1. Administration of penalties and interest (Sec. 3801 of the Bill)

Present Law

The last major comprehensive revision of the overall penalty structure in the Internal Revenue Code was the "Improved Penalty Administration and Compliance Tax Act," enacted as part of the Omnibus Budget Reconciliation Act of 1989.

Reasons for Change

The Committee believes that it is appropriate to undertake a study of penalty and interest administration, which will provide the Committee with legislative and administrative recommendations for improvement of the current penalty and interest structure.

Explanation of Provision

The provision requires the Joint Committee on Taxation and the Treasury to each conduct a separate study reviewing the interest and penalty provisions of the Code (including the administration and implementation of the penalty reform provisions of the Omnibus Budget Reconciliation Act of 1989), and making any legislative and administrative recommendations it deems appropriate to simplify penalty administration and reduce taxpayer burden. The studies must also include an analysis of the interest provisions in the Code, including legislative and administrative recommendations deemed appropriate to simplify the administration of the interest provisions and to reduce taxpayer burden.

Effective Date

The reports must be provided not later than nine months after the date of enactment.

2. Confidentiality of tax return information (Sec. 3802 of the Bill)

Present Law

The Internal Revenue Code prohibits disclosure of tax returns and return information, except to the extent specifically authorized by the Internal Revenue Code (Sec. 6103). Unauthorized disclosure is a felony punishable by a fine not exceeding $5,000 or imprisonment of not more than five years, or both (Sec. 7213). An action for civil damages also may be brought for unauthorized disclosure (Sec. 7431). No tax information may be furnished by the IRS to another agency unless the other agency establishes procedures satisfactory to the IRS for safeguarding the tax information it receives (Sec. 6103(p)).

Reasons for Change

The Committee believes that a study of the confidentiality provisions will be useful in assisting the Committee in determining whether improvements can be made to these provisions.

Explanation of Provision

The provision requires the Joint Committee on Taxation and Treasury to each conduct a separate study on provisions regarding taxpayer confidentiality. The studies are to examine present-law protections of taxpayer privacy, the need, if any, for third parties to use tax return information, whether greater levels of voluntary compliance can be achieved by allowing the public to know who is legally required to file tax returns but does not do so, and the interrelationship of the taxpayer confidentiality provisions in the Internal Revenue Code with those elsewhere in the United States Code (such as the Freedom of Information Act).

Effective Date

The findings of the studies, along with any recommendations, are required to be reported to the Congress no later than one year after the date of enactment.