TECHNICAL EXPLANATION OF

THE “TAXPAYER FIRST ACT OF 2018”

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

July 19, 2018

JCX-65-18
i

CONTENTS

Page

INTRODUCTION .......................................................................................................................... 1

TITLE I ─ TAXPAYER PROTECTION....................................................................................... 2

A. Protection of Taxpayer Rights.......................................................................................... 2

1. Return preparation programs for applicable taxpayers (sec. 1001 of the bill

and new sec. 7526A of the Code).............................................................................. 2

2. Limit redisclosures and uses of consent-based disclosures of tax return

information (sec. 1002 of the bill and sec. 6103 of the Code)................................... 4

3. Clarification of equitable relief from joint liability (sec. 1003 of the bill and

sec. 6015 of the Code) ............................................................................................... 6

4. Notice from IRS regarding closure of Taxpayer Assistance Centers (sec. 1004

of the bill)................................................................................................................... 8

5. Whistleblower reforms (sec. 1011 of the bill and secs. 6103, 7213, and 7623

of the Code)................................................................................................................ 9

6. Electronic record retention (sec. 1021 of the bill) ................................................... 10

7. Prohibition on rehiring former IRS employees who were involuntarily separated

for misconduct (sec. 1022 of the bill and sec. 7804 of the Code)............................ 12

8. Authority to remove or transfer senior executives who fail in their performance

or engage in serious misconduct (sec. 1023 of the bill and sec. 7804 of the

Code)........................................................................................................................ 14

9. Limitation on access of non-Internal Revenue Service employees to returns

and return information (sec. 1024 of the bill and sec. 7602 of the Code) ............... 17

10. Notification of unauthorized inspection or disclosure of returns and return 

information (sec. 1025 of the bill and sec. 7431 of the Code)................................. 19

11. Mandatory electronic filing for annual returns of exempt organizations

(sec. 1031 of the bill and secs. 6033 and 6104 of the Code) ................................... 20

12. Prohibit the use of IRS funds for political targeting (sec. 1032 of the bill)............. 22

13. Require IRS to notify exempt organizations before revoking exempt status

for failing to file annual returns or notices (sec. 1033 of the bill and sec. 6033(j)

of the Code).............................................................................................................. 22

14. Report on IRS audit criteria (sec. 1041 of the bill).................................................. 25

B. Protection of Taxpayers From Identity Theft and Tax Fraud ........................................ 27

1. Single point of contact for tax-related identity theft victims (sec. 1101

of the bill)................................................................................................................. 27

2. Information on identity theft and tax scams (sec. 1102 of the bill)......................... 28

3. Notification of suspected identity theft (sec. 1103 of the bill and new

sec. 7529 of the Code) ............................................................................................. 28
ii

TITLE II ─ STOLEN IDENTITY FRAUD PREVENTION ....................................................... 31

A. Identity Theft and Tax Refund Fraud Prevention .......................................................... 31

1. Guidelines for stolen identity theft refund fraud cases (sec. 2001 of the bill)......... 31

2. Increased penalty for improper disclosure or use of information by preparers

of returns (sec. 2002 of the bill and sec. 6713 of the Code) .................................... 32

3. Authority to transfer IRS appropriations to combat tax fraud (sec. 2011

of the bill)................................................................................................................. 33

4. Streamlined critical pay authority for information technology positions

(sec. 2012 of the bill) ............................................................................................... 34

5. Access to the National Directory of New Hires to identify and prevent

fraudulent tax return filings and claims for refund (sec. 2013 of the bill)............... 35

6. Repeal of provision regarding certain tax compliance procedures and reports

(sec. 2014 of the bill) ............................................................................................... 36

B. Improvements to Electronic Filing of Tax Returns........................................................ 37

1. Identity protection personal identification numbers (sec. 2101 of the bill)............. 37

2. Electronic filing of returns (sec. 2102 of the bill and sec. 6011 of the Code)......... 38

3. Internet platform for Form 1099 filings (sec. 2103 of the bill) ............................... 39

4. Requirement that electronically prepared paper returns include scannable code

(sec. 2104 of the bill) ............................................................................................... 40

5. Authentication of users of electronic services accounts (sec. 2105 of the bill)....... 41

APPENDIX: ESTIMATED REVENUE EFFECTS OF THE “TAXPAYER FIRST ACT

OF 2018”....................................................................................................................................... 42
1

INTRODUCTION

This document,1 prepared by the staff of the Joint Committee on Taxation, provides a 

technical explanation of the “Taxpayer First Act of 2018.”

 1

 This document may be cited as follows: Joint Committee on Taxation, Technical Explanation of the 

“Taxpayer First Act of 2018,” (JCX-65-18), July 19, 2018. This document can also be found on our website at 

www.jct.gov. 
2

TITLE I ─ TAXPAYER PROTECTION

A. Protection of Taxpayer Rights

1. Return preparation programs for applicable taxpayers (sec. 1001 of the bill and

new sec. 7526A of the Code)

Present Law

The Code2 provides that the Secretary may allocate up to $6 million per year for 

matching grants to certain qualified low-income taxpayer clinics.3 Eligible clinics are those that 

charge no more than a nominal fee to either represent low-income taxpayers in controversies 

with the IRS or provide tax information to individuals for whom English is a second language. 

No clinic can receive more than $100,000 per year.

A qualified low-income taxpayer clinic includes (1) a clinical program at an accredited 

law, business, or accounting school, in which students represent low-income taxpayers, or (2) an 

organization exempt from tax under Code section 501(c) which either represents low-income 

taxpayers or provides referral to qualified representatives. A clinic is treated as representing 

low-income taxpayers if (i) at least 90 percent of the taxpayers represented by the clinic have 

income which does not exceed 250 percent of the poverty level, as determined in accordance 

with criteria established by the Director of the Office of Management and Budget,4 and (ii) the 

amount in controversy for any taxable year is $50,000 or less.5

While the Code does not provide funding for matching grants, funding for such grants 

was provided by the Consolidated Appropriations Act, 2018.6 Congress appropriated 

approximately $2.506 billion to the IRS for taxpayer services, of which not less than $15 million 

is to be made available for a Community Volunteer Income Tax Assistance (“VITA”) matching 

grants program for tax return preparation assistance. VITA is a program created by the IRS in 

1969 which utilizes volunteers to provide tax return preparation and filing service assistance to 

certain low-income taxpayers and members of underserved populations.

Explanation of Provision

The provision codifies the VITA program and provides that the Secretary, unless

otherwise provided by specific appropriation, may allocate from otherwise appropriated funds up 

 2

 All section references herein are to the Internal Revenue Code of 1986, as amended (the “Code”), unless 

otherwise stated.

3

 Sec. 7526.

4

 For a family of four, the 2018 income limit in the 48 contiguous states, Puerto Rico, and the District of 

Columbia is $62,750, available at https://www.irs.gov/advocate/low-income-taxpayer-clinics/low-income-taxpayerclinic-income-eligibility-guidelines.

5

 Sec. 7463.

6

 Pub. L. No. 115-141, Div. E, Title I (March 23, 2018). 
3

to $30 million per year in matching grants to qualified entities for the development, expansion, 

or continuation of qualified tax return preparation programs assisting applicable taxpayers and 

members of underserved populations. The Secretary is authorized to award a multi-year grant 

not to exceed three years.

The grant funds may be used for ordinary and necessary operation costs (including for 

wages or salaries of persons coordinating the activities of the program, to develop training 

materials, conduct training, and perform quality reviews of the returns for which assistance has 

been provided under the program, and for equipment purchases and vehicle-related expenses 

associated with remote or rural tax preparation services), outreach and educational activities 

relating to the eligibility and availability of income supports available through the Code, and 

services related to financial education and capability, asset development, and the establishment 

of savings accounts in connection with tax return preparation.

Matching funds are required to be provided on a dollar-for-dollar basis for all grants 

provided. Matching funds may include: (1) the salary (including fringe benefits) of individuals 

performing services for the program; (2) the cost of equipment used in the program; and (3) other 

ordinary and necessary costs that may be associated with the program. Indirect expenses, 

including general overhead of any entity administering the program are not counted as matching 

funds.

In awarding grants, priority is given to applications that (1) demonstrate assistance to 

certain applicable taxpayers with an emphasis on outreach, (2) demonstrate taxpayer outreach 

and education around available income supports available through the Code, and (3) demonstrate 

specific outreach and focus on one or more underserved populations. 

The provision requires the Secretary to establish procedures for periodic site visits not 

less than once every five calendar years (i) to ensure the program is carrying out the stated 

purpose and (ii) to determine whether the VITA grant program meets certain program adherence 

standards as the Secretary will require. If any qualified return preparation program is awarded a 

grant and is subsequently determined not to meet the adherence standards or not to be carrying 

out the stated purposes, such program will not be eligible for additional grants unless the 

program provides sufficient documentation of corrective measures established to address any 

deficiencies determined.

Qualified return preparation program means any program (1) which provides assistance 

to individuals, at least 90 percent of whom are applicable taxpayers, in preparing and filing 

Federal income tax returns, (2) which is administered by a qualified entity, (3) in which all 

volunteers who assist in the preparation of Federal income tax returns meet the training 

requirements prescribed by the Secretary, and (4) which uses a quality review process which 

reviews 100 percent of all returns. Qualified entity means any entity which (1) is an eligible 

organization (as defined), (2) is in compliance with Federal tax filing and payment requirements, 

(3) is not debarred or suspended from Federal contracts, grants, or cooperative agreements, and 

(4) agrees to provide documentation to substantiate any matching funds provided under the 

VITA grant program. Eligible organization means (1) an institution of higher education 

described in section 102 (other than subsection (a)(1)(C) thereof) of the Higher Education Act of 

1965, as in effect on the date of enactment, and which has not been disqualified from 
4

participating in a program under Title IV of such Act, (2) an exempt organization described in 

Code section 501(c), (3) a local government agency, including a county or municipal

government agency, and (4) an Indian tribe, as defined in section 4(12) of the Native American 

Housing Assistance and Self-Determination Act of 1996 (“Act”), including any tribally 

designated housing entity (as defined in such Act), tribal subsidiary, subdivision, or other wholly 

owned tribal entity, or a local, State, regional, or national coalition (with one lead organization 

which meets the eligibility requirements described above acting as the applicant organization). If 

no eligible organization is available to assist the targeted population or community, the eligible 

organization includes a State government agency and a Cooperative Extension Service office. 

Applicable taxpayer means a taxpayer who has income for the taxable year which does 

not exceed an amount equal to the completed phaseout amount under section 32(b) for a married 

couple filing a joint return with three or more qualifying children, as determined in a revenue 

procedure or other published guidance.7 Underserved population includes populations of 

persons with disabilities, persons with limited English proficiency, Native Americans, 

individuals living in rural areas, members of the Armed Forces and their spouses, and the elderly.

The provision allows the IRS to use mass communications and other means to promote 

the benefits and encourage the use of the program. The Secretary can provide taxpayers 

information regarding qualified return preparation programs receiving grants and those programs 

are encouraged to advise taxpayers of the availability of, and eligibility requirements for 

receiving, advice and assistance from local or regional low income taxpayer clinics. The 

programs are also encouraged to provide taxpayers information regarding the location and 

contact information for the low-income taxpayer clinics.

Effective Date

The provision is effective on the date of enactment. 

2. Limit redisclosures and uses of consent-based disclosures of tax return information

(sec. 1002 of the bill and sec. 6103 of the Code)

Present Law

In general

As a general rule, returns and return information are confidential and cannot be disclosed 

unless authorized by Title 26.8 Under section 6103(c), a taxpayer may designate in a request or 

consent to the disclosure by the IRS of his or her return or return information to a third party. 

Treasury regulations set forth the requirements for such consent.9 The request or consent may be 

in written or non-written form. The Treasury regulations require that the taxpayer sign and date 

 7

 For 2018, the amount is $54,884. Rev. Proc. 2018-18, 2018-10 I.R.B. 392, 395, March 5, 2018.

8

 Sec. 6103(a).

9

 Treas. Reg. sec. 301.6103(c)-1.
5

a written consent. At the time the consent is signed and dated by the taxpayer, the written 

document must indicate (1) the taxpayer's identity information; (2) the identity of the person to 

whom disclosure is to be made; (3) the type of return (or specified portion of the return) or return 

information (and the particular data) that is to be disclosed; and (4) the taxable year covered by 

the return or return information. The regulations also require that the consent be submitted 

within 120 days of the date signed and dated by the taxpayer. Present law does not require that a 

recipient receiving returns or return information by consent maintain the confidentiality of the 

information received. Under present law, the recipient is also free to use the information for 

purposes other than for which the information was solicited from the taxpayer.

Criminal penalties

Under section 7206, it is a felony to willfully make and subscribe any document that 

contains or is verified by a written declaration that it is made under penalties of perjury and 

which such person does not believe to be true and correct as to every material matter.10 Upon 

conviction, such person may be fined up to $100,000 ($500,000 in the case of a corporation) or 

imprisoned up to three years, or both, together with the costs of prosecution.

Under section 7213, criminal penalties apply to: (1) willful unauthorized disclosures of 

returns and return information by Federal and State employees and other persons; (2) the offering 

of any item of material value in exchange for a return or return information and the receipt of 

such information pursuant to such an offer; and (3) the unauthorized disclosure of return 

information received by certain shareholders under the material interest provision of section 

6103. Under section 7213, a court can impose a fine up to $5,000, up to five years 

imprisonment, or both, together with the costs of prosecution. If the offense is committed by a 

Federal employee or officer, the employee or officer will be discharged from office upon 

conviction. 

The willful and unauthorized inspection of returns and return information can subject 

Federal and State employees and others to a maximum fine of $1,000, up to a year in prison, or 

both, in addition to the costs of prosecution. If the offense is committed by a Federal employee 

or officer, the employee or officer will be discharged from office upon conviction.

Civil damage remedies for unauthorized disclosure or inspection

If a Federal employee makes an unauthorized disclosure or inspection, a taxpayer can 

bring suit against the United States in Federal district court. If a person other than a Federal 

employee makes an unauthorized disclosure or inspection, suit may be brought directly against 

such person. No liability results from a disclosure based on a good faith, but erroneous, 

interpretation of section 6103. A disclosure or inspection made at the request of the taxpayer 

will also relieve liability. 

Upon a finding of liability, a taxpayer can recover the greater of $1,000 per act of 

unauthorized disclosure (or inspection), or the sum of actual damages plus, in the case of an 

inspection or disclosure that was willful or the result of gross negligence, punitive damages. The 

 10 Sec. 7206(1).
6

taxpayer may also recover the costs of the action and, if found to be a prevailing party, 

reasonable attorney fees. 

The taxpayer has two years from the date of the discovery of the unauthorized inspection 

or disclosure to bring suit. The IRS is required to notify a taxpayer of an unauthorized inspection 

or disclosure as soon as practicable after any person is criminally charged by indictment or 

information for unlawful inspection or disclosure.

Explanation of Provision

Under the provision, persons designated by the taxpayer to receive return information 

shall not use the information for any purpose other than the express purpose for which consent 

was granted and shall not disclose return information to any other person without the express 

permission of, or request by, the taxpayer.

Effective Date

The provision is effective for disclosures made after the date that is six months after the 

date of enactment.

3. Clarification of equitable relief from joint liability (sec. 1003 of the bill and sec. 6015 of 

the Code)

Present Law

If a married couple elects to file a tax return on which they report their income jointly, 

they are generally jointly and severally liable for the entire tax liability that should have been 

reported on the joint return.11 A spouse may be entitled to relief from joint liability, in whole or 

in part, under the innocent spouse relief provisions of the Code. 

Grounds for relief from joint liability

There are three types of relief: general innocent spouse relief; relief for spouses no 

longer married or legally separated (separation of liabilities); and equitable relief. The grounds 

for relief and its scope differ among these three types of relief. In addition, the first two types of 

relief must be sought no later than two years after the date the IRS began collection activities 

against the electing spouse. For equitable relief, there is no limitations period in the statute.

General relief from joint liability with respect to an understatement of tax is available to 

all joint filers who make a timely election for such relief and are able to establish the following.12 

First, the electing spouse must establish that the underpayment is attributable to the erroneous 

items of the other spouse. Second, the electing spouse must show that at the time of signing the 

return, he or she did not know or have reason to know there was an understatement of tax. 

 11 Sec. 6103(d). 

12 Sec. 6015(b).
7

Finally, relief is granted only if it is inequitable to hold the electing spouse liable for the 

deficiency in tax, based on all facts and circumstances. 

Separation of liabilities relief from joint liability with respect to a deficiency is available 

to persons who are no longer married, are legally separated, or were no longer living together in 

the 12 months ending with the date innocent spouse relief is elected.13 The individual electing 

relief on this basis must establish the portion of any deficiency that is appropriately allocable to 

him or her. Special rules are provided in the Code for determining allocation of items that 

benefit one spouse more than the other, property transfers, and children's liability. Relief 

otherwise available is not permitted with respect to items of which a spouse was aware at the 

time the return was signed and which contributed to a deficiency. 

Equitable relief from joint liability may be available to those spouses who are ineligible 

under the provisions for general relief or separation of liabilities relief.14 Such relief is granted 

only if, taking into account all facts and circumstances, it is inequitable to hold the individual 

liable for the unpaid portion of tax or for a deficiency with respect to the joint return. 

Availability and scope of judicial review

If an individual elects to have the general relief provisions or the separation of liabilities 

relief provisions apply with respect to a deficiency, the individual may petition the United States 

Tax Court (the “Tax Court”) to review unfavorable determinations by the IRS with respect to the 

claimed relief. The Tax Court has held that its authority to review such IRS determinations is 

under a de novo standard.15 

The claim for relief from joint liability must be filed no later than 90 days after the notice 

of final determination on relief from joint liability and no earlier than the earlier of the mailing of 

such notice of final determination or the date which is six months after electing such relief. 

During the pendency of the Tax Court proceeding, or during the period in which a petition may 

be filed, collection action is restricted. 

In contrast to the above, the extent to which a denial of a claim for equitable relief from 

joint liability is also subject to judicial review by the Tax Court, the scope of that review, and the 

standard for any review have been the subject of conflicting appellate decisions. An abuse of 

discretion standard based on court review of the administrative record was held to be the correct 

standard in some instances,16 but other courts have permitted review of information beyond the 

 13 Sec. 6015(c).

14 Sec. 6015(f).

15 Sec. 6015(e)(1). 

16 Jonson v. Commissioner, 118 T.C. 106, 125 (2002), aff'd on other grounds, 353 F.3d 1181 (10th Cir. 

2003); Mitchell v. Commissioner, 292 F.3d 800, 807 (D.C. Cir. 2002); Cheshire v. Commissioner, 282 F.3d 326, 

337-38 (5th Cir. 2002). 
8

administrative record while applying an abuse of discretion standard.17 Still others have applied 

a de novo standard to both the scope of the review and the standard of review.18

Explanation of Provision

Under the provision, Tax Court review of innocent spouse equitable relief cases is not 

limited to the administrative record, but it may consider evidence that is newly discovered or was 

previously unavailable. The provision also clarifies that the Tax Court has jurisdiction to review 

a denial of equitable claims for relief from joint liability, and is not limited to a review for abuse 

of discretion by the IRS. 

The provision allows taxpayers to request equitable relief with respect to any unpaid 

liability before the expiration of the collection period or, if paid, before the expiration of the time 

for claiming a refund or credit.

Effective Date

The provision applies to petitions or requests filed or pending on or after the date of 

enactment.

4. Notice from IRS regarding closure of Taxpayer Assistance Centers (sec. 1004 of the bill)

Present Law

The IRS runs Taxpayer Assistance Centers (“TAC”) around the country to provide faceto-face assistance with preparing tax returns and understanding tax laws.

The IRS is not currently required to publish information or give notice to Congress before 

closing a TAC. 

Explanation of Provision

The provision requires the IRS to publish (including by non-electronic means such as 

local press and other media), 90 days in advance, a notice containing information identifying the 

TAC proposed for closure, the date of the proposed closure, and the relevant alternative sources 

of assistance which may be utilized by affected taxpayers. The provision also requires the IRS to 

provide, 90 days in advance, a report to Congress containing the information in the notice, the 

reasons for a proposed closure of the TAC, and other information as the Secretary may find 

appropriate.

Effective Date

The provision is effective on the date of enactment.

 17 Commissioner v. Neal, 557 F.3d 1262 (11th Cir. 2009).

18 Wilson v. Commissioner, 705 F.3d 980 (9th Cir. 2013); Porter v. Commissioner, 132 T.C. 203, 132 T.C. 

No. 11 (2009). 
9

5. Whistleblower reforms (sec. 1011 of the bill and secs. 6103, 7213, and 7623 of the Code)

Present Law

In general

Under section 7623, individuals who submit information leading to detection of 

underpayment of tax or to detection, trial, and punishment of persons guilty of violating internal 

revenue laws, may file a claim for an award of 15 to 30 percent of recovered funds resulting 

from such action. 

Disclosure rules for whistleblowers

Section 6103 provides a general rule of confidentiality for returns and return information: 

“Returns and return information shall be confidential and except as authorized by this title . . . 

[none of the specified recipients] shall disclose any return or return information obtained by him 

. . .”19 One of the exceptions to the general rule of confidentiality permits the IRS to make 

investigative disclosures of return information to third parties. The disclosures, made in 

accordance with regulations, are to be made to the extent necessary to obtain information, which 

is not otherwise reasonably available, with respect to the correct determination of tax, liability 

for tax, the amount to be collected, or with respect to the enforcement of any provision of Title 

26. The third party recipient of the return information furnished during an investigative 

disclosure is not subject to the general rule of confidentiality provided by section 6103.

There is no provision of section 6103 to provide whistleblowers with status updates 

regarding what the IRS has done with the information provided by the whistleblower. Such 

status information would be the return information of the taxpayer being audited/investigated for 

additional tax liability.

A taxpayer can file or sue for civil damages for the unauthorized disclosure and/or 

inspection of returns and return information.20 In addition, criminal penalties apply for the 

willful unauthorized disclosure or inspection of returns and return information.

Protection against retaliation

Though other statutes such as the False Claims Act21 currently protect some individuals 

from employer retaliation, those who file claims under the Code are not explicitly afforded these 

same protections.

 19 Sec. 6103(a).

20 Sec. 7431.

21 31 U.S.C. §3730(h)(2).
10

Explanation of Provision

This provision amends section 6103 to: (1) allow the IRS to exchange information with 

whistleblowers to the extent disclosure is necessary in obtaining information, which is not 

otherwise reasonably available, with respect to the correct determination of tax liability or the 

amount to be collected with respect to the enforcement of any other provision of the Code; and 

(2) require the Secretary to notify the whistleblower as to the status of their case not later than 60 

days after: (i) the case has been referred for an audit or examination; and (ii) the taxpayer makes 

a payment to settle the tax liability to which the information relates. Subject to such 

requirements and conditions prescribed by the Secretary, upon written request by the 

whistleblower and so long as the disclosure would not seriously impair Federal tax 

administration, the Secretary has the authority to provide information on the status and stage of 

any investigation, and in the case of a determination of the amount of any award, the reasons for 

such determination. To ensure taxpayer information is protected, whistleblowers receiving 

information under either (1) or (2) are subject to criminal penalties for unauthorized disclosure of 

taxpayer information.

The provision adds to section 7623, anti-retaliation whistleblower protections for 

employees. A person who alleges discharge or other reprisal by any person in violation of these 

protections may file a complaint with the Secretary of Labor (within 180 days after the date on 

which the violation occurs), and if the Secretary of Labor has not issued a final decision on such 

complaint within 180 days (and the delay is not due to the bad faith of the claimant), an action 

may be brought in the appropriate district court. The remedies provided are consistent with those 

currently available under the False Claims Act, including compensatory damages of 

reinstatement, back pay plus interest, and compensation for other special damages including 

litigation costs and reasonable attorneys’ fees. 

Effective Date

The modifications made to the disclosure rules apply to disclosures made after the date of 

enactment. The protections from retaliation are effective on the date of enactment. 

6. Electronic record retention (sec. 1021 of the bill)

Present Law

Federal executive agencies are required to maintain and preserve Federal records,22

whether in paper or electronic form, and protect against unauthorized removal of such records. 

Policies for the retention and disposal of records must conform to the requirements of the record-

 22 The Federal Records Act requirements for federal agencies are found in 44 U.S.C. chapter 31 (Records 

Management by Federal Agencies). See 44 U.S.C. sec. 3301 for a definition of Federal records that generally 

includes all documentary materials that agencies receive or create in the conduct of official business and that may 

have evidentiary value with respect to official business, regardless of the physical form of the materials. 
11

management procedures, as implemented by the Archivist of the United States.23 Email 

accounts are specifically included within the scope of records subject to the record-retention 

policies.24 Each agency is required to provide instruction and guidance to persons conducting 

business on behalf of the agency, including employees, officers and contractors.25 

The government-wide record-management requirements are in addition to the obligations 

to protect the sensitive information for which the IRS is responsible. Tax information is 

sensitive and confidential.26 The Code imposes civil and criminal penalties to protect it from 

unauthorized use, inspection or disclosure.27 As a condition of receiving tax data, outside 

agencies must establish to the satisfaction of the IRS that they have adequate programs and 

security protocols in place to protect the data received.28

There are no Code provisions governing IRS record retention, management, or transfer of 

paper or electronic records. The Internal Revenue Manual (“IRM”) provides IRS employees 

processes, procedures, and guidelines regarding records and information management, including 

the creation, maintenance, retrieval, preservation, and disposition of all records.29

Explanation of Provision

The provision codifies the joint directive regarding the management of government 

records previously issued by the Office of Management and Budget and the National Archives 

and Records Administration.30 Accordingly, the provision requires that permanent and 

 23 See generally Title 44, at chapter 21 (national archives and records administration), chapter 29 (records 

management by the Archivist of the United States and the General Services Administration), chapter 31 (records 

management by Federal agencies) and chapter 33 (disposal of records). 

24 The regulations implementing the Federal Records Act are found in 36 CFR chapter XII, subchapter B—

Records Management; 36 CFR 1236.22(a). These regulations implement the provisions of 44 U.S.C. chapters 21, 

29, 31 and 33 and specify policies for federal agencies’ records management programs relating to proper records 

creation and maintenance, adequate documentation, and records disposition. 

25 A quarterly bulletin published by the National Archives and Records Administration (“NARA”) 

provides guidance to executive agencies. See generally NARA Bulletin 2013-03, available at 

http://www.archives.gov/records-mgmt/bulletins/2013/2013-03.html. 

26 Sec. 6103(a).

27 See secs. 7213 (criminal unauthorized disclosure), 7213A (criminal unauthorized inspection) and 7431 

(civil remedy for unauthorized inspection or disclosure).

28 Sec. 6103(p)(4). 

29 IRM sections 1.15.1-1.15.36, Records and Information Management, available at 

https://www.irs.gov/irm/part1/irm_01-015-001.html. According to NARA, the IRM’s coverage of records and 

information management policies, routines, procedures, and requirements indicates compliance with 36 CFR 

1220.34(c) and 36 CFR 1222 through 1238. National Archives and Records Administration, Department of 

Treasury, Internal Revenue Service, Records Management Inspection Report, June 2015, available at 

http://www.archives.gov/records-mgmt/pdf/irs-inspection.pdf.

30 Office of Management and Budget and National Archives and Records Administration, Memorandum 

for the Heads of Executive Departments and Agencies and Independent Agencies: Managing Government Records 
12

temporary e-mail records of the IRS be retained in an appropriate electronic system that supports 

records management and litigation requirements by December 31, 2019. In addition, the 

provision requires that by December 31, 2019, the IRS Commissioner of Internal Revenue 

(“Commissioner”) and the Chief Counsel for the IRS (“Chief Counsel”) maintain e-mail records 

of all principal officers and specified employees for no less than 15 years beginning on the date 

the record was generated. At the end of the applicable period, the IRS is required to transfer all the 

email records for principal officers and specified employees to the National Archives for permanent 

storage. 

Principal officer means any employee whose position is listed under the IRS in the most 

recent version of the United States Government Manual published by the Office of the Federal 

Register, any employee who is a senior staff member reporting directly to the Commissioner or 

the Chief Counsel, and any associate counsel, deputy counsel or division head in the Office of 

Chief Counsel, and any employee who is a senior staff member who reports directly to Chief 

Counsel. Specified employee means any employee who holds a Senior Executive Service

position (as defined in Title 5 of the United States Code) in the IRS or the Office of Chief 

Counsel.

Until TIGTA certifies to the Senate Committee on Finance and the House Committee on 

Ways and Means that the IRS is in compliance with the requirements to maintain and transfer email records, the Commissioner and the Chief Counsel must retain the email records of all 

personnel. The provision requires TIGTA to prepare an interim report on the steps being taken to 

comply with the provision by December 31, 2019, and a final report on whether the IRS is in 

compliance with the provision by April 1, 2020, for the Senate Committee on Finance and the 

House Committee on Ways and Means.

Effective Date

The provision is effective on the date of enactment.

7. Prohibition on rehiring former IRS employees who were involuntarily separated for 

misconduct (sec. 1022 of the bill and sec. 7804 of the Code)

Present Law

Employees of the IRS are subject to rules governing Federal employment generally,31 as 

well as rules of conduct specific to Department of the Treasury and the IRS. Standards of 

 

Directive (M-12-18), August 24, 2012, available at 

https://www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-18.pdf.

31 Part III of Title 5 of the United States Code prescribes rules for Federal employment, including 

employment, retention, and management and employee issues.
13

Ethical Conduct for Employees of the Executive Branch are supplemented by additional rules 

applicable to employees of the Department of the Treasury.32

The Code33 provides that the Commissioner of the IRS has such duties and powers as 

prescribed by the Secretary. Unless otherwise specified by the Secretary, such duties and powers 

include the power to administer, manage, conduct, direct, and supervise the execution and 

application of the internal revenue laws or related statutes and tax conventions to which the 

United States is a party, and to recommend to the President a candidate for Chief Counsel (and 

recommend the removal of the Chief Counsel). Unless otherwise specified by the Secretary, the 

Commissioner is authorized to employ such persons as the Commissioner deems proper for the 

administration and enforcement of the internal revenue laws and is required to issue all necessary 

directions, instructions, orders, and rules applicable to such persons,34 including determination 

and designation of posts of duty. 

The Restructuring Act35 requires the IRS to terminate an employee for certain proven 

violations committed by the employee in connection with the performance of official duties. The 

violations include: (1) willful failure to obtain the required approval signatures on documents 

authorizing the seizure of a taxpayer’s home, personal belongings, or business assets; (2) 

providing a false statement under oath material to a matter involving a taxpayer; (3) with respect 

to a taxpayer, taxpayer representative, or other IRS employee, the violation of any right under the 

U.S. Constitution, or any civil right established under Titles VI or VII of the Civil Rights Act of 

1964, Title IX of the Educational Amendments of 1972, the Age Discrimination in Employment 

Act of 1967, the Age Discrimination Act of 1975, sections 501 or 504 of the Rehabilitation Act 

of 1973 and Title I of the Americans with Disabilities Act of 1990; (4) falsifying or destroying 

documents to conceal mistakes made by any employee with respect to a matter involving a 

taxpayer or a taxpayer representative; (5) assault or battery on a taxpayer or other IRS employee, 

but only if there is a criminal conviction or a final judgment by a court in a civil case, with 

respect to the assault or battery; (6) violations of the 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; (7) willful misuse of section 6103 for the purpose of concealing 

data from a Congressional inquiry; (8) willful failure to file any tax return required under the 

Code on or before the due date (including extensions) unless failure is due to reasonable cause; 

(9) willful understatement of Federal tax liability, unless such understatement is due to 

reasonable cause; and (10) threatening to take an official action, such as an audit, or delay or fail 

to take official action with respect to a taxpayer for political purposes or for the purpose of 

extracting personal gain or benefit.

 32 Standards of Ethical Conduct for Employees of the Executive Branch, 5 CFR 735. 5 CFR 3101, 

Supplemental Standards of Ethical Conduct for Employees of the Department of the Treasury; 31 CFR Part 0, 

Department of the Treasury Employee Rules of Conduct. 

33 Sec. 7803(a).

34 Sec. 7804.

35 Pub. L. No. 105-206, sec. 1203(b), July 22, 1998.
14

The Restructuring Act provides non-delegable authority to the Commissioner to 

determine that mitigating factors exist, that, in the Commissioner’s sole discretion, mitigate 

against terminating the employee. The Act also provides that the Commissioner, in his sole 

discretion, may establish a procedure to determine whether an individual should be referred for 

such a determination by the Commissioner. TIGTA is required to track employee terminations 

and terminations that would have occurred had the Commissioner not determined that there were 

mitigation factors and include such information in TIGTA’s annual report to Congress.

Explanation of Provision

A former employee of the IRS cannot be rehired by the IRS if: (1) he was involuntarily 

separated due to misconduct or unacceptable performance under subchapter B of Chapter 80 of 

the Code, under chapters 43 or 75 of Title 5 of the United States Code, or a similar provision of 

law, (2) he has voluntarily separated after receiving a notice of proposed action of removal for 

misconduct or unacceptable performance, or (3) his employment was terminated under section 

1203 of the IRS Restructuring Act of 1998. 

Effective Date

The provision is effective with respect to the hiring of employees after the date of 

enactment.

8. Authority to remove or transfer senior executives who fail in their performance or 

engage in serious misconduct (sec. 1023 of the bill and sec. 7804 of the Code) 

Present Law

Employees of the IRS are subject to rules governing Federal employment generally,36 as 

well as rules of conduct specific to Department of the Treasury and IRS. Standards of Ethical 

Conduct for Employees of the Executive Branch are supplemented by additional rules applicable 

to employees of the Department of the Treasury.37

The Code38 provides that the Commissioner of the IRS has such duties and powers as 

prescribed by the Secretary. Unless otherwise specified by the Secretary, such duties and powers 

include the power to administer, manage, conduct, direct, and supervise the execution and 

application of the internal revenue laws or related statutes and tax conventions to which the 

United States is a party, and to recommend to the President a candidate for Chief Counsel (and 

recommend the removal of the Chief Counsel). Unless otherwise specified by the Secretary, the 

 36 Part III of Title 5 of the United States Code prescribes rules for Federal employment, including 

employment, retention, and management and employee issues.

37 Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. 735. 5 CFR 3101, 

Supplemental Standards of Ethical Conduct for Employees of the Department of the Treasury; 31 CFR Part 0, 

Department of the Treasury Employee Rules of Conduct. 

38 Sec. 7803(a).
15

Commissioner is authorized to employ such persons as the Commissioner deems proper for the 

administration and enforcement of the internal revenue laws and is required to issue all necessary 

directions, instructions, orders, and rules applicable to such persons,39 including determination 

and designation of posts of duty. 

The Restructuring Act40 requires the IRS to terminate an employee for certain proven 

violations committed by the employee in connection with the performance of official duties. The 

violations include: (1) willful failure to obtain the required approval signatures on documents 

authorizing the seizure of a taxpayer’s home, personal belongings, or business assets; (2) 

providing a false statement under oath material to a matter involving a taxpayer; (3) with respect 

to a taxpayer, taxpayer representative, or other IRS employee, the violation of any right under the 

U.S. Constitution, or any civil right established under Titles VI or VII of the Civil Rights Act of 

1964, Title IX of the Educational Amendments of 1972, the Age Discrimination in Employment 

Act of 1967, the Age Discrimination Act of 1975, sections 501 or 504 of the Rehabilitation Act 

of 1973 and Title I of the Americans with Disabilities Act of 1990; (4) falsifying or destroying 

documents to conceal mistakes made by any employee with respect to a matter involving a 

taxpayer or a taxpayer representative; (5) assault or battery on a taxpayer or other IRS employee, 

but only if there is a criminal conviction or a final judgment by a court in a civil case, with 

respect to the assault or battery; (6) violations of the 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; (7) willful misuse of section 6103 for the purpose of concealing 

data from a Congressional inquiry; (8) willful failure to file any tax return required under the 

Code on or before the due date (including extensions) unless failure is due to reasonable cause; 

(9) willful understatement of Federal tax liability, unless such understatement is due to 

reasonable cause; and (10) threatening to take an official action, such as an audit, or delay or fail 

to take official action with respect to a taxpayer for political purposes or for the purpose of 

extracting personal gain or benefit.

The Restructuring Act provides non-delegable authority to the Commissioner to 

determine that mitigating factors exist, that, in the Commissioner’s sole discretion, mitigate 

against terminating the employee. The Act also provides that the Commissioner, in his sole 

discretion, may establish a procedure to determine whether an individual should be referred for 

such a determination by the Commissioner. The IG is required to track employee terminations 

and terminations that would have occurred had the Commissioner not determined that there were 

mitigation factors and include such information in the IG’s annual report to Congress.

Adverse personnel actions may be reviewed by the Merit Systems Protection Board, (“the 

MSPB Board”) under its appellate jurisdiction.41 Members of the Senior Executive Service 

 39 Sec. 7804.

40 Pub. L. No. 105-206, sec. 1203(b), July 22, 1998.

41 Title 5 CFR, Part 1201-Practices and Procedures.
16

(“SES”) have additional rights to seek informal hearings of the MSPB Board after notice of 

proposed adverse action by the IRS.42

Explanation of Provision

Under the provision, the Commissioner may use expedited procedures to remove or 

demote any individual employed in a senior executive position at the IRS if the Commissioner 

determines the performance or misconduct of the individual warrants such removal. Employees 

subject to this provision are those senior executives who are career appointees (as defined in 

section 3132(a)(4) of Title 5) in SES positions as defined in Title 5 of the United States Code.43

The authority granted by this provision is in addition to the procedures for removal and 

transfer under present law in Title 5.44 

Misconduct includes neglect of duty, malfeasance, or failure to accept a directed 

reassignment or to accompany a position in a transfer of function. The provision specifies that 

such misconduct does not include the ten acts or omissions listed in the Restructuring Act and 

punishable by termination. 

The senior executive is allowed an opportunity for an expedited review by the MSPB 

Board. The expedited review is to be conducted by an administrative law judge at the MSPB 

Board. If the judge does not conclude their review within 21 days, then the removal or demotion 

is final. Within 14 days after the removal or transfer is final, the MSPB Board must notify 

Congress of the removal or transfer and explain why a decision was not issued. The provision 

does not permit appeal from the administrative law judge. Notice to the Congress includes 

written notice to the following Committees: in the Senate, the Committee on Finance and the 

Committee on Homeland Security and Governmental Affairs; in the House of Representatives, 

the Committee on Ways and Means and the Committee on Oversight and Government Reform. 

If the senior executive who is removed appeals the IRS’s decision, the senior executive is 

not entitled to any type of pay, bonus, or benefit while appealing the decision of removal. If a 

senior executive is demoted, and then appeals the IRS’s decision, the senior executive may only 

receive any type of pay, bonus, or benefit at the rate appropriate for the position they were 

demoted to, and only if the individual reports for duty, while appealing the decision of demotion. 

The transferred senior executive may not utilize any manner of paid leave (sick leave, annual 

leave, etc.) while an appeal is pending. 

The provision requires that the MSPB Board submit to the Committees a plan within 30

days of enactment of how the expedited review would be implemented and to implement such 

 42 5 U.S.C. sec. 3592 and related regulations.

43 See 5 U.S.C. secs. 3132(a)(4) (definition of career appointee) and 3132(a)(2) (definition of SES 

position).

44 5 U.S.C. secs. 3592 (removal of SES appointees) and Chapter 75 (Adverse Actions).
17

plan within 60 days of enactment. In designing the plan for implementation, the provision 

cannot be construed to apply to an appeal that was filed or pending before the date of enactment. 

Effective Date

The provision is effective on the date of enactment. 

9. Limitation on access of non-Internal Revenue Service employees to returns and return 

information (sec. 1024 of the bill and sec. 7602 of the Code)

Present Law

Returns and return information

General rule of confidentiality

As a general rule, returns and return information are confidential and cannot be disclosed 

unless authorized by the Code.

45 The definition of return information is very broad and 

generally includes any information received or collected by the IRS with respect to liability 

under the Code of any person for any tax, penalty, interest or offense. The term “return 

information” includes, among other items: 

a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, 

deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, 

deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is 

being, or will be examined or subject to other investigation or processing, or any other 

data, received by, recorded by, prepared by, furnished to, or collected by the Secretary 

with respect to a return or with respect to the determination of the existence, or possible 

existence, of liability (or the amount thereof) of any person under this title for any tax, 

penalty, interest, fine, forfeiture, or other imposition, or offense . . . 46

Disclosure exception for tax administration contracts (section 6103(n))

There are several exceptions to the general rule of confidentiality. One exception permits 

the disclosure of returns and return information in connection with written contracts or 

agreements for the acquisition of property or services for tax administration purposes (“tax 

administration contractor”).47 

 45 Sec. 6103(a).

46 Sec. 6103(b)(2)(A).

47 Sec. 6103(n).
18

Summons authority

In general

For the purposes of ascertaining the correctness of any return, making a return when none 

has been made, determining the liability of any person for any internal revenue tax, and certain 

other purposes, the Secretary is authorized to examine any books, records, or other data which 

may be relevant or material to such inquiry, and to take such testimony of the person concerned, 

under oath, as may be relevant or material to such inquiry. The Secretary also is authorized to 

issue summonses to appear before the Secretary at the time and place named in the summons to 

produce books, records and other data and to give testimony, under oath, as may be relevant or 

material to such inquiry. 

Summons interview regulations

Under the Treasury regulations, a person authorized to receive returns and return 

information as a tax administration contractor may receive and examine books, papers, records, 

or other data produced to comply with the summons, and, in the presence and under the guidance 

of an IRS officer or employee, participate fully in the interview of a witness summoned by the 

IRS to provide testimony under oath.48

Proposed Treasury regulations would narrow this authority by excluding non-government 

attorneys from receiving summoned books, papers, records, or other data, or from participating 

in the interview of a witness summoned by the IRS to provide testimony under oath.49 An 

exception to this general exclusion is provided with respect to non-government attorneys hired 

for their expertise in an area other than Federal tax law. The proposed regulations would allow 

the IRS to hire an attorney who has specialized knowledge of foreign, state, or local law, or in 

non-tax substantive law, such as patent law, property law, or environmental law. It would not 

permit the IRS to hire an attorney for non-substantive specialized knowledge, such as civil 

litigation skills. These changes are proposed to be effective for examinations begun and 

summonses served by the IRS on or after the date the proposed regulations were published in the 

Federal Register (March 28, 2018).

Explanation of Provision

The Secretary shall not, under the authority of section 6103(n) (relating to tax 

administration contracts), provide to a tax administration contractor any books, papers, records 

or other data obtained by summons, except when such person requires such information for the 

sole purpose of providing expert evaluation and assistance to the IRS. Further, no person other 

than an officer or employee of the IRS or Office of Chief Counsel may on behalf of the Secretary 

question a witness under oath whose testimony was obtained by summons.

 48 Treas. Reg. sec. 301.7602-1(b)(3).

49 Prop. Treas. Reg. sec. 3017602-1(b)(3), 83 Fed. Reg. 13208 (March 28, 2018).
19

Effective Date

The provision is generally effective on the date of enactment and applies to any tax 

administration contracts under section 6103(n) in effect on the date of enactment.

10. Notification of unauthorized inspection or disclosure of returns and return information 

(sec. 1025 of the bill and sec. 7431 of the Code)

Present Law

If a Federal employee makes an unauthorized disclosure or inspection, a taxpayer can 

bring suit against the United States in Federal district court. If a person other than a Federal 

employee makes an unauthorized disclosure or inspection, suit may be brought directly against 

such person. No liability results from a disclosure based on a good faith, but erroneous, 

interpretation of section 6103. A disclosure or inspection made at the request of the taxpayer 

will also relieve liability. 

Upon a finding of liability, a taxpayer can recover the greater of $1,000 per act of 

unauthorized disclosure (or inspection), or the sum of actual damages plus, in the case of an 

inspection or disclosure that was willful or the result of gross negligence, punitive damages. 

The taxpayer may also recover the costs of the action and, if found to be a prevailing party, 

reasonable attorney fees. 

The taxpayer has two years from the date of the discovery of the unauthorized inspection 

or disclosure to bring suit. The IRS is required to notify a taxpayer of an unauthorized inspection 

or disclosure as soon as practicable after any person is criminally charged by indictment or 

information for unlawful inspection or disclosure.

Explanation of Provision

The provision requires the Secretary to notify a taxpayer if the IRS or, a Federal or State 

agency (upon notice to the Secretary by such Federal or State agency), if such Federal or State 

agency, proposes an administrative determination as to disciplinary or adverse action against an 

employee arising from the employee's unauthorized inspection or disclosure of the taxpayer's 

return or return information. The provision requires the notice to include the date of the 

unauthorized inspection or disclosure and the rights of the taxpayer as a result of such 

administrative determination. 

Effective Date

The provision is effective for determinations proposed after 180 days after the date of 

enactment.
20

11. Mandatory electronic filing for annual returns of exempt organizations (sec. 1031 of the 

bill and secs. 6033 and 6104 of the Code)

Present Law

In general

The Internal Revenue Service Restructuring and Reform Act of 1998 (“RRA 1998”)50

states a Congressional policy to promote the paperless filing of Federal tax returns. Section 

2001(a) of RRA 1998 set a goal for the IRS to have at least 80 percent of all Federal tax and 

information returns filed electronically by 2007.51 Section 2001(b) of RRA 1998 requires the 

IRS to establish a 10-year strategic plan to eliminate barriers to electronic filing.

Present law requires the Secretary to issue regulations regarding electronic filing and 

specifies certain limitations on the rules that may be included in such regulations.52 The statute 

requires that Federal income tax returns prepared by specified tax return preparers be filed 

electronically,

53 and that all partnerships with more than 100 partners file electronically. For 

taxpayers other than partnerships, the statute prohibits any requirement that persons who file 

fewer than 250 returns during a calendar year file electronically. With respect to individuals, 

estates, and trusts, the Secretary may permit, but generally cannot require, electronic filing of 

income tax returns. In crafting any of these required regulations, the Secretary must take into 

account the ability of taxpayers to comply at reasonable cost.

The regulations require corporations that have assets of $10 million or more and file at 

least 250 returns during a calendar year to file electronically their Form 1120/1120S income tax 

returns and Form 990 information returns for tax years ending on or after December 31, 2006. In 

determining whether the 250 return threshold is met, income tax, information, excise tax, and 

employment tax returns filed within one calendar year are counted. 

Tax-exempt organizations

Most tax-exempt organizations are required to file an annual information return or notice 

in the Form 990 series. Since 2007, the smallest organizations − generally, those with gross 

receipts of less than $50,000 − may provide an abbreviated notice on Form 990-N, sometimes 

referred to as an “e-postcard.” Which form to file depends on the annual receipts, value of 

 50 Pub. L. No. 105-206.

51 The Electronic Tax Administration Advisory Committee, the body charged with oversight of IRS 

progress in reaching that goal reported that e-filing by individuals exceeded 80 percent in the 2013 filing season, but 

projected an overall rate of 72.8 percent based on all Federal returns. See Electronic Tax Administration Advisory 

Committee, Annual Report to Congress, June 2013, IRS Pub. 3415, page 6. 

52 Sec. 6011(e). 

53 Section 6011(e)(3)(B) defines a “specified tax return preparer” as any return preparer who reasonably 

expects to file more than 10 individual income tax returns during a calendar year. 
21

assets, and types of activities of the exempt entity. Forms 990, 990-EZ, and 990-PF are released 

to the public on DVDs. 

In general, only the largest and smallest tax-exempt organizations are required to 

electronically file their annual information returns. First, as indicated above, tax-exempt 

corporations that have assets of $10 million or more and that file at least 250 returns during a 

calendar year must electronically file their Form 990 information returns. Private foundations 

and charitable trusts, regardless of asset size, that file at least 250 returns during a calendar year 

are required to file electronically their Form 990-PF information returns.54 Finally, organizations 

that file Form 990-N (the e-postcard) also must electronically file.55 

Explanation of Provision

The provision extends the requirement to e-file to all tax-exempt organizations required 

to file statements or returns in the Form 990 series or Form 8872 (“Political Organization Report 

of Contributions and Expenditures”). The provision also requires that the IRS make the 

information provided on the forms available to the public (consistent with the disclosure rules of 

section 6104 of the Code) in a machine-readable format as soon as practicable. 

Effective Date

The provision generally is effective for taxable years beginning after date of enactment. 

Transition relief is provided for certain organizations. First, for certain small organizations or 

other organizations for which the Secretary determines that application of the e-filing 

requirement would constitute an undue hardship in the absence of additional transitional time, 

the requirement to file electronically must be implemented not later than taxable years beginning 

two years following the date of enactment. For this purpose, small organization means any 

organization: (1) the gross receipts of which for the taxable year are less than $200,000; and (2) 

the aggregate gross assets of which at the end of the taxable year are less than $500,000. In 

addition, the provision grants IRS the discretion to delay the effective date not later than taxable 

years beginning two years after the date of enactment for the filing of Form 990-T (reports of 

unrelated business taxable income or the payment of proxy tax under section 6033(e)).

 54 Taxpayers can request waivers of the electronic filing requirement if they cannot meet that requirement 

due to technological constraints, or if compliance with the requirement would result in undue financial burden on the 

taxpayer.

55 See Form 990-N, “Electronic Notice for Tax-exempt Organizations Not Required to File a Form 990 or 

990-EZ.”
22

12. Prohibit the use of IRS funds for political targeting (sec. 1032 of the bill)

Present Law

No provision.

Explanation of Provision

The provision would prohibit the use of any funds by the IRS to target citizens of the 

United States for exercising any right guaranteed under the First Amendment to the U.S. 

Constitution.

Effective Date

The provision is effective on the date of enactment.

13. Require IRS to notify exempt organizations before revoking exempt status for failing to 

file annual returns or notices (sec. 1033 of the bill and sec. 6033(j) of the Code)

Present Law

Applications for tax exemption

Section 501(c)(3) organizations

Section 501(c)(3) organizations (with certain exceptions) are required to seek formal 

recognition of tax-exempt status by filing an application with the IRS (Form 1023 (Application 

for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code) or Form 

1023-EZ (Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the 

Internal Revenue Code)).56 In response to the application, the IRS issues a determination letter 

or ruling either recognizing the applicant as tax-exempt or not. Certain organizations are not 

required to apply for recognition of tax-exempt status in order to qualify as tax-exempt under 

section 501(c)(3) but may do so. These organizations include churches, certain church-related 

organizations, organizations (other than private foundations) the gross receipts of which in each 

taxable year are normally not more than $5,000, and organizations (other than private 

foundations) subordinate to another tax-exempt organization that are covered by a group 

exemption letter.

A favorable determination by the IRS on an application for recognition of tax-exempt 

status generally will be retroactive to the date that the section 501(c)(3) organization was created 

if it files a completed Form 1023 within 15 months of the end of the month in which it was 

formed.57 If the organization does not file Form 1023 or files a late application, it will not be 

 56 See sec. 508(a). 

57 Pursuant to Treas. Reg. sec. 301.9100-2(a)(2)(iv), organizations are allowed an automatic 12-month 

extension as long as the application for recognition of tax exemption is filed within the extended, i.e., 27-month, 

period. The IRS also may grant an extension beyond the 27-month period if the organization is able to establish that 
23

treated as tax-exempt under section 501(c)(3) for any period prior to the filing of an application 

for recognition of tax exemption.58 Contributions to section 501(c)(3) organizations that are 

subject to the requirement that the organization apply for recognition of tax-exempt status 

generally are not deductible from income, gift, or estate tax until the organization receives a 

determination letter from the IRS.59

Other section 501(c) organizations

Most other types of section 501(c) organizations – including organizations described 

within sections 501(c)(4) (social welfare organizations, etc.), 501(c)(5) (labor organizations, 

etc.), or 501(c)(6) (business leagues, etc.) – are not required to apply recognition of exempt 

status. Rather, organizations are exempt under these provisions if they satisfy the requirements 

applicable to such organizations. However, an organization that intends to operate as a section 

501(c)(4) organization must notify the Secretary no later than 60 days after its formation that it is 

operating as such by filing form 8976 (Notice of Intent to Operate Under Section 501(c)(4)). In 

addition, in order to obtain certain benefits such as public recognition of tax-exempt status, 

exemption from certain State taxes, and nonprofit mailing privileges, such organizations 

voluntarily may request a formal recognition of exempt status by filing a Form 1024 

(Application for Recognition of Exemption under Section 501(a)) or Form 1024-A (Application 

for Recognition of Exemption under Section 501(c)(4) of the Internal Revenue Code). 

Annual information returns

Exempt organizations are required to file an annual information return, Form 990 (Return 

of Organization Exempt From Income Tax), stating specifically the items of gross income, 

receipts, disbursements, and such other information as the Secretary may prescribe.60 Exempt

from the requirement are churches, their integrated auxiliaries, and conventions or associations 

of churches; the exclusively religious activities of any religious order; certain State institutions 

whose income is excluded from gross income under section 115; an interchurch organization of 

local units of a church; certain mission societies; certain church-affiliated elementary and high 

 it acted reasonably and in good faith and that granting relief will not prejudice the interests of the government. 

Treas. Reg. secs. 301.9100-1 and 301.9100-3.

58 Treas. Reg. sec. 1.508-1(a)(1).

59 Sec. 508(d)(2)(B). Contributions made prior to receipt of a favorable determination letter may be 

deductible prior to the organization’s receipt of such favorable determination letter if the organization has timely 

filed its application to be recognized as tax-exempt. Treas. Reg. secs. 1.508-1(a) and 1.508-2(b)(1)(i)(b).

60 Sec. 6033(a). An organization that has not received a determination of its tax-exempt status, but that 

claims tax-exempt status under section 501(a), is subject to the same annual reporting requirements and exceptions 

as organizations that have received a tax-exemption determination.
24

schools; and certain other organizations, including some that the IRS has relieved from the filing 

requirement pursuant to its statutory discretionary authority.61

An organization that is required to file an information return, but that has gross receipts 

of less than $200,000 during its taxable year, and total assets of less than $500,000 at the end of 

its taxable year, may file Form 990-EZ. If an organization normally has gross receipts of 

$50,000 or less, it must file Form 990-N (“e-postcard”), if it chooses not to file Form 990 or 

Form 990-EZ. Private foundations are required to file Form 990-PF rather than Form 990.

Revocation of exempt status

In general

An organization that has received a favorable tax-exemption determination from the IRS 

generally may continue to rely on the determination as long as “there are no substantial changes 

in the organization’s character, purposes, or methods of operation.”62 A ruling or determination 

letter concluding that an organization is exempt from tax may, however, be revoked or modified: 

(1) by notice from the IRS to the organization to which the ruling or determination letter was 

originally issued; (2) by enactment of legislation or ratification of a tax treaty; (3) by a decision 

of the United States Supreme Court; (4) by issuance of temporary or final Regulations by the 

Treasury Department; (5) by issuance of a revenue ruling, a revenue procedure, or other 

statement in the Internal Revenue Bulletin; or (6) automatically, in the event the organization 

fails to file a required annual return or notice for three consecutive years (discussed in greater 

detail below).63 A revocation or modification of a determination letter or ruling may be 

retroactive if, for example, there has been a change in the applicable law, the organization 

omitted or misstated a material fact, or the organization has operated in a manner materially 

different from that originally represented.64 Upon revocation of tax-exemption or change in the 

classification of an organization (e.g., from public charity to private foundation status), the IRS 

publishes an announcement of such revocation or change in the Internal Revenue Bulletin.

Automatic revocation for failure to file information returns

If an organization fails to file a required Form 990-series return or notice for three 

consecutive years, the organization’s tax-exempt status is automatically revoked.65 A revocation 

for failure to file is effective from the date that the Secretary determines was the last day the 

organization could have timely filed the third required information return or notice. To again be 

recognized as tax-exempt, the organization must apply to the Secretary for recognition of tax-

 61 Sec. 6033(a)(3); Treas. Reg. secs. 1.6033-2(a)(2)(i) and (g)(1).

62 Treas. Reg. sec. 1.501(a)-1(a)(2). 

63 Rev. Proc. 2018-5, sec. 12.

64 Ibid.

65 Sec. 6033(j)(1).
25

exemption, irrespective of whether the organization was required to make an application for 

recognition of tax-exemption in order to gain tax-exemption originally.66

If, upon application for tax-exempt status after an automatic revocation for failure to file 

information returns, the organization shows to the satisfaction of the Secretary reasonable cause 

for failing to file the required annual notices or returns, the organization’s tax-exempt status may, 

in the discretion of the Secretary, be reinstated retroactive to the date of revocation.67 An 

organization may not challenge under the Code’s declaratory judgment procedures (section 

7428) a revocation of tax-exemption made for failure to file annual information returns. 

The Secretary is authorized to publish a list of organizations whose exempt status is 

automatically revoked.

Explanation of Provision

The provision requires that the IRS provide notice to an organization that fails to file a 

Form 990-series return or notice for two consecutive years. The notice must state that the IRS 

has no record of having received such a return or notice from the organization for two 

consecutive years and inform the organization about the revocation of the organization’s taxexempt status that will occur if the organization fails to file such a return or notice by the due 

date for the next such return or notice. The notice must also contain information about how to 

comply with the annual information return and notice requirements under sections 6033(a)(1) 

and 6033(i).

Effective Date

The provision applies to failures to file returns or notices for two consecutive years if the 

return or notice for the second year is required to be filed after December 31, 2018.

14. Report on IRS audit criteria (sec. 1041 of the bill)

Present Law

The Treasury Inspector General for Tax Administration (“TIGTA”) is not currently 

required to consult with the IRS on the criteria it uses to select tax returns for audits, 

assessments, criminal investigations, or report any instances where the IRS’s criteria 

discriminate on the basis of race, religion, or political ideology.

Explanation of Provision

In an effort to ascertain whether taxpayers may be targeted for audits, assessments, 

criminal investigations, or any heightened scrutiny or review by the IRS because of their political 

ideology, race, religion, or any other impermissible factor, TIGTA is required to perform an 

 66 Sec. 6033(j)(2).

67 Sec. 6033(j)(3); Rev. Proc. 2014-11, 2014-3 I.R.B. 411 (January 13, 2014).
26

audit of the criteria the IRS uses to select tax returns for audit, assessments, criminal 

investigation, or heightened scrutiny or review.

TIGTA shall provide a report of its findings within two years of the date of enactment.

Effective Date

The provision is effective on the date of enactment. 
27

B. Protection of Taxpayers From Identity Theft and Tax Fraud

1. Single point of contact for tax-related identity theft victims (sec. 1101 of the bill)

Present Law

Tax-related identity theft generally takes one of two forms: refund fraud or employment 

fraud. In refund fraud, a perpetrator may obtain a taxpayer’s identifying information, submit an 

individual income tax return using a falsified Form W-2, Wage and Tax Statement, and 

fraudulently claim a refund. In employment fraud, the stolen identifying information is used in 

order to obtain employment. The returns then filed using the stolen identity may be based on the 

actual wages and withholding of the identity thief. Victims of the employment fraud include the 

individuals whose identifying information was stolen as well as the businesses whose systems 

may have been breached to obtain that personal information. 

The IRS describes its procedures for addressing both types of fraud in the Internal 

Revenue Manual. The IRS initially established the Identity Protection Specialized Unit 

(“IPSU”) to assist victims of identity theft, but taxpayers were also referred to other operating 

units of the IRS to deal with various aspects of their cases.68 Subsequently reorganized and 

renamed the Identity Theft Victim Assistance (“IDTVA”) organization, the unit is staffed with 

specially trained employees who are able to assess each case, identify issues, and assist the 

taxpayer in getting the correct return filed, refunds issued, etc.69 The IDTVA organization’s 

work is coordinated by the IRS’s Identity Protection Program through the auspices of an 

oversight office within the Wage and Investment Operating Division.70

If a victim thinks he or she is not being properly served by the IRS or the IDTVA 

organization, the victim may be eligible for assistance from the Taxpayer Advocate Service 

(“TAS”). In such instances, the TAS will assign a case advocate to the taxpayer’s account.

Explanation of Provision

The provision requires the Secretary to establish procedures to implement a single point 

of contact for taxpayers adversely affected by identity theft. The single point of contact consists 

of a team of specially trained employees who can work across functions to resolve problems for 

the victim and who are accountable for handling the case to completion. The makeup of the 

team may change as required to meet IRS needs, but the procedures must ensure continuity of

records and case history and may require notice to the taxpayer in appropriate instances. 

 68 Inspector General for Tax Administration, Department of the Treasury, Most Taxpayers Whose Identities 

Have Been Stolen to Commit Refund Fraud Do Not Receive Quality Customer Service (TIGTA 2012-40-050), May 

2012. 

69 A description of the services provided by the IDTVA organization is available at 

https://www.irs.gov/uac/Newsroom/IRS-Identity-Theft-Victim-Assistance-How-It-Works. 

70 Internal Revenue Service, Identity Protection and Victim Assistance, Internal Revenue Manual Chapter 

23, paragraph 25.23.1 et seq. (September 22, 2016). 
28

Effective Date

The provision is effective on the date of enactment.

2. Information on identity theft and tax scams (sec. 1102 of the bill)

Present Law

No provision.

Explanation of Provision

The provision requires the IRS to provide the following information over the telephone, 

while taxpayers are on hold with the IRS call center: information about common tax scams, 

direction to the taxpayer on where and how to report such activity, and tips on how to protect 

against identity theft and tax scams. 

Effective Date

The provision is effective on the date of enactment.

3. Notification of suspected identity theft (sec. 1103 of the bill and new sec. 7529 of the 

Code)

Present Law

Section 6103 provides that returns and return information are confidential and may not be 

disclosed by the IRS, other Federal employees, State employees, and certain others having access 

to the information except as provided in the Code.71 The definition of “return information” is 

very broad and includes any information gathered by the IRS with respect to a person’s liability 

or possible liability under the Code for any tax, penalty, interest, fine, forfeiture, or other 

imposition or offense.72 Thus, information gathered by the IRS in connection with an 

investigation of a person for a Title 26 offense, such as fraud, is the return information of the 

person being investigated and is subject to the confidentiality restrictions of section 6103. 

As an exception to section 6103's general rule of confidentiality, the Code permits a 

taxpayer to receive his or her own tax return, and also can receive his or her return information if 

the Secretary determines that such disclosure would not seriously impair Federal tax 

administration.73 With respect to fraudulent tax returns, if the victim's name and Social Security 

 71 Sec. 6103(a). 

72 Sec. 6103(b)(2). 

73 Sec. 6103(e)(1) and (7). The Code also permits the disclosure of returns and return information to such 

persons or persons the taxpayer may designate, if the request meets the requirements of the Treasury regulations and 

if it is determined that such disclosure would not seriously impair Federal tax administration. Sec. 6103(c).
29

number (“SSN”) are listed as either the primary or secondary taxpayer on a fraudulent return, a 

victim of identity theft, or a person authorized to obtain the identity theft victim’s tax 

information, may request a redacted copy (one with some information blacked-out) of a 

fraudulent return that was filed and accepted by the IRS using the identity theft victim’s name 

and SSN.74

Under a Privacy Act notice, with respect to investigations other than those involving 

violations of Title 26, TIGTA may disclose the following information to complainants: 

In cases not involving violations of Title 26, under a Privacy Act Notice, TIGTA is 

allowed to disclose information to complainants, victims, or their representatives (defined to be a 

complainant’s or victim’s legal counsel or a Senator or Representative whose assistance the 

complainant or victim has solicited) concerning the status and/or results of an investigation or 

case arising from the matters of which they complained and/or of which they were a victim, 

including, once the investigative subject has exhausted all reasonable appeals, any action taken. 

Information concerning the status of the investigation or case is limited strictly to whether the 

investigation or case is open or closed. Information concerning the results of the investigation or 

case is limited strictly to whether the allegations made in the complaint were substantiated or 

were not substantiated and, if the subject has exhausted all reasonable appeals, any action 

taken.75

Explanation of Provision

If the Secretary determines that there has been or may have been an unauthorized use of a 

taxpayer’s identity or that of the taxpayer’s dependents, the provision requires the Secretary to,

without jeopardizing an investigation relating to tax administration, as soon as practicable, notify 

the taxpayer of such determination, and provide: (1) instructions to the taxpayer about filing a 

report with law enforcement; (2) the forms the taxpayer must submit to allow investigating law 

enforcement officials to access the taxpayer's personal information; (3) steps that victims can 

take to protect themselves from harm caused by the unauthorized use; and (4) an offer of IRS 

victim protection measures such as an IP PIN that allows returns to be filed securely. 

At the time this information is provided (or, if not available at such time, as soon as 

practicable thereafter), the Secretary shall issue additional notifications to such individual (or 

such individual’s designee) regarding: (1) whether an investigation has been initiated in regards 

to such unauthorized use; (2) whether the investigation substantiated an unauthorized use of the 

taxpayer’s identity; and (3) whether any action has been taken with respect to the individual who 

committed the substantiated violation, including whether any referral has been made for criminal 

prosecution of such individual, and, to the extent such information is available, whether such 

person has been criminally charged by indictment or information. 

 74 See, Internal Revenue Service, Instructions for Requesting Copy of Fraudulent Returns (June 5, 2018), 

available at https://www.irs.gov/Individuals/Instructions-for-Requesting-Copy-of-Fraudulent-Returns. 

75 See 75 Fed. Reg. 20715 (April 20, 2010) (relating to TIGTA Office of Investigation files).
30

For purposes of this provision, the unauthorized use of the identity of an individual 

includes the unauthorized use of the identity of the individual to obtain employment (herein 

“employment-related identity theft”). In making a determination as to whether there has been or 

may have been an unauthorized use of the identity of an individual to obtain employment, the 

Secretary shall review any information obtained from a statement described in section 6051 or an 

information return relating to compensation for services rendered other than as an employee, or 

provided to the IRS by the SSA regarding any statement described in section 6051 which 

indicates that the Social Security account number provided on such statement or information 

return does not correspond with the name provided on such statement or information return or 

the name on the tax return reporting the income which is included on such statement or 

information return. This provision requires the Secretary to examine the statements, information 

returns, and tax returns described in the provision for any evidence of employment-related 

identity theft, regardless of whether such statements or returns are submitted electronically or on 

paper. The provision amends the Social Security Act to require the Commissioner of SSA to 

request information described in the provision not less than annually. The provision also 

requires that the IRS establish procedures to ensure that identity theft victims are not penalized 

for underreporting of income as a result of the unauthorized use of their identity. 

Effective Date

The provision applies to determinations made after the date that is six months after the 

date of enactment.
31

TITLE II ─ STOLEN IDENTITY FRAUD PREVENTION

A. Identity Theft and Tax Refund Fraud Prevention

1. Guidelines for stolen identity theft refund fraud cases (sec. 2001 of the bill)

Present Law

Disparate elements in the tax laws and administration are implicated in identity theft. 

The tax aspects of identity theft can generally occur in one of two ways. In refund fraud, a 

perpetrator obtains someone else’s identifying information and submits an individual income tax 

return using the name and Social Security number of the victim, with a falsified Form W-2, 

Wage and Tax Statement, and fraudulently claims a refund. In other cases, the stolen identifying 

information is used in order to obtain employment; the returns then filed by the persons 

employed using the stolen identity may be based on the actual wages and withholding. Victims 

of the fraud include the individuals whose identifying information was stolen as well as the 

businesses whose systems may have been breached to obtain that personal information. 

The Internal Revenue Service (“IRS”) describes its procedures for addressing both types 

of fraud in its manual. Its work is coordinated by the IRS’s Identity Protection Program through 

the auspices of an oversight office.76 

In her 2014 Annual Report to Congress, the National Taxpayer Advocate included a 

review of fraudulent refund claims that included the theft of a taxpayer’s identity.77 The review 

found that such cases involved multiple issues requiring coordination among several business 

units of the IRS, and took approximately six months to resolve. Identity theft victims were 

required to deal with multiple persons within the IRS to resolve the issues, either because a case 

involved multiple business units or was transferred among multiple employees within a business 

unit. 

Explanation of Provision

The provision requires that the IRS, in consultation with the National Taxpayer 

Advocate, develop and implement publicly available casework guidelines for the handling of 

refund fraud cases that would have the effect of reducing the administrative burdens on victims 

of identity theft. The guidelines may address both procedures and metrics for determining 

whether the procedures are successfully implemented. Among the issues to be considered are 

the standards for opening, assigning, reassigning or closing a case; the average length of time in 

which a case with an identity theft issue should be resolved; the average length of time a victim 

 76 Internal Revenue Service, Identity Protection Program, Internal Revenue Manual paragraph 10.5.3, et 

seq. (December 2014). 

77 National Taxpayer Advocate, “Identity Theft Case Review Report: A Statistical Analysis of Identity Theft 

Cases Closed in June 2014,” 2014 Annual Report to Congress, available at 

http://www.taxpayeradvocate.irs.gov/reports-to-congress/2014-annual-report-to-congress/research-studies.
32

entitled to a tax refund may have to wait to receive such refund; and the number of IRS offices 

and employees with whom a victim should interact to resolve a case. 

Effective Date

The provision is effective on the date of enactment, with guidelines to be implemented 

within six months of the date of enactment. 

2. Increased penalty for improper disclosure or use of information by preparers of returns

(sec. 2002 of the bill and sec. 6713 of the Code)

Present Law

The Code provides both civil and criminal penalties for a tax return preparer who 

discloses any information furnished to the preparer for, or in connection with, the preparation of 

such return or uses such information for any purpose other than to prepare or assist in preparing, 

any such return. The civil penalty is $250 for each unauthorized disclosure or use up to $10,000 

per calendar year.78 The corresponding criminal penalty under section 7216 provides that 

knowing or reckless conduct is a misdemeanor, subject to a fine up to $1,000, one year of 

imprisonment, or both, together with the costs of prosecution.

Section 6103(b)(6) defines “taxpayer identity” as the name of the person with respect to 

whom a return is filed, his mailing address, his taxpayer identifying number or a combination 

thereof.

Explanation of Provision

The provision increases the civil penalty on the unauthorized disclosure or use of 

information by tax return preparers from $250 to $1,000 for cases in which the disclosure or use 

is made in connection with a crime relating to the misappropriation of another person’s taxpayer 

identity (“taxpayer identity theft”). The provision also increases the calendar year limitation 

from $10,000 to $50,000. The calendar year limitation is applied separately with respect to 

disclosures or uses made in connection with taxpayer identity theft.

The provision also increases the criminal penalty for knowing or reckless conduct to 

$100,000 in the case of disclosures or uses in connection with taxpayer identity theft.

Effective Date

The provision applies to disclosures or uses on or after the date of enactment. 

 78 Sec. 6713.
33

3. Authority to transfer IRS appropriations to combat tax fraud (sec. 2011 of the bill) 

Present Law

Article I, section nine of the Constitution provides that “No money shall be drawn from 

the Treasury, but in Consequence of Appropriations made by Law.” Under section 1301 of Title 

31, public funds may be used only for the purposes(s) for which Congress appropriated the 

funds, except as otherwise provided by law. An officer or employee of the United States 

government cannot make or authorize an expenditure or obligation exceeding an amount 

available in an appropriation or fund for the expenditure or obligation.79 Such officer or 

employee violating this rule will be subject to appropriate disciplinary measures, including when 

circumstances warrant, suspension from duty without pay or removal from office.80 In addition, 

a Federal officer or employee who knowingly and willfully violates the rule is subject to a fine of 

up to $5,000, imprisonment of up to two years, or both.81

Section 101 of the Consolidated and Continuing Appropriations Act of 201582 allows the 

IRS, with advance approval of the Appropriations Committees, to transfer up to five percent of 

any appropriation:

SEC. 101. Not to exceed 5 percent of any appropriation made available in this Act to the 

Internal Revenue Service may be transferred to any other Internal Revenue Service 

appropriation upon the advance approval of the Committees on Appropriations.

Explanation of Provision

Under the provision, for any fiscal year, the Commissioner of Internal Revenue 

(“Commissioner”) may transfer not more than $10 million to any account of the IRS from 

amounts appropriated to other IRS accounts. Any amounts so transferred shall be used solely for 

the purposes of preventing, detecting, and resolving potential cases of tax fraud. The prevention 

of tax fraud includes educating taxpayers about scams that target them and providing information 

about how they can protect themselves. 

In addition, such transfer of funds can only be made if the Commissioner has determined 

that customer service to the general public (including telephone operations, forms and 

publications, and similar taxpayer assistance provided by the IRS) will not be impaired by such 

transfer. This authority to transfer $10 million among IRS accounts is in addition to any other 

permitted transfers of appropriations (such as the five percent referenced above).

 79 31 U.S.C. sec. 1341.

80 31 U.S.C. sec. 1349.

81 31 U.S.C. sec. 1350.

82 Pub. L. No. 113-235.
34

Effective Date

The provision is effective on the date of enactment.

4. Streamlined critical pay authority for information technology positions (sec. 2012 of the 

bill)

Present Law

The IRS is currently subject to the personnel rules and procedures set forth in Title 5 of 

the United States Code. Under these rules, IRS employees generally are classified under the 

General Schedule or the Senior Executive Service. 

The IRS Restructuring and Reform Act of 1998 (“Restructuring Act”) provided the IRS 

with certain personnel flexibilities, one of which was the streamlined critical pay authority.83 

This authority was originally provided for 10 years; it was extended on two occasions and 

ultimately expired on September 30, 2013.84 

Under the Restructuring Act, the Secretary of the Treasury, or his delegate, was 

authorized to fix the compensation of, and appoint up to 40 individuals to, designated critical 

technical and professional positions, provided that: (1) the positions require expertise of an 

extremely high level in a technical or professional field and are critical to the IRS; (2) exercise of

the authority is necessary to recruit or retain an individual exceptionally well qualified for the 

position; (3) designation of such positions is approved by the Secretary; (4) the terms of such 

appointments are limited to no more than four years; (5) appointees to such positions are not IRS 

employees immediately prior to such appointment; and (6) the total annual compensation for any 

position (including performance bonuses) does not exceed the rate of pay of the Vice President.

These appointments would not be subject to the otherwise applicable requirements under 

Title 5. All such appointments would be excluded from the collective bargaining unit and the 

appointments would not be subject to approval of the Office of Management and Budget 

(“OMB”) or the Office of Personnel Management (“OPM”).

Also, OMB was authorized to approve increases in the pay level for certain critical pay 

positions requested by the Secretary. These critical pay positions would be critical, technical and 

professional positions other than those designated under the streamlined authority described 

above. OMB was authorized to approve requests for critical position pay up to the highest total 

compensation that does not exceed the rate of pay of the Vice President of the United States.

 83 Pub. L. No. 105-206, 112 Stat. 712 (1998).

84 In December 2007, the Consolidated Appropriations Act, 2008, Pub. L. No. 110–161, 121 Stat. 1844, 

(2008), extended the original deadline to July 23, 2013. Subsequently, the Consolidated and Further Continuing 

Appropriations Act 2013, Pub. L. No. 113-6, 127 Stat. 198 (2013), extended the deadline to September 30, 2013.
35

According to TIGTA, during the years in which it had streamlined critical pay authority, 

the IRS exercised that authority to fill 168 positions, the majority of which were in the 

Information Technology function of the IRS.85 

Explanation of Provision

The provision reinstates streamlined critical pay authority at IRS for positions in its 

information technology operations that are necessary to ensure the functionality of such 

operations. Such authority is reinstated for a period starting on October 1, 2018 and ending on

September 30, 2023.

The provision reinstates the ability to provide payment for recruitment, retention, 

relocation incentives, and relocation expenses for positions in information technology operations 

at the IRS. It also reinstates the ability to pay performance bonuses for senior executives who 

have program management responsibility over the information technology operations at the IRS. 

Such authority is reinstated for a period starting on October 1, 2018 and ending on September 30, 

2023. 

Effective Date

The provision is effective for payments made on or after the date of enactment. 

5. Access to the National Directory of New Hires to identify and prevent fraudulent tax 

return filings and claims for refund (sec. 2013 of the bill)

Present Law

The Office of Child Support Enforcement of the Department of Health and Human 

Services (“HHS”) maintains the National Directory of New Hires (the “Directory”), which is a 

database that contains data on newly-hired employees from Forms W-4, quarterly wage data 

from State and Federal employment security agencies, and unemployment benefit data from 

State unemployment insurance agencies. The Directory was created to help State child support 

enforcement agencies enforce obligations of parents across State lines. 

Under the Social Security Act, the IRS may obtain data from the Directory for the sole 

purpose of administering the earned income credit (“EIC”)86 and verifying a taxpayer’s 

employment that is reported on a tax return.87 The IRS also may negotiate for access to 

employment data directly from State agencies responsible for such data, to the extent permitted 

by the laws of the various States. Generally, the IRS obtains such employment data less 

 85 TIGTA, The Internal Revenue Service’s Use of its Streamlined Critical Pay Authority,” Ref. No. 2015-

IE-R001, (December 5, 2014), available at https://www.treasury.gov/tigta/iereports/2015reports/2015ier001fr.pdf.

86 Sec. 32(a)(1).

87 42 U.S.C. secs. 653 and 653a.
36

frequently than quarterly, due to the significant internal costs it incurs in preparing these data for 

use.88

Explanation of Provision

The provision amends the Social Security Act to expand IRS access to the Directory data 

for the sole purpose of identifying and preventing fraudulent tax return filings and claims for 

refund. Data obtained by the IRS from the Directory are protected by existing taxpayer privacy 

law.89

Effective Date

The provision is effective on the date of enactment. 

6. Repeal of provision regarding certain tax compliance procedures and reports

(sec. 2014 of the bill)

Present Law

Under present law, taxpayers generally are required to calculate their own tax liabilities 

and submit returns showing their calculations. The IRS Restructuring and Reform Act of 1998 

(“Restructuring Act”) requires the Secretary of the Treasury or his delegate (“Secretary”) to 

study the feasibility of, and develop procedures for, the implementation of a return-free tax 

system for appropriate individuals for taxable years beginning after 2007.90 The Secretary is 

required annually to report to the tax-writing committees on the progress of the development of 

such system. The Secretary was required to make the first report on the development of the 

return-free filing system to the tax-writing committees by June 30, 2000.

Explanation of Provision

The provision repeals section 2004 of the Restructuring Act. 

Effective Date

The provision is effective on the date of enactment.

 88 See Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2016 

Revenue Proposals, February 2015, p.238.

89 See section 6103(b)(2)(A), providing that information received by or recorded by or furnished to the 

Secretary with respect to the existence or possible existence of a liability under Title 26 is return information. 

Section 6103(A) provides that return information is confidential and cannot be disclosed except as authorized. See 

section 7431, 7213 and 7213A for civil and criminal penalties for the unauthorized disclosure or inspection of return 

information.

90 Pub. L. No. 105-206, sec. 2004.
37

B. Improvements to Electronic Filing of Tax Returns

1. Identity protection personal identification numbers (sec. 2101 of the bill)

Present Law

In 2011, the IRS launched a pilot program to test the identity protection personal 

identification number (“IP PIN”). The IP PIN is a unique six-digit identifier that authenticates a 

return filer as the legitimate taxpayer at the time the return is filed. The IP PIN allows taxpayers 

affected by identity theft to avoid delays in filing returns and receiving refunds. The IRS verifies 

the presence of the IP PIN at the time of filing, and rejects returns associated with a taxpayer’s 

account where an IP PIN has been assigned but is missing. For the 2016 filing season, the IRS 

issued IP PINs to more than 2.7 million taxpayers who had identity theft markers on their tax 

accounts.91

In January 2014, the IRS also started a limited pilot program under which taxpayers who 

obtained an electronic filing PIN through an IRS authentication website and live in the District of 

Columbia, Florida, or Georgia were provided an opportunity to obtain an IP PIN.92 These 

locations were selected because they had the highest per capita rate of tax-related identity theft 

when the initiative was piloted. Residents in these places do not need to be identity theft victims 

to participate. 

Explanation of Provision

Within five years of the date of enactment, the Secretary is required to establish a 

program to issue an IP PIN to any individual requesting one to assist the Secretary in verifying 

the individual’s true identity.

Effective Date

The provision is effective on the date of enactment.

 91 Inspector General for Tax Administration, Department of the Treasury, Inconsistent Processes and 

Procedures Result in Many Victims of Identity Theft Not Receiving Identity Protection Personal Identification 

Numbers (TIGTA 2017-40-026), March 23, 2017, available at 

https://www.treasury.gov/tigta/auditreports/2017reports/201740026fr.pdf.

92 Internal Revenue Service, IP PIN pilot continues in Georgia, Florida and the District of Columbia, 

available at https://www.irs.gov/identity-theft-fraud-scams/identity-protection-pin-pilot-program.
38

2. Electronic filing of returns (sec. 2102 of the bill and sec. 6011 of the Code)

Present Law

In general

The IRS Reform and Restructuring Act of 1998 (“RRA98”) states a Congressional policy 

to promote the paperless filing of Federal tax returns. Section 2001(a) of RRA98 set a goal for 

the IRS to have at least 80 percent of all Federal tax and information returns filed electronically 

by 2007.93 Section 2001(b) of RRA98 requires the IRS to establish a 10-year strategic plan to 

eliminate barriers to electronic filing.

Present law requires the Secretary to issue regulations regarding electronic filing and 

specifies certain limitations on the rules that may be included in such regulations.94 The statute 

requires that Federal income tax returns prepared by specified tax return preparers be filed 

electronically,95 and further requires that all partnerships with more than 100 partners be required 

to file electronically. For taxpayers other than partnerships, the statute prohibits any requirement 

that persons who file fewer than 250 returns during a calendar year file electronically. With 

respect to individuals, estates, and trusts, the Secretary may permit, but generally cannot require, 

electronic filing of income tax returns. In crafting any of these required regulations, the 

Secretary must take into account the ability of taxpayers to comply at a reasonable cost.

The regulations require corporations that have assets of $10 million or more and file at 

least 250 returns during a calendar year to file electronically their Form 1120/1120S income tax 

returns (U.S. Corporation Income Tax Return/U.S. Income Tax Return for an S Corporation) and 

Form 990 information returns (Return of Organization Exempt from Income Tax) for tax years 

ending on or after December 31, 2006. In determining whether the 250 returns threshold is met, 

income tax, excise tax, employment tax and information returns filed within one calendar year 

are counted. 

Explanation of Provision

The provision relaxes the current restrictions on the authority of the Secretary to mandate 

electronic filing based on the number of returns required to be filed by a taxpayer in a given 

taxable period. First, it phases in a reduction in the threshold requirement that taxpayers have an 

obligation to file a specified number of returns and statements during a calendar year in order to 

be subject to a regulatory mandate. That threshold is reduced from 250 to 100 for calendar year 

 93 The Electronic Tax Administration Advisory Committee, the body charged with oversight of IRS 

progress in reaching that goal projected an overall e-filing rate of 80.1 percent in the 2017 filing season based on all 

Federal returns. See Electronic Tax Administration Advisory Committee, Annual Report to Congress, June 2017, 

IRS Pub. 3415, page 5.

94 Sec. 6011(e). 

95 Section 6011(e)(3)(B) defines a “specified tax return preparer” as any return preparer who reasonably 

expects to file more than 10 individual income tax returns during a calendar year. 
39

2020, from 100 to 10 for calendar year 2021 and for calendar years thereafter. Notwithstanding 

these thresholds, in the case of a partnership the applicable number is 200 in the case of calendar 

year 2018 and 150 in the case of calendar year 2019.96 

The provision authorizes the Secretary to waive the requirement that a Federal income 

tax return prepared by a specified tax return preparer be filed electronically if a tax return 

preparer applies for a waiver and demonstrates that the inability to file electronically is due to 

lack of internet availability (other than dial-up or satellite service) in the geographic location in 

which the return preparation business is operated. 

Effective Date

The provision is effective on the date of enactment. 

3. Internet platform for Form 1099 filings (sec. 2103 of the bill)

Present Law

The Code does not presently require the IRS to make available an internet platform for 

the preparation or filing of information returns, such as the series, Form 1099. 

Explanation of Provision

The provision requires the Secretary of the Treasury (or his or her delegate) to make 

available, by January 1, 2023, an internet website or other electronic medium (the “website”), 

with a user interface and functionality similar to the Business Services Online Suite of Services 

provided by the Social Security Administration.97 The website will allow persons, with access to 

resources and guidance provided by the IRS, to prepare, file, and distribute Forms 1099, and 

maintain a record of completed and submitted Forms 1099. The Secretary is required to ensure 

that the services provided on the website are not a replacement for services currently provided by 

the IRS, and that the website comply with applicable security standards.

Effective Date

The provision is effective on the date of enactment.

 96 There is no change to the requirement that partnerships having more than 100 partners must file 

electronic returns notwithstanding these thresholds.

97 Available at http://www.ssa.gov/bso/bsowelcome.htm.
40

4. Requirement that electronically prepared paper returns include scannable code

(sec. 2104 of the bill) 

Present Law

Every citizen, whether residing in or outside the United States, and every resident of the 

United States within the meaning of section 7701(b) must file an income tax return if the 

individual has income that equals or exceeds the exemption amount.98 Treasury regulations 

require individual taxpayers to make this return using a Form 1040, U.S. Individual Income Tax 

Return.99 Similarly, every corporation subject to Federal income tax, regardless of the amount of 

its gross or taxable income for the taxable year, is required to file a return.100

In 1998, Congress declared a policy that (1) paperless filing should be the preferred and 

most convenient means of filing Federal tax and information returns, (2) the IRS’s goal should 

be to receive at least 80 percent of all returns electronically by 2007, and (3) the IRS should 

encourage private-sector competition to increase electronic filing.101 Section 6011(f), also 

enacted in 1998, authorizes the Department of the Treasury to advertise the benefits of electronic 

tax administration programs and to make payment of appropriate incentives for electronicallyfiled returns.

The Department of the Treasury generally is authorized to prescribe regulations 

providing standards for determining which returns must be filed on magnetic media or in another 

machine-readable form. However, except under certain circumstances, the Department of the 

Treasury “may not require returns of any tax imposed by subtitle A on individuals, estates, and 

trusts, to be other than on paper forms supplied by the Secretary.”102

Explanation of Provision

The provision requires that taxpayers who prepare their returns electronically, but print 

and file the returns on paper must print their returns with a scannable code. A scannable code 

enables the IRS to convert paper-filed tax returns into an electronic format using scanning 

technology.

 98 Sec. 6012(a)(1); Treas. Reg. sec. 1.6012-1(a)(1).

99 Treas. Reg. sec. 1.6012-1(a)(6).

100 Sec. 6012(a)(2).

101 The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, sec. 2001.

102 Sec. 6011(e)(1).
41

Effective Date

The provision is effective for tax returns with a due date, determined without regard to 

extensions, after December 31, 2019.

5. Authentication of users of electronic services accounts (sec. 2105 of the bill)

Present Law

The IRS has developed a suite of web-based products, called e-Services Online Tools for 

Tax Professionals, which provides multiple electronic products and services to tax professionals. 

Explanation of Provision

The provision requires the IRS to verify the identity of any individual opening an eServices account before he or she is able to use such services.

Effective Date

The provision is effective not later than 180 days after the date of enactment. 
42

APPENDIX:

ESTIMATED REVENUE EFFECTS OF THE “TAXPAYER FIRST ACT OF 2018”
Provision Effective 2019 2020 2021 2022 2023 2024 2025 20

I. Taxpayer Protection

A. Protection of Taxpayer Rights

1. Return preparation programs for applicable taxpayers.......... DOE2. Limit redisclosures and uses of consent-based

disclosures of tax return information..................................... [1]

3. Clarification of equitable relief from joint liability............... porfopo/a DOE

4. Notice from IRS regarding closure of Taxpayer

Assistance Centers................................................................ DOE

5. Whistleblower Reforms........................................................ [2]6. Electronic record retention.................................................... DOE7. Prohibition on rehiring former IRS employees who

were involuntarily separated for misconduct........................ [3]

8. Authority to remove or transfer senior IRS executives

who fail in their performance or engage in seriousmisconduct............................................................................ DOE

9. Limitation on access of non-Internal Revenue Service

employees to returns and return information........................ [4]

10. Notification of unauthorized inspection or disclosure

of returns and return information.......................................... [5]

11. Mandatory e-filing by exempt generally

organizations......................................................................... tyba DOE

12. Prohibit the use of IRS funds for political targeting.............. DOE13. Notice required before revocation of tax exempt

status for failure to file return................................................ [6]

14. Report on IRS Audit Criteria................................................ DOE

B. Protection of Taxpayers From Identity Theft and Tax Fraud

1. Single point of contact for identity theft victims................... DOE

2. Information on identity theft and tax scams.......................... DOE

3. Notification of suspected identity theft................................. [7]

Total of Taxpayer Protection.....................................................................

II. Stolen Identity Fraud Prevention

A. Identity Theft and Tax Refund Fraud Protection

1. Guidelines for stolen identity refund fraud cases.................. [8]

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect 

THE "TAXPAYER FIRST ACT OF 2018"

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

ESTIMATED REVENUE EFFECTS OF

Fiscal Years 2019 - 2028

[Millions of Dollars] 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

43
Provision Effective 2019 2020 2021 2022 2023 2024 2025 20

2. Increased penalty for improper disclosure or use of

information by preparers of returns....................................... douo/a DOE [9] [9] [9] [9] [9] [9] [9] 

3. Authority to transfer Internal Revenue Service

appropriations to combat tax fraud........................................ DOE

4. Streamlined critical pay authority for information

technology positions............................................................. pmo/a DOE

5. Access to the National Directory of New Hires to

identify and prevent fraudulent tax return filings andclaims for refund................................................................... DOE

6. Repeal of provision regarding certain tax compliance

procedures and reports.......................................................... DOE

B. Improvements to Electronic Filing of Tax Returns

1. Identity protection personal identification numbers.............. DOE

2. Electronic filing of returns.................................................... DOE3. Internet platform for Form 1099 filings................................ DOE

4. Requirement that electronically prepared paper

returns include scannable code.............................................. [10]

5. Authentication of users of electronic services accounts........ nlt 180da DOE

Total of Stolen Identity Fraud Prevention ...................................................... [9] [9] [9] [9] [9] [9] [9] 

 NET TOTAL ............................................................................................. [9] [9] [9] [9] [9] [9] [9] Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. The date of enactment is assumed to be October 1, 2018.Legend for "Effective" column: 

DOE = date of enactment porfopo/a = petitions or requests filed ordouo/a = disclosures or uses on or after pending on or afternlt = not later than 180da = 180 days afterpmo/a = payments made on or after

[1] Effective for disclosures made after the date that is six months after the date of enactment.[2] The modifications made to the disclosure rules apply to disclosures made after the date of enactment. The protections from retaliation are effective on the date of 

[3] The prohibition applies with respect to the hiring of employees after the date of enactment.[4] The provision is generally effective on the date of enactment and applies to any tax administration contracts in effect on the date of enactment.

[5] Effective for determinations proposed after the date which is 180 days after the date of the enactment of this Act.[6] Effective for failures to file returns or notices for 2 consecutive years if the return or notice for the second year is required to be filed after December 31, 2018.[7] Effective for determinations made after the date that is six months after the date of enactment.[8] Effective on the date of enactment, with guidelines to be implemented within six months of the date of enactment.[9] Gain of less than $500,000.

[10] Effective for tax returns with a due date, determined without regard to extensions, after December 31, 2019.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - 

44