Taxpayer Bill of Rights III

Summary: Taxpayer Bill of Rights III - Amends the Internal Revenue Code to, among other things:  (1) place the burden of proof, with respect to any factual issue relevant to ascertaining tax liability, on the Secretary of the Treasury; (2) require the Internal Revenue Service (IRS), upon the request of a taxpayer, to provide a taxpayer with a written transcript of any oral advice; (3) direct the Secretary to establish an office within the IRS to receive taxpayer suggestions and complaints; (4) direct the Secretary to establish a mediation service within the IRS; (5) prohibit the use of random audits and investigation quotas; and (6) in a court proceeding, make IRS employees personally liable under specified circumstances.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Taxpayer Bill of Rights III''.

SEC. 2. BURDEN OF PROOF.

    (a) In General.--Chapter 76 of the Internal Revenue Code of 1986 
(relating to judicial proceedings) is amended by adding at the end the 
following new subchapter:

                    ``Subchapter E--Burden of Proof

                              ``Sec. 7491. Burden of proof.

``SEC. 7491. BURDEN OF PROOF.

    ``The Secretary shall have the burden of proof in any court 
proceeding with respect to any factual issue relevant to ascertaining 
the tax liability of a taxpayer and the assessment and collection of 
any such tax.''
    (b) Conforming Amendments.--
            (1) Section 6201 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
            (2) The table of subchapters for chapter 76 is amended by 
        adding at the end the following new item:

                              ``Subchapter E. Burden of proof.''
    (c) Effective Date.--The amendments made by this section shall 
apply to court proceedings arising in connection with examinations 
commencing after the date of the enactment of this Act.

SEC. 3. TAXPAYER RELIANCE ON ORAL ADVICE PROVIDED BY THE INTERNAL 
              REVENUE SERVICE.

    (a) In General.--Subsection (f) of section 6404 of the Internal 
Revenue Code of 1986 is amended--
            (1) in the heading, by striking ``Written'',
            (2) in paragraph (2)(A), by striking ``specific written 
        request'' and inserting ``specific request'',
            (3) by redesignating paragraph (3) as paragraph (4) and by 
        inserting after paragraph (2) the following new paragraph:
            ``(3) Oral requests for advice.--Upon request by a 
        taxpayer, any officer or employee of the Internal Revenue 
        Service who provides advice orally in response to a specific 
        request of the taxpayer shall provide such taxpayer with a 
        transcript or other written evidence of such advice.''
    (b) Effective date.--The amendments made by subsection (a) shall 
apply to advice provided after 180 days after the date of the enactment 
of this Act.

SEC. 4. JEOPARDY.

    (a) In General.--Section 6861 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Affidavit Requirement.--No assessment may be made under this 
section unless such assessment is based on affidavits of not less than 
2 officers or employees of the Internal Revenue Service. Each such 
officer or employee shall make an independent evaluation of the 
situation giving rise to assessment under this section.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to assessments made after the date of the enactment of this Act.

SEC. 5. TAXPAYER SUGGESTIONS AND COMPLAINTS WITHOUT RETRIBUTION.

    (a) Establishment of Office.--Not later than 180 days after the 
date of the enactment of this Act, the Secretary of the Treasury or the 
Secretary's delegate shall establish an office within the Internal 
Revenue Service to receive taxpayer suggestions and complaints.
    (b) Confidentiality of Information.--No information identifying a 
problem within the Internal Revenue Service provided by a taxpayer to 
the office established under subsection (a) may be used by the Internal 
Revenue Service, including selecting such taxpayer for audit.

SEC. 6. MEDIATION OF TAX DISPUTES.

    Not later than 180 days after the date of the enactment of this 
Act, the Secretary of the Treasury or the Secretary's delegate shall 
establish a mediation service within the Internal Revenue Service. Such 
service shall, upon request of a taxpayer, provide an individual to 
mediate disputes between the taxpayer and the Internal Revenue Service 
regarding tax liability of the taxpayer and the assessment and 
collection of such tax.

SEC. 7. STRICT LIABILITY FOR ERRORS BY THE INTERNAL REVENUE SERVICE.

    (a) Failure To Release Lien.--Section 7432(a) of the Internal 
Revenue Code of 1986 (relating to civil damages for failure to release 
lien) is amended by striking ``knowingly, or by reason of 
negligence,''.
    (b) Unauthorized Collection Actions.--
            (1) In general.--Section 7433 of such Code (relating to 
        civil damages for certain unauthorized collection actions) is 
        amended to read as follows:

``SEC. 7433. CIVIL DAMAGES FOR UNAUTHORIZED ACTIONS.

    ``(a) In General.--If, in connection with any collection of Federal 
tax with respect to a taxpayer, any officer or employee of the Internal 
Revenue Service disregards any provision of this title, or any 
regulation promulgated under this title, such taxpayer may bring a 
civil action for damages against the United States in a district court 
of the United States. Except as provided in section 7432, such civil 
action shall be the exclusive remedy for recovering damages resulting 
from such actions.
    ``(b) Damages.--In any action brought under subsection (a), upon a 
finding of liability on the part of the defendant, the defendant shall 
be liable to the plaintiff in an amount equal to the lesser of 
$1,000,000 or the sum of--
            ``(1) actual, direct economic damages sustained by the 
        plaintiff as a proximate result of the reckless or intentional 
        actions of the officer or employee, and
            ``(2) the costs of the action.
    ``(c) Payment Authority.--Claims pursuant to this section shall be 
payable out of funds appropriated under section 1304 of title 31, 
United States Code.
    ``(d) Limitations.--
            ``(1) Award for damages may be reduced if administrative 
        remedies not exhausted.--The amount of damages awarded under 
        subsection (b) may be reduced if the court determines that the 
        plaintiff has not exhausted the administrative remedies 
        available to such plaintiff within the Internal Revenue 
        Service.
            ``(2) Mitigation of damages.--The amount of damages awarded 
        under subsection (b)(1) shall be reduced by the amount of such 
        damages which could have reasonably been mitigated by the 
        plaintiff.
            ``(3) Period for bringing action.--Notwithstanding any 
        other provision of law, an action to enforce liability created 
        under this section may be brought without regard to the amount 
        in controversy and may be brought only within 2 years after the 
        date the right of action accrues.''
            (2) Clerical amendment.--The item in the table of sections 
        for subchapter B of chapter 76 of such Code relating to section 
        7433 is amended to read as follows:

                              ``Sec. 7433. Civil damages for 
                                        unauthorized actions.''
    (c) Effective Date.--The amendments made by this section shall 
apply to actions of officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 8. PROHIBITION ON USE OF RANDOM AUDITS.

    Section 7602 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(e) Prohibition on Use of Random Audits.--The Secretary shall not 
use random examination techniques to determine the existence of 
unreported income of any taxpayer.''

SEC. 9. PERSONAL LIABILITY OF INTERNAL REVENUE SERVICE EMPLOYEES.

    (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 7437 as section 7438 and inserting 
after section 7436 the following new section:

``SEC. 7437. PERSONAL LIABILITY OF INTERNAL REVENUE SERVICE EMPLOYEES.

    ``In any proceeding under this title in which the prevailing party 
(as defined in section 7430) is awarded a judgment for reasonable 
litigation costs under such section, the court may assess a portion of 
such costs against any Internal Revenue Service officer or employee, 
who shall not be reimbursed by the United States for the costs so 
assessed, if the court determines that such proceeding resulted from 
actions of such officer or employee outside established Internal 
Revenue Service protocol.''
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 76 of such Code is amended by striking the item relating to 
section 7437 and inserting the following:

                              ``Sec. 7437. Personal liability of 
                                        Internal Revenue Service 
                                        employees.
                              ``Sec. 7438. Cross References.''
    (c) Effective Date.--The amendments made by this section shall 
apply to actions of officers and employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 10. PROHIBITION ON USE OF QUOTAS.

    Officers and employees of the Internal Revenue Service may not 
establish, and shall not be subject to, any quota regarding the 
initiation of investigations or otherwise determining the taxpayers 
found to be delinquent in filing their returns of tax or in remitting 
their taxes.