Fairness in IRS Debt Payment Act of 1999

Summary: Fairness in IRS Debt Payment Act of 1999 - Amends the Internal Revenue Code to compute interest on the tax portion of underpayments annually (currently daily). 
Allocates payments for taxable period underpayments equally among such periods or as directed by the taxpayer. 
Prohibits the Secretary of the Treasury from modifying certain voluntary installment agreements other than for reasons of nonpayment. 
Requires abatement of aggregate tax interest and penalties in excess of the amount of such tax. 
Requires the Secretary to: (1) prescribe penalty abatement guidelines; and (2) provide a requesting taxpayer with a written explanation for nonabatement of a penalty.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fairness in IRS Debt Payment Act of 
1999''.

SEC. 2. INTEREST ON TAX PORTION OF UNDERPAYMENT TO BE COMPOUNDED 
              ANNUALLY.

    (a) In General.--Section 6622 of the Internal Revenue Code of 1986 
(relating to interest compounded daily) is amended by adding at the end 
the following new subsection:
    ``(c) Interest on Tax Portion of Underpayment To Be Compounded 
Annually.--
            ``(1) In general.--In the case of interest or other amount 
        referred to in subsection (a) which is required to be paid by 
        the taxpayer, such interest and such amount shall be compounded 
        annually. The preceding sentence shall only apply to the extent 
        that the amount on which such interest and amount are imposed 
        is tax.
            ``(2) Interest and penalties not treated as tax.--
        Notwithstanding sections 6601(e) and 6665, interest and 
        additions to the tax, additional amounts, and penalties 
        provided by chapter 68 shall not be treated as tax for purposes 
        of paragraph (1).
            ``(3) Allocation of payments.--For purposes of paragraph 
        (1), payments on any underpayment shall be allocated first to 
        amounts which are not treated as tax under paragraph (2) and 
        then to amounts of tax.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to interest for periods after December 31, 1999.

SEC. 3. ALLOCATION OF PAYMENTS TO UNDERPAYMENTS.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7527. ALLOCATION OF PAYMENTS TO UNDERPAYMENTS.

    ``In the case of a taxpayer having underpayments for more than 1 
taxable period, payments by the taxpayer against those underpayments 
shall be allocated by the Secretary of the Treasury equally among such 
underpayments or in such other manner as may be directed by the 
taxpayer.''
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
such Code is amended by adding at the end the following new item:

                              ``Sec. 7527. Allocation of payments to 
                                        underpayments.''
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 1999.

SEC. 4. PROHIBITION ON MODIFICATION OF INSTALLMENT AGREEMENTS.

    (a) In General.--Section 6159 of the Internal Revenue Code of 1986 
(relating to agreements for payment of tax liability in installments) 
is amended by redesignating subsections (d) and (e) as subsection (e) 
and (f), respectively, and by inserting after subsection (c) the 
following new subsection:
    ``(d) Prohibition of Certain Modifications of Installment 
Agreements.--If the Secretary enters into an installment agreement with 
a taxpayer under this section (other than under subsection (c))--
            ``(1) such agreement shall serve as a closing agreement 
        with respect to the amount of the liability specified in the 
        installment agreement for the periods to which such liability 
        relates, and
            ``(2) except as provided in subsection (b)(2), such 
        installment agreement may not be altered, modified, or 
        terminated other than by reason of a failure to make a timely 
        payment of any installment under such agreement.''
    (b) Conforming Amendments.--
            (1) Subsection (b) of section 6159 of such Code is amended 
        by striking paragraphs (3) and (4) and by redesignating 
        paragraph (5) as paragraph (3).
            (2) Paragraph (3) of section 6159(b) of such Code (as 
        redesignating by paragraph (1)) is amended by striking ``, (3), 
        or (4)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to agreements entered into after December 31, 1999.

SEC. 5. LIMITATION ON AGGREGATE INTEREST AND PENALTIES.

    (a) In General.--Section 6404 of the Internal Revenue Code of 1986 
(relating to abatements) is amended by adding at the end the following 
new subsection:
    ``(j) Abatement of Excessive Interest and Penalties.--
            ``(1) In general.--The Secretary shall abate the excessive 
        portion of interest and penalties.
            ``(2) Excessive portion.--The excessive portion of interest 
        and penalties is the amount by which the aggregate interest, 
        penalties, and additions to the tax with respect to any tax 
        exceeds the amount of such tax.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 6. GUIDELINES AND CRITERIA FOR PENALTY ABATEMENT; REQUIRED 
              EXPLANATION OF REFUSAL TO ABATE PENALTIES.

    (a) In General.--Section 6404 of the Internal Revenue Code of 1986 
(relating to abatements) is amended by adding at the end the following 
new subsection:
    ``(k) Guidelines and Criteria for Penalty Abatement; Required 
Explanation of Refusal To Abate Penalties.--
            ``(1) Guidelines and criteria.--The Secretary shall 
        prescribe guidelines and criteria which will be used by the 
        Secretary in determining whether to abate any penalty or 
        addition to the tax.
            ``(2) Explanations.--If--
                    ``(A) a taxpayer requests (in such form and manner 
                as the Secretary prescribes) that the Secretary abate 
                any portion of a penalty or an addition to the tax, and
                    ``(B) the Secretary does not grant such request in 
                full,
        the Secretary shall provide a written explanation to the 
        taxpayer of the reason for not granting such request.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.