
(l)(6), (7), (8), (9), (12), (15), or (16), any
appropriate State officer (as defined in section
6104(c)), or any other person described in subsection
(k)(10), subsection (l)(10), (16), (18), (19), or (20),
or any entity described in subsection (l)(21), shall,
as a condition for receiving returns or return
information--
(A) establish and maintain, to the
satisfaction of the Secretary, a permanent
system of standardized records with respect to
any request, the reason for such request, and
the date of such request made by or of it and
any disclosure of return or return information
made by or to it;
(B) establish and maintain, to the
satisfaction of the Secretary, a secure area or
place in which such returns or return
information shall be stored;
(C) restrict, to the satisfaction of the
Secretary, access to the returns or return
information only to persons whose duties or
responsibilities require access and to whom
disclosure may be made under the provisions of
this title;
(D) provide such other safeguards which the
Secretary determines (and which he prescribes
in regulations) to be necessary or appropriate
to protect the confidentiality of the returns
or return information;
(E) furnish a report to the Secretary, at
such time and containing such information as
the Secretary may prescribe, which describes
the procedures established and utilized by such
agency, body, or commission, the Government
Accountability Office, or the Congressional
Budget Office for ensuring the confidentiality
of returns and return information required by
this paragraph; and
(F) upon completion of use of such returns or
return information--
(i) in the case of an agency, body,
or commission described in subsection
(d), (i)(3)(B)(i), (k)(10), or (l)(6),
(7), (8), (9), or (16), any appropriate
State officer (as defined in section
6104(c)), or any other person described
in subsection (k)(10) or subsection
(l)(10), (16), (18), (19), or (20)
return to the Secretary such returns or
return information (along with any
copies made therefrom) or make such
returns or return information
undisclosable in any manner and furnish
a written report to the Secretary
describing such manner,
(ii) in the case of an agency
described in subsection (h)(2), (h)(5),
(i)(1), (2), (3), (5) or (7), (j)(1),
(2), or (5), (k)(8), (10), or (11),
(l)(1), (2), (3), (5), (10), (11),
(12), (13), (14), (15), (17), or (22),
or (o)(1)(A) or any entity described in
subsection (l)(21), the Government
Accountability Office, or the
Congressional Budget Office, either--
(I) return to the Secretary
such returns or return
information (along with any
copies made therefrom),
(II) otherwise make such
returns or return information
undisclosable, or
(III) to the extent not so
returned or made undisclosable,
ensure that the conditions of
subparagraphs (A), (B), (C),
(D), and (E) of this paragraph
continue to be met with respect
to such returns or return
information, and
(iii) in the case of the Department
of Health and Human Services for
purposes of subsection (m)(6), destroy
all such return information upon
completion of its use in providing the
notification for which the information
was obtained, so as to make such
information undisclosable;
except that the conditions of subparagraphs (A), (B),
(C), (D), and (E) shall cease to apply with respect to
any return or return information if, and to the extent
that, such return or return information is disclosed in
the course of any judicial or administrative proceeding
and made a part of the public record thereof. If the
Secretary determines that any such agency, body, or
commission, including an agency, an appropriate State
officer (as defined in section 6104(c)), or any other
person described in subsection (k)(10) or subsection
(l)(10), (16), (18), (19), or (20) or any entity
described in subsection (l)(21), or the Government
Accountability Office or the Congressional Budget
Office, has failed to, or does not, meet the
requirements of this paragraph, he may, after any
proceedings for review established under paragraph (7),
take such actions as are necessary to ensure such
requirements are met, including refusing to disclose
returns or return information to such agency, body, or
commission, including an agency, an appropriate State
officer (as defined in section 6104(c)), or any other
person described in subsection (k)(10) or subsection
(l)(10), (16), (18), (19), or (20) or any entity
described in subsection (l)(21), or the Government
Accountability Office or the Congressional Budget
Office, until he determines that such requirements have
been or will be met. In the case of any agency which
receives any mailing address under paragraph (2), (4),
(6), or (7) of subsection (m) and which discloses any
such mailing address to any agent or which receives any
information under paragraph (6)(A), (10), (12)(B), or
(16) of subsection (l) and which discloses any such
information to any agent, or any person including an
agent described in subsection (l)(10) or (16), this
paragraph shall apply to such agency and each such
agent or other person (except that, in the case of an
agent, or any person including an agent described in
subsection (l)(10) or (16), any report to the Secretary
or other action with respect to the Secretary shall be
made or taken through such agency). For purposes of
applying this paragraph in any case to which subsection
(m)(6) applies, the term ``return information''
includes related blood donor records (as defined in
section 1141(h)(2) of the Social Security Act).
(5) Report on procedures and safeguards.--After the
close of each calendar year, the Secretary shall
furnish to each committee described in subsection
(f)(1) a report which describes the procedures and
safeguards established and utilized by such agencies,
bodies, or commissions, the Government Accountability
Office, and the Congressional Budget Office for
ensuring the confidentiality of returns and return
information as required by this subsection. Such report
shall also describe instances of deficiencies in, and
failure to establish or utilize, such procedures.
(6) Audit of procedures and safeguards.--
(A) Audit by Comptroller General.--The
Comptroller General may audit the procedures
and safeguards established by such agencies,
bodies, or commissions and the Congressional
Budget Office pursuant to this subsection to
determine whether such safeguards and
procedures meet the requirements of this
subsection and ensure the confidentiality of
returns and return information. The Comptroller
General shall notify the Secretary before any
such audit is conducted.
(B) Records of inspection and reports by the
Comptroller General.--The Comptroller General
shall--
(i) maintain a permanent system of
standardized records and accountings of
returns and return information
inspected by officers and employees of
the Government Accountability Office
under subsection (i)(8)(A)(ii) and
shall, within 90 days after the close
of each calendar year, furnish to the
Secretary a report with respect to, or
summary of, such records or accountings
in such form and containing such
information as the Secretary may
prescribe, and
(ii) furnish an annual report to each
committee described in subsection (f)
and to the Secretary setting forth his
findings with respect to any audit
conducted pursuant to subparagraph (A).
The Secretary may disclose to the Joint
Committee any report furnished to him under
clause (i).
(7) Administrative review.--The Secretary shall by
regulations prescribe procedures which provide for
administrative review of any determination under
paragraph (4) that any agency, body, or commission
described in subsection (d) has failed to meet the
requirements of such paragraph.
(8) State law requirements.--
(A) Safeguards.--Notwithstanding any other
provision of this section, no return or return
information shall be disclosed after December
31, 1978, to any officer or employee of any
State which requires a taxpayer to attach to,
or include in, any State tax return a copy of
any portion of his Federal return, or
information reflected on such Federal return,
unless such State adopts provisions of law
which protect the confidentiality of the copy
of the Federal return (or portion thereof)
attached to, or the Federal return information
reflected on, such State tax return.
(B) Disclosure of returns or return
information in State returns.--Nothing in
subparagraph (A) or paragraph (9) shall be
construed to prohibit the disclosure by an
officer or employee of any State of any copy of
any portion of a Federal return or any
information on a Federal return which is
required to be attached or included in a State
return to another officer or employee of such
State (or political subdivision of such State)
if such disclosure is specifically authorized
by State law.
(9) Disclosure to contractors and other agents.--
Notwithstanding any other provision of this section, no
return or return information shall be disclosed to any
contractor or other agent of a Federal, State, or local
agency unless such agency, to the satisfaction of the
Secretary--
(A) has requirements in effect which require
each such contractor or other agent which would
have access to returns or return information to
provide safeguards (within the meaning of
paragraph (4)) to protect the confidentiality
of such returns or return information,
(B) agrees to conduct an on-site review every
3 years (or a mid-point review in the case of
contracts or agreements of less than 3 years in
duration) of each contractor or other agent to
determine compliance with such requirements,
(C) submits the findings of the most recent
review conducted under subparagraph (B) to the
Secretary as part of the report required by
paragraph (4)(E), and
(D) certifies to the Secretary for the most
recent annual period that such contractor or
other agent is in compliance with all such
requirements.
The certification required by subparagraph (D) shall
include the name and address of each contractor or
other agent, a description of the contract or agreement
with such contractor or other agent, and the duration
of such contract or agreement. The requirements of this
paragraph shall not apply to disclosures pursuant to
subsection (n) for purposes of Federal tax
administration.
(q) Regulations.--The Secretary is authorized to prescribe
such other regulations as are necessary to carry out the
provisions of this section.
SEC. 6104. PUBLICITY OF INFORMATION REQUIRED FROM CERTAIN EXEMPT
ORGANIZATIONS AND CERTAIN TRUSTS.
(a) Inspection of applications for tax exemption or notice of
status.--
(1) Public inspection.--
(A) Organizations described in section 501 or
527.--If an organization described in section
501(c) or (d) is exempt from taxation under
section 501(a) for any taxable year or a
political organization is exempt from taxation
under section 527 for any taxable year, the
application filed by the organization with
respect to which the Secretary made his
determination that such organization was
entitled to exemption under section 501(a) or
notice of status filed by the organization
under section 527(i), together with any papers
submitted in support of such application or
notice, and any letter or other document issued
by the Internal Revenue Service with respect to
such application or notice shall be open to
public inspection at the national office of the
Internal Revenue Service. In the case of any
application or notice filed after the date of
the enactment of this subparagraph, a copy of
such application or notice and such letter or
document shall be open to public inspection at
the appropriate field office of the Internal
Revenue Service (determined under regulations
prescribed by the Secretary). Any inspection
under this subparagraph may be made at such
times, and in such manner, as the Secretary
shall by regulations prescribe. After the
application of any organization for exemption
from taxation under section 501(a) has been
opened to public inspection under this
subparagraph, the Secretary shall, on the
request of any person with respect to such
organization, furnish a statement indicating
the subsection and paragraph of section 501
which it has been determined describes such
organization.
(B) Pension, etc., plans.--The following
shall be open to public inspection at such
times and in such places as the Secretary may
prescribe:
(i) any application filed with
respect to the qualification of a
pension, profit-sharing, or stock bonus
plan under section 401(a) or 403(a), an
individual retirement account described
in section 408(a), or an individual
retirement annuity described in section
408(b),
(ii) any application filed with
respect to the exemption from tax under
section 501(a) of an organization
forming part of a plan or account
referred to in clause (i),
(iii) any papers submitted in support
of an application referred to in clause
(i) or (ii), and
(iv) any letter or other document
issued by the Internal Revenue Service
and dealing with the qualification
referred to in clause (i) or the
exemption from tax referred to in
clause (ii).
Except in the case of a plan participant, this
subparagraph shall not apply to any plan
referred to in clause (i) having not more than
25 participants.
(C) Certain names and compensation not to be
opened to public inspection.--In the case of
any application, document, or other papers,
referred to in subparagraph (B), information
from which the compensation (including deferred
compensation) of any individual may be
ascertained shall not be open to public
inspection under subparagraph (B).
(D) Withholding of certain other
information.--Upon request of the organization
submitting any supporting papers described in
subparagraph (A) or (B), the Secretary shall
withhold from public inspection any information
contained therein which he determines relates
to any trade secret, patent, process, style of
work, or apparatus, of the organization, if he
determines that public disclosure of such
information would adversely affect the
organization. The Secretary shall withhold from
public inspection any information contained in
supporting papers described in subparagraph (A)
or (B) the public disclosure of which he
determines would adversely affect the national
defense.
(2) Inspection by committees of Congress.--Section
6103(f) shall apply with respect to--
(A) the application for exemption of any
organization described in section 501(c) or (d)
which is exempt from taxation under section
501(a) for any taxable year or notice of status
of any political organization which is exempt
from taxation under section 527 for any taxable
year, and any application referred to in
subparagraph (B) of subsection (a)(1) of this
section, and
(B) any other papers which are in the
possession of the Secretary and which relate to
such application,
as if such papers constituted returns.
(3) Information available on Internet and in
person.--
(A) In general.--The Secretary shall make
publicly available, on the Internet and at the
offices of the Internal Revenue Service--
(i) a list of all political
organizations which file a notice with
the Secretary under section 527(i), and
(ii) the name, address, electronic
mailing address, custodian of records,
and contact person for such
organization.
(B) Time to make information available.--The
Secretary shall make available the information
required under subparagraph (A) not later than
5 business days after the Secretary receives a
notice from a political organization under
section 527(i).
(b) Inspection of annual returns.--The information required
to be furnished by sections 6033, 6034, and 6058, together with
the names and addresses of such organizations and trusts, shall
be made available to the public at such times and in such
places as the Secretary may prescribe. Nothing in this
subsection shall authorize the Secretary to disclose the name
or address of any contributor to any organization or trust
(other than a private foundation, as defined in section 509(a)
or a political organization exempt from taxation under section
527) which is required to furnish such information. In the case
of an organization described in section 501(d), this subsection
shall not apply to copies referred to in section 6031(b) with
respect to such organization. In the case of a trust which is
required to file a return under section 6034(a), this
subsection shall not apply to information regarding
beneficiaries which are not organizations described in section
170(c). Any annual return which is filed under section 6011 by
an organization described in section 501(c)(3) and which
relates to any tax imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable,
etc., organizations) shall be treated for purposes of this
subsection in the same manner as if furnished under section
6033. Any annual return required to be filed electronically
under section 6033(n) shall be made available by the Secretary
to the public as soon as practicable in a machine readable
format.
(c) Publication to State officials.--
(1) General rule for charitable organizations.--In
the case of any organization which is described in
section 501(c)(3) and exempt from taxation under
section 501(a), or has applied under section 508(a) for
recognition as an organization described in section
501(c)(3), the Secretary at such times and in such
manner as he may by regulations prescribe shall--
(A) notify the appropriate State officer of a
refusal to recognize such organization as an
organization described in section 501(c)(3), or
of the operation of such organization in a
manner which does not meet, or no longer meets,
the requirements of its exemption,
(B) notify the appropriate State officer of
the mailing of a notice of deficiency of tax
imposed under section 507 or chapter 41 or 42,
and
(C) at the request of such appropriate State
officer, make available for inspection and
copying such returns, filed statements,
records, reports, and other information,
relating to a determination under subparagraph
(A) or (B) as are relevant to any determination
under State law.
(2) Disclosure of proposed actions related to
charitable organizations.--
(A) Specific notifications.--In the case of
an organization to which paragraph (1) applies,
the Secretary may disclose to the appropriate
State officer--
(i) a notice of proposed refusal to
recognize such organization as an
organization described in section
501(c)(3) or a notice of proposed
revocation of such organization's
recognition as an organization exempt
from taxation,
(ii) the issuance of a letter of
proposed deficiency of tax imposed
under section 507 or chapter 41 or 42,
and
(iii) the names, addresses, and
taxpayer identification numbers of
organizations which have applied for
recognition as organizations described
in section 501(c)(3).
(B) Additional disclosures.--Returns and
return information of organizations with
respect to which information is disclosed under
subparagraph (A) may be made available for
inspection by or disclosed to an appropriate
State officer.
(C) Procedures for disclosure.--Information
may be inspected or disclosed under
subparagraph (A) or (B) only--
(i) upon written request by an
appropriate State officer, and
(ii) for the purpose of, and only to
the extent necessary in, the
administration of State laws regulating
such organizations.
Such information may only be inspected by or
disclosed to a person other than the
appropriate State officer if such person is an
officer or employee of the State and is
designated by the appropriate State officer to
receive the returns or return information under
this paragraph on behalf of the appropriate
State officer.
(D) Disclosures other than by request.--The
Secretary may make available for inspection or
disclose returns and return information of an
organization to which paragraph (1) applies to
an appropriate State officer of any State if
the Secretary determines that such returns or
return information may constitute evidence of
noncompliance under the laws within the
jurisdiction of the appropriate State officer.
(3) Disclosure with respect to certain other exempt
organizations.--Upon written request by an appropriate
State officer, the Secretary may make available for
inspection or disclosure returns and return information
of any organization described in section 501(c) (other
than organizations described in paragraph (1) or (3)
thereof) for the purpose of, and only to the extent
necessary in, the administration of State laws
regulating the solicitation or administration of the
charitable funds or charitable assets of such
organizations. Such information may only be inspected
by or disclosed to a person other than the appropriate
State officer if such person is an officer or employee
of the State and is designated by the appropriate State
officer to receive the returns or return information
under this paragraph on behalf of the appropriate State
officer.
(4) Use in civil judicial and administrative
proceedings.--Returns and return information disclosed
pursuant to this subsection may be disclosed in civil
administrative and civil judicial proceedings
pertaining to the enforcement of State laws regulating
such organizations in a manner prescribed by the
Secretary similar to that for tax administration
proceedings under section 6103(h)(4).
(5) No disclosure if impairment.--Returns and return
information shall not be disclosed under this
subsection, or in any proceeding described in paragraph
(4), to the extent that the Secretary determines that
such disclosure would seriously impair Federal tax
administration.
(6) Definitions.--For purposes of this subsection--
(A) Return and return information.--The terms
``return'' and ``return information'' have the
respective meanings given to such terms by
section 6103(b).
(B) Appropriate State officer.--The term
``appropriate State officer'' means--
(i) the State attorney general,
(ii) the State tax officer,
(iii) in the case of an organization
to which paragraph (1) applies, any
other State official charged with
overseeing organizations of the type
described in section 501(c)(3), and
(iv) in the case of an organization
to which paragraph (3) applies, the
head of an agency designated by the
State attorney general as having
primary responsibility for overseeing
the solicitation of funds for
charitable purposes.
(d) Public inspection of certain annual returns, reports,
applications for exemption, and notices of status.--
(1) In general.--In the case of an organization
described in subsection (c) or (d) of section 501 and
exempt from taxation under section 501(a) or an
organization exempt from taxation under section
527(a)--
(A) a copy of--
(i) the annual return filed under
section 6033 (relating to returns by
exempt organizations) by such
organization,
(ii) any annual return which is filed
under section 6011 by an organization
described in section 501(c)(3) and
which relates to any tax imposed by
section 511 (relating to imposition of
tax on unrelated business income of
charitable, etc., organizations),
(iii) if the organization filed an
application for recognition of
exemption under section 501 or notice
of status under section 527(i), the
exempt status application materials or
any notice materials of such
organization, and
(iv) the reports filed under section
527(j) (relating to required disclosure
of expenditures and contributions) by
such organization,
shall be made available by such organization
for inspection during regular business hours by
any individual at the principal office of such
organization and, if such organization
regularly maintains 1 or more regional or
district offices having 3 or more employees, at
each such regional or district office, and
(B) upon request of an individual made at
such principal office or such a regional or
district office, a copy of such annual return,
reports, and exempt status application
materials or such notice materials shall be
provided to such individual without charge
other than a reasonable fee for any
reproduction and mailing costs.
The request described in subparagraph (B) must be made
in person or in writing. If such request is made in
person, such copy shall be provided immediately and, if
made in writing, shall be provided within 30 days.
(2) 3-year limitation on inspection of returns.--
Paragraph (1) shall apply to an annual return filed
under section 6011 or 6033 only during the 3-year
period beginning on the last day prescribed for filing
such return (determined with regard to any extension of
time for filing).
(3) Exceptions from disclosure requirement.--
(A) Nondisclosure of contributors, etc..--In
the case of an organization which is not a
private foundation (within the meaning of
section 509(a)) or a political organization
exempt from taxation under section 527,
paragraph (1) shall not require the disclosure
of the name or address of any contributor to
the organization. In the case of an
organization described in section 501(d),
paragraph (1) shall not require the disclosure
of the copies referred to in section 6031(b)
with respect to such organization.
(B) Nondisclosure of certain other
information.--Paragraph (1) shall not require
the disclosure of any information if the
Secretary withheld such information from public
inspection under subsection (a)(1)(D).
(4) Limitation on providing copies.--Paragraph (1)(B)
shall not apply to any request if, in accordance with
regulations promulgated by the Secretary, the
organization has made the requested documents widely
available, or the Secretary determines, upon
application by an organization, that such request is
part of a harassment campaign and that compliance with
such request is not in the public interest.
(5) Exempt status application materials.--For
purposes of paragraph (1), the term ``exempt status
application materials'' means the application for
recognition of exemption under section 501 and any
papers submitted in support of such application and any
letter or other document issued by the Internal Revenue
Service with respect to such application.
(6) Notice materials.--For purposes of paragraph (1),
the term ``notice materials'' means the notice of
status filed under section 527(i) and any papers
submitted in support of such notice and any letter or
other document issued by the Internal Revenue Service
with respect to such notice.
(7) Disclosure of reports by Internal Revenue
Service.--Any report filed by an organization under
section 527(j) (relating to required disclosure of
expenditures and contributions) shall be made available
to the public at such times and in such places as the
Secretary may prescribe.
(8) Application to nonexempt charitable trusts and
nonexempt private foundations.--The organizations
referred to in paragraphs (1) and (2) of section
6033(d) shall comply with the requirements of this
subsection relating to annual returns filed under
section 6033 in the same manner as the organizations
referred to in paragraph (1).
* * * * * * *
SEC. 6108. STATISTICAL PUBLICATIONS AND STUDIES.
(a) Publication or other disclosure of statistics of
income.--The Secretary shall prepare and publish not less than
annually statistics reasonably available with respect to the
operations of the internal revenue laws, including
classifications of taxpayers and of income, the amounts claimed
or allowed as deductions, exemptions, and credits, and any
other facts deemed pertinent and valuable.
(b) Special statistical studies.--The Secretary may, upon
written request by any party or parties, make special
statistical studies and compilations involving return
information (as defined in section 6103(b)(2)) and furnish to
such party or parties transcripts of any such special
statistical study or compilation. A reasonable fee may be
prescribed for the cost of the work or services performed for
such party or parties.
(c) Anonymous form.--No publication or other disclosure of
statistics or other information required or authorized by
subsection (a) or special statistical study authorized by
subsection (b) shall in any manner permit the statistics,
study, or any information so published, furnished, or otherwise
disclosed to be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer.
(d) Statistical Support for National Taxpayer Advocate.--Upon
request of the National Taxpayer Advocate, the Secretary shall,
to the extent practicable, provide the National Taxpayer
Advocate with statistical support in connection with the
preparation by the National Taxpayer Advocate of the annual
report described in section 7803(c)(2)(B)(ii). Such statistical
support shall include statistical studies, compilations, and
the review of information provided by the National Taxpayer
Advocate for statistical validity and sound statistical
methodology.
* * * * * * *
CHAPTER 64--COLLECTION
* * * * * * *
Subchapter A--GENERAL PROVISIONS
* * * * * * *
SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS.
(a) In general.--Nothing in any provision of law shall be
construed to prevent the Secretary from entering into a
qualified tax collection contract.
(b) Qualified tax collection contract.--For purposes of this
section, the term ``qualified tax collection contract'' means
any contract which--
(1) is for the services of any person (other than an
officer or employee of the Treasury Department)--
(A) to locate and contact any taxpayer
specified by the Secretary,
(B) to request full payment from such
taxpayer of an amount of Federal tax specified
by the Secretary and, if such request cannot be
met by the taxpayer, to offer the taxpayer an
installment agreement providing for full
payment of such amount during a period not to
exceed [5 years] 7 years, and
(C) to obtain financial information specified
by the Secretary with respect to such taxpayer,
(2) prohibits each person providing such services
under such contract from committing any act or omission
which employees of the Internal Revenue Service are
prohibited from committing in the performance of
similar services,
(3) prohibits subcontractors from--
(A) having contacts with taxpayers,
(B) providing quality assurance services, and
(C) composing debt collection notices, and
(4) permits subcontractors to perform other services
only with the approval of the Secretary.
(c) Collection of inactive tax receivables.--
(1) In general.--Notwithstanding any other provision
of law, the Secretary shall enter into one or more
qualified tax collection contracts for the collection
of all outstanding inactive tax receivables.
(2) Inactive tax receivables.--For purposes of this
section--
(A) In general.--The term ``inactive tax
receivable'' means any tax receivable if--
(i) at any time after assessment, the
Internal Revenue Service removes such
receivable from the active inventory
for lack of resources or inability to
locate the taxpayer,
(ii) [more than 1/3 of the period of
the applicable statute of limitation
has lapsed] more than 2 years has
passed since assessment and such
receivable has not been assigned for
collection to any employee of the
Internal Revenue Service, or
(iii) in the case of a receivable
which has been assigned for collection,
more than 365 days have passed without
interaction with the taxpayer or a
third party for purposes of furthering
the collection of such receivable.
(B) Tax receivable.--The term ``tax
receivable'' means any outstanding assessment
which the Internal Revenue Service includes in
potentially collectible inventory.
(d) Certain tax receivables not eligible for collection under
qualified tax collections contracts.--A tax receivable shall
not be eligible for collection pursuant to a qualified tax
collection contract if such receivable--
(1) is subject to a pending or active offer-in-
compromise or installment agreement,
(2) is classified as an innocent spouse case,
(3) involves a taxpayer identified by the Secretary
as being--
(A) deceased,
(B) under the age of 18,
(C) in a designated combat zone, [or]
(D) a victim of tax-related identity theft,
(E) a taxpayer substantially all of whose
income consists of disability insurance
benefits under section 223 of the Social
Security Act or supplemental security income
benefits under title XVI of the Social Security
Act (including supplemental security income
benefits of the type described in section 1616
of such Act or section 212 of Public Law 93-
66), or
(F) a taxpayer who is an individual with
adjusted gross income, as determined for the
most recent taxable year for which such
information is available, which does not exceed
200 percent of the applicable poverty level (as
determined by the Secretary),
(4) is currently under examination, litigation,
criminal investigation, or levy, or
(5) is currently subject to a proper exercise of a
right of appeal under this title.
(e) Fees.--The Secretary may retain and use--
(1) an amount not in excess of 25 percent of the
amount collected under any qualified tax collection
contract for the costs of services performed under such
contract, and
(2) an amount not in excess of 25 percent of such
amount collected to fund the special compliance
personnel program account under section 6307.
The Secretary shall keep adequate records regarding amounts so
retained and used. The amount credited as paid by any taxpayer
shall be determined without regard to this subsection.
(f) No Federal liability.--The United States shall not be
liable for any act or omission of any person performing
services under a qualified tax collection contract.
(g) Application of Fair Debt Collection Practices Act.--The
provisions of the Fair Debt Collection Practices Act (15 U.S.C.
1692 et seq.) shall apply to any qualified tax collection
contract, except to the extent superseded by section 6304,
section 7602(c), or by any other provision of this title.
(h) Contracting priority.--In contracting for the services of
any person under this section, the Secretary shall utilize
private collection contractors and debt collection centers on
the schedule required under section 3711(g) of title 31, United
States Code, including the technology and communications
infrastructure established therein, to the extent such private
collection contractors and debt collection centers are
appropriate to carry out the purposes of this section.
(i) Taxpayers in presidentially declared disaster areas.--The
Secretary may prescribe procedures under which a taxpayer
determined to be affected by a Federally declared disaster (as
defined by section 165(i)(5)) may request--
(1) relief from immediate collection measures by
contractors under this section, and
(2) a return of the inactive tax receivable to the
inventory of the Internal Revenue Service to be
collected by an employee thereof.
(j) Report to Congress.--Not later than 90 days after the
last day of each fiscal year (beginning with the first such
fiscal year ending after the date of the enactment of this
subsection), the Secretary shall submit to the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate a report with respect to
qualified tax collection contracts under this section which
shall include--
(1) annually, with respect to such fiscal year--
(A) the total number and amount of tax
receivables provided to each contractor for
collection under this section,
(B) the total amounts collected (and amounts
of installment agreements entered into under
subsection (b)(1)(B)) with respect to each
contractor and the collection costs incurred
(directly and indirectly) by the Internal
Revenue Service with respect to such amounts,
(C) the impact of such contracts on the total
number and amount of unpaid assessments, and on
the number and amount of assessments collected
by Internal Revenue Service personnel after
initial contact by a contractor,
(D) the amount of fees retained by the
Secretary under subsection (e) and a
description of the use of such funds, and
(E) a disclosure safeguard report in a form
similar to that required under section
6103(p)(5), and
(2) biannually (beginning with the second report
submitted under this subsection)--
(A) an independent evaluation of contractor
performance, and
(B) a measurement plan that includes a
comparison of the best practices used by the
private collectors to the collection techniques
used by the Internal Revenue Service and
mechanisms to identify and capture information
on successful collection techniques used by the
contractors that could be adopted by the
Internal Revenue Service.
(k) Cross references.--
(1) For damages for certain unauthorized
collection actions by persons performing
services under a qualified tax collection
contract, see section 7433A.
(2) For application of Taxpayer Assistance
Orders to persons performing services under a
qualified tax collection contract, see section
7811(g).
SEC. 6307. SPECIAL COMPLIANCE PERSONNEL PROGRAM ACCOUNT.
(a) Establishment of a special compliance personnel program
account.--The Secretary shall establish an account within the
Department for carrying out a program consisting of the hiring,
training, and employment of special compliance personnel, and
shall transfer to such account from time to time amounts
retained by the Secretary under section 6306(e)(2).
(b) Restrictions.--The program described in subsection (a)
shall be subject to the following restrictions:
(1) No funds shall be transferred to such account
except as described in subsection (a).
(2) No other funds from any other source shall be
expended for special compliance personnel employed
under such program[, and no funds from such account
shall be expended for the hiring of any personnel other
than special compliance personnel.].
(3) Notwithstanding any other authority, the
Secretary is prohibited from spending funds out of such
account [for any purpose other than for costs under
such program associated with the employment of special
compliance personnel and the retraining and
reassignment of current noncollections personnel as
special compliance personnel, and to reimburse the
Internal Revenue Service or other government agencies
for the cost of administering qualified tax collection
contracts under section 6306.] for other than program
costs.
(c) Reporting.--Not later than March of each year, the
Commissioner of Internal Revenue shall submit a report to the
Committees on Finance and Appropriations of the Senate and the
Committees on Ways and Means and Appropriations of the House of
Representatives consisting of the following:
(1) For the preceding fiscal year, all funds received
in the account established under subsection (a),
administrative and program costs for the program
described in such subsection, the number of special
compliance personnel hired and employed under the
program, and the amount of revenue actually collected
by such personnel.
(2) For the current fiscal year, all actual and
estimated funds received or to be received in the
account, all actual and estimated administrative and
program costs, the number of all actual and estimated
special compliance personnel hired and employed under
the program, and the actual and estimated revenue
actually collected or to be collected by such
personnel.
(3) For the following fiscal year, an estimate of all
funds to be received in the account, all estimated
administrative and program costs, the estimated number
of special compliance personnel hired and employed
under the program, and the estimated revenue to be
collected by such personnel.
(d) Definitions.--For purposes of this section--
(1) Special compliance personnel.--The term ``special
compliance personnel'' means individuals employed by
the Internal Revenue Service as field function
collection officers or in a similar position, or
employed to collect taxes using the automated
collection system or an equivalent replacement system.
(2) Program costs.--The term ``program costs''
means--
(A) total salaries (including locality pay
and bonuses), benefits, and employment taxes
for special compliance personnel employed or
trained under the program described in
subsection (a), [and]
(B) direct overhead costs, salaries,
benefits, and employment taxes relating to
support staff, rental payments, office
equipment and furniture, travel, data
processing services, vehicle costs, utilities,
[telecommunications] communications, software,
technology, postage, printing and reproduction,
supplies and materials, lands and structures,
insurance claims, and indemnities for special
compliance personnel hired and employed under
this section[.], and
(C) reimbursement of the Internal Revenue
Service or other government agencies for the
cost of administering the qualified tax
collection program under section 6306.
For purposes of subparagraph (B), the cost of
management and supervision of special compliance
personnel shall be taken into account as direct
overhead costs to the extent such costs, when included
in total program costs under this paragraph, do not
represent more than 10 percent of such total costs.
* * * * * * *
Subchapter B--RECEIPT OF PAYMENT
* * * * * * *
SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPTABLE MEANS.
(a) Authority to receive.--It shall be lawful for the
Secretary to receive for internal revenue taxes (or in payment
for internal revenue stamps) any commercially acceptable means
that the Secretary deems appropriate to the extent and under
the conditions provided in regulations prescribed by the
Secretary.
(b) Ultimate liability.--If a check, money order, or other
method of payment, including payment by credit card, debit
card, or charge card so received is not duly paid, or is paid
and subsequently charged back to the Secretary, the person by
whom such check, or money order, or other method of payment has
been tendered shall remain liable for the payment of the tax or
for the stamps, and for all legal penalties and additions, to
the same extent as if such check, money order, or other method
of payment had not been tendered.
(c) Liability of banks and others.--If any certified,
treasurer's, or cashier's check (or other guaranteed draft), or
any money order, or any other means of payment that has been
guaranteed by a financial institution (such as a credit card,
debit card, or charge card transaction which has been
guaranteed expressly by a financial institution) so received is
not duly paid, the United States shall, in addition to its
right to exact payment from the party originally indebted
therefor, have a lien for--
(1) the amount of such check (or draft) upon all
assets of the financial institution on which drawn,
(2) the amount of such money order upon all the
assets of the issuer thereof, or
(3) the guaranteed amount of any other transaction
upon all the assets of the institution making such
guarantee,
and such amount shall be paid out of such assets in preference
to any other claims whatsoever against such financial
institution, issuer, or guaranteeing institution, except the
necessary costs and expenses of administration and the
reimbursement of the United States for the amount expended in
the redemption of the circulating notes of such financial
institution.
(d) Payment by other means.--
(1) Authority to prescribe regulations.--The
Secretary shall prescribe such regulations as the
Secretary deems necessary to receive payment by
commercially acceptable means, including regulations
that--
(A) specify which methods of payment by
commercially acceptable means will be
acceptable,
(B) specify when payment by such means will
be considered received,
(C) identify types of nontax matters related
to payment by such means that are to be
resolved by persons ultimately liable for
payment and financial intermediaries, without
the involvement of the Secretary, and
(D) ensure that tax matters will be resolved
by the Secretary, without the involvement of
financial intermediaries.
(2) Authority to enter into contracts.--
Notwithstanding section 3718(f) of title 31, United
States Code, the Secretary is authorized to enter into
contracts to obtain services related to receiving
payment by other means where cost beneficial to the
Government. The Secretary may not pay any fee or
provide any other consideration under any such contract
for the use of credit, debit, or charge cards for the
payment of taxes imposed by subtitle A. The preceding
sentence shall not apply to the extent that the
Secretary ensures that any such fee or other
consideration is fully recouped by the Secretary in the
form of fees paid to the Secretary by persons paying
taxes imposed under subtitle A with credit, debit, or
charge cards pursuant to such contract. Notwithstanding
the preceding sentence, the Secretary shall seek to
minimize the amount of any fee or other consideration
that the Secretary pays under any such contract.
(3) Special provisions for use of credit cards.--If
use of credit cards is accepted as a method of payment
of taxes pursuant to subsection (a)--
(A) a payment of internal revenue taxes (or a
payment for internal revenue stamps) by a
person by use of a credit card shall not be
subject to section 161 of the Truth in Lending
Act (15 U.S.C. 1666), or to any similar
provisions of State law, if the error alleged
by the person is an error relating to the
underlying tax liability, rather than an error
relating to the credit card account such as a
computational error or numerical transposition
in the credit card transaction or an issue as
to whether the person authorized payment by use
of the credit card,
(B) a payment of internal revenue taxes (or a
payment for internal revenue stamps) shall not
be subject to section 170 of the Truth in
Lending Act (15 U.S.C. 1666i), or to any
similar provisions of State law,
(C) a payment of internal revenue taxes (or a
payment for internal revenue stamps) by a
person by use of a debit card shall not be
subject to section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or to any
similar provisions of State law, if the error
alleged by the person is an error relating to
the underlying tax liability, rather than an
error relating to the debit card account such
as a computational error or numerical
transposition in the debit card transaction or
an issue as to whether the person authorized
payment by use of the debit card,
(D) the term ``creditor'' under section
103(g) of the Truth in Lending Act (15 U.S.C.
1602(g)) shall not include the Secretary with
respect to credit card transactions in payment
of internal revenue taxes (or payment for
internal revenue stamps), and
(E) notwithstanding any other provision of
law to the contrary, in the case of payment
made by credit card or debit card transaction
of an amount owed to a person as the result of
the correction of an error under section 161 of
the Truth in Lending Act (15 U.S.C. 1666) or
section 908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693f), the Secretary is authorized
to provide such amount to such person as a
credit to that person's credit card or debit
card account through the applicable credit card
or debit card system.
(e) Confidentiality of information.--
(1) In general.--Except as otherwise authorized by
this subsection, no person may use or disclose any
information relating to credit or debit card
transactions obtained pursuant to section 6103(k)(9)
other than for purposes directly related to the
processing of such transactions, or the billing or
collection of amounts charged or debited pursuant
thereto.
(2) Exceptions.--(A) Debit or credit card issuers or
others acting on behalf of such issuers may also use
and disclose such information for purposes directly
related to servicing an issuer's accounts.
(B) Debit or credit card issuers or others
directly involved in the processing of credit
or debit card transactions or the billing or
collection of amounts charged or debited
thereto may also use and disclose such
information for purposes directly related to--
(i) statistical risk and profitability
assessment;
(ii) transferring receivables, accounts, or
interest therein;
(iii) auditing the account information;
(iv) complying with Federal, State, or local
law; and
(v) properly authorized civil, criminal, or
regulatory investigation by Federal, State, or
local authorities.
(3) Procedures.--Use and disclosure of information
under this paragraph shall be made only to the extent
authorized by written procedures promulgated by the
Secretary.
(4) Cross reference.--For provision providing for
civil damages for violation of paragraph (1), see
section 7431.
* * * * * * *
Subchapter C--LIEN FOR TAXES
* * * * * * *
PART I--DUE PROCESS FOR LIENS
* * * * * * *
SEC. 6320. NOTICE AND OPPORTUNITY FOR HEARING UPON FILING OF NOTICE OF
LIEN.
(a) Requirement of notice.--
(1) In general.--The Secretary shall notify in
writing the person described in section 6321 of the
filing of a notice of lien under section 6323.
(2) Time and method for notice.--The notice required
under paragraph (1) shall be--
(A) given in person;
(B) left at the dwelling or usual place of
business of such person; or
(C) sent by certified or registered mail to
such person's last known address,
not more than 5 business days after the day of the
filing of the notice of lien.
(3) Information included with notice.--The notice
required under paragraph (1) shall include in simple
and nontechnical terms--
(A) the amount of unpaid tax;
(B) the right of the person to request a
hearing during the 30-day period beginning on
the day after the 5-day period described in
paragraph (2);
(C) the administrative appeals available to
the taxpayer with respect to such lien and the
procedures relating to such appeals;
(D) the provisions of this title and
procedures relating to the release of liens on
property; and
(E) the provisions of section 7345 relating
to the certification of seriously delinquent
tax debts and the denial, revocation, or
limitation of passports of individuals with
such debts pursuant to section 32101 of the
FAST Act.
(b) Right to fair hearing.--
(1) In general.--If the person requests a hearing in
writing under subsection (a)(3)(B) and states the
grounds for the requested hearing, such hearing shall
be held by the [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent Office of
Appeals.
(2) One hearing per period.--A person shall be
entitled to only one hearing under this section with
respect to the taxable period to which the unpaid tax
specified in subsection (a)(3)(A) relates.
(3) Impartial officer.--The hearing under this
subsection shall be conducted by an officer or employee
who has had no prior involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the
first hearing under this section or section 6330. A
taxpayer may waive the requirement of this paragraph.
(4) Coordination with section 6330.--To the extent
practicable, a hearing under this section shall be held
in conjunction with a hearing under section 6330.
(c) Conduct of hearing; review; suspensions.--For purposes of
this section, subsections (c), (d) (other than paragraph (3)(B)
thereof), (e), and (g) of section 6330 shall apply.
* * * * * * *
Subchapter D--SEIZURE OF PROPERTY FOR COLLECTION OF TAXES
* * * * * * *
PART I--DUE PROCESS FOR COLLECTIONS
* * * * * * *
SEC. 6330. NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.
(a) Requirement of notice before levy.--
(1) In general.--No levy may be made on any property
or right to property of any person unless the Secretary
has notified such person in writing of their right to a
hearing under this section before such levy is made.
Such notice shall be required only once for the taxable
period to which the unpaid tax specified in paragraph
(3)(A) relates.
(2) Time and method for notice.--The notice required
under paragraph (1) shall be--
(A) given in person;
(B) left at the dwelling or usual place of
business of such person; or
(C) sent by certified or registered mail,
return receipt requested, to such person's last
known address;
not less than 30 days before the day of the first levy
with respect to the amount of the unpaid tax for the
taxable period.
(3) Information included with notice.--The notice
required under paragraph (1) shall include in simple
and nontechnical terms--
(A) the amount of unpaid tax;
(B) the right of the person to request a
hearing during the 30-day period under
paragraph (2); and
(C) the proposed action by the Secretary and
the rights of the person with respect to such
action, including a brief statement which sets
forth--
(i) the provisions of this title
relating to levy and sale of property;
(ii) the procedures applicable to the
levy and sale of property under this
title;
(iii) the administrative appeals
available to the taxpayer with respect
to such levy and sale and the
procedures relating to such appeals;
(iv) the alternatives available to
taxpayers which could prevent levy on
property (including installment
agreements under section 6159); and
(v) the provisions of this title and
procedures relating to redemption of
property and release of liens on
property.
(b) Right to fair hearing.--
(1) In general.--If the person requests a hearing in
writing under subsection (a)(3)(B) and states the
grounds for the requested hearing, such hearing shall
be held by the [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent Office of
Appeals.
(2) One hearing per period.--A person shall be
entitled to only one hearing under this section with
respect to the taxable period to which the unpaid tax
specified in subsection (a)(3)(A) relates.
(3) Impartial officer.--The hearing under this
subsection shall be conducted by an officer or employee
who has had no prior involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the
first hearing under this section or section 6320. A
taxpayer may waive the requirement of this paragraph.
(c) Matters considered at hearing.--In the case of any
hearing conducted under this section--
(1) Requirement of investigation.--The appeals
officer shall at the hearing obtain verification from
the Secretary that the requirements of any applicable
law or administrative procedure have been met.
(2) Issues at hearing.--
(A) In general.--The person may raise at the
hearing any relevant issue relating to the
unpaid tax or the proposed levy, including--
(i) appropriate spousal defenses;
(ii) challenges to the
appropriateness of collection actions;
and
(iii) offers of collection
alternatives, which may include the
posting of a bond, the substitution of
other assets, an installment agreement,
or an offer-in-compromise.
(B) Underlying liability.--The person may
also raise at the hearing challenges to the
existence or amount of the underlying tax
liability for any tax period if the person did
not receive any statutory notice of deficiency
for such tax liability or did not otherwise
have an opportunity to dispute such tax
liability.
(3) Basis for the determination.--The determination
by an appeals officer under this subsection shall take
into consideration--
(A) the verification presented under
paragraph (1);
(B) the issues raised under paragraph (2);
and
(C) whether any proposed collection action
balances the need for the efficient collection
of taxes with the legitimate concern of the
person that any collection action be no more
intrusive than necessary.
(4) Certain issues precluded.--An issue may not be
raised at the hearing if--
(A)(i) the issue was raised and considered at
a previous hearing under section 6320 or in any
other previous administrative or judicial
proceeding; and
(ii) the person seeking to raise the
issue participated meaningfully in such
hearing or proceeding;
(B) the issue meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A); or
(C) a final determination has been made with
respect to such issue in a proceeding brought
under subchapter C of chapter 63.
This paragraph shall not apply to any issue with
respect to which subsection (d)(3)(B) applies.
(d) Proceeding after hearing.--
(1) Petition for review by Tax Court.--The person
may, within 30 days of a determination under this
section, petition the Tax Court for review of such
determination (and the Tax Court shall have
jurisdiction with respect to such matter).
(2) Suspension of running of period for filing
petition in title 11 cases.--In the case of a person
who is prohibited by reason of a case under title 11,
United States Code, from filing a petition under
paragraph (1) with respect to a determination under
this section, the running of the period prescribed by
such subsection for filing such a petition with respect
to such determination shall be suspended for the period
during which the person is so prohibited from filing
such a petition, and for 30 days thereafter.
(3) Jurisdiction retained at irs independent office
of appeals.--The [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent Office of
Appeals shall retain jurisdiction with respect to any
determination made under this section, including
subsequent hearings requested by the person who
requested the original hearing on issues regarding--
(A) collection actions taken or proposed with
respect to such determination; and
(B) after the person has exhausted all
administrative remedies, a change in
circumstances with respect to such person which
affects such determination.
(e) Suspension of collections and statute of limitations.--
(1) In general.--Except as provided in paragraph (2),
if a hearing is requested under subsection (a)(3)(B),
the levy actions which are the subject of the requested
hearing and the running of any period of limitations
under section 6502 (relating to collection after
assessment), section 6531 (relating to criminal
prosecutions), or section 6532 (relating to other
suits) shall be suspended for the period during which
such hearing, and appeals therein, are pending. In no
event shall any such period expire before the 90th day
after the day on which there is a final determination
in such hearing. Notwithstanding the provisions of
section 7421(a), the beginning of a levy or proceeding
during the time the suspension under this paragraph is
in force may be enjoined by a proceeding in the proper
court, including the Tax Court. The Tax Court shall
have no jurisdiction under this paragraph to enjoin any
action or proceeding unless a timely appeal has been
filed under subsection (d)(1) and then only in respect
of the unpaid tax or proposed levy to which the
determination being appealed relates.
(2) Levy upon appeal.--Paragraph (1) shall not apply
to a levy action while an appeal is pending if the
underlying tax liability is not at issue in the appeal
and the court determines that the Secretary has shown
good cause not to suspend the levy.
(f) Exceptions.--If--
(1) the Secretary has made a finding under the last
sentence of section 6331(a) that the collection of tax
is in jeopardy,
(2) the Secretary has served a levy on a State to
collect a Federal tax liability from a State tax
refund,
(3) the Secretary has served a disqualified
employment tax levy, or
(4) the Secretary has served a Federal contractor
levy,
this section shall not apply, except that the taxpayer shall be
given the opportunity for the hearing described in this section
within a reasonable period of time after the levy.
(g) Frivolous requests for hearing, etc..--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.
(h) Definitions related to exceptions.--For purposes of
subsection (f)--
(1) Disqualified employment tax levy.--A disqualified
employment tax levy is any levy in connection with the
collection of employment taxes for any taxable period
if the person subject to the levy (or any predecessor
thereof) requested a hearing under this section with
respect to unpaid employment taxes arising in the most
recent 2-year period before the beginning of the
taxable period with respect to which the levy is
served. For purposes of the preceding sentence, the
term ``employment taxes'' means any taxes under chapter
21, 22, 23, or 24.
(2) Federal contractor levy.--A Federal contractor
levy is any levy if the person whose property is
subject to the levy (or any predecessor thereof) is a
Federal contractor.
PART II--LEVY
* * * * * * *
SEC. 6336. SALE OF PERISHABLE GOODS.
If the Secretary determines that any property seized is
liable to perish [or become greatly reduced in price or value
by keeping, or that such property cannot be kept without great
expense], he shall appraise the value of such property and--
(1) Return to owner.--If the owner of the property
can be readily found, the Secretary shall give him
notice of such determination of the appraised value of
the property. The property shall be returned to the
owner if, within such time as may be specified in the
notice, the owner--
(A) Pays to the Secretary an amount equal to
the appraised value, or
(B) Gives bond in such form, with such
sureties, and in such amount as the Secretary
shall prescribe, to pay the appraised amount at
such time as the Secretary determines to be
appropriate in the circumstances.
(2) Immediate sale.--If the owner does not pay such
amount or furnish such bond in accordance with this
section, the Secretary shall as soon as practicable
make public sale of the property in accordance with
such regulations as may be prescribed by the Secretary.
* * * * * * *
CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS
* * * * * * *
Subchapter A--PROCEDURE IN GENERAL
* * * * * * *
SEC. 6402. AUTHORITY TO MAKE CREDITS OR REFUNDS.
(a) General rule.--In the case of any overpayment, the
Secretary, within the applicable period of limitations, may
credit the amount of such overpayment, including any interest
allowed thereon, against any liability in respect of an
internal revenue tax on the part of the person who made the
overpayment and shall, subject to subsections (c), (d), (e),
and (f), refund any balance to such person.
(b) Credits against estimated tax.--The Secretary is
authorized to prescribe regulations providing for the crediting
against the estimated income tax for any taxable year of the
amount determined by the taxpayer or the Secretary to be an
overpayment of the income tax for a preceding taxable year.
(c) Offset of past-due support against overpayments.--The
amount of any overpayment to be refunded to the person making
the overpayment shall be reduced by the amount of any past-due
support (as defined in section 464(c) of the Social Security
Act) owed by that person of which the Secretary has been
notified by a State in accordance with section 464 of such Act.
The Secretary shall remit the amount by which the overpayment
is so reduced to the State collecting such support and notify
the person making the overpayment that so much of the
overpayment as was necessary to satisfy his obligation for
past-due support has been paid to the State. The Secretary
shall apply a reduction under this subsection first to an
amount certified by the State as past due support under section
464 of the Social Security Act before any other reductions
allowed by law. This subsection shall be applied to an
overpayment prior to its being credited to a person's future
liability for an internal revenue tax.
(d) Collection of debts owed to Federal agencies.--
(1) In general.--Upon receiving notice from any
Federal agency that a named person owes a past-due
legally enforceable debt (other than past-due support
subject to the provisions of subsection (c)) to such
agency, the Secretary shall--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
debt;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such
agency; and
(C) notify the person making such overpayment
that such overpayment has been reduced by an
amount necessary to satisfy such debt.
(2) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection
after such overpayment is reduced pursuant to
subsection (c) with respect to past-due support
collected pursuant to an assignment under section
408(a)(3) of the Social Security Act (42 U.S.C.
608(a)(3)) and before such overpayment is reduced
pursuant to subsections (e) and (f) and before such
overpayment is credited to the future liability for tax
of such person pursuant to subsection (b). If the
Secretary receives notice from a Federal agency or
agencies of more than one debt subject to paragraph (1)
that is owed by a person to such agency or agencies,
any overpayment by such person shall be applied against
such debts in the order in which such debts accrued.
(3) Treatment of OASDI overpayments.--
(A) Requirements.--Paragraph (1) shall apply
with respect to an OASDI overpayment only if
the requirements of paragraphs (1) and (2) of
section 3720A(f) of title 31, United States
Code, are met with respect to such overpayment.
(B) Notice; protection of other persons
filing joint return.--
(i) Notice.--In the case of a debt
consisting of an OASDI overpayment, if
the Secretary determines upon receipt
of the notice referred to in paragraph
(1) that the refund from which the
reduction described in paragraph (1)(A)
would be made is based upon a joint
return, the Secretary shall--
(I) notify each taxpayer
filing such joint return that
the reduction is being made
from a refund based upon such
return, and
(II) include in such
notification a description of
the procedures to be followed,
in the case of a joint return,
to protect the share of the
refund which may be payable to
another person.
(ii) Adjustments based on protections
given to other taxpayers on joint
return.--If the other person filing a
joint return with the person owing the
OASDI overpayment takes appropriate
action to secure his or her proper
share of the refund subject to
reduction under this subsection, the
Secretary shall pay such share to such
other person. The Secretary shall
deduct the amount of such payment from
amounts which are derived from
subsequent reductions in refunds under
this subsection and are payable to a
trust fund referred to in subparagraph
(C).
(C) Deposit of amount of reduction into
appropriate trust fund.--In lieu of payment,
pursuant to paragraph (1)(B), of the amount of
any reduction under this subsection to the
Commissioner of Social Security, the Secretary
shall deposit such amount in the Federal Old-
Age and Survivors Insurance Trust Fund or the
Federal Disability Insurance Trust Fund,
whichever is certified to the Secretary as
appropriate by the Commissioner of Social
Security.
(D) OASDI overpayment.--For purposes of this
paragraph, the term ``OASDI overpayment'' means
any overpayment of benefits made to an
individual under title II of the Social
Security Act.
(e) Collection of past-due, legally enforceable State income
tax obligations.--
(1) In general.--Upon receiving notice from any State
that a named person owes a past-due, legally
enforceable State income tax obligation to such State,
the Secretary shall, under such conditions as may be
prescribed by the Secretary--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
State income tax obligation;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such State
and notify such State of such person's name,
taxpayer identification number, address, and
the amount collected; and
(C) notify the person making such overpayment
that the overpayment has been reduced by an
amount necessary to satisfy a past-due, legally
enforceable State income tax obligation.
If an offset is made pursuant to a joint return, the
notice under subparagraph (B) shall include the names,
taxpayer identification numbers, and addresses of each
person filing such return.
(2) Offset permitted only against residents of State
seeking offset.--Paragraph (1) shall apply to an
overpayment by any person for a taxable year only if
the address shown on the Federal return for such
taxable year of the overpayment is an address within
the State seeking the offset.
(3) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection--
(A) after such overpayment is reduced
pursuant to--
(i) subsection (a) with respect to
any liability for any internal revenue
tax on the part of the person who made
the overpayment;
(ii) subsection (c) with respect to
past-due support; and
(iii) subsection (d) with respect to
any past-due, legally enforceable debt
owed to a Federal agency; and
(B) before such overpayment is credited to
the future liability for any Federal internal
revenue tax of such person pursuant to
subsection (b).
If the Secretary receives notice from one or more
agencies of the State of more than one debt subject to
paragraph (1) or subsection (f) that is owed by such
person to such an agency, any overpayment by such
person shall be applied against such debts in the order
in which such debts accrued.
(4) Notice; consideration of evidence.--No State may
take action under this subsection until such State--
(A) notifies by certified mail with return
receipt the person owing the past-due State
income tax liability that the State proposes to
take action pursuant to this section;
(B) gives such person at least 60 days to
present evidence that all or part of such
liability is not past-due or not legally
enforceable;
(C) considers any evidence presented by such
person and determines that an amount of such
debt is past-due and legally enforceable; and
(D) satisfies such other conditions as the
Secretary may prescribe to ensure that the
determination made under subparagraph (C) is
valid and that the State has made reasonable
efforts to obtain payment of such State income
tax obligation.
(5) Past-due, legally enforceable State income tax
obligation.--For purposes of this subsection, the term
``past-due, legally enforceable State income tax
obligation'' means a debt--
(A)(i) which resulted from--
(I) a judgment rendered by a
court of competent jurisdiction
which has determined an amount
of State income tax to be due;
or
(II) a determination after an
administrative hearing which
has determined an amount of
State income tax to be due; and
(ii) which is no longer subject to
judicial review; or
(B) which resulted from a State income tax
which has been assessed but not collected, the
time for redetermination of which has expired,
and which has not been delinquent for more than
10 years.
For purposes of this paragraph, the term ``State income
tax'' includes any local income tax administered by the
chief tax administration agency of the State.
(6) Regulations.--The Secretary shall issue
regulations prescribing the time and manner in which
States must submit notices of past-due, legally
enforceable State income tax obligations and the
necessary information that must be contained in or
accompany such notices. The regulations shall specify
the types of State income taxes and the minimum amount
of debt to which the reduction procedure established by
paragraph (1) may be applied. The regulations may
require States to pay a fee to reimburse the Secretary
for the cost of applying such procedure. Any fee paid
to the Secretary pursuant to the preceding sentence
shall be used to reimburse appropriations which bore
all or part of the cost of applying such procedure.
(7) Erroneous payment to State.--Any State receiving
notice from the Secretary that an erroneous payment has
been made to such State under paragraph (1) shall pay
promptly to the Secretary, in accordance with such
regulations as the Secretary may prescribe, an amount
equal to the amount of such erroneous payment (without
regard to whether any other amounts payable to such
State under such paragraph have been paid to such
State).
(f) Collection of unemployment compensation debts.--
(1) In general.--Upon receiving notice from any State
that a named person owes a covered unemployment
compensation debt to such State, the Secretary shall,
under such conditions as may be prescribed by the
Secretary--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
covered unemployment compensation debt;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such State
and notify such State of such person's name,
taxpayer identification number, address, and
the amount collected; and
(C) notify the person making such overpayment
that the overpayment has been reduced by an
amount necessary to satisfy a covered
unemployment compensation debt.
If an offset is made pursuant to a joint return, the
notice under subparagraph (C) shall include information
related to the rights of a spouse of a person subject
to such an offset.
(2) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection--
(A) after such overpayment is reduced
pursuant to--
(i) subsection (a) with respect to
any liability for any internal revenue
tax on the part of the person who made
the overpayment;
(ii) subsection (c) with respect to
past-due support; and
(iii) subsection (d) with respect to
any past-due, legally enforceable debt
owed to a Federal agency; and
(B) before such overpayment is credited to
the future liability for any Federal internal
revenue tax of such person pursuant to
subsection (b).
If the Secretary receives notice from a State or States
of more than one debt subject to paragraph (1) or
subsection (e) that is owed by a person to such State
or States, any overpayment by such person shall be
applied against such debts in the order in which such
debts accrued.
(3) Notice; consideration of evidence.--No State may
take action under this subsection until such State--
(A) notifies the person owing the covered
unemployment compensation debt that the State
proposes to take action pursuant to this
section;
(B) provides such person at least 60 days to
present evidence that all or part of such
liability is not legally enforceable or is not
a covered unemployment compensation debt;
(C) considers any evidence presented by such
person and determines that an amount of such
debt is legally enforceable and is a covered
unemployment compensation debt; and
(D) satisfies such other conditions as the
Secretary may prescribe to ensure that the
determination made under subparagraph (C) is
valid and that the State has made reasonable
efforts to obtain payment of such covered
unemployment compensation debt.
(4) Covered unemployment compensation debt.--For
purposes of this subsection, the term ``covered
unemployment compensation debt'' means--
(A) a past-due debt for erroneous payment of
unemployment compensation due to fraud or the
person's failure to report earnings which has
become final under the law of a State certified
by the Secretary of Labor pursuant to section
3304 and which remains uncollected;
(B) contributions due to the unemployment
fund of a State for which the State has
determined the person to be liable and which
remain uncollected; and
(C) any penalties and interest assessed on
such debt.
(5) Regulations.--
(A) In general.--The Secretary may issue
regulations prescribing the time and manner in
which States must submit notices of covered
unemployment compensation debt and the
necessary information that must be contained in
or accompany such notices. The regulations may
specify the minimum amount of debt to which the
reduction procedure established by paragraph
(1) may be applied.
(B) Fee payable to Secretary.--The
regulations may require States to pay a fee to
the Secretary, which may be deducted from
amounts collected, to reimburse the Secretary
for the cost of applying such procedure. Any
fee paid to the Secretary pursuant to the
preceding sentence shall be used to reimburse
appropriations which bore all or part of the
cost of applying such procedure.
(C) Submission of notices through Secretary
of Labor.--The regulations may include a
requirement that States submit notices of
covered unemployment compensation debt to the
Secretary via the Secretary of Labor in
accordance with procedures established by the
Secretary of Labor. Such procedures may require
States to pay a fee to the Secretary of Labor
to reimburse the Secretary of Labor for the
costs of applying this subsection. Any such fee
shall be established in consultation with the
Secretary of the Treasury. Any fee paid to the
Secretary of Labor may be deducted from amounts
collected and shall be used to reimburse the
appropriation account which bore all or part of
the cost of applying this subsection.
(6) Erroneous payment to State.--Any State receiving
notice from the Secretary that an erroneous payment has
been made to such State under paragraph (1) shall pay
promptly to the Secretary, in accordance with such
regulations as the Secretary may prescribe, an amount
equal to the amount of such erroneous payment (without
regard to whether any other amounts payable to such
State under such paragraph have been paid to such
State).
(g) Review of reductions.--No court of the United States
shall have jurisdiction to hear any action, whether legal or
equitable, brought to restrain or review a reduction authorized
by subsection (c), (d), (e), or (f). No such reduction shall be
subject to review by the Secretary in an administrative
proceeding. No action brought against the United States to
recover the amount of any such reduction shall be considered to
be a suit for refund of tax. This subsection does not preclude
any legal, equitable, or administrative action against the
Federal agency or State to which the amount of such reduction
was paid or any such action against the Commissioner of Social
Security which is otherwise available with respect to
recoveries of overpayments of benefits under section 204 of the
Social Security Act.
(h) Federal agency.--For purposes of this section, the term
``Federal agency'' means a department, agency, or
instrumentality of the United States, and includes a Government
corporation (as such term is defined in section 103 of title 5,
United States Code).
(i) Treatment of payments to States.--The Secretary may
provide that, for purposes of determining interest, the payment
of any amount withheld under subsection (c), (e), or (f) to a
State shall be treated as a payment to the person or persons
making the overpayment.
(j) Cross reference.--For procedures relating to agency
notification of the Secretary, see section 3721 of title 31,
United States Code.
(k) Refunds to certain fiduciaries of insolvent members of
affiliated groups.--Notwithstanding any other provision of law,
in the case of an insolvent corporation which is a member of an
affiliated group of corporations filing a consolidated return
for any taxable year and which is subject to a statutory or
court-appointed fiduciary, the Secretary may by regulation
provide that any refund for such taxable year may be paid on
behalf of such insolvent corporation to such fiduciary to the
extent that the Secretary determines that the refund is
attributable to losses or credits of such insolvent
corporation.
(l) Explanation of reason for refund disallowance.--In the
case of a disallowance of a claim for refund, the Secretary
shall provide the taxpayer with an explanation for such
disallowance.
(m) Earliest date for certain refunds.--No credit or refund
of an overpayment for a taxable year shall be made to a
taxpayer before the 15th day of the second month following the
close of such taxable year if a credit is allowed to such
taxpayer under section 24 (by reason of subsection (d) thereof)
or 32 for such taxable year.
(n) Misdirected Direct Deposit Refund.--Not later than the
date which is 6 months after the date of the enactment of the
Taxpayer First Act of 2019, the Secretary shall prescribe
regulations to establish procedures to allow for--
(1) taxpayers to report instances in which a refund
made by the Secretary by electronic funds transfer was
not transferred to the account of the taxpayer;
(2) coordination with financial institutions for the
purpose of--
(A) identifying the accounts to which
transfers described in paragraph (1) were made;
and
(B) recovery of the amounts so transferred;
and
(3) the refund to be delivered to the correct account
of the taxpayer.
* * * * * * *
CHAPTER 66--LIMITATIONS
* * * * * * *
Subchapter A--LIMITATIONS ON ASSESSMENT AND COLLECTION
* * * * * * *
SEC. 6503. SUSPENSION OF RUNNING OF PERIOD OF LIMITATION.
(a) Issuance of statutory notice of deficiency.--
(1) General rule.--The running of the period of
limitations provided in section 6501 or 6502 on the
making of assessments or the collection by levy or a
proceeding in court, in respect of any deficiency as
defined in section 6211 (relating to income, estate,
gift and certain excise taxes), shall (after the
mailing of a notice under section 6212(a)) be suspended
for the period during which the Secretary is prohibited
from making the assessment or from collecting by levy
or a proceeding in court (and in any event, if a
proceeding in respect of the deficiency is placed on
the docket of the Tax Court, until the decision of the
Tax Court becomes final), and for 60 days thereafter.
(2) Corporation joining in consolidated income tax
return.--If a notice under section 6212(a) in respect
of a deficiency in tax imposed by subtitle A for any
taxable year is mailed to a corporation, the suspension
of the running of the period of limitations provided in
paragraph (1) of this subsection shall apply in the
case of corporations with which such corporation made a
consolidated income tax return for such taxable year.
(b) Assets of taxpayer in control or custody of court.--The
period of limitations on collection after assessment prescribed
in section 6502 shall be suspended for the period the assets of
the taxpayer are in the control or custody of the court in any
proceeding before any court of the United States or of any
State or of the District of Columbia, and for 6 months
thereafter.
(c) Taxpayer outside United States.--The running of the
period of limitations on collection after assessment prescribed
in section 6502 shall be suspended for the period during which
the taxpayer is outside the United States if such period of
absence is for a continuous period of at least 6 months. If the
preceding sentence applies and at the time of the taxpayer's
return to the United States the period of limitations on
collection after assessment prescribed in section 6502 would
expire before the expiration of 6 months from the date of his
return, such period shall not expire before the expiration of
such 6 months.
(d) Extensions of time for payment of estate tax.--The
running of the period of limitation for collection of any tax
imposed by chapter 11 shall be suspended for the period of any
extension of time for payment granted under the provisions of
section 6161(a)(2) or (b)(2) or under the provisions of section
6163 or 6166.
(e) Extensions of time for payment of tax attributable to
recoveries of foreign expropriation losses.--The running of the
period of limitations for collection of the tax attributable to
a recovery of a foreign expropriation loss (within the meaning
of section 6167(f)) shall be suspended for the period of any
extension of time for payment under subsection (a) or (b) of
section 6167.
(f) Wrongful seizure of or lien on property of third party.--
(1) Wrongful seizure.--The running of the period
under section 6502 shall be suspended for a period
equal to the period from the date property (including
money) of a third party is wrongfully seized or
received by the Secretary to the date the Secretary
returns property pursuant to section 6343(b) or the
date on which a judgment secured pursuant to section
7426 with respect to such property becomes final, and
for 30 days thereafter. The running of such period
shall be suspended under this paragraph only with
respect to the amount of such assessment equal to the
amount of money or the value of specific property
returned.
(2) Wrongful lien.--In the case of any assessment for
which a lien was made on any property, the running of
the period under section 6502 shall be suspended for a
period equal to the period beginning on the date any
person becomes entitled to a certificate under section
6325(b)(4) with respect to such property and ending on
the date which is 30 days after the earlier of--
(A) the earliest date on which the Secretary
no longer holds any amount as a deposit or bond
provided under section 6325(b)(4) by reason of
such deposit or bond being used to satisfy the
unpaid tax or being refunded or released; or
(B) the date that the judgment secured under
section 7426(b)(5) becomes final.
The running of such period shall be suspended under
this paragraph only with respect to the amount of such
assessment equal to the value of the interest of the
United States in the property plus interest, penalties,
additions to the tax, and additional amounts
attributable thereto.
(g) Suspension pending correction.--The running of the
periods of limitations provided in sections 6501 and 6502 on
the making of assessments or the collection by levy or a
proceeding in court in respect of any tax imposed by chapter 42
or section 507, 4971, or 4975 shall be suspended for any period
described in section 507(g)(2) or during which the Secretary
has extended the time for making correction under section
4963(e).
(h) Cases under title 11 of the United States Code.--The
running of the period of limitations provided in section 6501
or 6502 on the making of assessments or collection shall, in a
case under title 11 of the United States Code, be suspended for
the period during which the Secretary is prohibited by reason
of such case from making the assessment or from collecting
and--
(1) for assessment, 60 days thereafter, and
(2) for collection, 6 months thereafter.
(i) Extension of time for payment of undistributed PFIC
earnings tax liability.--The running of any period of
limitations for collection of any amount of undistributed PFIC
earnings tax liability (as defined in section 1294(b)) shall be
suspended for the period of any extension of time under section
1294 for payment of such amount.
(j) Extension in case of certain summonses.--
(1) In general.--If any designated summons is issued
by the Secretary to a corporation (or to any other
person to whom the corporation has transferred records)
with respect to any return of tax by such corporation
for a taxable year (or other period) for which such
corporation is being examined under the [coordinated
examination program] coordinated industry case program
(or any successor program) of the Internal Revenue
Service, the running of any period of limitations
provided in section 6501 on the assessment of such tax
shall be suspended--
(A) during any judicial enforcement period--
(i) with respect to such summons, or
(ii) with respect to any other
summons which is issued during the 30-
day period which begins on the date on
which such designated summons is issued
and which relates to the same return as
such designated summons, and
(B) if the court in any proceeding referred
to in paragraph (3) requires any compliance
with a summons referred to in subparagraph (A),
during the 120-day period beginning with the
1st day after the close of the suspension under
subparagraph (A).
If subparagraph (B) does not apply, such period shall
in no event expire before the 60th day after the close
of the suspension under subparagraph (A).
(2) Designated summons.--For purposes of this
subsection--
(A) In general.--The term ``designated
summons'' means any summons issued for purposes
of determining the amount of any tax imposed by
this title if--
[(i) the issuance of such summons is
preceded by a review of such issuance
by the regional counsel of the Office
of Chief Counsel for the region in
which the examination of the
corporation is being conducted,]
(i) the issuance of such summons is
preceded by a review and written
approval of such issuance by the
Commissioner of the relevant operating
division of the Internal Revenue
Service and the Chief Counsel which--
(I) states facts clearly
establishing that the Secretary
has made reasonable requests
for the information that is the
subject of the summons, and
(II) is attached to such
summons,
(ii) such summons is issued at least
60 days before the day on which the
period prescribed in section 6501 for
the assessment of such tax expires
(determined with regard to extensions),
and
(iii) such summons clearly states
that it is a designated summons for
purposes of this subsection.
(B) Limitation.--A summons which relates to
any return shall not be treated as a designated
summons if a prior summons which relates to
such return was treated as a designated summons
for purposes of this subsection.
(3) Judicial enforcement period.--For purposes of
this subsection, the term ``judicial enforcement
period'' means, with respect to any summons, the
period--
(A) which begins on the day on which a court
proceeding with respect to such summons is
brought, and
(B) which ends on the day on which there is a
final resolution as to the summoned person's
response to such summons.
(4) Establishment that reasonable requests for
information were made.--In any court proceeding
described in paragraph (3), the Secretary shall
establish that reasonable requests were made for the
information that is the subject of the summons.
(k) Cross references.--For suspension in case of--
(1) Deficiency dividends of a
personal holding company, see section
547(f).
(2) Receiverships, see subchapter B
of chapter 70.
(3) Claims against transferees and
fiduciaries, see chapter 71.
(4) Tax return preparers, see section
6694(c)(3).
(5) Deficiency dividends in the case
of a regulated investment company or a
real estate investment trust, see
section 860(h).
* * * * * * *
CHAPTER 67--INTEREST
* * * * * * *
Subchapter A--INTEREST ON UNDERPAYMENTS
* * * * * * *
SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL
UNDERPAYMENTS, ETC.
(a) Authority to make deposits other than as payment of
tax.--A taxpayer may make a cash deposit with the Secretary
which may be used by the Secretary to pay any tax imposed under
subtitle A or B or chapter 41, 42, 43, or 44 which has not been
assessed at the time of the deposit. Such a deposit shall be
made in such manner as the Secretary shall prescribe.
(b) No interest imposed.--To the extent that such deposit is
used by the Secretary to pay tax, for purposes of section 6601
(relating to interest on underpayments), the tax shall be
treated as paid when the deposit is made.
(c) Return of deposit.--Except in a case where the Secretary
determines that collection of tax is in jeopardy, the Secretary
shall return to the taxpayer any amount of the deposit (to the
extent not used for a payment of tax) which the taxpayer
requests in writing.
(d) Payment of interest.--
(1) In general.--For purposes of section 6611
(relating to interest on overpayments), except as
provided in paragraph (4), a deposit which is returned
to a taxpayer shall be treated as a payment of tax for
any period to the extent (and only to the extent)
attributable to a disputable tax for such period. Under
regulations prescribed by the Secretary, rules similar
to the rules of section 6611(b)(2) shall apply.
(2) Disputable tax.--
(A) In general.--For purposes of this
section, the term ``disputable tax'' means the
amount of tax specified at the time of the
deposit as the taxpayer's reasonable estimate
of the maximum amount of any tax attributable
to disputable items.
(B) Safe harbor based on 30-day letter.--In
the case of a taxpayer who has been issued a
30-day letter, the maximum amount of tax under
subparagraph (A) shall not be less than the
amount of the proposed deficiency specified in
such letter.
(3) Other definitions.--For purposes of paragraph
(2)--
(A) Disputable item.--The term ``disputable
item'' means any item of income, gain, loss,
deduction, or credit if the taxpayer--
(i) has a reasonable basis for its
treatment of such item, and
(ii) reasonably believes that the
Secretary also has a reasonable basis
for disallowing the taxpayer's
treatment of such item.
(B) 30-day letter.--The term ``30-day
letter'' means the first letter of proposed
deficiency which allows the taxpayer an
opportunity for administrative review in the
[Internal Revenue Service Office of Appeals]
Internal Revenue Service Independent Office of
Appeals.
(4) Rate of interest.--The rate of interest under
this subsection shall be the Federal short-term rate
determined under section 6621(b), compounded daily.
(e) Use of deposits.--
(1) Payment of tax.--Except as otherwise provided by
the taxpayer, deposits shall be treated as used for the
payment of tax in the order deposited.
(2) Returns of deposits.--Deposits shall be treated
as returned to the taxpayer on a last-in, first-out
basis.
* * * * * * *
Subchapter C--DETERMINATION OF INTEREST RATE; COMPOUNDING OF INTEREST
* * * * * * *
SEC. 6621. DETERMINATION OF RATE OF INTEREST.
(a) General rule.--
(1) Overpayment rate.--The overpayment rate
established under this section shall be the sum of--
(A) the Federal short-term rate determined
under subsection (b), plus
(B) 3 percentage points (2 percentage points
in the case of a corporation).
To the extent that an overpayment of tax by a
corporation for any taxable period (as defined in
subsection (c)(3), applied by substituting
``overpayment'' for ``underpayment'') exceeds $10,000,
subparagraph (B) shall be applied by substituting ``0.5
percentage point'' for ``2 percentage points''.
(2) Underpayment rate.--The underpayment rate
established under this section shall be the sum of--
(A) the Federal short-term rate determined
under subsection (b), plus
(B) 3 percentage points.
(b) Federal short-term rate.--For purposes of this section--
(1) General rule.--The Secretary shall determine the
Federal short-term rate for the first month in each
calendar quarter.
(2) Period during which rate applies.--
(A) In general.--Except as provided in
subparagraph (B), the Federal short-term rate
determined under paragraph (1) for any month
shall apply during the first calendar quarter
beginning after such month.
(B) Special rule for individual estimated
tax.--In determining the addition to tax under
section 6654 for failure to pay estimated tax
for any taxable year, the Federal short-term
rate which applies during the 3rd month
following such taxable year shall also apply
during the first 15 days of the 4th month
following such taxable year.
(3) Federal short-term rate.--The Federal short-term
rate for any month shall be the Federal short-term rate
determined during such month by the Secretary in
accordance with section 1274(d). Any such rate shall be
rounded to the nearest full percent (or, if a multiple
of 1/2 of 1 percent, such rate shall be increased to
the next highest full percent).
(c) Increase in underpayment rate for large corporate
underpayments.--
(1) In general.--For purposes of determining the
amount of interest payable under section 6601 on any
large corporate underpayment for periods after the
applicable date, paragraph (2) of subsection (a) shall
be applied by substituting ``5 percentage points'' for
``3 percentage points''.
(2) Applicable date.--For purposes of this
subsection--
(A) In general.--The applicable date is the
30th day after the earlier of--
(i) the date on which the 1st letter
of proposed deficiency which allows the
taxpayer an opportunity for
administrative review in the [Internal
Revenue Service Office of Appeals]
Internal Revenue Service Independent
Office of Appeals is sent, or
(ii) the date on which the deficiency
notice under section 6212 is sent.
The preceding sentence shall be applied without
regard to any such letter or notice which is
withdrawn by the Secretary.
(B) Special rules.--
(i) Nondeficiency procedures.--In the
case of any underpayment of any tax
imposed by this title to which the
deficiency procedures do not apply,
subparagraph (A) shall be applied by
taking into account any letter or
notice provided by the Secretary which
notifies the taxpayer of the assessment
or proposed assessment of the tax.
(ii) Exception where amounts paid in
full.--For purposes of subparagraph
(A), a letter or notice shall be
disregarded if, during the 30-day
period beginning on the day on which it
was sent, the taxpayer makes a payment
equal to the amount shown as due in
such letter or notice, as the case may
be.
(iii) Exception for letters or
notices involving small amounts.--For
purposes of this paragraph, any letter
or notice shall be disregarded if the
amount of the deficiency or proposed
deficiency (or the assessment or
proposed assessment) set forth in such
letter or notice is not greater than
$100,000 (determined by not taking into
account any interest, penalties, or
additions to tax).
(3) Large corporate underpayment.--For purposes of
this subsection--
(A) In general.--The term ``large corporate
underpayment'' means any underpayment of a tax
by a C corporation for any taxable period if
the amount of such underpayment for such period
exceeds $100,000.
(B) Taxable period.--For purposes of
subparagraph (A), the term ``taxable period''
means--
(i) in the case of any tax imposed by
subtitle A, the taxable year, or
(ii) in the case of any other tax,
the period to which the underpayment
relates.
(d) Elimination of interest on overlapping periods of tax
overpayments and underpayments.--To the extent that, for any
period, interest is payable under subchapter A and allowable
under subchapter B on equivalent underpayments and overpayments
by the same taxpayer of tax imposed by this title, the net rate
of interest under this section on such amounts shall be zero
for such period.
* * * * * * *
CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
PENALTIES
* * * * * * *
Subchapter A--ADDITIONS TO THE TAX AND ADDITIONAL AMOUNTS
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 6651. FAILURE TO FILE TAX RETURN OR TO PAY TAX.
(a) Addition to the tax.--In case of failure--
(1) to file any return required under authority of
subchapter A of chapter 61 (other than part III
thereof), subchapter A of chapter 51 (relating to
distilled spirits, wines, and beer), or of subchapter A
of chapter 52 (relating to tobacco, cigars, cigarettes,
and cigarette papers and tubes), or of subchapter A of
chapter 53 (relating to machine guns and certain other
firearms), on the date prescribed therefor (determined
with regard to any extension of time for filing),
unless it is shown that such failure is due to
reasonable cause and not due to willful neglect, there
shall be added to the amount required to be shown as
tax on such return 5 percent of the amount of such tax
if the failure is for not more than 1 month, with an
additional 5 percent for each additional month or
fraction thereof during which such failure continues,
not exceeding 25 percent in the aggregate;
(2) to pay the amount shown as tax on any return
specified in paragraph (1) on or before the date
prescribed for payment of such tax (determined with
regard to any extension of time for payment), unless it
is shown that such failure is due to reasonable cause
and not due to willful neglect, there shall be added to
the amount shown as tax on such return 0.5 percent of
the amount of such tax if the failure is for not more
than 1 month, with an additional 0.5 percent for each
additional month or fraction thereof during which such
failure continues, not exceeding 25 percent in the
aggregate; or
(3) to pay any amount in respect of any tax required
to be shown on a return specified in paragraph (1)
which is not so shown (including an assessment made
pursuant to section 6213(b)) within 21 calendar days
from the date of notice and demand therefor (10
business days if the amount for which such notice and
demand is made equals or exceeds $100,000), unless it
is shown that such failure is due to reasonable cause
and not due to willful neglect, there shall be added to
the amount of tax stated in such notice and demand 0.5
percent of the amount of such tax if the failure is for
not more than 1 month, with an additional 0.5 percent
for each additional month or fraction thereof during
which such failure continues, not exceeding 25 percent
in the aggregate.
In the case of a failure to file a return of tax imposed by
chapter 1 within 60 days of the date prescribed for filing of
such return (determined with regard to any extensions of time
for filing), unless it is shown that such failure is due to
reasonable cause and not due to willful neglect, the addition
to tax under paragraph (1) shall not be less than the lesser of
[$205] $330 or 100 percent of the amount required to be shown
as tax on such return.
(b) Penalty imposed on net amount due.--For purposes of--
(1) subsection (a)(1), the amount of tax required to
be shown on the return shall be reduced by the amount
of any part of the tax which is paid on or before the
date prescribed for payment of the tax and by the
amount of any credit against the tax which may be
claimed on the return,
(2) subsection (a)(2), the amount of tax shown on the
return shall, for purposes of computing the addition
for any month, be reduced by the amount of any part of
the tax which is paid on or before the beginning of
such month and by the amount of any credit against the
tax which may be claimed on the return, and
(3) subsection (a)(3), the amount of tax stated in
the notice and demand shall, for the purpose of
computing the addition for any month, be reduced by the
amount of any part of the tax which is paid before the
beginning of such month.
(c) Limitations and special rule.--
(1) Additions under more than one paragraph.--With
respect to any return, the amount of the addition under
paragraph (1) of subsection (a) shall be reduced by the
amount of the addition under paragraph (2) of
subsection (a) for any month (or fraction thereof) to
which an addition to tax applies under both paragraphs
(1) and (2). In any case described in the last sentence
of subsection (a), the amount of the addition under
paragraph (1) of subsection (a) shall not be reduced
under the preceding sentence below the amount provided
in such last sentence.
(2) Amount of tax shown more than amount required to
be shown.--If the amount required to be shown as tax on
a return is less than the amount shown as tax on such
return, subsections (a)(2) and (b)(2) shall be applied
by substituting such lower amount.
(d) Increase in penalty for failure to pay tax in certain
cases.--
(1) In general.--In the case of each month (or
fraction thereof) beginning after the day described in
paragraph (2) of this subsection, paragraphs (2) and
(3) of subsection (a) shall be applied by substituting
``1 percent'' for ``0.5 percent'' each place it
appears.
(2) Description.--For purposes of paragraph (1), the
day described in this paragraph is the earlier of--
(A) the day 10 days after the date on which
notice is given under section 6331(d), or
(B) the day on which notice and demand for
immediate payment is given under the last
sentence of section 6331(a).
(e) Exception for estimated tax.--This section shall not
apply to any failure to pay any estimated tax required to be
paid by section 6654 or 6655.
(f) Increase in penalty for fraudulent failure to file.--If
any failure to file any return is fraudulent, paragraph (1) of
subsection (a) shall be applied--
(1) by substituting ``15 percent'' for ``5 percent''
each place it appears, and
(2) by substituting ``75 percent'' for ``25
percent''.
(g) Treatment of returns prepared by Secretary under section
6020(b).--In the case of any return made by the Secretary under
section 6020(b)--
(1) such return shall be disregarded for purposes of
determining the amount of the addition under paragraph
(1) of subsection (a), but
(2) such return shall be treated as the return filed
by the taxpayer for purposes of determining the amount
of the addition under paragraphs (2) and (3) of
subsection (a).
(h) Limitation on penalty on individual's failure to pay for
months during period of installment agreement.--In the case of
an individual who files a return of tax on or before the due
date for the return (including extensions), paragraphs (2) and
(3) of subsection (a) shall each be applied by substituting
``0.25'' for ``0.5'' each place it appears for purposes of
determining the addition to tax for any month during which an
installment agreement under section 6159 is in effect for the
payment of such tax.
(i) Application to imputed underpayment.--For purposes of
this section, any failure to comply with section
6226(b)(4)(A)(ii) shall be treated as a failure to pay the
amount described in subclause (II) thereof and such amount
shall be treated for purposes of this section as an amount
shown as tax on a return specified in subsection (a)(1).
(j) Adjustment for inflation.--
(1) In general.--In the case of any return required
to be filed in a calendar year beginning after [2014]
2020, the [$205] $330 dollar amount under subsection
(a) shall be increased by an amount equal to such
dollar amount multiplied by the cost-of-living
adjustment determined under section 1(f)(3) for the
calendar year determined by substituting ``calendar
year [2013] 2019'' for ``calendar year 2016'' in
subparagraph (A)(ii) thereof.
(2) Rounding.--If any amount adjusted under paragraph
(1) is not a multiple of $5, such amount shall be
rounded to the next lowest multiple of $5.
Subchapter B--ASSESSABLE PENALTIES
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 6713. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF RETURNS
(a) Imposition of penalty.--If any person who is engaged in
the business of preparing, or providing services in connection
with the preparation of, returns of tax imposed by chapter 1,
or any person who for compensation prepares any such return for
any other person, and who--
(1) discloses any information furnished to him for,
or in connection with, the preparation of any such
return, or
(2) uses any such information for any purpose other
than to prepare, or assist in preparing, any such
return,
shall pay a penalty of $250 for each such disclosure or use,
but the total amount imposed under this subsection on such a
person for any calendar year shall not exceed $10,000.
(b) Enhanced Penalty for Improper Use or Disclosure Relating
to Identity Theft.--
(1) In general.--In the case of a disclosure or use
described in subsection (a) that is made in connection
with a crime relating to the misappropriation of
another person's taxpayer identity (as defined in
section 6103(b)(6)), whether or not such crime involves
any tax filing, subsection (a) shall be applied--
(A) by substituting ``$1,000'' for ``$250'',
and
(B) by substituting ``$50,000'' for
``$10,000''.
(2) Separate application of total penalty
limitation.--The limitation on the total amount of the
penalty under subsection (a) shall be applied
separately with respect to disclosures or uses to which
this subsection applies and to which it does not apply.
[(b)] (c) Exceptions.--The rules of section 7216(b) shall
apply for purposes of this section.
[(c)] (d) Deficiency procedures not to apply.--Subchapter B
of chapter 63 (relating to deficiency procedures for income,
estate, gift, and certain excise taxes) shall not apply in
respect of the assessment or collection of any penalty imposed
by this section.
* * * * * * *
PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REPORTING
REQUIREMENTS
* * * * * * *
SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES
(a) Reasonable cause waiver.--No penalty shall be imposed
under this part with respect to any failure if it is shown that
such failure is due to reasonable cause and not to willful
neglect.
(b) Payment of penalty.--Any penalty imposed by this part
shall be paid on notice and demand by the Secretary and in the
same manner as tax.
(c) Special rule for failure to meet magnetic media
requirements.--No penalty shall be imposed under section 6721
solely by reason of any failure to comply with the requirements
of the regulations prescribed under section 6011(e)(2), except
to the extent that such a failure occurs with respect to more
than [250 information returns (more than 100 information
returns in the case of a partnership having more than 100
partners)] the applicable number (determined under section
6011(e)(5) with respect to the calendar year to which such
returns relate) of information returns or with respect to a
return described in section 6011(e)(4).
(d) Definitions.--For purposes of this part--
(1) Information return.--The term ``information
return'' means--
(A) any statement of the amount of payments
to another person required by--
(i) section 6041(a) or (b) (relating
to certain information at source),
(ii) section 6042(a)(1) (relating to
payments of dividends),
(iii) section 6044(a)(1) (relating to
payments of patronage dividends),
(iv) section 6049(a) (relating to
payments of interest),
(v) section 6050A(a) (relating to
reporting requirements of certain
fishing boat operators),
(vi) section 6050N(a) (relating to
payments of royalties),
(vii) section 6051(d) (relating to
information returns with respect to
income tax withheld),
(viii) section 6050R (relating to
returns relating to certain purchases
of fish), or
(ix) section 110(d) (relating to
qualified lessee construction
allowances for short-term leases),
(B) any return required by--
(i) section 6041A(a) or (b) (relating
to returns of direct sellers),
(ii) section 6043A(a) (relating to
returns relating to taxable mergers and
acquisitions),
(iii) section 6045(a) or (d)
(relating to returns of brokers),
(iv) section 6045B(a) (relating to
returns relating to actions affecting
basis of specified securities),
(v) section 6050H(a) or (h)(1)
(relating to mortgage interest received
in trade or business from individuals),
(vi) section 6050I(a) or (g)(1)
(relating to cash received in trade or
business, etc.),
(vii) section 6050J(a) (relating to
foreclosures and abandonments of
security),
(viii) section 6050K(a) (relating to
exchanges of certain partnership
interests),
(ix) section 6050L(a) (relating to
returns relating to certain
dispositions of donated property),
(x) section 6050P (relating to
returns relating to the cancellation of
indebtedness by certain financial
entities),
(xi) section 6050Q (relating to
certain long-term care benefits),
(xii) section 6050S (relating to
returns relating to payments for
qualified tuition and related
expenses),
(xiii) section 6050T (relating to
returns relating to credit for health
insurance costs of eligible
individuals),
(xiv) section 6052(a) (relating to
reporting payment of wages in the form
of group-life insurance),
(xv) section 6050V (relating to
returns relating to applicable
insurance contracts in which certain
exempt organizations hold interests),
(xvi) section 6053(c)(1) (relating to
reporting with respect to certain
tips),
(xvii) subsection (b) or (e) of
section 1060 (relating to reporting
requirements of transferors and
transferees in certain asset
acquisitions),
(xviii) section 4101(d) (relating to
information reporting with respect to
fuels taxes),
(xix) subparagraph (C) of section
338(h)(10) (relating to information
required to be furnished to the
Secretary in case of elective
recognition of gain or loss),
(xx) section 264(f)(5)(A)(iv)
(relating to reporting with respect to
certain life insurance and annuity
contracts),
(xxi) section 6050U (relating to
charges or payments for qualified long-
term care insurance contracts under
combined arrangements),
(xxii) section 6039(a) (relating to
returns required with respect to
certain options),
(xxiii) section 6050W (relating to
returns to payments made in settlement
of payment card transactions),
(xxiv) section 6055 (relating to
returns relating to information
regarding health insurance coverage),
(xxv) section 6056 (relating to
returns relating to certain employers
required to report on health insurance
coverage), or
(xxvi) section 6050Y (relating to
returns relating to certain life
insurance contract transactions), and
2
(C) any statement of the amount of
payments to another person required to be made
to the Secretary under--
(i) section 408(i) (relating to
reports with respect to individual
retirement accounts or annuities), or
(ii) section 6047(d) (relating to
reports by employers, plan
administrators, etc.), and
(D) any statement required to be filed with
the Secretary under section 6035.
Such term also includes any form, statement, or
schedule required to be filed with the Secretary under
chapter 4 or with respect to any amount from which tax
was required to be deducted and withheld under chapter
3 (or from which tax would be required to be so
deducted and withheld but for an exemption under this
title or any treaty obligation of the United States).
(2) Payee statement.--The term ``payee statement''
means any statement required to be furnished under--
(A) section 6031(b) or (c), 6034A, or 6037(b)
(relating to statements furnished by certain
pass-thru entities),
(B) section 6039(b) (relating to information
required in connection with certain options),
(C) section 6041(d) (relating to information
at source),
(D) section 6041A(e) (relating to returns
regarding payments of remuneration for services
and direct sales),
(E) section 6042(c) (relating to returns
regarding payments of dividends and corporate
earnings and profits),
(F) subsections (b) and (d) of section 6043A
(relating to returns relating to taxable
mergers and acquisitions),
(G) section 6044(e) (relating to returns
regarding payments of patronage dividends),
(H) section 6045(b) or (d) (relating to
returns of brokers),
(I) section 6045A (relating to information
required in connection with transfers of
covered securities to brokers),
(J) subsections (c) and (e) of section 6045B
(relating to returns relating to actions
affecting basis of specified securities),
(K) section 6049(c) (relating to returns
regarding payments of interest),
(L) section 6050A(b) (relating to reporting
requirements of certain fishing boat
operators),
(M) section 6050H(d) or (h)(2) (relating to
returns relating to mortgage interest received
in trade or business from individuals),
(N) section 6050I(e) or paragraph (4) or (5)
of section 6050I(g) (relating to cash received
in trade or business, etc.),
(O) section 6050J(e) (relating to returns
relating to foreclosures and abandonments of
security),
(P) section 6050K(b) (relating to returns
relating to exchanges of certain partnership
interests),
(Q) section 6050L(c) (relating to returns
relating to certain dispositions of donated
property),
(R) section 6050N(b) (relating to returns
regarding payments of royalties),
(S) section 6050P(d) (relating to returns
relating to the cancellation of indebtedness by
certain financial entities),
(T) section 6050Q(b) (relating to certain
long-term care benefits),
(U) section 6050R(c) (relating to returns
relating to certain purchases of fish),
(V) section 6051 (relating to receipts for
employees),
(W) section 6052(b) (relating to returns
regarding payment of wages in the form of
group-term life insurance),
(X) section 6053(b) or (c) (relating to
reports of tips),
(Y) section 6048(b)(1)(B) (relating to
foreign trust reporting requirements),
(Z) section 408(i) (relating to reports with
respect to individual retirement plans) to any
person other than the Secretary with respect to
the amount of payments made to such person,
(AA) section 6047(d) (relating to reports by
plan administrators) to any person other than
the Secretary with respect to the amount of
payments made to such person,
(BB) section 6050S(d) (relating to returns
relating to qualified tuition and related
expenses),
(CC) section 264(f)(5)(A)(iv) (relating to
reporting with respect to certain life
insurance and annuity contracts),
(DD) section 6050T (relating to returns
relating to credit for health insurance costs
of eligible individuals),
(EE) section 6050U (relating to charges or
payments for qualified long-term care insurance
contracts under combined arrangements),
(FF) section 6050W(f) (relating to returns
relating to payments made in settlement of
payment card transactions),
(GG) section 6055(c) (relating to statements
relating to information regarding health
insurance coverage),
(HH) section 6056(c) (relating to statements
relating to certain employers required to
report on health insurance coverage),
(II) section 6035 (other than a statement
described in paragraph (1)(D)), or
(JJ) section 6226(a)(2) (relating to
statements relating to alternative to payment
of imputed underpayment by partnership) or
under any other provision of this title which
provides for the application of rules similar
to such section.
(JJ) subsection (a)(2), (b)(2), or (c)(2)
of section 6050Y (relating to returns relating
to certain life insurance contract
transactions).
Such term also includes any form, statement, or
schedule required to be furnished to the recipient of
any amount from which tax was required to be deducted
and withheld under chapter 3 or 4 (or from which tax
would be required to be so deducted and withheld but
for an exemption under this title or any treaty
obligation of the United States).
(3) Specified information reporting requirement.--The
term ``specified information reporting requirement''
means--
(A) the notice required by section
6050K(c)(1) (relating to requirement that
transferor notify partnership of exchange),
(B) any requirement contained in the
regulations prescribed under section 6109 that
a person--
(i) include his TIN on any return,
statement, or other document (other
than an information return or payee
statement),
(ii) furnish his TIN to another
person, or
(iii) include on any return,
statement, or other document (other
than an information return or payee
statement) made with respect to another
person the TIN of such person,
(C) any requirement contained in the
regulations prescribed under section 215 that a
person--
(i) furnish his TIN to another
person, or
(ii) include on his return the TIN of
another person, and
(D) any requirement under section 6109(h)
that--
(i) a person include on his return
the name, address, and TIN of another
person, or
(ii) a person furnish his TIN to
another person.
(4) Required filing date.--The term ``required filing
date'' means the date prescribed for filing an
information return with the Secretary (determined with
regard to any extension of time for filing).
(e) Special rule for certain partnership returns.--If any
partnership return under section 6031(a) is required under
section 6011(e) to be filed on magnetic media or in other
machine-readable form, for purposes of this part, each schedule
required to be included with such return with respect to each
partner shall be treated as a separate information return.
(f) Special rule for returns of educational institutions
related to higher education tuition and related expenses.--No
penalty shall be imposed under section 6721 or 6722 solely by
reason of failing to provide the TIN of an individual on a
return or statement required by section 6050S(a)(1) if the
eligible educational institution required to make such return
contemporaneously makes a true and accurate certification under
penalty of perjury (and in such form and manner as may be
prescribed by the Secretary) that it has complied with
standards promulgated by the Secretary for obtaining such
individual's TIN.
* * * * * * *
CHAPTER 74--CLOSING AGREEMENTS AND COMPROMISES
* * * * * * *
SEC. 7122. COMPROMISES.
(a) Authorization.--The Secretary may compromise any civil or
criminal case arising under the internal revenue laws prior to
reference to the Department of Justice for prosecution or
defense; and the Attorney General or his delegate may
compromise any such case after reference to the Department of
Justice for prosecution or defense.
(b) Record.--Whenever a compromise is made by the Secretary
in any case, there shall be placed on file in the office of the
Secretary the opinion of the General Counsel for the Department
of the Treasury or his delegate, with his reasons therefor,
with a statement of--
(1) The amount of tax assessed,
(2) The amount of interest, additional amount,
addition to the tax, or assessable penalty, imposed by
law on the person against whom the tax is assessed, and
(3) The amount actually paid in accordance with the
terms of the compromise.
Notwithstanding the foregoing provisions of this subsection, no
such opinion shall be required with respect to the compromise
of any civil case in which the unpaid amount of tax assessed
(including any interest, additional amount, addition to the
tax, or assessable penalty) is less than $50,000. However, such
compromise shall be subject to continuing quality review by the
Secretary.
(c) Rules for submission of offers-in-compromise.--
(1) Partial payment required with submission.--
(A) Lump-sum offers.--
(i) In general.--The submission of
any lump-sum offer-in-compromise shall
be accompanied by the payment of 20
percent of the amount of such offer.
(ii) Lump-sum offer-in-compromise.--
For purposes of this section, the term
``lump-sum offer-in-compromise'' means
any offer of payments made in 5 or
fewer installments.
(B) Periodic payment offers.--
(i) In general.--The submission of
any periodic payment offer-in-
compromise shall be accompanied by the
payment of the amount of the first
proposed installment.
(ii) Failure to make installment
during pendency of offer.--Any failure
to make an installment (other than the
first installment) due under such
offer-in-compromise during the period
such offer is being evaluated by the
Secretary may be treated by the
Secretary as a withdrawal of such
offer-in-compromise.
(2) Rules of application.--
(A) Use of payment.--The application of any
payment made under this subsection to the
assessed tax or other amounts imposed under
this title with respect to such tax may be
specified by the taxpayer.
(B) Application of user fee.--In the case of
any assessed tax or other amounts imposed under
this title with respect to such tax which is
the subject of an offer-in-compromise to which
this subsection applies, such tax or other
amounts shall be reduced by any user fee
imposed under this title with respect to such
offer-in-compromise.
(C) Waiver authority.--The Secretary may
issue regulations waiving any payment required
under paragraph (1) in a manner consistent with
the practices established in accordance with
the requirements under subsection (d)(3).
(3) Exception for low-income taxpayers.--Paragraph
(1), and any user fee otherwise required in connection
with the submission of an offer-in-compromise, shall
not apply to any offer-in-compromise with respect to a
taxpayer who is an individual with adjusted gross
income, as determined for the most recent taxable year
for which such information is available, which does not
exceed 250 percent of the applicable poverty level (as
determined by the Secretary).
(d) Standards for evaluation of offers.--
(1) In general.--The Secretary shall prescribe
guidelines for officers and employees of the Internal
Revenue Service to determine whether an offer-in-
compromise is adequate and should be accepted to
resolve a dispute.
(2) Allowances for basic living expenses.--
(A) In general.--In prescribing guidelines
under paragraph (1), the Secretary shall
develop and publish schedules of national and
local allowances designed to provide that
taxpayers entering into a compromise have an
adequate means to provide for basic living
expenses.
(B) Use of schedules.--The guidelines shall
provide that officers and employees of the
Internal Revenue Service shall determine, on
the basis of the facts and circumstances of
each taxpayer, whether the use of the schedules
published under subparagraph (A) is appropriate
and shall not use the schedules to the extent
such use would result in the taxpayer not
having adequate means to provide for basic
living expenses.
(3) Special rules relating to treatment of offers.--
The guidelines under paragraph (1) shall provide that--
(A) an officer or employee of the Internal
Revenue Service shall not reject an offer-in-
compromise from a low-income taxpayer solely on
the basis of the amount of the offer,
(B) in the case of an offer-in-compromise
which relates only to issues of liability of
the taxpayer--
(i) such offer shall not be rejected
solely because the Secretary is unable
to locate the taxpayer's return or
return information for verification of
such liability; and
(ii) the taxpayer shall not be
required to provide a financial
statement, and
(C) any offer-in-compromise which does not
meet the requirements of subparagraph (A)(i) or
(B)(i), as the case may be, of subsection
(c)(1) may be returned to the taxpayer as
unprocessable.
(e) Administrative review.--The Secretary shall establish
procedures--
(1) for an independent administrative review of any
rejection of a proposed offer-in-compromise or
installment agreement made by a taxpayer under this
section or section 6159 before such rejection is
communicated to the taxpayer; and
(2) which allow a taxpayer to appeal any rejection of
such offer or agreement to the [Internal Revenue
Service Office of Appeals] Internal Revenue Service
Independent Office of Appeals.
(f) Deemed acceptance of offer not rejected within certain
period.--Any offer-in-compromise submitted under this section
shall be deemed to be accepted by the Secretary if such offer
is not rejected by the Secretary before the date which is 24
months after the date of the submission of such offer. For
purposes of the preceding sentence, any period during which any
tax liability which is the subject of such offer-in-compromise
is in dispute in any judicial proceeding shall not be taken
into account in determining the expiration of the 24-month
period.
(g) Frivolous submissions, etc..--Notwithstanding any other
provision of this section, if the Secretary determines that any
portion of an application for an offer-in-compromise or
installment agreement submitted under this section or section
6159 meets the requirement of clause (i) or (ii) of section
6702(b)(2)(A), then the Secretary may treat such portion as if
it were never submitted and such portion shall not be subject
to any further administrative or judicial review.
SEC. 7123. APPEALS DISPUTE RESOLUTION PROCEDURES.
(a) Early referral to appeals procedures.--The Secretary
shall prescribe procedures by which any taxpayer may request
early referral of 1 or more unresolved issues from the
examination or collection division to the [Internal Revenue
Service Office of Appeals] Internal Revenue Service Independent
Office of Appeals.
(b) Alternative dispute resolution procedures.--
(1) Mediation.--The Secretary shall prescribe
procedures under which a taxpayer or the [Internal
Revenue Service Office of Appeals] Internal Revenue
Service Independent Office of Appeals may request non-
binding mediation on any issue unresolved at the
conclusion of--
(A) appeals procedures; or
(B) unsuccessful attempts to enter into a
closing agreement under section 7121 or a
compromise under section 7122.
(2) Arbitration.--The Secretary shall establish a
pilot program under which a taxpayer and the [Internal
Revenue Service Office of Appeals] Internal Revenue
Service Independent Office of Appeals may jointly
request binding arbitration on any issue unresolved at
the conclusion of--
(A) appeals procedures; or
(B) unsuccessful attempts to enter into a
closing agreement under section 7121 or a
compromise under section 7122.
(c) Administrative appeal relating to adverse determination
of tax-exempt status of certain organizations.--
(1) In general.--The Secretary shall prescribe
procedures under which an organization which claims to
be described in section 501(c) may request an
administrative appeal (including a conference relating
to such appeal if requested by the organization) to the
[Internal Revenue Service Office of Appeals] Internal
Revenue Service Independent Office of Appeals of an
adverse determination described in paragraph (2).
(2) Adverse determinations.--For purposes of
paragraph (1), an adverse determination is described in
this paragraph if such determination is adverse to an
organization with respect to--
(A) the initial qualification or continuing
qualification of the organization as exempt
from tax under section 501(a) or as an
organization described in section 170(c)(2),
(B) the initial classification or continuing
classification of the organization as a private
foundation under section 509(a), or
(C) the initial classification or continuing
classification of the organization as a private
operating foundation under section 4942(j)(3).
* * * * * * *
CHAPTER 75--CRIMES, OTHER OFFENSES, AND FORFEITURES
* * * * * * *
Subchapter A--CRIMES
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 7213. UNAUTHORIZED DISCLOSURE OF INFORMATION.
(a) Returns and return information.--
(1) Federal employees and other persons.--It shall be
unlawful for any officer or employee of the United
States or any person described in section 6103(n) (or
an officer or employee of any such person), or any
former officer or employee, willfully to disclose to
any person, except as authorized in this title, any
return or return information (as defined in section
6103(b)). Any violation of this paragraph shall be a
felony punishable upon conviction by a fine in any
amount not exceeding $5,000, or imprisonment of not
more than 5 years, or both, together with the costs of
prosecution, and if such offense is committed by any
officer or employee of the United States, he shall, in
addition to any other punishment, be dismissed from
office or discharged from employment upon conviction
for such offense.
(2) State and other employees.--It shall be unlawful
for any person (not described in paragraph (1))
willfully to disclose to any person, except as
authorized in this title, any return or return
information (as defined in section 6103(b)) acquired by
him or another person under subsection (d), (i)(1)(C),
(3)(B)(i), or (7)(A)(ii), (k)(10), (13), or (14),
(l)(6), (7), (8), (9), (10), (12), (15), (16), (19),
(20), or (21) or (m)(2), (4), (5), (6), or (7) of
section 6103 or under section 6104(c). Any violation of
this paragraph shall be a felony punishable by a fine
in any amount not exceeding $5,000, or imprisonment of
not more than 5 years, or both, together with the costs
of prosecution.
(3) Other persons.--It shall be unlawful for any
person to whom any return or return information (as
defined in section 6103(b)) is disclosed in a manner
unauthorized by this title thereafter willfully to
print or publish in any manner not provided by law any
such return or return information. Any violation of
this paragraph shall be a felony punishable by a fine
in any amount not exceeding $5,000, or imprisonment of
not more than 5 years, or both, together with the costs
of prosecution.
(4) Solicitation.--It shall be unlawful for any
person willfully to offer any item of material value in
exchange for any return or return information (as
defined in section 6103(b)) and to receive as a result
of such solicitation any such return or return
information. Any violation of this paragraph shall be a
felony punishable by a fine in any amount not exceeding
$5,000, or imprisonment of not more than 5 years, or
both, together with the costs of prosecution.
(5) Shareholders.--It shall be unlawful for any
person to whom a return or return information (as
defined in section 6103(b)) is disclosed pursuant to
the provisions of section 6103(e)(1)(D)(iii) willfully
to disclose such return or return information in any
manner not provided by law. Any violation of this
paragraph shall be a felony punishable by a fine in any
amount not to exceed $5,000, or imprisonment of not
more than 5 years, or both, together with the costs of
prosecution.
(b) Disclosure of operations of manufacturer or producer.--
Any officer or employee of the United States who divulges or
makes known in any manner whatever not provided by law to any
person the operations, style of work, or apparatus of any
manufacturer or producer visited by him in the discharge of his
official duties shall be guilty of a misdemeanor and, upon
conviction thereof, shall be fined not more than $1,000, or
imprisoned not more than 1 year, or both, together with the
costs of prosecution; and the offender shall be dismissed from
office or discharged from employment.
(c) Disclosures by certain delegates of Secretary.--All
provisions of law relating to the disclosure of information,
and all provisions of law relating to penalties for
unauthorized disclosure of information, which are applicable in
respect of any function under this title when performed by an
officer or employee of the Treasury Department are likewise
applicable in respect of such function when performed by any
person who is a ``delegate'' within the meaning of section
7701(a)(12)(B).
(d) Disclosure of software.--Any person who willfully
divulges or makes known software (as defined in section
7612(d)(1)) to any person in violation of section 7612 shall be
guilty of a felony and, upon conviction thereof, shall be fined
not more than $5,000, or imprisoned not more than 5 years, or
both, together with the costs of prosecution.
(e) Cross references.--
(1) Penalties for disclosure of information by
preparers of returns.--For penalty for disclosure or
use of information by preparers of returns, see section
7216.
(2) Penalties for disclosure of confidential
information.--For penalties for disclosure of
confidential information by any officer or employee of
the United States or any department or agency thereof,
see 18 U.S.C. 1905.
* * * * * * *
SEC. 7216. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF RETURNS.
(a) General rule.--Any person who is engaged in the business
of preparing, or providing services in connection with the
preparation of, returns of the tax imposed by chapter 1, or any
person who for compensation prepares any such return for any
other person, and who knowingly or recklessly--
(1) discloses any information furnished to him for,
or in connection with, the preparation of any such
return, or
(2) uses any such information for any purpose other
than to prepare, or assist in preparing, any such
return,
shall be guilty of a misdemeanor, and, upon conviction thereof,
shall be fined not more than [$1,000] $1,000 ($100,000 in the
case of a disclosure or use to which section 6713(b) applies),
or imprisoned not more than 1 year, or both, together with the
costs of prosecution.
(b) Exceptions.--
(1) Disclosure.--Subsection (a) shall not apply to a
disclosure of information if such disclosure is made--
(A) pursuant to any other provision of this
title, or
(B) pursuant to an order of a court.
(2) Use.--Subsection (a) shall not apply to the use
of information in the preparation of, or in connection
with the preparation of, State and local tax returns
and declarations of estimated tax of the person to whom
the information relates.
(3) Regulations.--Subsection (a) shall not apply to a
disclosure or use of information which is permitted by
regulations prescribed by the Secretary under this
section. Such regulations shall permit (subject to such
conditions as such regulations shall provide) the
disclosure or use of information for quality or peer
reviews.
* * * * * * *
CHAPTER 76--JUDICIAL PROCEEDINGS
* * * * * * *
Subchapter B--PROCEEDINGS BY TAXPAYERS AND THIRD PARTIES
* * * * * * *
SEC. 7430. AWARDING OF COSTS AND CERTAIN FEES.
(a) In general.--In any administrative or court proceeding
which is brought by or against the United States in connection
with the determination, collection, or refund of any tax,
interest, or penalty under this title, the prevailing party may
be awarded a judgment or a settlement for--
(1) reasonable administrative costs incurred in
connection with such administrative proceeding within
the Internal Revenue Service, and
(2) reasonable litigation costs incurred in
connection with such court proceeding.
(b) Limitations.--
(1) Requirement that administrative remedies be
exhausted.--A judgment for reasonable litigation costs
shall not be awarded under subsection (a) in any court
proceeding unless the court determines that the
prevailing party has exhausted the administrative
remedies available to such party within the Internal
Revenue Service. Any failure to agree to an extension
of the time for the assessment of any tax shall not be
taken into account for purposes of determining whether
the prevailing party meets the requirements of the
preceding sentence.
(2) Only costs allocable to the United States.--An
award under subsection (a) shall be made only for
reasonable litigation and administrative costs which
are allocable to the United States and not to any other
party.
(3) Costs denied where party prevailing protracts
proceedings.--No award for reasonable litigation and
administrative costs may be made under subsection (a)
with respect to any portion of the administrative or
court proceeding during which the prevailing party has
unreasonably protracted such proceeding.
(4) Period for applying to IRS for administrative
costs.--An award may be made under subsection (a) by
the Internal Revenue Service for reasonable
administrative costs only if the prevailing party files
an application with the Internal Revenue Service for
such costs before the 91st day after the date on which
the final decision of the Internal Revenue Service as
to the determination of the tax, interest, or penalty
is mailed to such party.
(c) Definitions.--For purposes of this section--
(1) Reasonable litigation costs.--The term
``reasonable litigation costs'' includes--
(A) reasonable court costs, and
(B) based upon prevailing market rates for
the kind or quality of services furnished--
(i) the reasonable expenses of expert
witnesses in connection with a court
proceeding, except that no expert
witness shall be compensated at a rate
in excess of the highest rate of
compensation for expert witnesses paid
by the United States,
(ii) the reasonable cost of any
study, analysis, engineering report,
test, or project which is found by the
court to be necessary for the
preparation of the party's case, and
(iii) reasonable fees paid or
incurred for the services of attorneys
in connection with the court
proceeding, except that such fees shall
not be in excess of $125 per hour
unless the court determines that a
special factor, such as the limited
availability of qualified attorneys for
such proceeding, the difficulty of the
issues presented in the case, or the
local availability of tax expertise,
justifies a higher rate.
In the case of any calendar year beginning after 1996,
the dollar amount referred to in clause (iii) shall be
increased by an amount equal to such dollar amount
multiplied by the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year, by
substituting ``calendar year 1995'' for ``calendar year
2016'' in subparagraph (A)(ii) thereof. If any dollar
amount after being increased under the preceding
sentence is not a multiple of $10, such dollar amount
shall be rounded to the nearest multiple of $10.
(2) Reasonable administrative costs.--The term
``reasonable administrative costs'' means--
(A) any administrative fees or similar
charges imposed by the Internal Revenue
Service, and
(B) expenses, costs, and fees described in
paragraph (1)(B), except that any determination
made by the court under clause (ii) or (iii)
thereof shall be made by the Internal Revenue
Service in cases where the determination under
paragraph (4)(C) of the awarding of reasonable
administrative costs is made by the Internal
Revenue Service.
Such term shall only include costs incurred on or after
whichever of the following is the earliest: (i) the
date of the receipt by the taxpayer of the notice of
the decision of the [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent Office of
Appeals; (ii) the date of the notice of deficiency; or
(iii) the date on which the first letter of proposed
deficiency which allows the taxpayer an opportunity for
administrative review in the [Internal Revenue Service
Office of Appeals] Internal Revenue Service Independent
Office of Appeals is sent.
(3) Attorneys' fees.--
(A) In general.--For purposes of paragraphs
(1) and (2), fees for the services of an
individual (whether or not an attorney) who is
authorized to practice before the Tax Court or
before the Internal Revenue Service shall be
treated as fees for the services of an
attorney.
(B) Pro bono services.--The court may award
reasonable attorneys' fees under subsection (a)
in excess of the attorneys' fees paid or
incurred if such fees are less than the
reasonable attorneys' fees because an
individual is representing the prevailing party
for no fee or for a fee which (taking into
account all the facts and circumstances) is no
more than a nominal fee. This subparagraph
shall apply only if such award is paid to such
individual or such individual's employer.
(4) Prevailing party.--
(A) In general.--The term ``prevailing
party'' means any party in any proceeding to
which subsection (a) applies (other than the
United States or any creditor of the taxpayer
involved)--
(i) which--
(I) has substantially
prevailed with respect to the
amount in controversy, or
(II) has substantially
prevailed with respect to the
most significant issue or set
of issues presented, and
(ii) which meets the requirements of
the 1st sentence of section
2412(d)(1)(B) of title 28, United
States Code (as in effect on October
22, 1986) except to the extent
differing procedures are established by
rule of court and meets the
requirements of section 2412(d)(2)(B)
of such title 28 (as so in effect).
(B) Exception if United States establishes
that its position was substantially
justified.--
(i) General rule.--A party shall not
be treated as the prevailing party in a
proceeding to which subsection (a)
applies if the United States
establishes that the position of the
United States in the proceeding was
substantially justified.
(ii) Presumption of no justification
if Internal Revenue Service did not
follow certain published guidance.--For
purposes of clause (i), the position of
the United States shall be presumed not
to be substantially justified if the
Internal Revenue Service did not follow
its applicable published guidance in
the administrative proceeding. Such
presumption may be rebutted.
(iii) Effect of losing on
substantially similar issues.--In
determining for purposes of clause (i)
whether the position of the United
States was substantially justified, the
court shall take into account whether
the United States has lost in courts of
appeal for other circuits on
substantially similar issues.
(iv) Applicable published guidance.--
For purposes of clause (ii), the term
``applicable published guidance''
means--
(I) regulations, revenue
rulings, revenue procedures,
information releases, notices,
and announcements, and
(II) any of the following
which are issued to the
taxpayer: private letter
rulings, technical advice
memoranda, and determination
letters.
(C) Determination as to prevailing party.--
Any determination under this paragraph as to
whether a party is a prevailing party shall be
made by agreement of the parties or--
(i) in the case where the final
determination with respect to the tax,
interest, or penalty is made at the
administrative level, by the Internal
Revenue Service, or
(ii) in the case where such final
determination is made by a court, the
court.
(D) Special rules for applying net worth
requirement.--In applying the requirements of
section 2412(d)(2)(B) of title 28, United
States Code, for purposes of subparagraph
(A)(ii) of this paragraph--
(i) the net worth limitation in
clause (i) of such section shall apply
to--
(I) an estate but shall be
determined as of the date of
the decedent's death, and
(II) a trust but shall be
determined as of the last day
of the taxable year involved in
the proceeding, and
(ii) individuals filing a joint
return shall be treated as separate
individuals for purposes of clause (i)
of such section.
(E) Special rules where judgment less than
taxpayer's offer.--
(i) In general.--A party to a court
proceeding meeting the requirements of
subparagraph (A)(ii) shall be treated
as the prevailing party if the
liability of the taxpayer pursuant to
the judgment in the proceeding
(determined without regard to interest)
is equal to or less than the liability
of the taxpayer which would have been
so determined if the United States had
accepted a qualified offer of the party
under subsection (g).
(ii) Exceptions.--This subparagraph
shall not apply to--
(I) any judgment issued
pursuant to a settlement; or
(II) any proceeding in which
the amount of tax liability is
not in issue, including any
declaratory judgment
proceeding, any proceeding to
enforce or quash any summons
issued pursuant to this title,
and any action to restrain
disclosure under section
6110(f).
(iii) Special rules.--If this
subparagraph applies to any court
proceeding--
(I) the determination under
clause (i) shall be made by
reference to the last qualified
offer made with respect to the
tax liability at issue in the
proceeding; and
(II) reasonable
administrative and litigation
costs shall only include costs
incurred on and after the date
of such offer.
(iv) Coordination.--This subparagraph
shall not apply to a party which is a
prevailing party under any other
provision of this paragraph.
(5) Administrative proceedings.--The term
``administrative proceeding'' means any procedure or
other action before the Internal Revenue Service.
(6) Court proceedings.--The term ``court proceeding''
means any civil action brought in a court of the United
States (including the Tax Court and the United States
Court of Federal Claims).
(7) Position of United States.--The term ``position
of the United States'' means--
(A) the position taken by the United States
in a judicial proceeding to which subsection
(a) applies, and
(B) the position taken in an administrative
proceeding to which subsection (a) applies as
of the earlier of--
(i) the date of the receipt by the
taxpayer of the notice of the decision
of the [Internal Revenue Service Office
of Appeals] Internal Revenue Service
Independent Office of Appeals, or
(ii) the date of the notice of
deficiency.
(d) Special rules for payment of costs.--
(1) Reasonable administrative costs.--An award for
reasonable administrative costs shall be payable out of
funds appropriated under section 1304 of title 31,
United States Code.
(2) Reasonable litigation costs.--An award for
reasonable litigation costs shall be payable in the
case of the Tax Court in the same manner as such an
award by a district court.
(e) Multiple actions.--For purposes of this section, in the
case of--
(1) multiple actions which could have been joined or
consolidated, or
(2) a case or cases involving a return or returns of
the same taxpayer (including joint returns of married
individuals) which could have been joined in a single
court proceeding in the same court,
such actions or cases shall be treated as 1 court proceeding
regardless of whether such joinder or consolidation actually
occurs, unless the court in which such action is brought
determines, in its discretion, that it would be inappropriate
to treat such actions or cases as joined or consolidated.
(f) Right of appeal.--
(1) Court proceedings.--An order granting or denying
(in whole or in part) an award for reasonable
litigation or administrative costs under subsection (a)
in a court proceeding, may be incorporated as a part of
the decision or judgment in the court proceeding and
shall be subject to appeal in the same manner as the
decision or judgment.
(2) Administrative proceedings.--A decision granting
or denying (in whole or in part) an award for
reasonable administrative costs under subsection (a) by
the Internal Revenue Service shall be subject to the
filing of a petition for review with the Tax Court
under rules similar to the rules under section 7463
(without regard to the amount in dispute). If the
Secretary sends by certified or registered mail a
notice of such decision to the petitioner, no
proceeding in the Tax Court may be initiated under this
paragraph unless such petition is filed before the 91st
day after the date of such mailing.
(3) Appeal of Tax Court decision.--An order of the
Tax Court disposing of a petition under paragraph (2)
shall be reviewable in the same manner as a decision of
the Tax Court, but only with respect to the matters
determined in such order.
(g) Qualified offer.--For purposes of subsection (c)(4)--
(1) In general.--The term ``qualified offer'' means a
written offer which--
(A) is made by the taxpayer to the United
States during the qualified offer period;
(B) specifies the offered amount of the
taxpayer's liability (determined without regard
to interest);
(C) is designated at the time it is made as a
qualified offer for purposes of this section;
and
(D) remains open during the period beginning
on the date it is made and ending on the
earliest of the date the offer is rejected, the
date the trial begins, or the 90th day after
the date the offer is made.
(2) Qualified offer period.--For purposes of this
subsection, the term ``qualified offer period'' means
the period--
(A) beginning on the date on which the first
letter of proposed deficiency which allows the
taxpayer an opportunity for administrative
review in the [Internal Revenue Service Office
of Appeals] Internal Revenue Service
Independent Office of Appeals is sent, and
(B) ending on the date which is 30 days
before the date the case is first set for
trial.
SEC. 7431. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OR DISCLOSURE OF
RETURNS AND RETURN INFORMATION.
(a) In general.--
(1) Inspection or disclosure by employee of United
States.--If any officer or employee of the United
States knowingly, or by reason of negligence, inspects
or discloses any return or return information with
respect to a taxpayer in violation of any provision of
section 6103, such taxpayer may bring a civil action
for damages against the United States in a district
court of the United States.
(2) Inspection or disclosure by a person who is not
an employee of United States.--If any person who is not
an officer or employee of the United States knowingly,
or by reason of negligence, inspects or discloses any
return or return information with respect to a taxpayer
in violation of any provision of section 6103 or in
violation of section 6104(c), such taxpayer may bring a
civil action for damages against such person in a
district court of the United States.
(b) Exceptions.--No liability shall arise under this section
with respect to any inspection or disclosure--
(1) which results from a good faith, but erroneous,
interpretation of section 6103, or
(2) which is requested by the taxpayer.
(c) Damages.--In any action brought under subsection (a),
upon a finding of liability on the part of the defendant, the
defendant shall be liable to the plaintiff in an amount equal
to the sum of--
(1) the greater of--
(A) $1,000 for each act of unauthorized
inspection or disclosure of a return or return
information with respect to which such
defendant is found liable, or
(B) the sum of--
(i) the actual damages sustained by
the plaintiff as a result of such
unauthorized inspection or disclosure,
plus
(ii) in the case of a willful
inspection or disclosure or an
inspection or disclosure which is the
result of gross negligence, punitive
damages, plus
(2) the costs of the action, plus
(3) in the case of a plaintiff which is described in
section 7430(c)(4)(A)(ii), reasonable attorneys fees,
except that if the defendant is the United States,
reasonable attorneys fees may be awarded only if the
plaintiff is the prevailing party (as determined under
section 7430(c)(4)).
(d) Period for bringing action.--Notwithstanding any other
provision of law, an action to enforce any liability created
under this section may be brought, without regard to the amount
in controversy, at any time within 2 years after the date of
discovery by the plaintiff of the unauthorized inspection or
disclosure.
(e) Notification of unlawful inspection and disclosure.--If
any person is criminally charged by indictment or information
with inspection or disclosure of a taxpayer's return or return
information in violation of--
(1) paragraph (1) or (2) of section 7213(a),
(2) section 7213A(a), or
(3) subparagraph (B) of section 1030(a)(2) of title
18, United States Code,
the Secretary shall notify such taxpayer as soon as practicable
of such inspection or disclosure. The Secretary shall also
notify such taxpayer if the Internal Revenue Service or a
Federal or State agency (upon notice to the Secretary by such
Federal or State agency) proposes an administrative
determination as to disciplinary or adverse action against an
employee arising from the employee's unauthorized inspection or
disclosure of the taxpayer's return or return information. The
notice described in this subsection shall include the date of
the unauthorized inspection or disclosure and the rights of the
taxpayer under such administrative determination.
(f) Definitions.--For purposes of this section, the terms
``inspect'', ``inspection'', ``return'', and ``return
information'' have the respective meanings given such terms by
section 6103(b).
(g) Extension to information obtained under section 3406.--
For purposes of this section--
(1) any information obtained under section 3406
(including information with respect to any payee
certification failure under subsection (d) thereof)
shall be treated as return information, and
(2) any inspection or use of such information other
than for purposes of meeting any requirement under
section 3406 or (subject to the safeguards set forth in
section 6103) for purposes permitted under section 6103
shall be treated as a violation of section 6103.
For purposes of subsection (b), the reference to section 6103
shall be treated as including a reference to section 3406.
(h) Special rule for information obtained under section
6103(k)(9).--For purposes of this section, any reference to
section 6103 shall be treated as including a reference to
section 6311(e).
* * * * * * *
CHAPTER 77--MISCELLANEOUS PROVISIONS
Sec. 7501. Liability for taxes withheld or collected.
* * * * * * *
Sec. 7526. Low-income taxpayer clinics.
Sec. 7526A. Return preparation programs for applicable taxpayers.
Sec. 7527. Advance payment of credit for health insurance costs of
eligible individuals.
Sec. 7528. Internal Revenue Service user fees.
Sec. 7529. Notification of suspected identity theft.
* * * * * * *
SEC. 7522. CONTENT OF TAX DUE, DEFICIENCY, AND OTHER NOTICES.
(a) General rule.--Any notice to which this section applies
shall describe the basis for, and identify the amounts (if any)
of, the tax due, interest, additional amounts, additions to the
tax, and assessable penalties included in such notice. An
inadequate description under the preceding sentence shall not
invalidate such notice.
(b) Notices to which section applies.--This section shall
apply to--
(1) any tax due notice or deficiency notice described
in section 6155, 6212, or 6303,
(2) any notice generated out of any information
return matching program, and
(3) the 1st letter of proposed deficiency which
allows the taxpayer an opportunity for administrative
review in the [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent Office of
Appeals.
* * * * * * *
SEC. 7526. LOW-INCOME TAXPAYER CLINICS.
(a) In general.--The Secretary may, subject to the
availability of appropriated funds, make grants to provide
matching funds for the development, expansion, or continuation
of qualified low-income taxpayer clinics.
(b) Definitions.--For purposes of this section--
(1) Qualified low-income taxpayer clinic.--
(A) In general.--The term ``qualified low-
income taxpayer clinic'' means a clinic that--
(i) does not charge more than a
nominal fee for its services (except
for reimbursement of actual costs
incurred); and
(ii)(I) represents low-income
taxpayers in controversies with the
Internal Revenue Service; or
(II) operates programs to
inform individuals for whom
English is a second language
about their rights and
responsibilities under this
title.
(B) Representation of low-income taxpayers.--
A clinic meets the requirements of subparagraph
(A)(ii)(I) if--
(i) at least 90 percent of the
taxpayers represented by the clinic
have incomes which do not exceed 250
percent of the poverty level, as
determined in accordance with criteria
established by the Director of the
Office of Management and Budget; and
(ii) the amount in controversy for
any taxable year generally does not
exceed the amount specified in section
7463.
(2) Clinic.--The term ``clinic'' includes--
(A) a clinical program at an accredited law,
business, or accounting school in which
students represent low-income taxpayers in
controversies arising under this title; and
(B) an organization described in section
501(c) and exempt from tax under section 501(a)
which satisfies the requirements of paragraph
(1) through representation of taxpayers or
referral of taxpayers to qualified
representatives.
(3) Qualified representative.--The term ``qualified
representative'' means any individual (whether or not
an attorney) who is authorized to practice before the
Internal Revenue Service or the applicable court.
(c) Special rules and limitations.--
(1) Aggregate limitation.--Unless otherwise provided
by specific appropriation, the Secretary shall not
allocate more than $6,000,000 per year (exclusive of
costs of administering the program) to grants under
this section.
(2) Limitation on annual grants to a clinic.--The
aggregate amount of grants which may be made under this
section to a clinic for a year shall not exceed
$100,000.
(3) Multi-year grants.--Upon application of a
qualified low-income taxpayer clinic, the Secretary is
authorized to award a multi-year grant not to exceed 3
years.
(4) Criteria for awards.--In determining whether to
make a grant under this section, the Secretary shall
consider--
(A) the numbers of taxpayers who will be
served by the clinic, including the number of
taxpayers in the geographical area for whom
English is a second language;
(B) the existence of other low-income
taxpayer clinics serving the same population;
(C) the quality of the program offered by the
low-income taxpayer clinic, including the
qualifications of its administrators and
qualified representatives, and its record, if
any, in providing service to low-income
taxpayers; and
(D) alternative funding sources available to
the clinic, including amounts received from
other grants and contributions, and the
endowment and resources of the institution
sponsoring the clinic.
(5) Requirement of matching funds.--A low-income
taxpayer clinic must provide matching funds on a
dollar-for-dollar basis for all grants provided under
this section. Matching funds may include--
(A) the salary (including fringe benefits) of
individuals performing services for the clinic;
and
(B) the cost of equipment used in the clinic.
Indirect expenses, including general overhead of the
institution sponsoring the clinic, shall not be counted
as matching funds.
(6) Provision of information regarding qualified low-
income taxpayer clinics.--Notwithstanding any other
provision of law, officers and employees of the
Department of the Treasury may--
(A) advise taxpayers of the availability of,
and eligibility requirements for receiving,
advice and assistance from one or more specific
qualified low-income taxpayer clinics receiving
funding under this section, and
(B) provide information regarding the
location of, and contact information for, such
clinics.
SEC. 7526A. RETURN PREPARATION PROGRAMS FOR APPLICABLE TAXPAYERS.
(a) Establishment of Volunteer Income Tax Assistance Matching
Grant Program.--The Secretary shall establish a Community
Volunteer Income Tax Assistance Matching Grant Program under
which the Secretary may, subject to the availability of
appropriated funds, make grants to provide matching funds for
the development, expansion, or continuation of qualified return
preparation programs assisting applicable taxpayers and members
of underserved populations.
(b) Use of Funds.--
(1) In general.--Qualified return preparation
programs may use grants received under this section
for--
(A) ordinary and necessary costs associated
with program operation in accordance with cost
principles under the applicable Office of
Management and Budget circular, including--
(i) wages or salaries of persons
coordinating the activities of the
program,
(ii) developing training materials,
conducting training, and performing
quality reviews of the returns prepared
under the program,
(iii) equipment purchases, and
(iv) vehicle-related expenses
associated with remote or rural tax
preparation services,
(B) outreach and educational activities
described in subsection (c)(2)(B), and
(C) services related to financial education
and capability, asset development, and the
establishment of savings accounts in connection
with tax return preparation.
(2) Requirement of matching funds.--A qualified
return preparation program must provide matching funds
on a dollar-for-dollar basis for all grants provided
under this section. Matching funds may include--
(A) the salary (including fringe benefits) of
individuals performing services for the
program,
(B) the cost of equipment used in the
program, and
(C) other ordinary and necessary costs
associated with the program.
Indirect expenses, including general overhead of any
entity administering the program, shall not be counted
as matching funds.
(c) Application.--
(1) In general.--Each applicant for a grant under
this section shall submit an application to the
Secretary at such time, in such manner, and containing
such information as the Secretary may reasonably
require.
(2) Priority.--In awarding grants under this section,
the Secretary shall give priority to applications which
demonstrate--
(A) assistance to applicable taxpayers, with
emphasis on outreach to, and services for, such
taxpayers,
(B) taxpayer outreach and educational
activities relating to eligibility and
availability of income supports available
through this title, including the earned income
tax credit, and
(C) specific outreach and focus on one or
more underserved populations.
(3) Amounts taken into account.--In determining
matching grants under this section, the Secretary shall
only take into account amounts provided by the
qualified return preparation program for expenses
described in subsection (b).
(d) Program Adherence.--
(1) In general.--The Secretary shall establish
procedures for, and shall conduct not less frequently
than once every 5 calendar years during which a
qualified return preparation program is operating under
a grant under this section, periodic site visits--
(A) to ensure the program is carrying out the
purposes of this section, and
(B) to determine whether the program meets
such program adherence standards as the
Secretary shall by regulation or other guidance
prescribe.
(2) Additional requirements for grant recipients not
meeting program adherence standards.--In the case of
any qualified return preparation program which--
(A) is awarded a grant under this section,
and
(B) is subsequently determined--
(i) not to meet the program adherence
standards described in paragraph
(1)(B), or
(ii) not to be otherwise carrying out
the purposes of this section,
such program shall not be eligible for any additional
grants under this section unless such program provides
sufficient documentation of corrective measures
established to address any such deficiencies
determined.
(e) Definitions.--For purposes of this section--
(1) Qualified return preparation program.--The term
``qualified return preparation program'' means any
program--
(A) which provides assistance to individuals,
not less than 90 percent of whom are applicable
taxpayers, in preparing and filing Federal
income tax returns,
(B) which is administered by a qualified
entity,
(C) in which all volunteers who assist in the
preparation of Federal income tax returns meet
the training requirements prescribed by the
Secretary, and
(D) which uses a quality review process which
reviews 100 percent of all returns.
(2) Qualified entity.--
(A) In general.--The term ``qualified
entity'' means any entity which--
(i) is an eligible organization,
(ii) is in compliance with Federal
tax filing and payment requirements,
(iii) is not debarred or suspended
from Federal contracts, grants, or
cooperative agreements, and
(iv) agrees to provide documentation
to substantiate any matching funds
provided pursuant to the grant program
under this section.
(B) Eligible organization.--The term
``eligible organization'' means--
(i) an institution of higher
education which is described in section
102 (other than subsection (a)(1)(C)
thereof) of the Higher Education Act of
1965 (20 U.S.C. 1002), as in effect on
the date of the enactment of this
section, and which has not been
disqualified from participating in a
program under title IV of such Act,
(ii) an organization described in
section 501(c) and exempt from tax
under section 501(a),
(iii) a local government agency,
including--
(I) a county or municipal
government agency, and
(II) an Indian tribe, as
defined in section 4(13) of the
Native American Housing
Assistance and Self-
Determination Act of 1996 (25
U.S.C. 4103(13)), including any
tribally designated housing
entity (as defined in section
4(22) of such Act (25 U.S.C.
4103(22))), tribal subsidiary,
subdivision, or other wholly
owned tribal entity,
(iv) a local, State, regional, or
national coalition (with one lead
organization which meets the
eligibility requirements of clause (i),
(ii), or (iii) acting as the applicant
organization), or
(v) in the case of applicable
taxpayers and members of underserved
populations with respect to which no
organizations described in the
preceding clauses are available--
(I) a State government
agency, or
(II) an office providing
Cooperative Extension services
(as established at the land-
grant colleges and universities
under the Smith-Lever Act of
May 8, 1914).
(3) Applicable taxpayers.--The term ``applicable
taxpayer'' means a taxpayer whose income for the
taxable year does not exceed an amount equal to the
completed phaseout amount under section 32(b) for a
married couple filing a joint return with three or more
qualifying children, as determined in a revenue
procedure or other published guidance.
(4) Underserved population.--The term ``underserved
population'' includes populations of persons with
disabilities, persons with limited English proficiency,
Native Americans, individuals living in rural areas,
members of the Armed Forces and their spouses, and the
elderly.
(f) Special Rules and Limitations.--
(1) Duration of grants.--Upon application of a
qualified return preparation program, the Secretary is
authorized to award a multi-year grant not to exceed 3
years.
(2) Aggregate limitation.--Unless otherwise provided
by specific appropriation, the Secretary shall not
allocate more than $30,000,000 per fiscal year
(exclusive of costs of administering the program) to
grants under this section.
(g) Promotion of Programs.--
(1) In general.--The Secretary shall promote tax
preparation through qualified return preparation
programs through the use of mass communications and
other means.
(2) Provision of information regarding qualified
return preparation programs.--The Secretary may provide
taxpayers information regarding qualified return
preparation programs receiving grants under this
section.
(3) Referrals to low-income taxpayer clinics.--
Qualified return preparation programs receiving a grant
under this section are encouraged, in appropriate
cases, to--
(A) advise taxpayers of the availability of,
and eligibility requirements for receiving,
advice and assistance from qualified low-income
taxpayer clinics receiving funding under
section 7526, and
(B) provide information regarding the
location of, and contact information for, such
clinics.
* * * * * * *
SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.
(a) In General.--If the Secretary determines that there has
been or may have been an unauthorized use of the identity of
any individual, the Secretary shall, without jeopardizing an
investigation relating to tax administration--
(1) as soon as practicable--
(A) notify the individual of such
determination,
(B) provide instructions on how to file a
report with law enforcement regarding the
unauthorized use,
(C) identify any steps to be taken by the
individual to permit law enforcement to access
personal information of the individual during
the investigation,
(D) provide information regarding actions the
individual may take in order to protect the
individual from harm relating to the
unauthorized use, and
(E) offer identity protection measures to the
individual, such as the use of an identity
protection personal identification number, and
(2) at the time the information described in
paragraph (1) is provided (or, if not available at such
time, as soon as practicable thereafter), issue
additional notifications to such individual (or such
individual's designee) regarding--
(A) whether an investigation has been
initiated in regards to such unauthorized use,
(B) whether the investigation substantiated
an unauthorized use of the identity of the
individual, and
(C) whether--
(i) any action has been taken against
a person relating to such unauthorized
use, or
(ii) any referral has been made for
criminal prosecution of such person
and, to the extent such information is
available, whether such person has been
criminally charged by indictment or
information.
(b) Employment-related Identity Theft.--
(1) In general.--For purposes of this section, the
unauthorized use of the identity of an individual
includes the unauthorized use of the identity of the
individual to obtain employment.
(2) Determination of employment-related identity
theft.--For purposes of this section, in making a
determination as to whether there has been or may have
been an unauthorized use of the identity of an
individual to obtain employment, the Secretary shall
review any information--
(A) obtained from a statement described in
section 6051 or an information return relating
to compensation for services rendered other
than as an employee, or
(B) provided to the Internal Revenue Service
by the Social Security Administration regarding
any statement described in section 6051,
which indicates that the social security account number
provided on such statement or information return does
not correspond with the name provided on such statement
or information return or the name on the tax return
reporting the income which is included on such
statement or information return.
* * * * * * *
CHAPTER 78--DISCOVERY OF LIABILITY AND ENFORCEMENT OF TITLE
* * * * * * *
Subchapter A--EXAMINATION AND INSPECTION
* * * * * * *
SEC. 7602. EXAMINATION OF BOOKS AND WITNESSES.
(a) Authority to summon, etc..--For the purpose of
ascertaining the correctness of any return, making a return
where none has been made, determining the liability of any
person for any internal revenue tax or the liability at law or
in equity of any transferee or fiduciary of any person in
respect of any internal revenue tax, or collecting any such
liability, the Secretary is authorized--
(1) To examine any books, papers, records, or other
data which may be relevant or material to such inquiry;
(2) To summon the person liable for tax or required
to perform the act, or any officer or employee of such
person, or any person having possession, custody, or
care of books of account containing entries relating to
the business of the person liable for tax or required
to perform the act, or any other person the Secretary
may deem proper, to appear before the Secretary at a
time and place named in the summons and to produce such
books, papers, records, or other data, and to give such
testimony, under oath, as may be relevant or material
to such inquiry; and
(3) To take such testimony of the person concerned,
under oath, as may be relevant or material to such
inquiry.
(b) Purpose may include inquiry into offense.--The purposes
for which the Secretary may take any action described in
paragraph (1), (2), or (3) of subsection (a) include the
purpose of inquiring into any offense connected with the
administration or enforcement of the internal revenue laws.
(c) Notice of contact of third parties.--
[(1) General notice.--An officer or employee of the
Internal Revenue Service may not contact any person
other than the taxpayer with respect to the
determination or collection of the tax liability of
such taxpayer without providing reasonable notice in
advance to the taxpayer that contacts with persons
other than the taxpayer may be made.]
(1) General notice.--An officer or employee of the
Internal Revenue Service may not contact any person
other than the taxpayer with respect to the
determination or collection of the tax liability of
such taxpayer unless such contact occurs during a
period (not greater than 1 year) which is specified in
a notice which--
(A) informs the taxpayer that contacts with
persons other than the taxpayer are intended to
be made during such period, and
(B) except as otherwise provided by the
Secretary, is provided to the taxpayer not
later than 45 days before the beginning of such
period.
Nothing in the preceding sentence shall prevent the
issuance of notices to the same taxpayer with respect
to the same tax liability with periods specified
therein that, in the aggregate, exceed 1 year. A notice
shall not be issued under this paragraph unless there
is an intent at the time such notice is issued to
contact persons other than the taxpayer during the
period specified in such notice. The preceding sentence
shall not prevent the issuance of a notice if the
requirement of such sentence is met on the basis of the
assumption that the information sought to be obtained
by such contact will not be obtained by other means
before such contact.
(2) Notice of specific contacts.--The Secretary shall
periodically provide to a taxpayer a record of persons
contacted during such period by the Secretary with
respect to the determination or collection of the tax
liability of such taxpayer. Such record shall also be
provided upon request of the taxpayer.
(3) Exceptions.--This subsection shall not apply--
(A) to any contact which the taxpayer has
authorized;
(B) if the Secretary determines for good
cause shown that such notice would jeopardize
collection of any tax or such notice may
involve reprisal against any person; or
(C) with respect to any pending criminal
investigation.
(d) No administrative summons when there is Justice
Department referral.--
(1) Limitation of authority.--No summons may be
issued under this title, and the Secretary may not
begin any action under section 7604 to enforce any
summons, with respect to any person if a Justice
Department referral is in effect with respect to such
person.
(2) Justice Department referral in effect.--For
purposes of this subsection--
(A) In general.--A Justice Department
referral is in effect with respect to any
person if--
(i) the Secretary has recommended to
the Attorney General a grand jury
investigation of, or the criminal
prosecution of, such person for any
offense connected with the
administration or enforcement of the
internal revenue laws, or
(ii) any request is made under
section 6103(h)(3)(B) for the
disclosure of any return or return
information (within the meaning of
section 6103(b)) relating to such
person.
(B) Termination.--A Justice Department
referral shall cease to be in effect with
respect to a person when--
(i) the Attorney General notifies the
Secretary, in writing, that--
(I) he will not prosecute
such person for any offense
connected with the
administration or enforcement
of the internal revenue laws,
(II) he will not authorize a
grand jury investigation of
such person with respect to
such an offense, or
(III) he will discontinue
such a grand jury
investigation,
(ii) a final disposition has been
made of any criminal proceeding
pertaining to the enforcement of the
internal revenue laws which was
instituted by the Attorney General
against such person, or
(iii) the Attorney General notifies
the Secretary, in writing, that he will
not prosecute such person for any
offense connected with the
administration or enforcement of the
internal revenue laws relating to the
request described in subparagraph
(A)(ii).
(3) Taxable years, etc., treated separately.--For
purposes of this subsection, each taxable period (or,
if there is no taxable period, each taxable event) and
each tax imposed by a separate chapter of this title
shall be treated separately.
(e) Limitation on examination on unreported income.--The
Secretary shall not use financial status or economic reality
examination techniques to determine the existence of unreported
income of any taxpayer unless the Secretary has a reasonable
indication that there is a likelihood of such unreported
income.
(f) Limitation on Access of Persons Other Than Internal
Revenue Service Officers and Employees.--The Secretary shall
not, under the authority of section 6103(n), provide any books,
papers, records, or other data obtained pursuant to this
section to any person authorized under section 6103(n), except
when such person requires such information for the sole purpose
of providing expert evaluation and assistance to the Internal
Revenue Service. No person other than an officer or employee of
the Internal Revenue Service or the Office of Chief Counsel
may, on behalf of the Secretary, question a witness under oath
whose testimony was obtained pursuant to this section.
* * * * * * *
SEC. 7609. SPECIAL PROCEDURES FOR THIRD-PARTY SUMMONSES.
(a) Notice.--
(1) In general.--If any summons to which this section
applies requires the giving of testimony on or relating
to, the production of any portion of records made or
kept on or relating to, or the production of any
computer software source code (as defined in
7612(d)(2)) with respect to, any person (other than the
person summoned) who is identified in the summons, then
notice of the summons shall be given to any person so
identified within 3 days of the day on which such
service is made, but no later than the 23rd day before
the day fixed in the summons as the day upon which such
records are to be examined. Such notice shall be
accompanied by a copy of the summons which has been
served and shall contain an explanation of the right
under subsection (b)(2) to bring a proceeding to quash
the summons.
(2) Sufficiency of notice.--Such notice shall be
sufficient if, on or before such third day, such notice
is served in the manner provided in section 7603
(relating to service of summons) upon the person
entitled to notice, or is mailed by certified or
registered mail to the last known address of such
person, or, in the absence of a last known address, is
left with the person summoned. If such notice is
mailed, it shall be sufficient if mailed to the last
known address of the person entitled to notice or, in
the case of notice to the Secretary under section 6903
of the existence of a fiduciary relationship, to the
last known address of the fiduciary of such person,
even if such person or fiduciary is then deceased,
under a legal disability, or no longer in existence.
(3) Nature of summons.--Any summons to which this
subsection applies (and any summons in aid of
collection described in subsection (c)(2)(D)) shall
identify the taxpayer to whom the summons relates or
the other person to whom the records pertain and shall
provide such other information as will enable the
person summoned to locate the records required under
the summons.
(b) Right to intervene; right to proceeding to quash.--
(1) Intervention.--Notwithstanding any other law or
rule of law, any person who is entitled to notice of a
summons under subsection (a) shall have the right to
intervene in any proceeding with respect to the
enforcement of such summons under section 7604.
(2) Proceeding to quash.--
(A) In general.--Notwithstanding any other
law or rule of law, any person who is entitled
to notice of a summons under subsection (a)
shall have the right to begin a proceeding to
quash such summons not later than the 20th day
after the day such notice is given in the
manner provided in subsection (a)(2). In any
such proceeding, the Secretary may seek to
compel compliance with the summons.
(B) Requirement of notice to person summoned
and to Secretary.--If any person begins a
proceeding under subparagraph (A) with respect
to any summons, not later than the close of the
20-day period referred to in subparagraph (A)
such person shall mail by registered or
certified mail a copy of the petition to the
person summoned and to such office as the
Secretary may direct in the notice referred to
in subsection (a)(1).
(C) Intervention; etc..--Notwithstanding any
other law or rule of law, the person summoned
shall have the right to intervene in any
proceeding under subparagraph (A). Such person
shall be bound by the decision in such
proceeding (whether or not the person
intervenes in such proceeding).
(c) Summons to which section applies.--
(1) In general.--Except as provided in paragraph (2),
this section shall apply to any summons issued under
paragraph (2) of section 7602(a) or under section
6420(e)(2), 6421(g)(2), 6427(j)(2), or 7612.
(2) Exceptions.--This section shall not apply to any
summons--
(A) served on the person with respect to
whose liability the summons is issued, or any
officer or employee of such person;
(B) issued to determine whether or not
records of the business transactions or affairs
of an identified person have been made or kept;
(C) issued solely to determine the identity
of any person having a numbered account (or
similar arrangement) with a bank or other
institution described in section 7603(b)(2)(A);
(D) issued in aid of the collection of--
(i) an assessment made or judgment
rendered against the person with
respect to whose liability the summons
is issued; or
(ii) the liability at law or in
equity of any transferee or fiduciary
of any person referred to in clause
(i); or
(E)(i) issued by a criminal investigator of
the Internal Revenue Service in connection with
the investigation of an offense connected with
the administration or enforcement of the
internal revenue laws; and
(ii) served on any person who is not
a third-party recordkeeper (as defined
in section 7603(b)).
(3) John Doe and certain other summonses.--Subsection
(a) shall not apply to any summons described in
subsection (f) or (g).
(4) Records.--For purposes of this section, the term
``records'' includes books, papers, and other data.
(d) Restriction on examination of records.--No examination of
any records required to be produced under a summons as to which
notice is required under subsection (a) may be made--
(1) before the close of the 23rd day after the day
notice with respect to the summons is given in the
manner provided in subsection (a)(2), or
(2) where a proceeding under subsection (b)(2)(A) was
begun within the 20-day period referred to in such
subsection and the requirements of subsection (b)(2)(B)
have been met, except in accordance with an order of
the court having jurisdiction of such proceeding or
with the consent of the person beginning the proceeding
to quash.
(e) Suspension of statute of limitations.--
(1) Subsection (b) action.--If any person takes any
action as provided in subsection (b) and such person is
the person with respect to whose liability the summons
is issued (or is the agent, nominee, or other person
acting under the direction or control of such person),
then the running of any period of limitations under
section 6501 (relating to the assessment and collection
of tax) or under section 6531 (relating to criminal
prosecutions) with respect to such person shall be
suspended for the period during which a proceeding, and
appeals therein, with respect to the enforcement of
such summons is pending.
(2) Suspension after 6 months of service of
summons.--In the absence of the resolution of the
summoned party's response to the summons, the running
of any period of limitations under section 6501 or
under section 6531 with respect to any person with
respect to whose liability the summons is issued (other
than a person taking action as provided in subsection
(b)) shall be suspended for the period--
(A) beginning on the date which is 6 months
after the service of such summons, and
(B) ending with the final resolution of such
response.
(f) Additional requirement in the case of a John Doe
summons.--Any summons described in subsection (c)(1) which does
not identify the person with respect to whose liability the
summons is issued may be served only after a court proceeding
in which the Secretary establishes that--
(1) the summons relates to the investigation of a
particular person or ascertainable group or class of
persons,
(2) there is a reasonable basis for believing that
such person or group or class of persons may fail or
may have failed to comply with any provision of any
internal revenue law, and
(3) the information sought to be obtained from the
examination of the records or testimony (and the
identity of the person or persons with respect to whose
liability the summons is issued) is not readily
available from other sources.
The Secretary shall not issue any summons described in the
preceding sentence unless the information sought to be obtained
is narrowly tailored to information that pertains to the
failure (or potential failure) of the person or group or class
of persons referred to in paragraph (2) to comply with one or
more provisions of the internal revenue law which have been
identified for purposes of such paragraph.
(g) Special exception for certain summonses.--A summons is
described in this subsection if, upon petition by the
Secretary, the court determines, on the basis of the facts and
circumstances alleged, that there is reasonable cause to
believe the giving of notice may lead to attempts to conceal,
destroy, or alter records relevant to the examination, to
prevent the communication of information from other persons
through intimidation, bribery, or collusion, or to flee to
avoid prosecution, testifying, or production of records.
(h) Jurisdiction of district court; etc..--
(1) Jurisdiction.--The United States district court
for the district within which the person to be summoned
resides or is found shall have jurisdiction to hear and
determine any proceeding brought under subsection
(b)(2), (f), or (g). An order denying the petition
shall be deemed a final order which may be appealed.
(2) Special rule for proceedings under subsections
(f) and (g).--The determinations required to be made
under subsections (f) and (g) shall be made ex parte
and shall be made solely on the petition and supporting
affidavits.
(i) Duty of summoned party.--
(1) Recordkeeper must assemble records and be
prepared to produce records.--On receipt of a summons
to which this section applies for the production of
records, the summoned party shall proceed to assemble
the records requested, or such portion thereof as the
Secretary may prescribe, and shall be prepared to
produce the records pursuant to the summons on the day
on which the records are to be examined.
(2) Secretary may give summoned party certificate.--
The Secretary may issue a certificate to the summoned
party that the period prescribed for beginning a
proceeding to quash a summons has expired and that no
such proceeding began within such period, or that the
taxpayer consents to the examination.
(3) Protection for summoned party who discloses.--Any
summoned party, or agent or employee thereof, making a
disclosure of records or testimony pursuant to this
section in good faith reliance on the certificate of
the Secretary or an order of a court requiring
production of records or the giving of such testimony
shall not be liable to any customer or other person for
such disclosure.
(4) Notice of suspension of statute of limitations in
the case of a John Doe summons.--In the case of a
summons described in subsection (f) with respect to
which any period of limitations has been suspended
under subsection (e)(2), the summoned party shall
provide notice of such suspension to any person
described in subsection (f).
(j) Use of summons not required.--Nothing in this section
shall be construed to limit the Secretary's ability to obtain
information, other than by summons, through formal or informal
procedures authorized by sections 7601 and 7602.
* * * * * * *
SEC. 7612. SPECIAL PROCEDURES FOR SUMMONSES FOR COMPUTER SOFTWARE.
(a) General rule.--For purposes of this title--
(1) except as provided in subsection (b), no summons
may be issued under this title, and the Secretary may
not begin any action under section 7604 to enforce any
summons to produce or analyze any tax-related computer
software source code; and
(2) any software and related materials which are
provided to the Secretary under this title shall be
subject to the safeguards under subsection (c).
(b) Circumstances under which computer software source code
may be provided.--
(1) In general.--Subsection (a)(1) shall not apply to
any portion, item, or component of tax-related computer
software source code if--
(A) the Secretary is unable to otherwise
reasonably ascertain the correctness of any
item on a return from--
(i) the taxpayer's books, papers,
records, or other data; or
(ii) the computer software executable
code (and any modifications thereof) to
which such source code relates and any
associated data which, when executed,
produces the output to ascertain the
correctness of the item;
(B) the Secretary identifies with reasonable
specificity the portion, item, or component of
such source code needed to verify the
correctness of such item on the return; and
(C) the Secretary determines that the need
for the portion, item, or component of such
source code with respect to such item outweighs
the risks of unauthorized disclosure of trade
secrets.
(2) Exceptions.--Subsection (a)(1) shall not apply
to--
(A) any inquiry into any offense connected
with the administration or enforcement of the
internal revenue laws;
(B) any tax-related computer software source
code acquired or developed by the taxpayer or a
related person primarily for internal use by
the taxpayer or such person rather than for
commercial distribution;
(C) any communications between the owner of
the tax-related computer software source code
and the taxpayer or related persons; or
(D) any tax-related computer software source
code which is required to be provided or made
available pursuant to any other provision of
this title.
(3) Cooperation required.--For purposes of paragraph
(1), the Secretary shall be treated as meeting the
requirements of subparagraphs (A) and (B) of such
paragraph if--
(A) the Secretary determines that it is not
feasible to determine the correctness of an
item without access to the computer software
executable code and associated data described
in paragraph (1)(A)(ii);
(B) the Secretary makes a formal request to
the taxpayer for such code and data and to the
owner of the computer software source code for
such executable code; and
(C) such code and data is not provided within
180 days of such request.
(4) Right to contest summons.--In any proceeding
brought under section 7604 to enforce a summons issued
under the authority of this subsection, the court
shall, at the request of any party, hold a hearing to
determine whether the applicable requirements of this
subsection have been met.
(c) Safeguards to ensure protection of trade secrets and
other confidential information.--
(1) Entry of protective order.--In any court
proceeding to enforce a summons for any portion of
software, the court may receive evidence and issue any
order necessary to prevent the disclosure of trade
secrets or other confidential information with respect
to such software, including requiring that any
information be placed under seal to be opened only as
directed by the court.
(2) Protection of software.--Notwithstanding any
other provision of this section, and in addition to any
protections ordered pursuant to paragraph (1), in the
case of software that comes into the possession or
control of the Secretary in the course of any
examination with respect to any taxpayer--
(A) the software may be used only in
connection with the examination of such
taxpayer's return, any appeal by the taxpayer
to the [Internal Revenue Service Office of
Appeals] Internal Revenue Service Independent
Office of Appeals, any judicial proceeding (and
any appeals therefrom), and any inquiry into
any offense connected with the administration
or enforcement of the internal revenue laws;
(B) the Secretary shall provide, in advance,
to the taxpayer and the owner of the software a
written list of the names of all individuals
who will analyze or otherwise have access to
the software;
(C) the software shall be maintained in a
secure area or place, and, in the case of
computer software source code, shall not be
removed from the owner's place of business
unless the owner permits, or a court orders,
such removal;
(D) the software may not be copied except as
necessary to perform such analysis, and the
Secretary shall number all copies made and
certify in writing that no other copies have
been (or will be) made;
(E) at the end of the period during which the
software may be used under subparagraph (A)--
(i) the software and all copies
thereof shall be returned to the person
from whom they were obtained and any
copies thereof made under subparagraph
(D) on the hard drive of a machine or
other mass storage device shall be
permanently deleted; and
(ii) the Secretary shall obtain from
any person who analyzes or otherwise
had access to such software a written
certification under penalty of perjury
that all copies and related materials
have been returned and that no copies
were made of them;
(F) the software may not be decompiled or
disassembled;
(G) the Secretary shall provide to the
taxpayer and the owner of any interest in such
software, as the case may be, a written
agreement, between the Secretary and any person
who is not an officer or employee of the United
States and who will analyze or otherwise have
access to such software, which provides that
such person agrees not to--
(i) disclose such software to any
person other than persons to whom such
information could be disclosed for tax
administration purposes under section
6103; or
(ii) participate for 2 years in the
development of software which is
intended for a similar purpose as the
software examined; and
(H) the software shall be treated as return
information for purposes of section 6103.
For purposes of subparagraph (C), the owner shall make
available any necessary equipment or materials for
analysis of computer software source code required to
be conducted on the owner's premises. The owner of any
interest in the software shall be considered a party to
any agreement described in subparagraph (G).
(d) Definitions.--For purposes of this section--
(1) Software.--The term ``software'' includes
computer software source code and computer software
executable code.
(2) Computer software source code.--The term
``computer software source code'' means--
(A) the code written by a programmer using a
programming language which is comprehensible to
appropriately trained persons and is not
capable of directly being used to give
instructions to a computer;
(B) related programmers' notes, design
documents, memoranda, and similar
documentation; and
(C) related customer communications.
(3) Computer software executable code.--The term
``computer software executable code'' means--
(A) any object code, machine code, or other
code readable by a computer when loaded into
its memory and used directly by such computer
to execute instructions; and
(B) any related user manuals.
(4) Owner.--The term ``owner'' shall, with respect to
any software, include the developer of the software.
(5) Related person.--A person shall be treated as
related to another person if such persons are related
persons under section 267 or 707(b).
(6) Tax-related computer software source code.--The
term ``tax-related computer software source code''
means the computer source code for any computer
software program intended for accounting, tax return
preparation or compliance, or tax planning.
Subchapter B--GENERAL POWERS AND DUTIES
* * * * * * *
SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, ETC.
(a) In general.--The Secretary, under regulations prescribed
by the Secretary, is authorized to pay such sums as he deems
necessary for--
(1) detecting underpayments of tax, or
(2) detecting and bringing to trial and punishment
persons guilty of violating the internal revenue laws
or conniving at the same,
in cases where such expenses are not otherwise provided for by
law. Any amount payable under the preceding sentence shall be
paid from the proceeds of amounts collected by reason of the
information provided, and any amount so collected shall be
available for such payments.
(b) Awards to whistleblowers.--
(1) In general.--If the Secretary proceeds with any
administrative or judicial action described in
subsection (a) based on information brought to the
Secretary's attention by an individual, such individual
shall, subject to paragraph (2), receive as an award at
least 15 percent but not more than 30 percent of the
proceeds collected as a result of the action (including
any related actions) or from any settlement in response
to such action (determined without regard to whether
such proceeds are available to the Secretary). The
determination of the amount of such award by the
Whistleblower Office shall depend upon the extent to
which the individual substantially contributed to such
action.
(2) Award in case of less substantial contribution.--
(A) In general.--In the event the action
described in paragraph (1) is one which the
Whistleblower Office determines to be based
principally on disclosures of specific
allegations (other than information provided by
the individual described in paragraph (1))
resulting from a judicial or administrative
hearing, from a governmental report, hearing,
audit, or investigation, or from the news
media, the Whistleblower Office may award such
sums as it considers appropriate, but in no
case more than 10 percent of the proceeds
collected as a result of the action (including
any related actions) or from any settlement in
response to such action (determined without
regard to whether such proceeds are available
to the Secretary), taking into account the
significance of the individual's information
and the role of such individual and any legal
representative of such individual in
contributing to such action.
(B) Nonapplication of paragraph where
individual is original source of information.--
Subparagraph (A) shall not apply if the
information resulting in the initiation of the
action described in paragraph (1) was
originally provided by the individual described
in paragraph (1).
(3) Reduction in or denial of award.--If the
Whistleblower Office determines that the claim for an
award under paragraph (1) or (2) is brought by an
individual who planned and initiated the actions that
led to the underpayment of tax or actions described in
subsection (a)(2), then the Whistleblower Office may
appropriately reduce such award. If such individual is
convicted of criminal conduct arising from the role
described in the preceding sentence, the Whistleblower
Office shall deny any award.
(4) Appeal of award determination.--Any determination
regarding an award under paragraph (1), (2), or (3)
may, within 30 days of such determination, be appealed
to the Tax Court (and the Tax Court shall have
jurisdiction with respect to such matter).
(5) Application of this subsection.--This subsection
shall apply with respect to any action--
(A) against any taxpayer, but in the case of
any individual, only if such individual's gross
income exceeds $200,000 for any taxable year
subject to such action, and
(B) if the proceeds in dispute exceed
$2,000,000.
(6) Additional rules.--
(A) No contract necessary.--No contract with
the Internal Revenue Service is necessary for
any individual to receive an award under this
subsection.
(B) Representation.--Any individual described
in paragraph (1) or (2) may be represented by
counsel.
(C) Submission of information.--No award may
be made under this subsection based on
information submitted to the Secretary unless
such information is submitted under penalty of
perjury.
(c) Proceeds.--For purposes of this section, the term
``proceeds'' includes--
(1) penalties, interest, additions to tax, and
additional amounts provided under the internal revenue
laws, and
(2) any proceeds arising from laws for which the
Internal Revenue Service is authorized to administer,
enforce, or investigate, including--
(A) criminal fines and civil forfeitures, and
(B) violations of reporting requirements.
(d) Civil Action To Protect Against Retaliation Cases.--
(1) Anti-retaliation whistleblower protection for
employees.--No employer, or any officer, employee,
contractor, subcontractor, or agent of such employer,
may discharge, demote, suspend, threaten, harass, or in
any other manner discriminate against an employee in
the terms and conditions of employment (including
through an act in the ordinary course of such
employee's duties) in reprisal for any lawful act done
by the employee--
(A) to provide information, cause information
to be provided, or otherwise assist in an
investigation regarding underpayment of tax or
any conduct which the employee reasonably
believes constitutes a violation of the
internal revenue laws or any provision of
Federal law relating to tax fraud, when the
information or assistance is provided to the
Internal Revenue Service, the Secretary of
Treasury, the Treasury Inspector General for
Tax Administration, the Comptroller General of
the United States, the Department of Justice,
the United States Congress, a person with
supervisory authority over the employee, or any
other person working for the employer who has
the authority to investigate, discover, or
terminate misconduct, or
(B) to testify, participate in, or otherwise
assist in any administrative or judicial action
taken by the Internal Revenue Service relating
to an alleged underpayment of tax or any
violation of the internal revenue laws or any
provision of Federal law relating to tax fraud.
(2) Enforcement action.--
(A) In general.--A person who alleges
discharge or other reprisal by any person in
violation of paragraph (1) may seek relief
under paragraph (3) by--
(i) filing a complaint with the
Secretary of Labor, or
(ii) if the Secretary of Labor has
not issued a final decision within 180
days of the filing of the complaint and
there is no showing that such delay is
due to the bad faith of the claimant,
bringing an action at law or equity for
de novo review in the appropriate
district court of the United States,
which shall have jurisdiction over such
an action without regard to the amount
in controversy.
(B) Procedure.--
(i) In general.--An action under
subparagraph (A)(i) shall be governed
under the rules and procedures set
forth in section 42121(b) of title 49,
United States Code.
(ii) Exception.--Notification made
under section 42121(b)(1) of title 49,
United States Code, shall be made to
the person named in the complaint and
to the employer.
(iii) Burdens of proof.--An action
brought under subparagraph (A)(ii)
shall be governed by the legal burdens
of proof set forth in section 42121(b)
of title 49, United States Code, except
that in applying such section--
(I) ``behavior described in
paragraph (1)'' shall be
substituted for ``behavior
described in paragraphs (1)
through (4) of subsection (a)''
each place it appears in
paragraph (2)(B) thereof, and
(II) ``a violation of
paragraph (1)'' shall be
substituted for ``a violation
of subsection (a)'' each place
it appears.
(iv) Statute of limitations.--A
complaint under subparagraph (A)(i)
shall be filed not later than 180 days
after the date on which the violation
occurs.
(v) Jury trial.--A party to an action
brought under subparagraph (A)(ii)
shall be entitled to trial by jury.
(3) Remedies.--
(A) In general.--An employee prevailing in
any action under paragraph (2)(A) shall be
entitled to all relief necessary to make the
employee whole.
(B) Compensatory damages.--Relief for any
action under subparagraph (A) shall include--
(i) reinstatement with the same
seniority status that the employee
would have had, but for the reprisal,
(ii) the sum of 200 percent of the
amount of back pay and 100 percent of
all lost benefits, with interest, and
(iii) compensation for any special
damages sustained as a result of the
reprisal, including litigation costs,
expert witness fees, and reasonable
attorney fees.
(4) Rights retained by employee.--Nothing in this
section shall be deemed to diminish the rights,
privileges, or remedies of any employee under any
Federal or State law, or under any collective
bargaining agreement.
(5) Nonenforceability of certain provisions waiving
rights and remedies or requiring arbitration of
disputes.--
(A) Waiver of rights and remedies.--The
rights and remedies provided for in this
subsection may not be waived by any agreement,
policy form, or condition of employment,
including by a predispute arbitration
agreement.
(B) Predispute arbitration agreements.--No
predispute arbitration agreement shall be valid
or enforceable, if the agreement requires
arbitration of a dispute arising under this
subsection.
* * * * * * *
CHAPTER 80--GENERAL RULES
* * * * * * *
Subchapter A--APPLICATION OF INTERNAL REVENUE LAWS
Sec. 7801. Authority of Department of the Treasury.
* * * * * * *
Sec. 7812. Streamlined critical pay authority for information technology
positions.
* * * * * * *
SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.
(a) Commissioner of Internal Revenue.--
(1) Appointment.--
(A) In general.--There shall be in the
Department of the Treasury a Commissioner of
Internal Revenue who shall be appointed by the
President, by and with the advice and consent
of the Senate. Such appointment shall be made
from individuals who, among other
qualifications, have a demonstrated ability in
management.
(B) Term.--The term of the Commissioner of
Internal Revenue shall be a 5-year term,
beginning with a term to commence on November
13, 1997. Each subsequent term shall begin on
the day after the date on which the previous
term expires.
(C) Vacancy.--Any individual appointed as
Commissioner of Internal Revenue during a term
as defined in subparagraph (B) shall be
appointed for the remainder of that term.
(D) Removal.--The Commissioner may be removed
at the will of the President.
(E) Reappointment.--The Commissioner may be
appointed to serve more than one term.
(2) Duties.--The Commissioner shall have such duties
and powers as the Secretary may prescribe, including
the power to--
(A) administer, manage, conduct, direct, and
supervise the execution and application of the
internal revenue laws or related statutes and
tax conventions to which the United States is a
party; and
(B) recommend to the President a candidate
for appointment as Chief Counsel for the
Internal Revenue Service when a vacancy occurs,
and recommend to the President the removal of
such Chief Counsel.
If the Secretary determines not to delegate a power
specified in subparagraph (A) or (B), such
determination may not take effect until 30 days after
the Secretary notifies the Committees on Ways and
Means, Government Reform and Oversight, and
Appropriations of the House of Representatives and the
Committees on Finance, Governmental Affairs, and
Appropriations of the Senate.
(3) Execution of duties in accord with taxpayer
rights.--In discharging his duties, the Commissioner
shall ensure that employees of the Internal Revenue
Service are familiar with and act in accord with
taxpayer rights as afforded by other provisions of this
title, including--
(A) the right to be informed,
(B) the right to quality service,
(C) the right to pay no more than the correct
amount of tax,
(D) the right to challenge the position of
the Internal Revenue Service and be heard,
(E) the right to appeal a decision of the
Internal Revenue Service in an independent
forum,
(F) the right to finality,
(G) the right to privacy,
(H) the right to confidentiality,
(I) the right to retain representation, and
(J) the right to a fair and just tax system.
(4) Consultation with Board.--The Commissioner shall
consult with the Oversight Board on all matters set
forth in paragraphs (2) and (3) (other than paragraph
(3)(A)) of section 7802(d).
(b) Chief Counsel for the Internal Revenue Service.--
(1) Appointment.--There shall be in the Department of
the Treasury a Chief Counsel for the Internal Revenue
Service who shall be appointed by the President, by and
with the consent of the Senate.
(2) Duties.--The Chief Counsel shall be the chief law
officer for the Internal Revenue Service and shall
perform such duties as may be prescribed by the
Secretary, including the duty--
(A) to be legal advisor to the Commissioner
and the Commissioner's officers and employees;
(B) to furnish legal opinions for the
preparation and review of rulings and memoranda
of technical advice;
(C) to prepare, review, and assist in the
preparation of proposed legislation, treaties,
regulations, and Executive orders relating to
laws which affect the Internal Revenue Service;
(D) to represent the Commissioner in cases
before the Tax Court; and
(E) to determine which civil actions should
be litigated under the laws relating to the
Internal Revenue Service and prepare
recommendations for the Department of Justice
regarding the commencement of such actions.
If the Secretary determines not to delegate a power
specified in subparagraph (A), (B), (C), (D), or (E),
such determination may not take effect until 30 days
after the Secretary notifies the Committees on Ways and
Means, Government Reform and Oversight, and
Appropriations of the House of Representatives and the
Committees on Finance, Governmental Affairs, and
Appropriations of the Senate.
(3) Persons to whom Chief Counsel reports.--The Chief
Counsel shall report directly to the Commissioner of
Internal Revenue, except that--
(A) the Chief Counsel shall report to both
the Commissioner and the General Counsel for
the Department of the Treasury with respect
to--
(i) legal advice or interpretation of
the tax law not relating solely to tax
policy;
(ii) tax litigation; and
(B) the Chief Counsel shall report to the
General Counsel with respect to legal advice or
interpretation of the tax law relating solely
to tax policy.
If there is any disagreement between the Commissioner
and the General Counsel with respect to any matter
jointly referred to them under subparagraph (A), such
matter shall be submitted to the Secretary or Deputy
Secretary for resolution.
(4) Chief Counsel personnel.--All personnel in the
Office of Chief Counsel shall report to the Chief
Counsel.
(c) Office of the Taxpayer Advocate.--
(1) Establishment.--
(A) In general.--There is established in the
Internal Revenue Service an office to be known
as the ``Office of the Taxpayer Advocate''.
(B) National Taxpayer Advocate.--
(i) In general.--The Office of the
Taxpayer Advocate shall be under the
supervision and direction of an
official to be known as the ``National
Taxpayer Advocate''. The National
Taxpayer Advocate shall report directly
to the Commissioner of Internal Revenue
and shall be entitled to compensation
at the same rate as the highest rate of
basic pay established for the Senior
Executive Service under section 5382 of
title 5, United States Code[, or, if
the Secretary of the Treasury so
determines, at a rate fixed under
section 9503 of such title].
(ii) Appointment.--The National
Taxpayer Advocate shall be appointed by
the Secretary of the Treasury after
consultation with the Commissioner of
Internal Revenue and the Oversight
Board and without regard to the
provisions of title 5, United States
Code, relating to appointments in the
competitive service or the Senior
Executive Service.
(iii) Qualifications.--An individual
appointed under clause (ii) shall
have--
(I) a background in customer
service as well as tax law; and
(II) experience in
representing individual
taxpayers.
(iv) Restriction on employment.--An
individual may be appointed as the
National Taxpayer Advocate only if such
individual was not an officer or
employee of the Internal Revenue
Service during the 2-year period ending
with such appointment and such
individual agrees not to accept any
employment with the Internal Revenue
Service for at least 5 years after
ceasing to be the National Taxpayer
Advocate. Service as an officer or
employee of the Office of the Taxpayer
Advocate shall not be taken into
account in applying this clause.
(2) Functions of office.--
(A) In general.--It shall be the function of
the Office of the Taxpayer Advocate to--
(i) assist taxpayers in resolving
problems with the Internal Revenue
Service;
(ii) identify areas in which
taxpayers have problems in dealings
with the Internal Revenue Service;
(iii) to the extent possible, propose
changes in the administrative practices
of the Internal Revenue Service to
mitigate problems identified under
clause (ii); and
(iv) identify potential legislative
changes which may be appropriate to
mitigate such problems.
(B) Annual reports.--
(i) Objectives.--Not later than June
30 of each calendar year, the National
Taxpayer Advocate shall report to the
Committee on Ways and Means of the
House of Representatives and the
Committee on Finance of the Senate on
the objectives of the Office of the
Taxpayer Advocate for the fiscal year
beginning in such calendar year. Any
such report shall contain full and
substantive analysis, in addition to
statistical information.
(ii) Activities.--Not later than
December 31 of each calendar year, the
National Taxpayer Advocate shall report
to the Committee on Ways and Means of
the House of Representatives and the
Committee on Finance of the Senate on
the activities of the Office of the
Taxpayer Advocate during the fiscal
year ending during such calendar year.
Any such report shall contain full and
substantive analysis, in addition to
statistical information, and shall--
(I) identify the initiatives
the Office of the Taxpayer
Advocate has taken on improving
taxpayer services and Internal
Revenue Service responsiveness;
(II) contain recommendations
received from individuals with
the authority to issue Taxpayer
Assistance Orders under section
7811;
(III) contain a summary of
[at least 20 of the] the 10
most serious problems
encountered by taxpayers,
including a description of the
nature of such problems;
(IV) contain an inventory of
the items described in
subclauses (I), (II), and (III)
for which action has been taken
and the result of such action;
(V) contain an inventory of
the items described in
subclauses (I), (II), and (III)
for which action remains to be
completed and the period during
which each item has remained on
such inventory;
(VI) contain an inventory of
the items described in
subclauses (I), (II), and (III)
for which no action has been
taken, the period during which
each item has remained on such
inventory, the reasons for the
inaction, and identify any
Internal Revenue Service
official who is responsible for
such inaction;
(VII) identify any Taxpayer
Assistance Order which was not
honored by the Internal Revenue
Service in a timely manner, as
specified under section
7811(b);
(VIII) identify any Taxpayer
Advocate Directive which was
not honored by the Internal
Revenue Service in a timely
manner, as specified under
paragraph (5);
[(VIII)] (IX) contain
recommendations for such
administrative and legislative
action as may be appropriate to
resolve problems encountered by
taxpayers;
[(IX)] (X) identify areas of
the tax law that impose
significant compliance burdens
on taxpayers or the Internal
Revenue Service, including
specific recommendations for
remedying these problems;
[(X)] (XI) identify the 10
most litigated issues for each
category of taxpayers,
including recommendations for
mitigating such disputes; [and]
(XII) with respect to any
statistical information
included in such report,
include a statement of whether
such statistical information
was reviewed or provided by the
Secretary under section 6108(d)
and, if so, whether the
Secretary determined such
information to be statistically
valid and based on sound
statistical methodology; and
[(XI)] (XIII) include such
other information as the
National Taxpayer Advocate may
deem advisable.
(iii) Report to be submitted
directly.--Each report required under
this subparagraph shall be provided
directly to the committees described in
clause (i) without any prior review or
comment from the Commissioner, the
Secretary of the Treasury, the
Oversight Board, any other officer or
employee of the Department of the
Treasury, or the Office of Management
and Budget. The preceding sentence
shall not apply with respect to
statistical information provided to the
Secretary for review, or received from
the Secretary, under section 6108(d).
(iv) Coordination with report of
Treasury Inspector General for Tax
Administration.--To the extent that
information required to be reported
under clause (ii) is also required to
be reported under paragraph (1) or (2)
of subsection (d) by the Treasury
Inspector General for Tax
Administration, the National Taxpayer
Advocate shall not contain such
information in the report submitted
under such clause.
(C) Other responsibilities.--The National
Taxpayer Advocate shall--
(i) monitor the coverage and
geographic allocation of local offices
of taxpayer advocates;
(ii) develop guidance to be
distributed to all Internal Revenue
Service officers and employees
outlining the criteria for referral of
taxpayer inquiries to local offices of
taxpayer advocates;
(iii) ensure that the local telephone
number for each local office of the
taxpayer advocate is published and
available to taxpayers served by the
office; and
(iv) in conjunction with the
Commissioner, develop career paths for
local taxpayer advocates choosing to
make a career in the Office of the
Taxpayer Advocate.
(D) Personnel actions.--
(i) In general.--The National
Taxpayer Advocate shall have the
responsibility and authority to--
(I) appoint local taxpayer
advocates and make available at
least 1 such advocate for each
State; and
(II) evaluate and take
personnel actions (including
dismissal) with respect to any
employee of any local office of
a taxpayer advocate described
in subclause (I).
(ii) Consultation.--The National
Taxpayer Advocate may consult with the
appropriate supervisory personnel of
the Internal Revenue Service in
carrying out the National Taxpayer
Advocate's responsibilities under this
subparagraph.
(E) Coordination with treasury inspector
general for tax administration.--Before
beginning any research or study, the National
Taxpayer Advocate shall coordinate with the
Treasury Inspector General for Tax
Administration to ensure that the National
Taxpayer Advocate does not duplicate any action
that the Treasury Inspector General for Tax
Administration has already undertaken or has a
plan to undertake.
(3) Responsibilities of Commissioner.--The
Commissioner shall establish procedures requiring a
formal response to all recommendations submitted to the
Commissioner by the National Taxpayer Advocate within 3
months after submission to the Commissioner.
(4) Operation of local offices.--
(A) In general.--Each local taxpayer
advocate--
(i) shall report to the National
Taxpayer Advocate or delegate thereof;
(ii) may consult with the appropriate
supervisory personnel of the Internal
Revenue Service regarding the daily
operation of the local office of the
taxpayer advocate;
(iii) shall, at the initial meeting
with any taxpayer seeking the
assistance of a local office of the
taxpayer advocate, notify such taxpayer
that the taxpayer advocate offices
operate independently of any other
Internal Revenue Service office and
report directly to Congress through the
National Taxpayer Advocate; and
(iv) may, at the taxpayer advocate's
discretion, not disclose to the
Internal Revenue Service contact with,
or information provided by, such
taxpayer.
(B) Maintenance of independent
communications.--Each local office of the
taxpayer advocate shall maintain a separate
phone, facsimile, and other electronic
communication access, and a separate post
office address.
(5) Taxpayer advocate directives.--In the case of any
Taxpayer Advocate Directive issued by the National
Taxpayer Advocate pursuant to a delegation of authority
from the Commissioner of Internal Revenue--
(A) the Commissioner or a Deputy Commissioner
shall modify, rescind, or ensure compliance
with such directive not later than 90 days
after the issuance of such directive, and
(B) in the case of any directive which is
modified or rescinded by a Deputy Commissioner,
the National Taxpayer Advocate may (not later
than 90 days after such modification or
rescission) appeal to the Commissioner, and the
Commissioner shall (not later than 90 days
after such appeal is made) ensure compliance
with such directive as issued by the National
Taxpayer Advocate or provide the National
Taxpayer Advocate with the reasons for any
modification or rescission made or upheld by
the Commissioner pursuant to such appeal.
(d) Additional duties of the Treasury Inspector General for
Tax Administration.--
(1) Annual reporting.--The Treasury Inspector General
for Tax Administration shall include in one of the
semiannual reports under section 5 of the Inspector
General Act of 1978--
(A) an evaluation of the compliance of the
Internal Revenue Service with--
(i) restrictions under section 1204
of the Internal Revenue Service
Restructuring and Reform Act of 1998 on
the use of enforcement statistics to
evaluate Internal Revenue Service
employees;
(ii) restrictions under section 7521
on directly contacting taxpayers who
have indicated that they prefer their
representatives be contacted;
(iii) required procedures under
section 6320 upon the filing of a
notice of a lien;
(iv) required procedures under
subchapter D of chapter 64 for seizure
of property for collection of taxes,
including required procedures under
section 6330 regarding levies; and
(v) restrictions under section 3707
of the Internal Revenue Service
Restructuring and Reform Act of 1998 on
designation of taxpayers;
(B) a review and a certification of whether
or not the Secretary is complying with the
requirements of section 6103(e)(8) to disclose
information to an individual filing a joint
return on collection activity involving the
other individual filing the return;
(C) information regarding extensions of the
statute of limitations for assessment and
collection of tax under section 6501 and the
provision of notice to taxpayers regarding
requests for such extension;
(D) an evaluation of the adequacy and
security of the technology of the Internal
Revenue Service;
(E) any termination or mitigation under
section 1203 of the Internal Revenue Service
Restructuring and Reform Act of 1998;
(F) information regarding improper denial of
requests for information from the Internal
Revenue Service identified under paragraph
(3)(A); and
(G) information regarding any administrative
or civil actions with respect to violations of
the fair debt collection provisions of section
6304, including--
(i) a summary of such actions
initiated since the date of the last
report; and
(ii) a summary of any judgments or
awards granted as a result of such
actions.
(2) Semiannual reports.--(A) In general.--.--The
Treasury Inspector General for Tax Administration shall
include in each semiannual report under section 5 of
the Inspector General Act of 1978--
(i) the number of taxpayer complaints
during the reporting period;
(ii) the number of employee
misconduct and taxpayer abuse
allegations received by the Internal
Revenue Service or the Inspector
General during the period from
taxpayers, Internal Revenue Service
employees, and other sources;
(iii) a summary of the status of such
complaints and allegations; and
(iv) a summary of the disposition of
such complaints and allegations,
including the outcome of any Department
of Justice action and any monies paid
as a settlement of such complaints and
allegations.
(B) Clauses (iii) and (iv) of subparagraph
(A) shall only apply to complaints and
allegations of serious employee misconduct.
(3) Other responsibilities.--The Treasury Inspector
General for Tax Administration shall--
(A) conduct periodic audits of a
statistically valid sample of the total number
of determinations made by the Internal Revenue
Service to deny written requests to disclose
information to taxpayers on the basis of
section 6103 of this title or section 552(b)(7)
of title 5, United States Code;
(B) establish and maintain a toll-free
telephone number for taxpayers to use to
confidentially register complaints of
misconduct by Internal Revenue Service
employees and incorporate the telephone number
in the statement required by section 6227 of
the Omnibus Taxpayer Bill of Rights (Internal
Revenue Service Publication No. 1); and
(C) not later than December 31, 2010, submit
a written report to Congress on the
implementation of section 6103(k)(10).
(e) Independent Office of Appeals.--
(1) Establishment.--There is established in the
Internal Revenue Service an office to be known as the
``Internal Revenue Service Independent Office of
Appeals''.
(2) Chief of appeals.--
(A) In general.--The Internal Revenue Service
Independent Office of Appeals shall be under
the supervision and direction of an official to
be known as the ``Chief of Appeals''. The Chief
of Appeals shall report directly to the
Commissioner of Internal Revenue and shall be
entitled to compensation at the same rate as
the highest rate of basic pay established for
the Senior Executive Service under section 5382
of title 5, United States Code.
(B) Appointment.--The Chief of Appeals shall
be appointed by the Commissioner of Internal
Revenue without regard to the provisions of
title 5, United States Code, relating to
appointments in the competitive service or the
Senior Executive Service.
(C) Qualifications.--An individual appointed
under subparagraph (B) shall have experience
and expertise in--
(i) administration of, and compliance
with, Federal tax laws,
(ii) a broad range of compliance
cases, and
(iii) management of large service
organizations.
(3) Purposes and duties of office.--It shall be the
function of the Internal Revenue Service Independent
Office of Appeals to resolve Federal tax controversies
without litigation on a basis which--
(A) is fair and impartial to both the
Government and the taxpayer,
(B) promotes a consistent application and
interpretation of, and voluntary compliance
with, the Federal tax laws, and
(C) enhances public confidence in the
integrity and efficiency of the Internal
Revenue Service.
(4) Right of appeal.--The resolution process
described in paragraph (3) shall be generally available
to all taxpayers.
(5) Limitation on designation of cases as not
eligible for referral to independent office of
appeals.--
(A) In general.--If any taxpayer which is in
receipt of a notice of deficiency authorized
under section 6212 requests referral to the
Internal Revenue Service Independent Office of
Appeals and such request is denied, the
Commissioner of Internal Revenue shall provide
such taxpayer a written notice which--
(i) provides a detailed description
of the facts involved, the basis for
the decision to deny the request, and a
detailed explanation of how the basis
of such decision applies to such facts,
and
(ii) describes the procedures
prescribed under subparagraph (C) for
protesting the decision to deny the
request.
(B) Report to congress.--The Commissioner of
Internal Revenue shall submit a written report
to Congress on an annual basis which includes
the number of requests described in
subparagraph (A) which were denied and the
reasons (described by category) that such
requests were denied.
(C) Procedures for protesting denial of
request.--The Commissioner of Internal Revenue
shall prescribe procedures for protesting to
the Commissioner of Internal Revenue a denial
of a request described in subparagraph (A).
(D) Not applicable to frivolous positions.--
This paragraph shall not apply to a request for
referral to the Internal Revenue Service
Independent Office of Appeals which is denied
on the basis that the issue involved is a
frivolous position (within the meaning of
section 6702(c)).
(6) Staff.--
(A) In general.--All personnel in the
Internal Revenue Service Independent Office of
Appeals shall report to the Chief of Appeals.
(B) Access to staff of office of the chief
counsel.--The Chief of Appeals shall have
authority to obtain legal assistance and advice
from the staff of the Office of the Chief
Counsel. The Chief Counsel shall ensure, to the
extent practicable, that such assistance and
advice is provided by staff of the Office of
the Chief Counsel who were not involved in the
case with respect to which such assistance and
advice is sought and who are not involved in
preparing such case for litigation.
(7) Access to case files.--
(A) In general.--In any case in which a
conference with the Internal Revenue Service
Independent Office of Appeals has been
scheduled upon request of a specified taxpayer,
the Chief of Appeals shall ensure that such
taxpayer is provided access to the
nonprivileged portions of the case file on
record regarding the disputed issues (other
than documents provided by the taxpayer to the
Internal Revenue Service) not later than 10
days before the date of such conference.
(B) Taxpayer election to expedite
conference.--If the taxpayer so elects,
subparagraph (A) shall be applied by
substituting ``the date of such conference''
for ``10 days before the date of such
conference''.
(C) Specified taxpayer.--For purposes of this
paragraph--
(i) In general.--The term ``specified
taxpayer'' means--
(I) in the case of any
taxpayer who is a natural
person, a taxpayer whose
adjusted gross income does not
exceed $400,000 for the taxable
year to which the dispute
relates, and
(II) in the case of any other
taxpayer, a taxpayer whose
gross receipts do not exceed
$5,000,000 for the taxable year
to which the dispute relates.
(ii) Aggregation rule.--Rules similar
to the rules of section 448(c)(2) shall
apply for purposes of clause (i)(II).
(f) Internal Revenue Service Chief Information Officer.--
(1) In general.--There shall be in the Internal
Revenue Service an Internal Revenue Service Chief
Information Officer (hereafter referred to in this
subsection as the ``IRS CIO'') who shall be appointed
by the Commissioner of Internal Revenue.
(2) Centralized responsibility for internal revenue
service information technology.--The Commissioner of
Internal Revenue (and the Secretary) shall act through
the IRS CIO with respect to all development,
implementation, and maintenance of information
technology for the Internal Revenue Service. Any
reference in this subsection to the IRS CIO which
directs the IRS CIO to take any action, or to assume
any responsibility, shall be treated as a reference to
the Commissioner of Internal Revenue acting through the
IRS CIO.
(3) General duties and responsibilities.--The IRS CIO
shall--
(A) be responsible for the development,
implementation, and maintenance of information
technology for the Internal Revenue Service,
(B) ensure that the information technology of
the Internal Revenue Service is secure and
integrated,
(C) maintain operational control of all
information technology for the Internal Revenue
Service,
(D) be the principal advocate for the
information technology needs of the Internal
Revenue Service, and
(E) consult with the Chief Procurement
Officer of the Internal Revenue Service to
ensure that the information technology acquired
for the Internal Revenue Service is consistent
with--
(i) the goals and requirements
specified in subparagraphs (A) through
(D), and
(ii) the strategic plan developed
under paragraph (4).
(4) Strategic plan.--
(A) In general.--The IRS CIO shall develop
and implement a multiyear strategic plan for
the information technology needs of the
Internal Revenue Service. Such plan shall--
(i) include performance measurements
of such technology and of the
implementation of such plan,
(ii) include a plan for an integrated
enterprise architecture of the
information technology of the Internal
Revenue Service,
(iii) include and take into account
the resources needed to accomplish such
plan,
(iv) take into account planned major
acquisitions of information technology
by the Internal Revenue Service, and
(v) align with the needs and
strategic plan of the Internal Revenue
Service.
(B) Plan updates.--The IRS CIO shall, not
less frequently than annually, review and
update the strategic plan under subparagraph
(A) (including the plan for an integrated
enterprise architecture described in
subparagraph (A)(ii)) to take into account the
development of new information technology and
the needs of the Internal Revenue Service.
(5) Scope of authority.--
(A) Information technology.--For purposes of
this subsection, the term ``information
technology'' has the meaning given such term by
section 11101 of title 40, United States Code.
(B) Internal revenue service.--Any reference
in this subsection to the Internal Revenue
Service includes a reference to all components
of the Internal Revenue Service, including--
(i) the Office of the Taxpayer
Advocate,
(ii) the Criminal Investigation
Division of the Internal Revenue
Service, and
(iii) except as otherwise provided by
the Secretary with respect to
information technology related to
matters described in subsection
(b)(3)(B), the Office of the Chief
Counsel.
SEC. 7804. OTHER PERSONNEL.
(a) Appointment and supervision.--Unless otherwise prescribed
by the Secretary, the Commissioner of Internal Revenue is
authorized to employ such number of persons as the Commissioner
deems proper for the administration and enforcement of the
internal revenue laws, and the Commissioner shall issue all
necessary directions, instructions, orders, and rules
applicable to such persons.
(b) Posts of duty of employees in field service or
traveling.--Unless otherwise prescribed by the Secretary--
(1) Designation of post of duty.--The Commissioner
shall determine and designate the posts of duty of all
such persons engaged in field work or traveling on
official business outside of the District of Columbia.
(2) Detail of personnel from field service.--The
Commissioner may order any such person engaged in field
work to duty in the District of Columbia, for such
periods as the Commissioner may prescribe, and to any
designated post of duty outside the District of
Columbia upon the completion of such duty.
(c) Delinquent Internal Revenue officers and employees.--If
any officer or employee of the Treasury Department acting in
connection with the internal revenue laws fails to account for
and pay over any amount of money or property collected or
received by him in connection with the internal revenue laws,
the Secretary shall issue notice and demand to such officer or
employee for payment of the amount which he failed to account
for and pay over, and, upon failure to pay the amount demanded
within the time specified in such notice, the amount so
demanded shall be deemed imposed upon such officer or employee
and assessed upon the date of such notice and demand, and the
provisions of chapter 64 and all other provisions of law
relating to the collection of assessed taxes shall be
applicable in respect of such amount.
(d) Prohibition on Rehiring Employees Involuntarily
Separated.--The Commissioner may not hire any individual
previously employed by the Commissioner who was removed for
misconduct under this subchapter or chapter 43 or chapter 75 of
title 5, United States Code, or whose employment was terminated
under section 1203 of the Internal Revenue Service
Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note).
* * * * * * *
SEC. 7812. STREAMLINED CRITICAL PAY AUTHORITY FOR INFORMATION
TECHNOLOGY POSITIONS.
In the case of any position which is critical to the
functionality of the information technology operations of the
Internal Revenue Service--
(1) section 9503 of title 5, United States Code,
shall be applied--
(A) by substituting ``during the period
beginning on the date of the enactment of
section 7812 of the Internal Revenue Code of
1986, and ending on September 30, 2025'' for
``Before September 30, 2013 in subsection
(a)'',
(B) without regard to subparagraph (B) of
subsection (a)(1), and
(C) by substituting ``the date of the
enactment of the Taxpayer First Act of 2019''
for ``June 1, 1998'' in subsection (a)(6),
(2) section 9504 of such title 5 shall be applied by
substituting ``During the period beginning on the date
of the enactment of section 7812 of the Internal
Revenue Code of 1986, and ending on September 30,
2025'' for ``Before September 30, 2013'' each place it
appears in subsections (a) and (b), and
(3) section 9505 of such title shall be applied--
(A) by substituting ``During the period
beginning on the date of the enactment of
section 7812 of the Internal Revenue Code of
1986, and ending on September 30, 2025'' for
``Before September 30, 2013'' in subsection
(a), and
(B) by substituting ``the information
technology operations'' for ``significant
functions'' in subsection (a).
* * * * * * *
----------
TITLE 31, UNITED STATES CODE
* * * * * * *
SUBTITLE IV--MONEY
* * * * * * *
CHAPTER 53--MONETARY TRANSACTIONS
* * * * * * *
SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS
* * * * * * *
Sec. 5317. Search and forfeiture of monetary instruments
(a) The Secretary of the Treasury may apply to a court of
competent jurisdiction for a search warrant when the Secretary
reasonably believes a monetary instrument is being transported
and a report on the instrument under section 5316 of this title
has not been filed or contains a material omission or
misstatement. The Secretary shall include a statement of
information in support of the warrant. On a showing of probable
cause, the court may issue a search warrant for a designated
person or a designated or described place or physical object.
This subsection does not affect the authority of the Secretary
under another law.
(b) Searches at Border.--For purposes of ensuring compliance
with the requirements of section 5316, a customs officer may
stop and search, at the border and without a search warrant,
any vehicle, vessel, aircraft, or other conveyance, any
envelope or other container, and any person entering or
departing from the United States.
(c) Forfeiture.--
(1) Criminal forfeiture.--
(A) In general.--The court in imposing
sentence for any violation of section 5313,
5316, or 5324 of this title, or any conspiracy
to commit such violation, shall order the
defendant to forfeit all property, real or
personal, involved in the offense and any
property traceable thereto.
(B) Procedure.--Forfeitures under this
paragraph shall be governed by the procedures
established in section 413 of the Controlled
Substances Act.
(2) Civil forfeiture.--[Any property]
(A) In general._Any property involved in a
violation of section 5313, 5316, or 5324 of
this title, or any conspiracy to commit any
such violation, and any property traceable to
any such violation or conspiracy, may be seized
and forfeited to the United States in
accordance with the procedures governing civil
forfeitures in money laundering cases pursuant
to section 981(a)(1)(A) of title 18, United
States Code.
(B) Internal revenue service seizure
requirements with respect to structuring
transactions.--
(i) Property derived from an illegal
source.--Property may only be seized by
the Internal Revenue Service pursuant
to subparagraph (A) by reason of a
claimed violation of section 5324 if
the property to be seized was derived
from an illegal source or the funds
were structured for the purpose of
concealing the violation of a criminal
law or regulation other than section
5324.
(ii) Notice.--Not later than 30 days
after property is seized by the
Internal Revenue Service pursuant to
subparagraph (A), the Internal Revenue
Service shall--
(I) make a good faith effort
to find all persons with an
ownership interest in such
property; and
(II) provide each such person
so found with a notice of the
seizure and of the person's
rights under clause (iv).
(iii) Extension of notice under
certain circumstances.--The Internal
Revenue Service may apply to a court of
competent jurisdiction for one 30-day
extension of the notice requirement
under clause (ii) if the Internal
Revenue Service can establish probable
cause of an imminent threat to national
security or personal safety
necessitating such extension.
(iv) Post-seizure hearing.--If a
person with an ownership interest in
property seized pursuant to
subparagraph (A) by the Internal
Revenue Service requests a hearing by a
court of competent jurisdiction within
30 days after the date on which notice
is provided under subclause (ii), such
property shall be returned unless the
court holds an adversarial hearing and
finds within 30 days of such request
(or such longer period as the court may
provide, but only on request of an
interested party) that there is
probable cause to believe that there is
a violation of section 5324 involving
such property and probable cause to
believe that the property to be seized
was derived from an illegal source or
the funds were structured for the
purpose of concealing the violation of
a criminal law or regulation other than
section 5324.
* * * * * * *
----------
SECTION 232 OF THE SOCIAL SECURITY ACT
processing of tax data
Sec. 232. The Secretary of the Treasury shall make available
information returns filed pursuant to part III of subchapter A
of chapter 61 of subtitle F of the Internal Revenue Code of
1954, to the Commissioner of Social Security for the purposes
of this title and title XI. The Commissioner of Social Security
and the Secretary of the Treasury are authorized to enter into
an agreement for the processing by the Commissioner of Social
Security of information contained in returns filed pursuant to
part III of subchapter A of chapter 61 of subtitle F of the
Internal Revenue Code of 1986. Notwithstanding the provisions
of section 6103(a) of the Internal Revenue Code of 1986, the
Secretary of the Treasury shall make available to the
Commissioner of Social Security such documents as may be agreed
upon as being necessary for purposes of such processing. For
purposes of carrying out the return processing program
described in the preceding sentence, the Commissioner of Social
Security shall request, not less than annually, such
information described in section 7529(b)(2) of the Internal
Revenue Code of 1986 as may be necessary to ensure the accuracy
of the records maintained by the Commissioner of Social
Security related to the amounts of wages paid to, and the
amounts of self-employment income derived by, individuals. The
Commissioner of Social Security shall process any withholding
tax statements or other documents made available to the
Commissioner by the Secretary of the Treasury pursuant to this
section. Any agreement made pursuant to this section shall
remain in full force and effect until modified or otherwise
changed by mutual agreement of the Commissioner of Social
Security and the Secretary of the Treasury.
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INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
* * * * * * *
TITLE II--ELECTRONIC FILING
* * * * * * *
[SEC. 2004. RETURN-FREE TAX SYSTEM.
[(a) In General.--The Secretary of the Treasury or the
Secretary's delegate shall develop procedures for the
implementation of a return-free tax system under which
appropriate individuals would be permitted to comply with the
Internal Revenue Code of 1986 without making the return
required under section 6012 of such Code for taxable years
beginning after 2007.
[(b) Report.--Not later than June 30 of each calendar year
after 1999, the Secretary shall report to the Committee on Ways
and Means of the House of Representatives and the Committee on
Finance of the Senate on--
[(1) what additional resources the Internal Revenue
Service would need to implement such a system;
[(2) the changes to the Internal Revenue Code of 1986
that could enhance the use of such a system;
[(3) the procedures developed pursuant to subsection
(a); and
[(4) the number and classes of taxpayers that would
be permitted to use the procedures developed pursuant
to subsection (a).]
* * * * * * *
[all]