A bill to amend the Internal Revenue Code of 1986 to preserve taxpayers' rights to administrative appeal of deficiency determinations, and for other purposes.

Summary: This bill amends the Internal Revenue Code to establish new procedures and requirements for administrative appeals of Internal Revenue Service (IRS) deficiency determinations.  If the IRS determines that there is a deficiency with respect to a tax imposed, it may send a notice of deficiency to a taxpayer after:    the taxpayer has been issued a letter of proposed deficiency that explains the basis for the determination of deficiency and provides an opportunity for administrative review in the IRS Office of Appeals; and  either: (1) the time provided in the letter for contacting the office has expired and the taxpayer has not contacted the office, or (2) the office has issued a decision with respect to the deficiency.   The bill includes exceptions to these requirements for frivolous tax positions and issues in cases designated for litigation.  The IRS must permit a taxpayer to appeal a deficiency prior to issuing a deficiency notice if 60 or fewer days remain on the statute of limitations and the taxpayer agrees to extend the period for 12 months.  The bill modifies appeals dispute resolution procedures. It also restricts the authority of the IRS to: (1) designate cases for litigation without permitting an appeal, or (2) offer settlement agreements that preclude an appeal.  The bill modifies the authority of the IRS to issue a summons and limits the access that people outside of the IRS have to returns and return information acquired by a summons. 

PROCEDURES.

    Subsection (a) of section 7123 of the Internal Revenue Code of 1986 
is amended to read as follows:
    ``(a) Referral to Appeals Procedures.--The Secretary shall 
prescribe procedures by which any taxpayer may request--
            ``(1) early referral of 1 or more unresolved issues from 
        the examination or collection division to the Internal Revenue 
        Service Office of Appeals, or
            ``(2) consideration by such Office of Appeals of issues 
        included in--
                    ``(A) a letter of proposed deficiency described in 
                section 6212(a)(2)(A), or
                    ``(B) a notice of deficiency pursuant to section 
                6212, whether or not the taxpayer has filed a petition 
                with the Tax Court pursuant to section 6213(a), a claim 
                for refund, or a suit in a district court or the United 
                States Court of Federal Claims with respect to such 
                issues.
        Such regulations may limit such procedures in cases involving 
        solely the failure or refusal to comply with the tax laws 
        because of moral, religious, political, constitutional, 
        conscientious, or similar grounds, or for other positions 
        listed as frivolous under section 6702(c). Such procedures 
        shall not be available in the case of issues designated for 
        litigation in accordance with section 7124.''.

SEC. 3. RESTRICTION ON SECRETARIAL AUTHORITY TO DESIGNATE CASES FOR 
              LITIGATION.

    (a) In General.--Chapter 74 of the Internal Revenue Code of 1986 is 
amended by redesignating section 7124 as section 7125 and by inserting 
after section 7123 the following new section:

``SEC. 7124. RESTRICTION ON SECRETARIAL AUTHORITY TO DESIGNATE CASES 
              FOR LITIGATION.

    ``(a) In General.--The Secretary may designate issues arising from 
the examination or collection division for litigation, and not permit 
the taxpayer to request consideration of such issues by the Internal 
Revenue Service Office of Appeals under section 7123(a), only to the 
extent such issues relate to listed transactions (as defined in section 
6707A(c)(2)).
    ``(b) Settlement.--In offering terms under a settlement agreement 
for purposes of the resolution of any issues arising from the 
examination or collection division, the Secretary may offer terms that 
preclude the taxpayer from requesting consideration of such issues by 
the Office of Appeals under section 7123(a) only to the extent such 
issues relate to listed transactions (as defined in section 
6707A(c)(2)).''.
    (b) Clerical Amendment.--The table of sections for chapter 74 of 
the Internal Revenue Code of 1986 is amended by striking the item 
relating to section 7124 and inserting the following new items:

``Sec. 7124. Restriction on Secretarial authority to designate cases 
                            for litigation.
``Sec. 7125. Cross references.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the designation of issues for litigation, and offers of 
settlement terms, after April 20, 2016.

SEC. 4. MODIFICATION OF AUTHORITY TO ISSUE DESIGNATED SUMMONS.

    (a) In General.--Paragraph (1) of section 6503(j) of the Internal 
Revenue Code of 1986 is amended by striking ``coordinated examination 
program'' and inserting ``coordinated industry case program''.
    (b) Designated Summons.--Clause (i) of section 6503(j)(2)(A) of the 
Internal Revenue Code of 1986 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 Large Business and 
                        International Division Commissioner and the 
                        Division Counsel of the Office of Chief Counsel 
                        (or their successors)--
                                    ``(I) which clearly establishes 
                                that the taxpayer did not reasonably 
                                cooperate with reasonable requests by 
                                the Secretary for witnesses, documents, 
                                meetings, and interviews, and
                                    ``(II) which is attached to such 
                                summons,''.
    (c) Burden of Proof.--Subsection (j) of section 6503 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(4) Burden of proof.--In any court proceeding described 
        in paragraph (3), the Secretary shall bear the burden of 
        proving that the corporation described in paragraph (1) did not 
        reasonably cooperate with reasonable requests by the Secretary 
        for witnesses, documents, meetings, and interviews.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to summonses issued after April 20, 2016.

SEC. 5. LIMITATION ON ACCESS OF NON-IRS EMPLOYEES TO RETURNS AND RETURN 
              INFORMATION ACQUIRED BY SUMMONS.

    (a) In General.--Section 7602 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Limitation on Access of Persons Other Than IRS Officers and 
Employees.--The authority granted under this section may not be 
delegated, directly or indirectly, to any person authorized to receive 
returns and return information under section 6103(n).''.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by this section shall take effect on the date of 
        the enactment of this Act.
            (2) Application to contracts in effect.--The amendment made 
        by this section shall apply to any contract in effect under 
        section 6103(n) of the Internal Revenue Code of 1986, pursuant 
        to temporary Treasury Regulation section 301.7602-1T proposed 
        in Internal Revenue Bulletin 2014-28 or any similar or 
        successor regulation, that is in effect on the date of the 
        enactment of this Act.