Internal Revenue Service Accountability Act

Summary: Internal Revenue Service Accountability Act - Amends the Internal Revenue Code to impose a fine or imprisonment upon any U.S. officer or employee who willfully and maliciously disregards any revenue law or related regulation relating to any proceeding against a taxpayer. 
Allows, if litigation costs are awarded, a portion of the costs to be assessed against any current or former Internal Revenue Service officer or employee (prohibiting Government reimbursement) if the proceeding resulted from any arbitrary, capricious, or malicious act of the officer or employee.  Allows Government defense of the officer or employee, but makes the officer or employee liable for defense costs if the employee is found liable for litigation costs.  Imposes similar liabilities regarding civil damages for a failure to release a lien or for certain unauthorized collection actions. 
Amends provisions allowing civil damages for disclosure of returns and return information to allow the damages for access as well as disclosure and apply the provisions to former as well as current officers and employees. Provides for dismissal from office or discharge from employment, a fine or imprisonment, and costs of prosecution for unauthorized access. Prohibits unauthorized access and, on discovery of unauthorized access, requires immediate taxpayer notification. 
Requires reasonable justification (not random selection) for examining a return.  Prohibits, except on court approval, a second examination of a return or extending an examination back beyond three taxable years. 
Extends from 21 to 90 calendar days after notice and demand the deadline to pay a tax required to be shown on certain returns but not shown. 
Allows a district court to rule on a decision by the Secretary of the Treasury to not acquiesce regarding conclusions of law in identical, similar, or previously-decided cases. 
Requires court consent for a levy to collect a tax. 
Prohibits interest on assessable penalties, additional amounts, or additions to tax. 
Sets the interest rate for overpayments and underpayments (the same rate for both). 
Modifies requirements regarding abatement of interest, penalties, additional amounts, or additions to tax attributable to a mathematical or clerical error.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internal Revenue Service 
Accountability Act''.

SEC. 2. CRIMINAL PENALTY FOR CERTAIN UNAUTHORIZED ACTIONS.

    (a) In General.--Section 7214 of the Internal Revenue Code of 1986 
(relating to offenses by officers and employees of the United States) 
is amended--
            (1) by striking ``or'' at the end of paragraph (8),
            (2) by adding ``or'' at the end of paragraph (9),
            (3) by inserting after paragraph (9) the following new 
        paragraph:
            ``(10) who willfully and maliciously disregards such law, 
        or any regulation promulgated under such law, relating to any 
        proceeding against any taxpayer;'', and
            (4) by striking ``$10,000, or imprisoned not more than 5 
        years, or both'' and inserting ``$10,000 ($1,000, in the case 
        of an offense under paragraph (10)), or imprisoned not more 
        than 5 years (1 year, in the case of an offense under paragraph 
        (10), or both''.
    (b) Effective Date.--The amendments made by this section shall 
apply to actions by officers or employees after the date of the 
enactment of this Act.

SEC. 3. INTERNAL REVENUE SERVICE EMPLOYEES PERSONALLY LIABLE FOR 
              DAMAGES AND LITIGATION COSTS IN CERTAIN CASES.

    (a) Litigation Costs.--Section 7430 of the Internal Revenue Code of 
1986 (relating to awarding of costs and certain fees) is amended by 
adding at the end the following new subsection:
    ``(g) Personal Liability of Internal Revenue Service Officers and 
Employees in Certain Cases.--
            ``(1) In general.--In any proceeding in which the 
        prevailing party is awarded a judgment for reasonable 
        litigation costs under this section, the court may assess a 
        portion of such costs against any Internal Revenue Service 
        officer or employee (and such officer or employee shall not be 
        reimbursed by the United States for the costs so assessed) if 
        the court determines that such proceeding resulted from any 
        arbitrary, capricious, or malicious act of such officer or 
        employee. For purposes of this section, the term `officer or 
        employee' includes a former officer or employee.
            ``(2) Representation of officer or employee.--Upon the 
        request of any Internal Revenue Service officer or employee, 
        such officer or employee may be represented by the United 
        States in any proceeding with respect to the issue of whether 
        there is to be an assessment against such officer or employee 
        under paragraph (1). If, in any case in which such an officer 
        or employee is so represented by the United States, it is 
        finally determined that such officer or employee is liable for 
        an assessment under paragraph (1), such officer or employee 
        shall also be liable to repay the United States for the costs 
        of its representation under this paragraph.''.
    (b) Civil Damages and Court Costs for Failure To Release Lien.--
Section 7432 of the Internal Revenue Code of 1986 (relating to civil 
damages for failure to release lien) is amended by adding at the end 
the following new subsection:
    ``(f) Personal Liability of Internal Revenue Service Officers and 
Employees in Certain Cases.--
            ``(1) In general.--In any proceeding in which the 
        prevailing plaintiff is awarded a judgment under this section 
        for damages described in subsection (b), the court may assess a 
        portion of such damages against any Internal Revenue Service 
        officer or employee (and such officer or employee shall not be 
        reimbursed by the United States for the damages so assessed) if 
        the court determines that such proceeding resulted from any 
        arbitrary, capricious, or malicious act of such officer or 
        employee. For purposes of this section, the term `officer or 
        employee' includes a former officer or employee.
            ``(2) Representation of officer or employee.--Upon the 
        request of any Internal Revenue Service officer or employee, 
        such officer or employee may be represented by the United 
        States in any proceeding with respect to the issue of whether 
        there is to be an assessment against such officer or employee 
        under paragraph (1). If, in any case in which such an officer 
        or employee is so represented by the United States, it is 
        finally determined that such officer or employee is liable for 
        an assessment under paragraph (1), such officer or employee 
        shall also be liable to repay the United States for the costs 
        of its representation under this paragraph.''.
    (c) Civil Damages and Court Costs for Certain Unauthorized 
Collection Actions.--Section 7433 of the Internal Revenue Code of 1986 
(relating to civil damages for certain unauthorized collection actions) 
is amended by adding at the end the following new subsection:
    ``(e) Personal Liability of Internal Revenue Service Officers and 
Employees in Certain Cases.--
            ``(1) In general.--In any proceeding in which the 
        prevailing plaintiff is awarded a judgment for damages 
        described in subsection (b), the court may assess a portion of 
        such damages against any Internal Revenue Service officer or 
        employee (and such officer or employee shall not be reimbursed 
        by the United States for the damages so assessed) if the court 
        determines that such proceeding resulted from any arbitrary, 
        capricious, or malicious act of such officer or employee. For 
        purposes of this section, the term `officer or employee' 
        includes a former officer or employee.
            ``(2) Representation of officer or employee.--Upon the 
        request of any Internal Revenue Service officer or employee, 
        such officer or employee may be represented by the United 
        States in any proceeding with respect to the issue of whether 
        there is to be an assessment against such officer or employee 
        under paragraph (1). If, in any case in which such an officer 
        or employee is so represented by the United States, it is 
        finally determined that such officer or employee is liable for 
        an assessment under paragraph (1), such officer or employee 
        shall also be liable to repay the United States for the costs 
        of its representation under this paragraph.''.
    (d) Effective Date.--The amendments made by this section shall 
apply in the case of proceedings commenced after the date of the 
enactment of this Act.

SEC. 4. PROTECTING THE PRIVACY OF TAXPAYERS.

    (a) Civil Penalty for Unauthorized Access of Returns and Return 
Information.--Section 7431 of the Internal Revenue Code of 1986 
(relating to civil damages for unauthorized disclosure of returns and 
return information) is amended--
            (1) by inserting ``or accesses'' after ``discloses'' in 
        subsection (a)(1),
            (2) by inserting ``or Access'' after ``Disclosure'' in the 
        heading for subsection (a)(1),
            (3) by inserting ``(or former officer or employee)'' after 
        ``officer or employee'' both places it appears in subsection 
        (a),
            (4) by inserting ``or access'' after ``disclosure'' each 
        place it appears in subsections (b), (c)(1), and (d),
            (5) by inserting ``the earlier of notification to or'' 
        after ``after the date of'' in subsection (d), and
            (6) by inserting ``or access'' after ``disclosure'' in the 
        heading.
    (b) Criminal Penalty for Unauthorized Access of Returns and Return 
Information.--Section 7213(a)(1) of the Internal Revenue Code of 1986 
(relating to Federal employees and other persons) is amended--
            (1) by striking ``this paragraph'' and inserting ``this 
        subparagraph'',
            (2) by striking ``It shall be unlawful'' and inserting the 
        following:
                    ``(A) Disclosure.--It shall be unlawful'', and
            (3) by adding at the end the following new subparagraph:
                    ``(B) Access.--It shall be unlawful for any 
                officer, employee, or other person described in 
                subparagraph (A) willfully to access without 
                authorization any return or return information (as 
                defined in section 6103(b)). Any violation of this 
                subparagraph shall be punishable by dismissal from 
                office or discharge from employment and, further, shall 
                be a misdemeanor punishable upon conviction by a fine 
                in any amount not exceeding $1,000, or imprisonment of 
                not more than 1 year, or both, together with costs of 
                prosecution, and, if necessary, by dismissal from 
                office or discharge from employment.''.
    (c) Notification of Unauthorized Access.--Section 6103 of the 
Internal Revenue Code of 1986 (relating to confidentiality and 
disclosure of returns and return information) is amended by 
redesignating subsection (q) as subsection (r) and by inserting after 
subsection (p) the following new subsection:
    ``(q) Unauthorized Access Prohibited.--
            ``(1) In general.--Except as authorized by this title, no 
        officer or employee (or former officer or employee) of the 
        United States shall access any return or return information.
            ``(2) Notification.--Upon discovery that a taxpayer's 
        return or return information has been accessed in violation of 
        paragraph (1), the taxpayer shall be notified immediately.''.
    (d) Conforming Amendment.--The table of sections for subchapter B 
of chapter 76 of the Internal Revenue Code of 1986 is amended by 
inserting ``or access'' after ``disclosure'' in the item relating to 
section 7431.
    (e) Effective Date.--The amendments made by this section shall 
apply to actions by officers or employees after the date of the 
enactment of this Act.

SEC. 5. LIMITATIONS ON EXAMINATIONS.

    (a) In General.--Section 7602 of the Internal Revenue Code of 1986 
(relating to examination of books and witnesses) is amended by adding 
at the end the following new subsection:
    ``(d) Limitations on Authority To Examine.--In taking any action 
under subsection (a), the Secretary--
            ``(1) shall demonstrate, upon demand of any person 
        described in subsection (a), reasonable justification (and not 
        random selection) for initiating an examination of a return, 
        and
            ``(2) shall not--
                    ``(A) initiate an examination of a return or issue 
                of a return if such return or issue of a return has 
                previously been examined, or
                    ``(B) extend back an examination under subsection 
                (a), once initiated, beyond a 3-taxable-year period 
                ending on the day before the beginning of the taxable 
                year which includes the date of initiation,
        except upon court approval if in the course of an investigation 
        into possible criminal activity.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to examinations initiated after the date of the enactment of this Act.

SEC. 6. EXTENSION OF TIME TO PAY TAX AFTER NOTICE AND DEMAND.

    (a) In General.--Section 6651(a)(3) of the Internal Revenue Code of 
1986 (relating to addition to the tax) is amended by striking ``21 
calendar days'' and inserting ``90 calendar days''.
    (b) Effective Date.--The amendment made by this section shall apply 
to notices and demands given after the date of the enactment of this 
Act.

SEC. 7. ENSURING THE INTEGRITY OF JUDICIAL PROCEEDINGS.

    (a) In General.--Subchapter B of chapter 76 of the Internal Revenue 
Code of 1986 (relating to proceedings by taxpayers and third parties) 
is amended by redesignating section 7436 as section 7437 and by 
inserting after section 7435 the following new section:

``SEC. 7436. DECLARATORY JUDGMENTS RELATING TO SECRETARIAL 
              NONACQUIESCENCE.

    ``In a case of actual controversy involving the Secretary's 
decision to not acquiesce with respect to conclusions of law in 
identical or similar cases to a case or cases previously decided within 
the same court jurisdiction or appellate circuit, upon the filing of an 
appropriate pleading and the exhaustion of administrative remedies 
available to the petitioner within the Internal Revenue Service, the 
district court for such jurisdiction may make a declaration with 
respect to the Secretary's decision. Any such declaration shall have 
the force and effect of a final judgment or decree of the district 
court and shall be reviewable as such.''.
    (b) Conforming Amendment.--The table of sections for such 
subchapter B is amended by striking the item relating to section 7436 
and inserting the following new items:

                              ``Sec. 7436. Declaratory judgments 
                                        relating to secretarial 
                                        nonacquiescence.
                              ``Sec. 7437. Cross references.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to court proceedings initiated after the date of the enactment of 
this Act.

SEC. 8. LIMITATIONS ON ASSET SEIZURES AND LEVIES.

    (a) In General.--Section 6331(a) of the Internal Revenue Code of 
1986 (relating to levy and distraint) is amended by inserting ``, upon 
the consent of an appropriate court,'' after ``it shall be lawful for 
the Secretary''.
    (b) Effective Date.--The amendment made by this section shall apply 
to levies initiated after the date of the enactment of this Act.

SEC. 9. NO INTEREST ON PENALTIES, ADDITIONAL AMOUNTS, AND ADDITIONS TO 
              TAX.

    (a) In General.--Section 6601(e)(2) of the Internal Revenue Code of 
1986 (relating to applicable rules) is amended to read as follows:
            ``(2) No interest on penalties, additional amounts, and 
        additions to tax.--Interest shall not be imposed under 
subsection (a) in respect of any assessable penalty, additional amount, 
or addition to tax.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to notices and demands given after the date of the enactment of this 
Act.

SEC. 10. INTEREST RATE FOR OVERPAYMENTS TO EQUAL RATE FOR 
              UNDERPAYMENTS.

    (a) In General.--Section 6621(a) of the Internal Revenue Code of 
1986 (relating to determination of rate of interest) is amended to read 
as follows:
    ``(a) General Rule.--The overpayment rate and the underpayment rate 
established under this section shall be the Federal short-term rate 
determined under subsection (b).''.
    (b) Conforming Amendment.--Section 6621 of the Internal Revenue 
Code of 1986 (relating to determination of rate of interest) is amended 
by striking subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply for purposes of determining interest to periods after the date of 
the enactment of this Act.

SEC. 11. FAIRNESS WHEN COLLECTING A TAX DUE TO MATHEMATICAL AND 
              CLERICAL ERRORS.

    (a) In General.--Section 6404(d) of the Internal Revenue Code of 
1986 (relating to abatements) is amended to read as follows:
    ``(d) Abatement of Interest, Penalty, Additional Amount, and 
Addition to Tax Attributable to Certain Mathematical or Clerical 
Errors.--In the case of an assessment of additional tax attributable to 
a mathematical or clerical error (as defined in section 6213(g)(2)), 
the Secretary shall abate any interest, penalty, additional amount, and 
addition to tax with respect to such assessment if, within 60 days 
after notice of such assessment is sent under section 6213(b)(1) by 
certified mail or registered mail, the taxpayer pays, or files a 
request for an abatement of, such assessment.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to notices filed after the date of the enactment of this Act.