I

106TH CONGRESS

1ST SESSION H. R. 753

To amend the Internal Revenue Code of 1986 to provide that interest on

the tax portion of an underpayment shall be compounded annually,

to provide that the amount and timing of payments under an installment

agreement may not be modified without the taxpayer’s consent, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 11, 1999

Mr. TOWNS introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

that interest on the tax portion of an underpayment

shall be compounded annually, to provide that the

amount and timing of payments under an installment

agreement may not be modified without the taxpayer’s

consent, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Fairness in IRS Debt

5 Payment Act of 1999’’.
2

•HR 753 IH

1 SEC. 2. INTEREST ON TAX PORTION OF UNDERPAYMENT TO

2 BE COMPOUNDED ANNUALLY.

3 (a) IN GENERAL.—Section 6622 of the Internal Rev4 enue Code of 1986 (relating to interest compounded daily)

5 is amended by adding at the end the following new sub6 section:

7 ‘‘(c) INTEREST ON TAX PORTION OF UNDER8 PAYMENT TO BE COMPOUNDED ANNUALLY.—

9 ‘‘(1) IN GENERAL.—In the case of interest or

10 other amount referred to in subsection (a) which is

11 required to be paid by the taxpayer, such interest

12 and such amount shall be compounded annually.

13 The preceding sentence shall only apply to the ex14 tent that the amount on which such interest and

15 amount are imposed is tax.

16 ‘‘(2) INTEREST AND PENALTIES NOT TREATED

17 AS TAX.—Notwithstanding sections 6601(e) and

18 6665, interest and additions to the tax, additional

19 amounts, and penalties provided by chapter 68 shall

20 not be treated as tax for purposes of paragraph (1).

21 ‘‘(3) ALLOCATION OF PAYMENTS.—For pur22 poses of paragraph (1), payments on any under23 payment shall be allocated first to amounts which

24 are not treated as tax under paragraph (2) and then

25 to amounts of tax.’’
3

•HR 753 IH

1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to interest for periods after De3 cember 31, 1999.

4 SEC. 3. ALLOCATION OF PAYMENTS TO UNDERPAYMENTS.

5 (a) IN GENERAL.—Chapter 77 of the Internal Reve6 nue Code of 1986 is amended by adding at the end the

7 following new section:

8 ‘‘SEC. 7527. ALLOCATION OF PAYMENTS TO UNDERPAY9 MENTS.

10 ‘‘In the case of a taxpayer having underpayments for

11 more than 1 taxable period, payments by the taxpayer

12 against those underpayments shall be allocated by the Sec13 retary of the Treasury equally among such underpayments

14 or in such other manner as may be directed by the tax15 payer.’’

16 (b) CLERICAL AMENDMENT.—The table of sections

17 for chapter 77 of such Code is amended by adding at the

18 end the following new item:

‘‘Sec. 7527. Allocation of payments to underpayments.’’

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to payments made after December

21 31, 1999.

22 SEC. 4. PROHIBITION ON MODIFICATION OF INSTALLMENT

23 AGREEMENTS.

24 (a) IN GENERAL.—Section 6159 of the Internal Rev25 enue Code of 1986 (relating to agreements for payment
4

•HR 753 IH

1 of tax liability in installments) is amended by redesignat2 ing subsections (d) and (e) as subsection (e) and (f), re3 spectively, and by inserting after subsection (c) the follow4 ing new subsection:

5 ‘‘(d) PROHIBITION OF CERTAIN MODIFICATIONS OF

6 INSTALLMENT AGREEMENTS.—If the Secretary enters

7 into an installment agreement with a taxpayer under this

8 section (other than under subsection (c))—

9 ‘‘(1) such agreement shall serve as a closing

10 agreement with respect to the amount of the liability

11 specified in the installment agreement for the peri12 ods to which such liability relates, and

13 ‘‘(2) except as provided in subsection (b)(2),

14 such installment agreement may not be altered,

15 modified, or terminated other than by reason of a

16 failure to make a timely payment of any installment

17 under such agreement.’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Subsection (b) of section 6159 of such Code

20 is amended by striking paragraphs (3) and (4) and

21 by redesignating paragraph (5) as paragraph (3).

22 (2) Paragraph (3) of section 6159(b) of such

23 Code (as redesignating by paragraph (1)) is amend24 ed by striking ‘‘, (3), or (4)’’.
5

•HR 753 IH

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to agreements entered into after

3 December 31, 1999.

4 SEC. 5. LIMITATION ON AGGREGATE INTEREST AND PEN5 ALTIES.

6 (a) IN GENERAL.—Section 6404 of the Internal Rev7 enue Code of 1986 (relating to abatements) is amended

8 by adding at the end the following new subsection:

9 ‘‘(j) ABATEMENT OF EXCESSIVE INTEREST AND

10 PENALTIES.—

11 ‘‘(1) IN GENERAL.—The Secretary shall abate

12 the excessive portion of interest and penalties.

13 ‘‘(2) EXCESSIVE PORTION.—The excessive por14 tion of interest and penalties is the amount by which

15 the aggregate interest, penalties, and additions to

16 the tax with respect to any tax exceeds the amount

17 of such tax.’’

18 (b) EFFECTIVE DATE.—The amendment made by

19 subsection (a) shall take effect on the date of the enact20 ment of this Act.
6

•HR 753 IH

1 SEC. 6. GUIDELINES AND CRITERIA FOR PENALTY ABATE2 MENT; REQUIRED EXPLANATION OF REFUSAL

3 TO ABATE PENALTIES.

4 (a) IN GENERAL.—Section 6404 of the Internal Rev5 enue Code of 1986 (relating to abatements) is amended

6 by adding at the end the following new subsection:

7 ‘‘(k) GUIDELINES AND CRITERIA FOR PENALTY

8 ABATEMENT; REQUIRED EXPLANATION OF REFUSAL TO

9 ABATE PENALTIES.—

10 ‘‘(1) GUIDELINES AND CRITERIA.—The Sec11 retary shall prescribe guidelines and criteria which

12 will be used by the Secretary in determining whether

13 to abate any penalty or addition to the tax.

14 ‘‘(2) EXPLANATIONS.—If—

15 ‘‘(A) a taxpayer requests (in such form

16 and manner as the Secretary prescribes) that

17 the Secretary abate any portion of a penalty or

18 an addition to the tax, and

19 ‘‘(B) the Secretary does not grant such re20 quest in full,

21 the Secretary shall provide a written explanation to

22 the taxpayer of the reason for not granting such re23 quest.’’
7

•HR 753 IH

1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall take effect on the date of the enact3 ment of this Act.

Æ