Taxpayer Bill of Rights  

Outline Of IRS Bill Reported By The Finance Committee

I. Restructuring and Establishment of an IRS Board

A. Statutory Language -Organizational Structure

    1. Direct the Commissioner of Internal Revenue to restructure the IRS by eliminating the three-tier (nation/region/district) structure and replacing current geographically based organizational units with operating units serving particular groups of taxpayers with similar needs.

    2. Direct the IRS to revise its mission statement to provide greater emphasis on serving the needs of taxpayers.

    3. Direct IRS to establish an independent appeals function. Prohibit ex parte communication between Appeals and other IRS personnel (collection or audit) as to a particular taxpayer's case. Direct the IRS to provide taxpayers in each state with access to Appeals Officers.

B. Establish an IRS Board

    1. Generally follow the House bill which would create a Board to oversee the management and operations of the IRS. As in the House bill, the Board would be authorized to review and approve strategic plans, the Commissioner's plan for major reorganization, and the Commissioner's budget request, etc. The Board would have the authority to review (not approve) Commissioner Rossotti's reorganization plan. Also require the Board to review procedures relating to financial audits.

    2. The Board would be composed of the Commissioner, Secretary of Treasury, an IRS employee representative, and 6 "private-life" experts in certain fields. As in the House bill, the Chairman of the Board would be a "private-life" member and serve a 2 year term. The Board shall be part-time and have an independent staff.

    3. The "private-life" experts will be subject to the same conflict-of-interest restrictions as other employees who provide limited services to the Government. In addition, the "private-life" experts will not be allowed to represent parties on any matter before the Board or the IRS during their term. Nor can the "private-life" experts represent any party on tax-related matters before the Treasury. As in the House bill, the "private-life" experts will be subject to (a) the public financial disclosure rules and (b) the 1-year post-employment restriction.

    4. The IRS employee representative would not be subject to the general criminal conflict of interest laws. Thus, the IRS employee representative can carry out his or her duties as a Board member while at the same time represent the interests of the employee organization. The employee representative will have the same public financial disclosure rules as the "private-life" experts, with an additional filing requirement with the tax writing committees.

    5. In addition to the responsibilities provided in the House bill, the Board must ensure that the IRS has proper procedures in effect to carry out its mission. The Board will have "big picture" authority over IRS law enforcement and collection activities. It will have limited 6103 authority with the ability to receive information (excluding a taxpayer's name, address, social security number, or employer identification number) prepared by the Treasury Inspector General or made available by the Commissioner. The Board shall not intervene or be involved in particular taxpayer matters or individual personnel matters. Board members would be subject to the same "browsing" rules as other IRS employees.

    6. If the Board identifies a potential problem, it may request the Inspector General for Tax Administration to investigate and report. The Board may receive unredacted reports that may include 6103 information except for a taxpayer's name, address, social security number and employer identification number. The Board will review the Commissioner's policies to address issues. If the IRS fails to fix a problem identified by the Board, the Board shall consult the chairmen of the tax writing committees.

    7. The Board shall provide the Secretary of Treasury with 3 candidates for the position of Taxpayer Advocate. The Commissioner will provide the initial list of candidates to the Board. The Taxpayer Advocate will report to the Commissioner and the Board.

    8. The Treasury Inspector General for Tax Administration shall report to the Secretary but will timely respond to requests by the Commissioner or Board to conduct an investigation or audit.

    9. The Board will sunset on September 30, 2008.

    10. Board members may be reimbursed for travel expenses in connection with their duties.

II. Management

A. Commissioner of Internal Revenue (House bill)

Establish a 5-year term for the Commissioner and require the Secretary of Treasury to notify Congress of any change of authority delegated to the IRS Commissioner. The Commissioner may be reappointed for more than one 5-year term. Also, the Commissioner must have demonstrated ability in management.

B. Require the IRS Chief Counsel to Report to the Commissioner

Require the IRS Chief Counsel to report to the Commissioner rather than to the Treasury General Counsel. The Chief Counsel's powers and duties would not change unless the Secretary provides notice to Congress. The Chief Counsel would represent the IRS but would not have any tax policy authority.

C. Structure of Employee Plans & Exempt Organizations ("EP&EO" Division) (House bill)

The Office of EP&EO would not be established by statute. It is intended that a comparable structure would be implemented administratively. Consistent with current practice, appropriate funding would be subject to Congressional appropriations.

D. Taxpayer Advocate

    1. Establish an independent Taxpayer Advocate. The Taxpayer Advocate will be selected by the Secretary of Treasury from 3 candidates recommended by the Board. The Commissioner shall provide an initial list of candidates to the Board. Prior to appointment of the Board, the Commissioner shall submit a list of candidates to the Secretary for appointment. The Taxpayer Advocate may not be employed by the IRS within 2 years before and 5 years after working in the Office of Taxpayer Advocate. The Taxpayer Advocate must have a background in customer service and tax law and should have experience representing individual taxpayers.

    2. Revise the Taxpayer Advocate's responsibilities and reporting requirements (e.g., providing line authority over local taxpayer advocates who will be more independent from the IRS).

    3. The shall be at least one local taxpayer advocate in each state.

    4. Expand the Taxpayer Advocate's authority to issue a Taxpayer Assistance Order when the Taxpayer Advocate believes it is appropriate. Relief may also be provided if the taxpayer is about to suffer a "significant hardship" including when:

    a. There is an immediate threat of adverse action;

    b. There has been unreasonable IRS delay (30 days) in resolving the taxpayer's account problem;

    c. The taxpayer will have to pay significant costs (including fees for representation) if relief is not granted; or

    d. The taxpayer will suffer irreparable injury or long-term adverse impact if relief is not granted.

    If the IRS is not following applicable published guidance (including the Internal Revenue Manual), the Taxpayer Advocate shall construe this in a manner most favorable to the taxpayer. (House bill - modified)

III. Transfer IRS Office of Chief Inspector Function to Treasury Inspector General

A. Eliminate the IRS Office of Chief Inspector and transfer approximately 900 FTEs from IRS Internal Security and portions of Internal Audit to a new Treasury Inspector General for Tax Administration. The new Treasury Inspector General for Tax Administration would be parallel to the current Treasury Inspector General. The Commissioner will retain approximately 300 internal audit FTEs for management purposes.

B. The Treasury Inspector General for Tax Administration will be appointed by the President and confirmed by the Senate. In addition to the standard qualifications for an Inspector General (e.g., appointed solely on the basis of integrity and demonstrated successful ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations), the Treasury Inspector General for Tax Administration should have experience in tax administration and the demonstrated ability to lead a significant organization.

C. The Treasury Inspector General for Tax Administration, any Deputies, and two Assistant Inspectors General for Auditing and Inspection, may not be employed by the IRS within 2 years before and 5 years after working at the Treasury Inspector General's office.

D. The Treasury Inspector General for Tax Administration must have access to tax return and return information.

E. The Secretary may not interfere with ongoing investigations of the Treasury Inspector General for Tax Administration.

F. In addition to standard reporting requirements the Treasury Inspector General, each semiannual report must include:

    1. The number of taxpayer complaints during the period;

    2. The number of employee misconduct and taxpayer abuse allegations received by the IRS and Treasury Inspector General for Tax Administration during the period from taxpayers, IRS employees, and other sources;

    3. A summary of the current status of such complaints and allegations; and

    4. A summary of the disposition of such complaints including the outcome of any Justice Department action and any monies paid to settle suits.

G. The Treasury Inspector General for Tax Administration must also annually report on whether the IRS is complying with:

    1. the prohibition on the use of enforcement statistics to evaluate employees;

    2. the prohibition on directly contacting taxpayers who are represented;

    3. management approval of collection activity;

    4. due process procedures relating to collection;

    5. the prohibition on labeling taxpayers as "illegal tax protestors";

    6. certification that the IRS provides information regarding collection activity against a joint filer;

    7. the prohibition on waiving the statue of limitations on collection and providing notice to taxpayers regarding waiver of the statute of limitations on assessment;

    8. an evaluation of the adequacy and security of IRS technology; and

    9. any mandatory termination (or mitigation) of employees.

H. The Treasury Inspector General for Tax Administration would be required to audit at least 1% of all determinations (randomly identified) where the IRS has refused to disclose information due to section 6103 or law enforcement considerations.

I. The Treasury Inspector General for Tax Administration must establish a toll-free number for taxpayers to register complaints of misconduct by IRS employees and shall publish the number in Publication 1.

J. The Commissioner may request the Treasury Inspector General for Tax Administration to conduct investigations and audits. The Treasury Inspector General shall timely comply and respond to the Commissioner's requests.

K. The Treasury Inspector General for Tax Administration shall make it a priority to ensure the security and integrity of the IRS computer systems (e.g., detection and prevention of fraud, unauthorized access, or abuse).

IV. Prohibition on Executive Branch Influence over Audits and Personnel Flexibilities

A. Prohibition on Executive Branch Influence Over Taxpayer Audits (House bill)

Prohibit high level Executive Branch Officials (subject to certain exceptions) from requesting the IRS to conduct or terminate an audit or investigation of any particular taxpayer.

B. IRS Personnel Flexibilities

Provide personnel tools that will enable the Commissioner to reorganize the IRS.

    1. Flexibilities for Senior Management, Professional and Technical Positions

    In order to give the Commissioner the ability to bring the type of executives to the IRS that he feels is necessary to effect the change in the organization, there would need to be changes in the current personnel programs. Currently, the number of employees the Commissioner can appoint and the pay and other remuneration that can be given to these employees is limited. These changes would be as follows:

    a. Give the Commissioner the authority to fill senior executive service positions which were reserved for IRS career service employees with limited or temporary appointments of individuals. These individuals would have time limits on their employment of up to three years (which could be extended). It is anticipated that these type of employees would be brought into the IRS to perform specific functions and then return to the private sector.

    b. Provide that the Treasury Secretary may appoint up to 40 senior executives with technical, professional and management expertise at pay levels not in excess of the compensation of the Vice President without approval of the OPM and OMB. In addition, the Treasury Secretary may appoint individuals to critical positions other than those established under the streamlined authority for senior executives at pay levels not in excess of the level of compensation of the Vice President, with the approval of OMB. The recruitment, retention, and relocation incentives that the IRS can provide would be expanded, subject to the approval of the OPM.

    c. As part of the return to a service-oriented culture and to reward these new critical executives for attaining specified performance results, the IRS will be given the authority to provide for variable compensation (i.e., bonuses) in excess of amounts currently allowed for up to 25 senior IRS executives. Any variable compensation award in excess of 20% of basic pay would have to be approved by the Treasury Secretary. In addition, the amount of the award when combined with other compensation of an individual in that year cannot exceed the level of compensation of the Vice President

    2. Flexibilities for the General Workforce

    a. Extend the voluntary separation incentive pay program that ended December 31, 1997 to December 31, 2002.

    b. Establish streamlined demonstration authority to establish new human resource programs within a specified time period. The streamlining eliminates or shortens some of the waiting periods and comment periods that are usually applicable with demonstration projects. The demonstration project will be subject to the review of the OPM.

    c. As the IRS decreases the levels of management in its organization, the traditional ways of rewarding superior performers by giving them higher management authority (along with commensurate pay increases) will not be as available as before. The Treasury Secretary is given the authority (subject to criteria established by the OPM) to restructure employee pay rates in connection with implementing a broad banded employee pay system which will provide for increases in pay based on increases in job competencies, but without the need for moving to a higher level of management. This will be different from the current government pay and grading system.

    d. The Treasury Secretary may establish a new performance management system, developing individual accountability for performance reviews. In conjunction with this new performance review system, the Treasury Secretary may also establish a new incentive awards program which awards up to $25,000 without OPM approval.

    3. Any of the personnel flexibilities that affect employees represented by a union must be agreed to between the IRS and the union. If the union and the IRS cannot agree, then the matter will be brought before the Federal Impasses Panel for resolution.

    4. Require the IRS to use fair and equitable treatment of taxpayers as one of the standards for evaluating employee performance.

    5. Require the IRS to terminate an employee if any of the following conduct relating to the employees official duties is proven in a final administrative or judicial determination:

    a. Failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets.

    b. Providing a false statement under oath material to a matter involving a taxpayer.

    c. Falsifying or destroying documents to conceal mistakes made by the employee with respect to a matter involving a taxpayer.

    d. Assault or battery on a taxpayer or other IRS employee.

    e. Violation of the civil rights of a taxpayer or other IRS employee.

    f. Violation of the Internal Revenue 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.

    g. Willful misuse of Section 6103 authority to conceal information from congressional inquiry.

    The Commissioner would have the non-delegable authority to consider mitigating factors that, in the Commissioner sole discretion, mitigate against terminating the employee. The Commissioner would have the authority to establish procedures to filter cases for which mitigation may be appropriate.

    6. Expand the prohibition on the use of enforcement statistics to evaluate individual employees to all IRS employees. Require the Treasury Inspector General to annually report to the tax writing committees on whether the law is being followed.

    7. Require the IRS to place a priority on employee training and adequately fund employee training programs

Within 90 days after enactment, require the IRS to provide to the tax writing committees a comprehensive multi year plan to: (1) ensure adequate customer service training; (2) review the organizational design of customer service; (3) implement a performance development system; and (4) provide in fiscal year 1999, at least 16 hours of conflict management training for collection employees.

V. Electronic Filing

A. Include the House proposal providing that paperless filing should be preferred and that by 2007, it should be a goal to have at least 80% of all tax and information returns filed electronically. The Secretary would be required to establish an electronic commerce advisory group (which would report to Congress) and establish a plan to meet this paperless filing goal.

B. Include the House provision extending from February 28th to March 31st, the time for electronically filing information returns.

C. Include the House provision requiring the Secretary of Treasury to develop an alternative to written signatures. This proposal will enhance electronic filing. However, unsigned returns (absent an alternative authorized by the IRS) would not be presumed signed for criminal and civil purposes.

D. Include the House provision requiring the Secretary to develop procedures to implement a return free tax system for appropriate individuals for tax years beginning after 2007. Treasury must report on its progress.

E. Include the House provision which requires the Secretary to develop by 2007 procedures to allow taxpayers to review their account electronically if proper safeguards are established.

VI. Taxpayer Protections

A. Burden of Proof

    1. Shift the burden of proof in court proceedings if the taxpayer introduces credible evidence with respect to a factual issue relevant to ascertaining income tax liability. As with the House provision, this shift would be subject to net worth limitations (except for individuals) and the taxpayer must comply with current law substantiation requirements and maintenance of records. Taxpayer must also cooperate (rather than "fully cooperate") with the IRS.

    2. In any instance in which the IRS uses statistics to determine a taxpayer's income, the burden of proof in court proceedings would shift to the IRS to prove the taxpayer's taxable income.

    3. In court proceedings, the IRS would have the burden of establishing that imposition of penalties is appropriate. If neither the IRS nor the taxpayer introduce evidence relating to penalties, the IRS should not be sustained.

B. Proceedings by Taxpayers

    1. Expansion of Authority to Award Costs and Certain Fees

    a. Allow a taxpayer to recover costs and fees from the time the taxpayer has a right to seek administrative review by the Office of Appeals (House bill);

    b. Allow reasonable attorney fees at the prevailing rate in the locality. (House bill provides exceptions to $110/hour limitation);

    c. When a taxpayer is represented for free, the IRS should bear the responsibility to pay reasonable costs and fees if the taxpayer substantially prevails and the IRS position was not substantially justified (House bill);

    d. In determining whether the IRS was substantially justified, the court must consider whether the IRS has lost in courts of appeal for other circuits on substantially similar issues. (House bill)

    e. Clarify that attorney fees may be recovered in a civil action in which the United States is a party for unauthorized browsing or disclosure of taxpayer information.

    f. If a taxpayer makes a statutory offer after the taxpayer has a right to an administrative review by Appeals, the IRS rejects the offer, and the IRS obtains a judgment against the taxpayer in an amount equal to or less than the amount of the taxpayer's statutory offer, the IRS must pay the taxpayer's fees and costs incurred from the date of the statutory offer. Interest would be disregarded when comparing the offer and the final judgment. Subject to net worth limitations for collection of attorney fees.

    2. Civil damages for collection actions

    a. Allow taxpayers to recover up to $100,000 in civil damages from the IRS due to IRS employee negligence in collection matters. (House bill)

    b. Allow up to $1 million in civil damages for willful violations of the Bankruptcy Code relating to automatic stays or discharges. (Administration proposal)

    c. Allow civil damages for unauthorized collection actions against persons other than the taxpayer. (Administration proposal).

    3. Increase the size of cases in the Tax Court's Small Case Calendar from $10,000 to $50,000. (House bill increased to $25,000)

    4. Expand Tax Court jurisdiction to include responsible person penalties, innocent spouse relief, and adverse IRS determinations of a bond issuer's tax-exempt status.

    5. Grant jurisdiction to U.S. District Courts and the U.S. Claims Court to determine the correct amount of estate tax liability in actions brought by taxpayers paying estate tax in installments as long as certain requirements are met. (House bill)

    6. Provide a new remedy for third-parties who claim the IRS filed an erroneous lien to obtain a certificate of discharge of property from lien as a matter of right. This would enable the third-party to post a bond and sell the property free and clear of the Federal tax lien. Also, allow third-parties to challenge a lien in court. The statute of limitations for collection would not be stayed during the third-party litigation. (Modified Administration Proposal)

C. Relief for Innocent Spouses and Persons with Disabilities

    1. Innocent Spouse Relief

    a. Overhaul the current law innocent spouse relief requirements and replace with proportionate liability. Innocent spouses could elect out of joint and several liability and be liable only for tax attributable to their income. The electing spouse must prove the amount of tax for which they should not be responsible. Community property laws would be disregarded for the purpose of this relief. As in the House bill, provide the Tax Court with jurisdiction to determine the limits of the spouse's liability. Include provisions to address gaming and fraudulent conveyances. Relief would be disallowed to the extent the IRS proves the electing spouse had actual knowledge of a particular item.

    b. Require the Treasury Inspector General to certify that the IRS notifies taxpayers of amount collected from a former spouse.

    c. Require the IRS to notify all taxpayers who have filed joint returns of their rights to elect to limit joint and several liability by requiring information to be included in appropriate IRS publications and in every collection related notice sent to taxpayers.

    2. Equitable Tolling (House bill and Administration Proposal).

    Allow equitable tolling of the statute of limitations on filing a refund claim for the period of time a taxpayer is unable to manage his affairs due to a physical or mental disability that is expected to result in death or last for more than 12 months. Tolling would not apply if someone was authorized to act on the taxpayer's behalf regarding financial affairs.

D. Provisions Relating to Interest and Penalties

    1. Eliminate the interest rate differential on overlapping periods of interest on income tax overpayments and underpayments (House bill).

    2. Eliminate the interest rate differential for non-corporate taxpayers by increasing the interest rate on overpayments from the Federal short-term interest +2% to +3%. (House bill)

    3. Do not impose the failure to pay penalty while the taxpayer is in an installment agreement.

    4. Allow the taxpayer to designate deposits for each payroll period rather than using the first-in-first-out ("FIFO") method that results in cascading penalties.

    5. If the IRS does not provide a notice of deficiency within 1 year after a return is timely filed, then interest and penalties will be suspended (excluding the failure to file, failure to pay, and fraud penalties) until 21 days after demand for payment.

    6. Require management to approve non-computer generated penalties (excluding failure to file, pay, or estimated tax payment).

    7. Allow personal delivery (as an alternative to US Mail) of a preliminary notice that the IRS intends to assess a 100 percent penalty. (Administration proposal)

    8. Require each notice of penalty and/or interest to include a computation of the penalty and interest.

E. Due Process for IRS Collection Actions

    1. Require the IRS to provide notice to taxpayers 30 days (90 days in case of life insurance) before the IRS files a notice of Federal tax lien, levies, or seizes a taxpayer's property.

    2. The taxpayer would have 30 days to request a hearing by IRS Appeals. No collection activity (other than in jeopardy situations) would be allowed until after the hearing. The taxpayer could raise any issue as to why collection should not continue.

    3. The taxpayer could petition the Tax Court to contest the Appeal's decision.

F. Examination Activities

    1. Extend the attorney client privilege to accountants and other tax practitioners.

    2. Prohibit the IRS from using financial status or economic reality audit techniques to determine the existence of unreported income unless the IRS has a reasonable indication there is a likelihood of unreported income. (House bill)

    3. Limit IRS authority to require the production of computer source code. The provision also establishes a number of protections against the disclosure and improper use of trade secrets and confidential information of any computer software program or source code that comes into the possession of the IRS as part of an examination of a taxpayer.

    4. Prohibit the use of threats of audits to obtain a Tip Reporting Alternative Commitment Agreement. (House bill)

    5. Allow taxpayers to bring an action to quash all third-party summonses (taxpayers would receive notice of the summons). (Administration proposal)

    6. Allow service of summons by mail. (Administration proposal)

    7. Require the IRS to notify taxpayers before the IRS contacts or summons third parties (e.g., customers, vendors, neighbors) regarding non-criminal examinations or collection matters.

G. Approval Process for Liens, Levies, and Seizures

Require the IRS to implement a review process under which liens, levies, and seizures would be approved by a supervisor, who would review the taxpayer's information, verify that a balance is due, and affirm that a lien, levy, or seizure is appropriate under the circumstances (including the amount due and the value of the asset). Failure to follow these procedures should result in disciplinary action against the revenue officer and his/her supervisor. Require the Treasury Inspector General to collect this information and annually report to the tax writing committees.

H. Liens and Levies

    1. Increase the amount exempt from levy to $10,000 for personal property and $5,000 for books and tools of trade indexed for inflation.

    2. Require the IRS to immediately release a levy upon agreement that the amount is "currently not collectible".

    3. Suspend collection by levy during refund suit. (Administration proposal)

    4. Require counsel to review of jeopardy and termination assessments and jeopardy levies. (Administration proposal)

    5. Increase superpriority limits (e.g., mechanics liens from $1,000 to $5,000 and casual sales from $250 to $1,000). (Administration proposal)

    6. Waive the 10% addition to tax for early withdrawal from an IRA or other qualified plan if the IRS levies.

I. Seizures

    1. Clarify that the IRS cannot sell a taxpayer's property for less than the minimum bid price. Cross reference to civil damages provision for unauthorized collection actions.

    2. Require the IRS to provide an accounting and receipt to the taxpayer (including the amount credited to the taxpayer's account) when the IRS seizes and sells the taxpayer's property.

    3. Require the IRS to implement, within 2 years, a uniform asset disposal mechanism (which may include consideration of outsourcing) for sales of seized property to prevent revenue officers from conducting sales.

    4. Current law prohibits the IRS from levying property if the amount of IRS expenses of levy and sale exceed the fair market value of such property at the time of the levy. Codify portions of the Internal Revenue Manual which require the IRS to investigate the status of the property prior to levy. Require the Treasury Inspector General to certify IRS compliance.

    5. Prohibit the IRS from seizing real property used as a residence to satisfy unpaid liabilities less than $5,000. Also provided that a principal residence and business property should be seized as a last resort.

J. Examination and Collection Activities

    1. Statute of Limitations

    a. Prohibit individual taxpayers from extending the 10 year collection statute of limitations.

    b. Require the IRS to provide notice of the taxpayer's rights if the IRS requests an extension of the statute of limitations for assessment. (House bill). Require Treasury Inspector General to track.

    2. Offers-in-Compromise

    a. Modify the House provision to require the IRS to consider the facts and circumstances of a particular taxpayer's case. The IRS should develop and publish schedules of national and local allowances designed to provide taxpayers with adequate living expenses. If the facts warrant, the taxpayer should not be limited by the standards.

    b. Require the IRS to prepare a statement setting forth the terms and rights of a taxpayer relating to an offer-in-compromise. (House bill)

    c. Specify that offers made by low income taxpayers will be considered even if the amount of the offer is low. This is not intended to allow others to make low-ball offers.

    d. Prohibit the IRS from requiring a financial statement if the taxpayer makes an offer based upon dispute as to liability (rather than based upon ability to pay).

    e. Report language will provide that the IRS should implement liberal offer in compromise acceptance procedures to keep taxpayers in the system.

    f. Prohibit the IRS from collecting a tax liability by levy if: (1) an offer in compromise is being processed; (2) within 30 days following rejection of an offer; and (3) during appeal of a rejection of an offer. (Administration proposal)

    g. Offer in compromises and requests to enter into an installment agreement must be reviewed by a higher level before being rejected on the merits.

    h. If the IRS cannot locate the taxpayer's file, prohibit the IRS from rejecting the taxpayer's offer-in-compromise based upon doubt as to the taxpayer's liability.

    i. Codify the IRS practice requiring appeals officer review of rejected offers in compromise. Taxpayers must be notified of this right.

    3. Require the IRS to include on each deficiency notice, the date the IRS determines is the last day for the taxpayer to file a Tax Court petition. A petition filed by the specified date would be deemed timely filed. (House bill)

    4. Allow courts to order a refund of any amount that was collected during a period in which the IRS is prohibited from collecting against the taxpayer. Allow refunds of the portion of the overpayment determined by the Tax Court that is not contested on appeal. (House bill)

    5. Provide taxpayers with an enhanced mechanism to appeal an audit. Codify existing IRS procedures which allow a taxpayer to request early referral to Appeals. Also, codify procedures relating to the existing alternative dispute resolution program but eliminate the current $10 million threshold requirement.

    6. Codify certain fair debt collection practices (e.g., prohibit late night calls to taxpayers, harassment, etc.). (Administration proposal)

    7. Ensure availability of installment agreements if the liability is $10,000 or less. (Administration proposal).

K. Disclosures to Taxpayers

Require the IRS to provide the following disclosures to taxpayers:

    1. Clearly alert married taxpayers of their joint and several liability on all appropriate publications and instructions. (House bill) Also require the IRS to notify all taxpayers who have filed joint returns of their rights to elect to limit joint and several liability by required information to be included in appropriate IRS publications and in any collection-related notices. Whenever practicable, such notices should be sent to both spouses;

    2. Clearly inform taxpayers of their rights to be represented at an IRS interview and to suspend an interview to allow the taxpayer to consult with his/her representative (House bill);

    3. Explain in simple non-technical terms the criteria and procedures for selecting taxpayers for audit. The statement shall not include any information which would be detrimental to law enforcement (House bill);

    4. Include with the first letter of proposed deficiency which allow the taxpayer an opportunity for administrative review by the Office of Appeals, an explanation of the appeals process and the collection process (House bill);

    5. Explain the reason for denial of a refund.

    6. Provide an annual statement to taxpayers regarding their installment agreement.

    7. Require the IRS to notify all partners required to receive notice of the selection of a new tax matters partner.

L. Low Income Taxpayer Clinics (House bill)

Require the Treasury to make matching grants for the development, expansion, or continuation of certain low-income taxpayer clinics. Various requirements must be satisfied. The aggregate amount of grants would be limited to $3 million each year. Clinics include accredited accounting, business or law schools.

M. Other Matters

    1. Require the IRS to maintain complaints of IRS employee misconduct on an individual employee basis. (House bill)

    2. Provide an exception to the disclosure rules to require the IRS to disclose IRS records to the National Archives. (House bill)

    3. Require Treasury to establish rules to allow payment of taxes by check or money order payable to the "United States Treasury". (House bill)

    4. Clarify that the Secretary of Treasury may prescribe the manner of making any election by any reasonable means. (House bill)

    5. Require all IRS notices and correspondence to include the name, phone number, and address of an IRS employee the taxpayer should contact regarding the notice. To the extent practicable and if advantageous to the taxpayer, one IRS employee should be assigned to handle a matter until resolved.

    6. Provide that the use of pseudonyms by IRS employees may not be approved merely at the employee's request. The employee must provide justification (e.g., personal safety) and management must agree.

    7. Provide that in any matter involving the submission of a substantive legal matter involving a specific taxpayer to the national office by the field (e.g., Technical Advice), the taxpayer may exclude field office personnel from the taxpayer's conference of right with the national office.

    8. In order to protect innocent taxpayers who may be mislabeled as "illegal tax protesters", prohibit the IRS from labeling taxpayers as "illegal tax protesters" (or any similar label) and from maintaining lists of such individuals. This proposal does not affect the ability of the IRS to label a taxpayer as a "potentially dangerous taxpayer". The IRS may keep track of non-filers. However, if a taxpayer is current for 2 years in filing and paying taxes, then the taxpayer should be removed from the non-filer list. Require the Treasury Inspector General to annually report to Congress on whether the IRS is in compliance.

    9. Modify section 6103 to allow the Chairmen of the tax writing committees to obtain data from IRS employees regarding employee and taxpayer abuse.

    10. Require the IRS to publish local addresses and phone numbers in appropriate directories.

    11. Authorize the IRS to approve alternatives to social security numbers to identify tax return preparers.

    12. Allow states to intercept federal tax refunds of its residents for state income tax liabilities reduced to a final judgment.

    13. Provide for a moratorium regarding Notice 98-11 so that no temporary or final regulations with respect to Notice 98-11 may be implemented prior to 6 months after date of enactment.

    14. Include a Sense of the Senate that: (1) Notice 98-11 (and regulations thereunder) should be withdrawn and that Congress, not Treasury should determine international tax policy; and (2) Treasury should limit any regulations issued under Notice 98-5 to the specific transactions described therein.

N. Studies

    1. Require the Joint Tax Committee and Treasury to separately study the administration and implementation of penalties and interest. The report is due 9 months after date of enactment. (House bill - modified)

    2. Require the Joint Tax Committee and Treasury to separately study the scope and use of taxpayer confidentiality provisions including the Freedom of Information Act. The report is due within 1 year after date of enactment. (House bill - modified)

    3. Require the Treasury to study the effect of extending from January 31st to February 15th, the deadline for providing taxpayers with information returns. The report is due 9 months after date of enactment.

VII. Congressional Accountability

A. Include a sense of the Congress that the IRS should place a high priority on resolving century date computing problems.

B. Require the IRS to annually report to the tax writing committees an analysis of the sources of complexity of administering the Federal tax laws. The analysis may include an analysis of: (1) frequently asked questions; (2) common errors; (3) areas of law which frequently result in disagreement between taxpayers and the IRS; (4) major areas of law which are uncertain or lack published guidance; (5) areas in which revenue officers make frequent errors; (6) impact of recent legislation on complexity; and (7) IRS forms - including the time to complete and the number of taxpayers who use each form.

C. Require Joint Tax (in consultation with the IRS and Treasury) to include in each report for legislation a tax complexity analysis of tax provisions which have widespread applicability to individual or small business taxpayers. The analysis would be included in any Committee Report or Conference Report and should include an estimate of the number of taxpayers affected and, if applicable, the income level of affected taxpayers. The analysis should also include, if determinable, the following items: (1) the extent tax forms would require revision; (2) the extent taxpayers would be required to keep additional records; (3) the estimated compliance cost to taxpayers; (4) the extent regulations would be modified; (5) the extent the provision would result in disagreements between taxpayers and the IRS; and (6) any expected impact on the IRS relating to internal training, revision of the Internal Revenue Manual, computer reprogramming, and diversion of resources in response to the provision.

VIII. Revenue Provisions

A. Clarify deduction for deferred compensation to provide that no amount shall be treated as received by the employee, or paid, until it is actually received by the employee.

B. Modify foreign tax credit carryback period from 2 years to 1 year and the carryforward period from 5 years to 7 years.

C. Clarify and expand the math error assessment procedures. If the Taxpayer Identification Number ("TIN") provided on the taxpayer's return differs with Treasury's records, it shall be treated as omitted and math error procedures will apply.

D. Limit the tax benefits for certain grandfathered paired-share real estate investment trusts ("REITs") with respect to real property acquired after March 26, 1998.

E. Provide that certain customer receivables are ineligible for mark-to-market treatment.

F. Add vaccine against rotavirus gastroenteritis to the list of taxable vaccines.

IX. Technical Corrections

The bill includes a package of technical corrections.

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