I

104TH CONGRESS

1ST SESSION H. R. 2337

To amend the Internal Revenue Code of 1986 to provide for increased

taxpayer protections.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 14, 1995

Mrs. JOHNSON of Connecticut (for herself and Mr. MATSUI) 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

for increased taxpayer protections.

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; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

5 (a) SHORT TITLE.—This Act may be cited as the

6 ‘‘Taxpayer Bill of Rights 2’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment

10 to, or repeal of, a section or other provision, the reference
2

•HR 2337 IH

1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—TAXPAYER ADVOCATE

Sec. 101. Establishment of position of Taxpayer Advocate within Internal Revenue Service.

Sec. 102. Expansion of authority to issue Taxpayer Assistance Orders.

TITLE II—MODIFICATIONS TO INSTALLMENT AGREEMENT

PROVISIONS

Sec. 201. Notification of reasons for termination of installment agreements.

Sec. 202. Administrative review of termination of installment agreement.

TITLE III—ABATEMENT OF INTEREST AND PENALTIES

Sec. 301. Expansion of authority to abate interest.

Sec. 302. Review of IRS failure to abate interest.

Sec. 303. Extension of interest-free period for payment of tax after notice and

demand.

Sec. 304. Abatement of penalty for failure to make required deposits of payroll

taxes in certain cases.

TITLE IV—JOINT RETURNS

Sec. 401. Studies of joint return-related issues.

Sec. 402. Joint return may be made after separate returns without full payment of tax.

Sec. 403. Disclosure of collection activities.

TITLE V—COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.

Sec. 502. Offers-in-compromise.

TITLE VI—INFORMATION RETURNS

Sec. 601. Civil damages for fraudulent filing of information returns.

Sec. 602. Requirement to conduct reasonable investigations of information returns.

TITLE VII—AWARDING OF COSTS AND CERTAIN FEES

Sec. 701. United States must establish that position in proceeding was substantially justified.

Sec. 702. Increased limit on attorney fees.

Sec. 703. Failure to agree to extension not taken into account.

Sec. 704. Award of litigation costs permitted in declaratory judgment proceedings.

Sec. 705. Effective date.
3

•HR 2337 IH

TITLE VIII—MODIFICATION TO RECOVERY OF CIVIL DAMAGES

FOR UNAUTHORIZED COLLECTION ACTIONS

Sec. 801. Increase in limit on recovery of civil damages for unauthorized collection actions.

Sec. 802. Court discretion to reduce award for litigation costs for failure to exhaust administrative remedies.

TITLE IX—MODIFICATIONS TO PENALTY FOR FAILURE TO

COLLECT AND PAY OVER TAX

Sec. 901. Preliminary notice requirement.

Sec. 902. Disclosure of certain information where more than 1 person liable for

penalty for failure to collect and pay over tax.

Sec. 903. Right of contribution where more than 1 person liable for penalty for

failure to collect and pay over tax.

Sec. 904. Volunteer board members of tax-exempt organizations exempt from

penalty for failure to collect and pay over tax.

TITLE X—MODIFICATIONS OF RULES RELATING TO SUMMONSES

Sec. 1001. Enrolled agents included as third-party recordkeepers.

Sec. 1002. Safeguards relating to designated summonses.

Sec. 1003. Annual report to Congress concerning designated summonses.

TITLE XI—RELIEF FROM RETROACTIVE APPLICATION OF

TREASURY DEPARTMENT REGULATIONS

Sec. 1101. Relief from retroactive application of Treasury Department regulations.

TITLE XII—MISCELLANEOUS PROVISIONS

Sec. 1201. Report on pilot program for appeal of enforcement actions.

Sec. 1202. Phone number of person providing payee statements required to be

shown on such statement.

Sec. 1203. Required notice of certain payments.

Sec. 1204. Unauthorized enticement of information disclosure.

Sec. 1205. Annual reminders to taxpayers with outstanding delinquent accounts.

Sec. 1206. 5-year extension of authority for undercover operations.

Sec. 1207. Disclosure of Form 8300 information on cash transactions.

Sec. 1208. Disclosure of returns and return information to designee of taxpayer.

Sec. 1209. Study of netting of interest on overpayments and liabilities.
4

•HR 2337 IH

1 TITLE I—TAXPAYER ADVOCATE

2 SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER AD3 VOCATE WITHIN INTERNAL REVENUE SERV4 ICE.

5 (a) GENERAL RULE.—Section 7802 (relating to

6 Commissioner of Internal Revenue; Assistant Commis7 sioner (Employee Plans and Exempt Organizations)) is

8 amended by adding at the end the following new sub9 section:

10 ‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—

11 ‘‘(1) IN GENERAL.—There is established in the

12 Internal Revenue Service an office to be known as

13 the ‘Office of the Taxpayer Advocate’. Such office

14 shall be under the supervision and direction of an of15 ficial to be known as the ‘Taxpayer Advocate’ who

16 shall be appointed by and report directly to the

17 Commissioner of Internal Revenue. The Taxpayer

18 Advocate shall be entitled to compensation at the

19 same rate as the highest level official reporting di20 rectly to the Deputy Commissioner of the Internal

21 Revenue Service.

22 ‘‘(2) FUNCTIONS OF OFFICE.—

23 ‘‘(A) IN GENERAL.—It shall be the func24 tion of the Office of Taxpayer Advocate to—
5

•HR 2337 IH

1 ‘‘(i) assist taxpayers in resolving prob2 lems with the Internal Revenue Service,

3 ‘‘(ii) identify areas in which taxpayers

4 have problems in dealings with the Internal

5 Revenue Service,

6 ‘‘(iii) to the extent possible, propose

7 changes in the administrative practices of

8 the Internal Revenue Service to mitigate

9 problems identified under clause (ii), and

10 ‘‘(iv) identify potential legislative

11 changes which may be appropriate to miti12 gate such problems.

13 ‘‘(B) ANNUAL REPORTS.—

14 ‘‘(i) OBJECTIVES.—Not later than

15 June 30 of each calendar year after 1995,

16 the Taxpayer Advocate shall report to the

17 Committee on Ways and Means of the

18 House of Representatives and the Commit19 tee on Finance of the Senate on the objec20 tives of the Taxpayer Advocate for the fis21 cal year beginning in such calendar year.

22 Any such report shall contain full and sub23 stantive analysis, in addition to statistical

24 information.
6

•HR 2337 IH

1 ‘‘(ii) ACTIVITIES.—Not later than De2 cember 31 of each calendar year after

3 1995, the Taxpayer Advocate shall report

4 to the Committee on Ways and Means of

5 the House of Representatives and the

6 Committee on Finance of the Senate on

7 the activities of the Taxpayer Advocate

8 during the fiscal year ending during such

9 calendar year. Any such report shall con10 tain full and substantive analysis, in addi11 tion to statistical information, and shall—

12 ‘‘(I) identify the initiatives the

13 Taxpayer Advocate has taken on im14 proving taxpayer services and Internal

15 Revenue Service responsiveness,

16 ‘‘(II) contain recommendations

17 received from individuals with the au18 thority to issue Taxpayer Assistance

19 Orders under section 7811,

20 ‘‘(III) contain a summary of at

21 least 20 of the most serious problems

22 encountered by taxpayers, including a

23 description of the nature of such prob24 lems,
7

•HR 2337 IH

1 ‘‘(IV) contain an inventory of the

2 items described in subclauses (I), (II),

3 and (III) for which action has been

4 taken and the result of such action,

5 ‘‘(V) contain an inventory of the

6 items described in subclauses (I), (II),

7 and (III) for which action remains to

8 be completed and the period during

9 which each item has remained on such

10 inventory,

11 ‘‘(VI) contain an inventory of the

12 items described in subclauses (II) and

13 (III) for which no action has been

14 taken, the period during which each

15 item has remained on such inventory,

16 the reasons for the inaction, and iden17 tify any Internal Revenue Service offi18 cial who is responsible for such inac19 tion,

20 ‘‘(VII) identify any Taxpayer As21 sistance Order which was not honored

22 by the Internal Revenue Service in a

23 timely manner, as specified under sec24 tion 7811(b),
8

•HR 2337 IH

1 ‘‘(VIII) contain recommendations

2 for such administrative and legislative

3 action as may be appropriate to re4 solve problems encountered by tax5 payers,

6 ‘‘(IX) describe the extent to

7 which regional problem resolution offi8 cers participate in the selection and

9 evaluation of local problem resolution

10 officers, and

11 ‘‘(X) include such other informa12 tion as the Taxpayer Advocate may

13 deem advisable.

14 ‘‘(iii) REPORT TO BE SUBMITTED DI15 RECTLY.—Each report required under this

16 subparagraph shall be provided directly to

17 the Committees referred to in clauses (i)

18 and (ii) without any prior review or com19 ment from the Commissioner, the Sec20 retary of the Treasury, any other officer or

21 employee of the Department of the Treas22 ury, or the Office of Management and

23 Budget.

24 ‘‘(3) RESPONSIBILITIES OF COMMISSIONER.—

25 The Commissioner of Internal Revenue shall estab-
9

•HR 2337 IH

1 lish procedures requiring a formal response to all

2 recommendations submitted to the Commissioner

3 by the Taxpayer Advocate within 3 months after

4 submission to the Commissioner.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 7811 (relating to Taxpayer Assist7 ance Orders) is amended—

8 (A) by striking ‘‘the Office of Ombuds9 man’’ in subsection (a) and inserting ‘‘the Of10 fice of the Taxpayer Advocate’’, and

11 (B) by striking ‘‘Ombudsman’’ each place

12 it appears (including in the headings of sub13 sections (e) and (f)) and inserting ‘‘Taxpayer

14 Advocate’’.

15 (2) The heading for section 7802 is amended to

16 read as follows:

17 ‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; AS18 SISTANT COMMISSIONERS; TAXPAYER ADVO19 CATE.’’

20 (3) The table of sections for subchapter A of

21 chapter 80 is amended by striking the item relating

22 to section 7802 and inserting the following new

23 item:

‘‘Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; Taxpayer Advocate.’’
10

•HR 2337 IH

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

2 this section shall take effect on the date of the enactment

3 of this Act.

4 SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER

5 ASSISTANCE ORDERS.

6 (a) TERMS OF ORDERS.—Subsection (b) of section

7 7811 (relating to terms of Taxpayer Assistance Orders)

8 is amended—

9 (1) by inserting ‘‘within a specified time pe10 riod’’ after ‘‘the Secretary’’, and

11 (2) by inserting ‘‘take any action as permitted

12 by law,’’ after ‘‘cease any action,’’.

13 (b) LIMITATION ON AUTHORITY TO MODIFY OR RE14 SCIND.—Section 7811(c) (relating to authority to modify

15 or rescind) is amended to read as follows:

16 ‘‘(c) AUTHORITY TO MODIFY OR RESCIND.—Any

17 Taxpayer Assistance Order issued by the Taxpayer Advo18 cate under this section may be modified or rescinded—

19 ‘‘(1) only by the Taxpayer Advocate, the Com20 missioner of Internal Revenue, the Deputy Commis21 sioner of Internal Revenue, or a regional problem

22 resolution officer, and

23 ‘‘(2) only if a written explanation of the reasons

24 for the modification or rescission is provided to the

25 Taxpayer Advocate.’’
11

•HR 2337 IH

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

2 this section shall take effect on the date of the enactment

3 of this Act.

4 TITLE II—MODIFICATIONS TO

5 INSTALLMENT AGREEMENT

6 PROVISIONS

7 SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION

8 OF INSTALLMENT AGREEMENTS.

9 (a) TERMINATIONS.—Subsection (b) of section 6159

10 (relating to extent to which agreements remain in effect)

11 is amended by adding at the end the following new para12 graph:

13 ‘‘(5) NOTICE REQUIREMENTS.—The Secretary

14 may not take any action under paragraph (2), (3),

15 or (4) unless—

16 ‘‘(A) a notice of such action is provided to

17 the taxpayer not later than the day 30 days be18 fore the date of such action, and

19 ‘‘(B) such notice includes an explanation

20 why the Secretary intends to take such action.

21 The preceding sentence shall not apply in any case

22 in which the Secretary believes that collection of any

23 tax to which an agreement under this section relates

24 is in jeopardy.’’
12

•HR 2337 IH

1 (b) CONFORMING AMENDMENT.—Paragraph (3) of

2 section 6159(b) is amended to read as follows:

3 ‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CON4 DITIONS.—If the Secretary makes a determination

5 that the financial condition of a taxpayer with whom

6 the Secretary has entered into an agreement under

7 subsection (a) has significantly changed, the Sec8 retary may alter, modify, or terminate such agree9 ment.’’

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

11 this section shall take effect on the date 6 months after

12 the date of the enactment of this Act.

13 SEC. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF

14 INSTALLMENT AGREEMENT.

15 (a) GENERAL RULE.—Section 6159 (relating to

16 agreements for payment of tax liability in installments)

17 is amended by adding at the end the following new sub18 section:

19 ‘‘(c) ADMINISTRATIVE REVIEW.—The Secretary shall

20 establish procedures for an independent administrative re21 view of terminations of installment agreements under this

22 section for taxpayers who request such a review.’’

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

24 subsection (a) shall take effect on January 1, 1996.
13

•HR 2337 IH

1 TITLE III—ABATEMENT OF

2 INTEREST AND PENALTIES

3 SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.

4 (a) GENERAL RULE.—Paragraph (1) of section

5 6404(e) (relating to abatement of interest in certain cases)

6 is amended—

7 (1) by inserting ‘‘unreasonable’’ before ‘‘error’’

8 each place it appears in subparagraphs (A) and (B),

9 and

10 (2) by striking ‘‘in performing a ministerial

11 act’’ each place it appears and inserting ‘‘in per12 forming a ministerial or managerial act’’.

13 (b) CLERICAL AMENDMENT.—The subsection head14 ing for subsection (e) of section 6404 is amended—

15 (1) by striking ‘‘ASSESSMENTS’’ and inserting

16 ‘‘ABATEMENT’’, and

17 (2) by inserting ‘‘UNREASONABLE’’ before ‘‘ER18 RORS’’.

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

20 this section shall apply to interest accruing with respect

21 to deficiencies or payments for taxable years beginning

22 after the date of the enactment of this Act.

23 SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.

24 (a) IN GENERAL.—Section 6404 is amended by add25 ing at the end the following new subsection:
14

•HR 2337 IH

1 ‘‘(g) REVIEW OF DENIAL OF REQUEST FOR ABATE2 MENT OF INTEREST.—The Tax Court shall have jurisdic3 tion over any action brought by a taxpayer who meets the

4 requirements referred to in section 7430(c)(4)(A)(iii) to

5 determine whether the Secretary’s failure to abate interest

6 under this section was an abuse of discretion if such action

7 is brought within 6 months after the date of the Sec8 retary’s final determination not to abate such interest.’’

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

10 this section shall apply to requests for abatement after the

11 date of the enactment of this Act.

12 SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAY13 MENT OF TAX AFTER NOTICE AND DEMAND.

14 (a) GENERAL RULE.—Paragraph (3) of section

15 6601(e) (relating to payments made within 10 days after

16 notice and demand) is amended to read as follows:

17 ‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE18 RIOD AFTER NOTICE AND DEMAND.—If notice and

19 demand is made for payment of any amount and if

20 such amount is paid within 21 calendar days (10

21 business days if the amount for which such notice

22 and demand is made equals or exceeds $100,000)

23 after the date of such notice and demand, interest

24 under this section on the amount so paid shall not
15

•HR 2337 IH

1 be imposed for the period after the date of such no2 tice and demand.’’

3 (b) CONFORMING AMENDMENTS.—

4 (1) Subparagraph (A) of section 6601(e)(2) is

5 amended by striking ‘‘10 days from the date of no6 tice and demand therefor’’ and inserting ‘‘21 cal7 endar days from the date of notice and demand

8 therefor (10 business days if the amount for which

9 such notice and demand is made equals or exceeds

10 $100,000)’’.

11 (2) Paragraph (3) of section 6651(a) is amend12 ed by striking ‘‘10 days of the date of the notice and

13 demand therefor’’ and inserting ‘‘21 calendar days

14 from the date of notice and demand therefor (10

15 business days if the amount for which such notice

16 and demand is made equals or exceeds $100,000)’’.

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

18 this section shall apply in the case of any notice and de19 mand given after June 30, 1996.

20 SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE

21 REQUIRED DEPOSITS OF PAYROLL TAXES IN

22 CERTAIN CASES.

23 (a) IN GENERAL.—Section 6656 (relating to failure

24 to make deposit of taxes) is amended by adding at the

25 end the following new subsections:
16

•HR 2337 IH

1 ‘‘(c) EXCEPTION FOR FIRST-TIME DEPOSITORS OF

2 EMPLOYMENT TAXES.—The Secretary may waive the pen3 alty imposed by subsection (a) on a person’s inadvertent

4 failure to deposit any employment tax if—

5 ‘‘(1) such person meets the requirements re6 ferred to in section 7430(c)(4)(A)(iii),

7 ‘‘(2) such failure occurs during the 1st quarter

8 that such person was required to deposit any em9 ployment tax, and

10 ‘‘(3) the return of such tax was filed on or be11 fore the due date.

12 For purposes of this subsection, the term ‘employment

13 taxes’ means the taxes imposed by subtitle C.

14 ‘‘(d) AUTHORITY TO ABATE PENALTY WHERE DE15 POSIT SENT TO SECRETARY.—The Secretary may abate

16 the penalty imposed by subsection (a) the first time a de17 positor inadvertently sends the amount required to be de18 posited to the Secretary instead of to the appropriate gov19 ernment depository.’’

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

21 subsection (a) shall apply to deposits required to be made

22 after the date of the enactment of this Act.
17

•HR 2337 IH

1 TITLE IV—JOINT RETURNS

2 SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.

3 The Secretary of the Treasury or his delegate and

4 the Comptroller General of the United States shall each

5 conduct separate studies of—

6 (1) the effects of changing the liability for tax

7 on a joint return from being joint and several to

8 being proportionate to the tax attributable to each

9 spouse,

10 (2) the effects of providing that, if a divorce de11 cree allocates liability for tax on a joint return filed

12 before the divorce, the Secretary may collect such li13 ability only in accordance with the decree,

14 (3) whether those provisions of the Internal

15 Revenue Code of 1986 intended to provide relief to

16 innocent spouses provide meaningful relief in all

17 cases where such relief is appropriate, and

18 (4) the effect of providing that community in19 come (as defined in section 66(d) of such Code)

20 which, in accordance with the rules contained in sec21 tion 879(a) of such Code, would be treated as the

22 income of one spouse is exempt from a levy for fail23 ure to pay any tax imposed by subtitle A by the

24 other spouse for a taxable year ending before their

25 marriage.
18

•HR 2337 IH

1 The reports of such studies shall be submitted to the Com2 mittee on Ways and Means of the House of Representa3 tives and the Committee on Finance of the Senate within

4 6 months after the date of the enactment of this Act.

5 SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE

6 RETURNS WITHOUT FULL PAYMENT OF TAX.

7 (a) GENERAL RULE.—Paragraph (2) of section

8 6013(b) (relating to limitations on filing of joint return

9 after filing separate returns) is amended by striking sub10 paragraph (A) and redesignating the following subpara11 graphs accordingly.

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

13 subsection (a) shall apply to taxable years beginning after

14 the date of the enactment of this Act.

15 SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.

16 Subsection (e) of section 6103 (relating to disclosure

17 to persons having material interest) is amended by adding

18 at the end the following new paragraph:

19 ‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES

20 WITH RESPECT TO JOINT RETURN.—If any defi21 ciency of tax with respect to a joint return is as22 sessed and the individuals filing such return are no

23 longer married or no longer reside in the same

24 household, upon request in writing by either of such

25 individuals, the Secretary shall disclose in writing to
19

•HR 2337 IH

1 the individual making the request whether the Sec2 retary has attempted to collect such deficiency from

3 such other individual, the general nature of such col4 lection activities, and the amount collected.’’

5 TITLE V—COLLECTION

6 ACTIVITIES

7 SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.

8 (a) WITHDRAWAL OF CERTAIN NOTICES.—Section

9 6323 (relating to validity and priority against certain per10 sons) is amended by adding at the end the following new

11 subsection:

12 ‘‘(j) WITHDRAWAL OF NOTICE IN CERTAIN CIR13 CUMSTANCES.—

14 ‘‘(1) IN GENERAL.—The Secretary may with15 draw a notice of a lien filed under this section and

16 this chapter shall be applied as if the withdrawn no17 tice had not been filed, if the Secretary determines

18 that—

19 ‘‘(A) the filing of such notice was pre20 mature or otherwise not in accordance with ad21 ministrative procedures of the Secretary,

22 ‘‘(B) the taxpayer has entered into an

23 agreement under section 6159 to satisfy the tax

24 liability for which the lien was imposed by
20

•HR 2337 IH

1 means of installment payments, unless such

2 agreement provides otherwise,

3 ‘‘(C) the withdrawal of such notice will fa4 cilitate the collection of the tax liability, or

5 ‘‘(D) with the consent of the taxpayer or

6 the Taxpayer Advocate, the withdrawal of such

7 notice would be in the best interests of the tax8 payer (as determined by the Taxpayer Advo9 cate) and the United States.

10 Any such withdrawal shall be made by filing notice

11 at the same office as the withdrawn notice. A copy

12 of such notice of withdrawal shall be provided to the

13 taxpayer.

14 ‘‘(2) NOTICE TO CREDIT AGENCIES, ETC.—

15 Upon written request by the taxpayer with respect

16 to whom a notice of a lien was withdrawn under

17 paragraph (1), the Secretary shall promptly make

18 reasonable efforts to notify credit reporting agencies,

19 and any financial institution or creditor whose name

20 and address is specified in such request, of the with21 drawal of such notice. Any such request shall be in

22 such form as the Secretary may prescribe.’’

23 (b) RETURN OF LEVIED PROPERTY IN CERTAIN

24 CASES.—Section 6343 (relating to authority to release
21

•HR 2337 IH

1 levy and return property) is amended by adding at the

2 end the following new subsection:

3 ‘‘(d) RETURN OF PROPERTY IN CERTAIN CASES.—

4 If—

5 ‘‘(1) any property has been levied upon, and

6 ‘‘(2) the Secretary determines that—

7 ‘‘(A) the levy on such property was pre8 mature or otherwise not in accordance with ad9 ministrative procedures of the Secretary,

10 ‘‘(B) the taxpayer has entered into an

11 agreement under section 6159 to satisfy the tax

12 liability for which the levy was imposed by

13 means of installment payments, unless such

14 agreement provides otherwise,

15 ‘‘(C) the return of such property will facili16 tate the collection of the tax liability, or

17 ‘‘(D) with the consent of the taxpayer or

18 the Taxpayer Advocate, the return of such

19 property would be in the best interests of the

20 taxpayer (as determined by the Taxpayer Advo21 cate) and the United States,

22 the provisions of subsection (b) shall apply in the same

23 manner as if such property had been wrongly levied upon,

24 except that no interest shall be allowed under subsection

25 (c).’’
22

•HR 2337 IH

1 (c) MODIFICATIONS IN CERTAIN LEVY EXEMPTION

2 AMOUNTS.—

3 (1) FUEL, ETC.—Paragraph (2) of section

4 6334(a) (relating to fuel, provisions, furniture, and

5 personal effects exempt from levy) is amended—

6 (A) by striking ‘‘If the taxpayer is the

7 head of a family, so’’ and inserting ‘‘So’’,

8 (B) by striking ‘‘his household’’ and insert9 ing ‘‘the taxpayer’s household’’, and

10 (C) by striking ‘‘$1,650 ($1,550 in the

11 case of levies issued during 1989)’’ and insert12 ing ‘‘$2,500’’.

13 (2) INFLATION ADJUSTMENT.—Section 6334

14 (relating to property exempt from levy) is amended

15 by adding at the end the following new subsection:

16 ‘‘(f) INFLATION ADJUSTMENT.—

17 ‘‘(1) IN GENERAL.—In the case of any calendar

18 year beginning after 1996, each dollar amount re19 ferred to in paragraphs (2) and (3) of subsection (a)

20 shall be increased by an amount equal to—

21 ‘‘(A) such dollar amount, multiplied by

22 ‘‘(B) the cost-of-living adjustment deter23 mined under section 1(f)(3) for such calendar

24 year, by substituting ‘calendar year 1995’ for
23

•HR 2337 IH

1 ‘calendar year 1992’ in subparagraph (B)

2 thereof.

3 ‘‘(2) ROUNDING.—If any dollar amount after

4 being increased under paragraph (1) is not a mul5 tiple of $10, such dollar amount shall be rounded to

6 the nearest multiple of $10.’’

7 (3) TECHNICAL AMENDMENT.—Paragraph (3)

8 of section 6334(a) is amended by striking ‘‘($1,050

9 in the case of levies issued during 1989)’’.

10 (d) EFFECTIVE DATES.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section

13 shall take effect on the date of the enactment of this

14 Act.

15 (2) EXEMPT AMOUNTS.—The amendments

16 made by subsection (c) shall take effect with respect

17 to levies issued after December 31, 1995.

18 SEC. 502. OFFERS-IN-COMPROMISE.

19 (a) REVIEW REQUIREMENTS.—Subsection (b) of sec20 tion 7122 (relating to records) is amended by striking

21 ‘‘$500.’’ and inserting ‘‘$100,000. However, such com22 promise shall be subject to continuing quality review by

23 the Secretary.’’
24

•HR 2337 IH

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

2 this section shall take effect on the date of the enactment

3 of this Act.

4 TITLE VI—INFORMATION

5 RETURNS

6 SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN7 FORMATION RETURNS.

8 (a) GENERAL RULE.—Subchapter B of chapter 76

9 (relating to proceedings by taxpayers and third parties)

10 is amended by redesignating section 7434 as section 7435

11 and by inserting after section 7433 the following new

12 section:

13 ‘‘SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF

14 INFORMATION RETURNS.

15 ‘‘(a) IN GENERAL.—If any person willfully files a

16 fraudulent information return with respect to payments

17 purported to be made to any other person, such other per18 son may bring a civil action for damages against the per19 son so filing such return.

20 ‘‘(b) DAMAGES.—In any action brought under sub21 section (a), upon a finding of liability on the part of the

22 defendant, the defendant shall be liable to the plaintiff in

23 an amount equal to the greater of $5,000 or the sum of—

24 ‘‘(1) any actual damages sustained by the plain25 tiff as a proximate result of the filing of the fraudu-
25

•HR 2337 IH

1 lent information return (including any costs attrib2 utable to resolving deficiencies asserted as a result

3 of such filing), and

4 ‘‘(2) the costs of the action.

5 ‘‘(c) PERIOD FOR BRINGING ACTION.—Notwith6 standing any other provision of law, an action to enforce

7 the liability created under this section may be brought

8 without regard to the amount in controversy and may be

9 brought only within the later of—

10 ‘‘(1) 6 years after the date of the filing of the

11 fraudulent information return, or

12 ‘‘(2) 1 year after the date such fraudulent in13 formation return would have been discovered by ex14 ercise of reasonable care.

15 ‘‘(d) COPY OF COMPLAINT FILED WITH IRS.—Any

16 person bringing an action under subsection (a) shall pro17 vide a copy of the complaint to the Internal Revenue Serv18 ice upon the filing of such complaint with the court.

19 ‘‘(e) FINDING OF COURT TO INCLUDE CORRECT

20 AMOUNT OF PAYMENT.—The judgment of the court in an

21 action brought under subsection (a) shall include a finding

22 of the correct amount which should have been reported

23 in the information return.
26

•HR 2337 IH

1 ‘‘(f) INFORMATION RETURN.—For purposes of this

2 section, the term ‘information return’ means any state3 ment described in section 6724(d)(1)(A).’’

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

5 for subchapter B of chapter 76 is amended by striking

6 the item relating to section 7434 and inserting the

7 following:

‘‘Sec. 7434. Civil damages for fraudulent filing of information returns.

‘‘Sec. 7435. Cross references.’’

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

9 this section shall apply to fraudulent information returns

10 filed after the date of the enactment of this Act.

11 SEC. 602. REQUIREMENT TO CONDUCT REASONABLE IN12 VESTIGATIONS OF INFORMATION RETURNS.

13 (a) GENERAL RULE.—Section 6201 (relating to as14 sessment authority) is amended by redesignating sub15 section (d) as subsection (e) and by inserting after sub16 section (c) the following new subsection:

17 ‘‘(d) REQUIRED REASONABLE VERIFICATION OF IN18 FORMATION RETURNS.—In any court proceeding, if a tax19 payer asserts a reasonable dispute with respect to any

20 item of income reported on an information return filed

21 with the Secretary under subpart B or C of part III of

22 subchapter A of chapter 61 by a third party and the tax23 payer has fully cooperated with the Secretary (including

24 providing, within a reasonable period of time, access to
27

•HR 2337 IH

1 and inspection of all witnesses, information, and docu2 ments within the control of the taxpayer as reasonably re3 quested by the Secretary), the Secretary shall have the

4 burden of producing reasonable and probative information

5 concerning such deficiency in addition to such information

6 return.’’

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

8 subsection (a) shall take effect on the date of the enact9 ment of this Act.

10 TITLE VII—AWARDING OF COSTS

11 AND CERTAIN FEES

12 SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSI13 TION IN PROCEEDING WAS SUBSTANTIALLY

14 JUSTIFIED.

15 (a) GENERAL RULE.—Subparagraph (A) of section

16 7430(c)(4) (defining prevailing party) is amended by

17 striking clause (i) and by redesignating clauses (ii) and

18 (iii) as clauses (i) and (ii), respectively.

19 (b) BURDEN OF PROOF ON UNITED STATES.—Para20 graph (4) of section 7430(c) is amended by redesignating

21 subparagraph (B) as subparagraph (C) and by inserting

22 after subparagraph (A) the following new subparagraph:

23 ‘‘(B) EXCEPTION IF UNITED STATES ES24 TABLISHES THAT ITS POSITION WAS SUBSTAN25 TIALLY JUSTIFIED.—
28

•HR 2337 IH

1 ‘‘(i) GENERAL RULE.—A party shall

2 not be treated as the prevailing party in a

3 proceeding to which subsection (a) applies

4 if the United States establishes that the

5 position of the United States in the pro6 ceeding was substantially justified.

7 ‘‘(ii) PRESUMPTION OF NO JUSTIFICA8 TION IF INTERNAL REVENUE SERVICE

9 DIDN’T FOLLOW CERTAIN PUBLISHED

10 GUIDANCE.—For purposes of clause (i),

11 the position of the United States shall be

12 presumed not to be substantially justified

13 if the Internal Revenue Service did not fol14 low its applicable published guidance in the

15 administrative proceeding. Such presump16 tion may be rebutted.

17 ‘‘(iii) APPLICABLE PUBLISHED GUID18 ANCE.—For purposes of clause (ii), the

19 term ‘applicable published guidance’

20 means—

21 ‘‘(I) regulations, revenue rulings,

22 revenue procedures, information re23 leases, notices, and announcements,

24 and
29

•HR 2337 IH

1 ‘‘(II) any of the following which

2 are issued to the taxpayer: private let3 ter rulings, technical advice memo4 randa, and determination letters.’’

5 (c) CONFORMING AMENDMENTS.—

6 (1) Subparagraph (B) of section 7430(c)(2) is

7 amended by striking ‘‘paragraph (4)(B)’’ and insert8 ing ‘‘paragraph (4)(C)’’.

9 (2) Subparagraph (C) of section 7430(c)(4), as

10 redesignated by subsection (b), is amended by strik11 ing ‘‘subparagraph (A)’’ and inserting ‘‘this para12 graph’’.

13 (3) Sections 6404(g) and 6656(c)(1), as amend14 ed by this Act, are each amended by striking ‘‘sec15 tion 7430(c)(4)(A)(iii)’’ and inserting ‘‘section

16 7430(c)(4)(A)(ii)’’.

17 SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.

18 Paragraph (1) of section 7430(c) (defining reason19 able litigation costs) is amended—

20 (1) by striking ‘‘$75’’ in clause (iii) of subpara21 graph (B) and inserting ‘‘$110’’,

22 (2) by striking ‘‘an increase in the cost of living

23 or’’ in clause (iii) of subparagraph (B), and

24 (3) by adding after clause (iii) the following:
30

•HR 2337 IH

1 ‘‘In the case of any calendar year beginning after

2 1996, the dollar amount referred to in clause (iii)

3 shall be increased by an amount equal to such dollar

4 amount multiplied by the cost-of-living adjustment

5 determined under section 1(f)(3) for such calendar

6 year, by substituting ‘calendar year 1995’ for ‘cal7 endar year 1992’ in subparagraph (B) thereof. If

8 any dollar amount after being increased under the

9 preceding sentence is not a multiple of $10, such

10 dollar amount shall be rounded to the nearest mul11 tiple of $10.’’

12 SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN

13 INTO ACCOUNT.

14 Paragraph (1) of section 7430(b) (relating to require15 ment that administrative remedies be exhausted) is

16 amended by adding at the end the following new sentence:

17 ‘‘Any failure to agree to an extension of the time for the

18 assessment of any tax shall not be taken into account for

19 purposes of determining whether the prevailing party

20 meets the requirements of the preceding sentence.’’

21 SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DE22 CLARATORY JUDGMENT PROCEEDINGS.

23 Subsection (b) of section 7430 is amended by striking

24 paragraph (3) and by redesignating paragraph (4) as

25 paragraph (3).
31

•HR 2337 IH

1 SEC. 705. EFFECTIVE DATE.

2 The amendments made by this title shall apply in the

3 case of proceedings commenced after the date of the enact4 ment of this Act.

5 TITLE VIII—MODIFICATION TO

6 RECOVERY OF CIVIL DAM7 AGES FOR UNAUTHORIZED

8 COLLECTION ACTIONS

9 SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAM10 AGES FOR UNAUTHORIZED COLLECTION AC11 TIONS.

12 (a) GENERAL RULE.—Subsection (b) of section 7433

13 (relating to damages) is amended by striking ‘‘$100,000’’

14 and inserting ‘‘$1,000,000’’.

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

16 subsection (a) shall apply to actions by officers or employ17 ees of the Internal Revenue Service after the date of the

18 enactment of this Act.

19 SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR

20 LITIGATION COSTS FOR FAILURE TO EX21 HAUST ADMINISTRATIVE REMEDIES.

22 (a) GENERAL RULE.—Paragraph (1) of section

23 7433(d) (relating to civil damages for certain unauthor24 ized collection actions) is amended to read as follows:

25 ‘‘(1) AWARD FOR DAMAGES MAY BE REDUCED

26 IF ADMINISTRATIVE REMEDIES NOT EXHAUSTED.—
32

•HR 2337 IH

1 The amount of damages awarded under subsection

2 (b) may be reduced if the court determines that the

3 plaintiff has not exhausted the administrative rem4 edies available to such plaintiff within the Internal

5 Revenue Service.’’

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

7 this section shall apply in the case of proceedings com8 menced after the date of the enactment of this Act.

9 TITLE IX—MODIFICATIONS TO

10 PENALTY FOR FAILURE TO

11 COLLECT AND PAY OVER TAX

12 SEC. 901. PRELIMINARY NOTICE REQUIREMENT.

13 (a) IN GENERAL.—Section 6672 (relating to failure

14 to collect and pay over tax, or attempt to evade or defeat

15 tax) is amended by redesignating subsection (b) as sub16 section (c) and by inserting after subsection (a) the follow17 ing new subsection:

18 ‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—

19 ‘‘(1) IN GENERAL.—No penalty shall be im20 posed under subsection (a) unless the Secretary noti21 fies the taxpayer in writing by mail to an address as

22 determined under section 6212(b) that the taxpayer

23 shall be subject to an assessment of such penalty.

24 ‘‘(2) TIMING OF NOTICE.—The mailing of the

25 notice described in paragraph (1) shall precede any
33

•HR 2337 IH

1 notice and demand of any penalty under subsection

2 (a) by at least 60 days.

3 ‘‘(3) STATUTE OF LIMITATIONS.—If a notice

4 described in paragraph (1) with respect to any pen5 alty is mailed before the expiration of the period

6 provided by section 6501 for the assessment of such

7 penalty (determined without regard to this para8 graph), the period provided by such section for the

9 assessment of such penalty shall not expire before

10 the later of—

11 ‘‘(A) the date 90 days after the date on

12 which such notice was mailed, or

13 ‘‘(B) if there is a timely protest of the pro14 posed assessment, the date 30 days after the

15 Secretary makes a final administrative deter16 mination with respect to such protest.

17 ‘‘(4) EXCEPTION FOR JEOPARDY.—This sub18 section shall not apply if the Secretary finds that the

19 collection of the penalty is in jeopardy.’’

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

21 subsection (a) shall apply to proposed assessments made

22 after June 30, 1996.
34

•HR 2337 IH

1 SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE

2 MORE THAN 1 PERSON LIABLE FOR PENALTY

3 FOR FAILURE TO COLLECT AND PAY OVER

4 TAX.

5 (a) IN GENERAL.—Subsection (e) of section 6103

6 (relating to disclosure to persons having material interest),

7 as amended by section 403, is amended by adding at the

8 end the following new paragraph:

9 ‘‘(9) DISCLOSURE OF CERTAIN INFORMATION

10 WHERE MORE THAN 1 PERSON SUBJECT TO PEN11 ALTY UNDER SECTION 6672.—If the Secretary deter12 mines that a person is liable for a penalty under sec13 tion 6672(a) with respect to any failure, upon re14 quest in writing of such person, the Secretary shall

15 disclose in writing to such person—

16 ‘‘(A) the name of any other person whom

17 the Secretary has determined to be liable for

18 such penalty with respect to such failure, and

19 ‘‘(B) whether the Secretary has attempted

20 to collect such penalty from such other person,

21 the general nature of such collection activities,

22 and the amount collected.’’

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

24 subsection (a) shall take effect on the date of the enact25 ment of this Act.
35

•HR 2337 IH

1 SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1

2 PERSON LIABLE FOR PENALTY FOR FAILURE

3 TO COLLECT AND PAY OVER TAX.

4 (a) IN GENERAL.—Section 6672 (relating to failure

5 to collect and pay over tax, or attempt to evade or defeat

6 tax) is amended by adding at the end the following new

7 subsection:

8 ‘‘(d) RIGHT OF CONTRIBUTION WHERE MORE THAN

9 1 PERSON LIABLE FOR PENALTY.—If more than 1 person

10 is liable for the penalty under subsection (a) with respect

11 to any tax, each person who paid such penalty shall be

12 entitled to recover from other persons who are liable for

13 such penalty an amount equal to the excess of the amount

14 paid by such person over such person’s proportionate

15 share of the penalty. Any claim for such a recovery may

16 be made only in a separate action involving such persons.’’

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

18 subsection (a) shall apply to penalties assessed after the

19 date of the enactment of this Act.

20 SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT

21 ORGANIZATIONS EXEMPT FROM PENALTY

22 FOR FAILURE TO COLLECT AND PAY OVER

23 TAX.

24 (a) IN GENERAL.—Section 6672 is amended by add25 ing at the end the following new subsection:
36

•HR 2337 IH

1 ‘‘(e) EXCEPTION FOR VOLUNTARY BOARD MEMBERS

2 OF TAX-EXEMPT ORGANIZATIONS.—No penalty shall be

3 imposed by subsection (a) on any unpaid, volunteer mem4 ber of any board of trustees or directors of an organization

5 exempt from tax under subtitle A if such member—

6 ‘‘(1) is solely serving in an honorary capacity,

7 ‘‘(2) does not participate in the day-to-day or

8 financial operations of the organization, and

9 ‘‘(3) does not have actual knowledge of the fail10 ure on which such penalty is imposed.

11 The preceding sentence shall not apply if it results in no

12 person being liable for the penalty imposed by subsection

13 (a).’’

14 (b) PUBLIC INFORMATION REQUIREMENTS.—

15 (1) IN GENERAL.—The Secretary of the Treas16 ury or the Secretary’s delegate (hereafter in this

17 subsection referred to as the ‘‘Secretary’’) shall take

18 such actions as may be appropriate to ensure that

19 employees are aware of their responsibilities under

20 the Federal tax depository system, the circumstances

21 under which employees may be liable for the penalty

22 imposed by section 6672 of the Internal Revenue

23 Code of 1986, and the responsibility to promptly re24 port to the Internal Revenue Service any failure re-
37

•HR 2337 IH

1 ferred to in subsection (a) of such section 6672.

2 Such actions shall include—

3 (A) printing of a warning on deposit cou4 pon booklets and the appropriate tax returns

5 that certain employees may be liable for the

6 penalty imposed by such section 6672, and

7 (B) the development of a special informa8 tion packet.

9 (2) DEVELOPMENT OF EXPLANATORY MATE10 RIALS.—The Secretary shall develop materials ex11 plaining the circumstances under which board mem12 bers of tax-exempt organizations (including vol13 untary and honorary members) may be subject to

14 penalty under section 6672 of such Code. Such ma15 terials shall be made available to tax-exempt organi16 zations.

17 (3) IRS INSTRUCTIONS.—The Secretary shall

18 clarify the instructions to Internal Revenue Service

19 employees on the application of the penalty under

20 section 6672 of such Code with regard to voluntary

21 members of boards of trustees or directors of tax22 exempt organizations.
38

•HR 2337 IH

1 TITLE X—MODIFICATIONS OF

2 RULES RELATING TO SUM3 MONSES

4 SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY

5 RECORDKEEPERS.

6 (a) IN GENERAL.—Paragraph (3) of section 7609(a)

7 (relating to third-party recordkeeper defined) is amended

8 by striking ‘‘and’’ at the end of subparagraph (G), by

9 striking the period at the end of subparagraph (H) and

10 inserting ‘‘; and’’, and by adding at the end the following

11 the subparagraph:

12 ‘‘(I) any enrolled agent.’’

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

14 subsection (a) shall apply to summonses issued after the

15 date of the enactment of this Act.

16 SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUM17 MONSES.

18 (a) STANDARD OF REVIEW.—Subparagraph (A) of

19 section 6503(j)(2) (defining designated summons) is

20 amended by redesignating clauses (i) and (ii) as clauses

21 (ii) and (iii), respectively, and by inserting before clause

22 (ii) (as so redesignated) the following new clause:

23 ‘‘(i) the issuance of such summons is

24 preceded by a review of such issuance by

25 the regional counsel of the Office of Chief
39

•HR 2337 IH

1 Counsel for the region in which the exam2 ination of the corporation is being con3 ducted,’’.

4 (b) LIMITATION ON PERSONS TO WHOM DES5 IGNATED SUMMONS MAY BE ISSUED.—Paragraph (1) of

6 section 6503(j) is amended by striking ‘‘with respect to

7 any return of tax by a corporation’’ and inserting ‘‘to a

8 corporation (or to any other person to whom the corpora9 tion has transferred records) with respect to any return

10 of tax by such corporation for a taxable year (or other

11 period) for which such corporation is being examined

12 under the coordinated examination program (or any suc13 cessor program) of the Internal Revenue Service’’.

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

15 this section shall apply to summonses issued after the date

16 of the enactment of this Act.

17 SEC. 1003. ANNUAL REPORT TO CONGRESS CONCERNING

18 DESIGNATED SUMMONSES.

19 Not later than December 31 of each calendar year

20 after 1995, the Secretary of the Treasury or his delegate

21 shall report to the Committee on Ways and Means of the

22 House of Representatives and the Committee on Finance

23 of the Senate on the number of designated summonses (as

24 defined in section 6503(j) of the Internal Revenue Code
40

•HR 2337 IH

1 of 1986) which were issued during the preceding 12

2 months.

3 TITLE XI—RELIEF FROM RETRO4 ACTIVE APPLICATION OF

5 TREASURY DEPARTMENT

6 REGULATIONS

7 SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF

8 TREASURY DEPARTMENT REGULATIONS.

9 (a) IN GENERAL.—Subsection (b) of section 7805

10 (relating to rules and regulations) is amended to read as

11 follows:

12 ‘‘(b) RETROACTIVITY OF REGULATIONS.—

13 ‘‘(1) IN GENERAL.—Except as otherwise pro14 vided in this subsection, no temporary, proposed, or

15 final regulation relating to the internal revenue laws

16 shall apply to any taxable period ending before the

17 earliest of the following dates:

18 ‘‘(A) The date on which such regulation is

19 filed with the Federal Register.

20 ‘‘(B) In the case of any final regulation,

21 the date on which any proposed or temporary

22 regulation to which such final regulation relates

23 was filed with the Federal Register.

24 ‘‘(C) The date on which any notice sub25 stantially describing the expected contents of
41

•HR 2337 IH

1 any temporary, proposed, or final regulation is

2 issued to the public.

3 ‘‘(2) EXCEPTION FOR PROMPTLY ISSUED REGU4 LATIONS.—Paragraph (1) shall not apply to regula5 tions issued within 12 months of the date of the en6 actment of the statutory provision to which the regu7 lation relates.

8 ‘‘(3) PREVENTION OF ABUSE.—The Secretary

9 may provide that any regulation may take effect or

10 apply retroactively to prevent abuse.

11 ‘‘(4) CORRECTION OF PROCEDURAL DE12 FECTS.—The Secretary may provide that any regu13 lation may apply retroactively to correct a proce14 dural defect in the issuance of any prior regulation.

15 ‘‘(5) INTERNAL REGULATIONS.—The limitation

16 of paragraph (1) shall not apply to any regulation

17 relating to internal Treasury Department policies,

18 practices, or procedures.

19 ‘‘(6) CONGRESSIONAL AUTHORIZATION.—The

20 limitation of paragraph (1) may be superseded by a

21 legislative grant from Congress authorizing the Sec22 retary to prescribe the effective date with respect to

23 any regulation.

24 ‘‘(7) ELECTION TO APPLY RETROACTIVELY.—

25 Paragraph (1) shall not apply to any regulation
42

•HR 2337 IH

1 which the taxpayer elects to apply before the dates

2 specified in paragraph (1) but only if such election

3 applies to all regulations which were issued with

4 such regulation under the statutory provision to

5 which such regulation relates.

6 ‘‘(8) APPLICATION TO RULINGS.—The Sec7 retary may prescribe the extent, if any, to which any

8 ruling (including any judicial decision or any admin9 istrative determination other than by regulation) re10 lating to the internal revenue laws shall be applied

11 without retroactive effect.’’

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

13 subsection (a) shall apply with respect to regulations

14 which relate to statutory provisions enacted on or after

15 the date of the enactment of this Act.

16 TITLE XII—MISCELLANEOUS

17 PROVISIONS

18 SEC. 1201. REPORT ON PILOT PROGRAM FOR APPEAL OF

19 ENFORCEMENT ACTIONS.

20 Not later than March 1, 1996, the Secretary of the

21 Treasury or his delegate shall submit to the Committee

22 on Ways and Means of the House of Representatives and

23 the Committee on Finance of the Senate a report on the

24 pilot program for appeals of enforcement actions (includ25 ing lien, levy, and seizure actions) to the Appeals Division
43

•HR 2337 IH

1 of the Internal Revenue Service, together with such rec2 ommendations as he may deem advisable.

3 SEC. 1202. PHONE NUMBER OF PERSON PROVIDING PAYEE

4 STATEMENTS REQUIRED TO BE SHOWN ON

5 SUCH STATEMENT.

6 (a) GENERAL RULE.—The following provisions are

7 each amended by striking ‘‘name and address’’ and insert8 ing ‘‘name, address, and phone number of the information

9 contact’’:

10 (1) Section 6041(d)(1).

11 (2) Section 6041A(e)(1).

12 (3) Section 6042(c)(1).

13 (4) Section 6044(e)(1).

14 (5) Section 6045(b)(1).

15 (6) Section 6049(c)(1)(A).

16 (7) Section 6050B(b)(1).

17 (8) Section 6050H(d)(1).

18 (9) Section 6050I(e)(1).

19 (10) Section 6050J(e).

20 (11) Section 6050K(b)(1).

21 (12) Section 6050N(b)(1).

22 (b) EFFECTIVE DATE.—The amendments made by

23 subsection (a) shall apply to statements required to be fur24 nished after December 31, 1996 (determined without

25 regard to any extension).
44

•HR 2337 IH

1 SEC. 1203. REQUIRED NOTICE OF CERTAIN PAYMENTS.

2 If any payment is received by the Secretary of the

3 Treasury or his delegate from any taxpayer and the Sec4 retary cannot associate such payment with such taxpayer,

5 the Secretary shall make reasonable efforts to notify the

6 taxpayer of such inability within 60 days after the re7 ceipt of such payment.

8 SEC. 1204. UNAUTHORIZED ENTICEMENT OF INFORMATION

9 DISCLOSURE.

10 (a) IN GENERAL.—Subchapter B of chapter 76 (re11 lating to proceedings by taxpayers and third parties), as

12 amended by section 601(a), is amended by redesignating

13 section 7435 as section 7436 and by inserting after sec14 tion 7434 the following new section:

15 ‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE16 MENT OF INFORMATION DISCLOSURE.

17 ‘‘(a) IN GENERAL.—If any officer or employee of the

18 United States intentionally compromises the determina19 tion or collection of any tax due from an attorney, certified

20 public accountant, or enrolled agent representing a tax21 payer in exchange for information conveyed by the tax22 payer to the attorney, certified public accountant, or en23 rolled agent for purposes of obtaining advice concerning

24 the taxpayer’s tax liability, such taxpayer may bring a civil

25 action for damages against the United States in a district

26 court of the United States. Such civil action shall be the
45

•HR 2337 IH

1 exclusive remedy for recovering damages resulting from

2 such actions.

3 ‘‘(b) DAMAGES.—In any action brought under sub4 section (a), upon a finding of liability on the part of the

5 defendant, the defendant shall be liable to the plaintiff in

6 an amount equal to the lesser of $500,000 or the sum

7 of—

8 ‘‘(1) actual, direct economic damages sustained

9 by the plaintiff as a proximate result of the informa10 tion disclosure, and

11 ‘‘(2) the costs of the action.

12 Damages shall not include the taxpayer’s liability for any

13 civil or criminal penalties, or other losses attributable to

14 incarceration or the imposition of other criminal sanctions.

15 ‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to

16 this section shall be payable out of funds appropriated

17 under section 1304 of title 31, United States Code.

18 ‘‘(d) PERIOD FOR BRINGING ACTION.—Notwith19 standing any other provision of law, an action to enforce

20 liability created under this section may be brought without

21 regard to the amount in controversy and may be brought

22 only within 2 years after the date the actions creating such

23 liability would have been discovered by exercise of reason24 able care.
46

•HR 2337 IH

1 ‘‘(e) MANDATORY STAY.—Upon a certification by the

2 Commissioner or the Commissioner’s delegate that there

3 is an ongoing investigation or prosecution of the taxpayer,

4 the district court before which an action under this section

5 is pending, shall stay all proceedings with respect to such

6 action pending the conclusion of the investigation or

7 prosecution.

8 ‘‘(f) CRIME-FRAUD EXCEPTION.—Subsection (a)

9 shall not apply to information conveyed to an attorney,

10 certified public accountant, or enrolled agent for the pur11 pose of perpetrating a fraud or crime.’’

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

13 for subchapter B of chapter 76, as amended by section

14 601(b), is amended by striking the item relating to section

15 7435 and by adding at the end the following new items:

‘‘Sec. 7435. Civil damages for unauthorized enticement of information disclosure.

‘‘Sec. 7436. Cross references.’’

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

17 this section shall apply to actions after the date of the

18 enactment of this Act.

19 SEC. 1205. ANNUAL REMINDERS TO TAXPAYERS WITH OUT20 STANDING DELINQUENT ACCOUNTS.

21 (a) IN GENERAL.—Chapter 77 (relating to mis22 cellaneous provisions) is amended by adding at the end

23 the following new section:
47

•HR 2337 IH

1 ‘‘SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

2 ‘‘Not less often than annually, the Secretary shall

3 send a written notice to each taxpayer who has a tax delin4 quent account of the amount of the tax delinquency as

5 of the date of the notice.’’

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

7 for chapter 77 is amended by adding at the end the follow8 ing new item:

‘‘Sec. 7524. Annual notice of tax delinquency.’’

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

10 this section shall apply to calendar years after 1995.

11 SEC. 1206. 5-YEAR EXTENSION OF AUTHORITY FOR UNDER12 COVER OPERATIONS.

13 (a) IN GENERAL.—Paragraph (3) of section 7601(c)

14 of the Anti-Drug Abuse Act of 1988 is amended by strik15 ing all that follows ‘‘this Act’’ and inserting a period.

16 (b) RESTORATION OF AUTHORITY FOR 5 YEARS.—

17 Subsection (c) of section 7608 is amended by adding at

18 the end the following new paragraph:

19 ‘‘(6) APPLICATION OF SECTION.—The provi20 sions of this subsection—

21 ‘‘(A) shall apply after November 17, 1988,

22 and before January 1, 1990, and

23 ‘‘(B) shall apply after the date of the en24 actment of this paragraph and before January

25 1, 2001.
48

•HR 2337 IH

1 All amounts expended pursuant to this subsection

2 during the period described in subparagraph (B)

3 shall be recovered to the extent possible, and depos4 ited in the Treasury of the United States as mis5 cellaneous receipts, before January 1, 2001.’’

6 (c) ENHANCED OVERSIGHT.—

7 (1) ADDITIONAL INFORMATION REQUIRED IN

8 REPORTS TO CONGRESS.—Subparagraph (B) of sec9 tion 7608(c)(4) is amended—

10 (A) by striking ‘‘preceding the period’’ in

11 clause (ii),

12 (B) by striking ‘‘and’’ at the end of clause

13 (ii), and

14 (C) by striking clause (iii) and inserting

15 the following:

16 ‘‘(iii) the number, by programs, of un17 dercover investigative operations closed in

18 the 1-year period for which such report is

19 submitted, and

20 ‘‘(iv) the following information with

21 respect to each undercover investigative op22 eration pending as of the end of the 1-year

23 period for which such report is submitted

24 or closed during such 1-year period—
49

•HR 2337 IH

1 ‘‘(I) the date the operation began

2 and the date of the certification re3 ferred to in the last sentence of para4 graph (1),

5 ‘‘(II) the total expenditures

6 under the operation and the amount

7 and use of the proceeds from the op8 eration,

9 ‘‘(III) a detailed description of

10 the operation including the potential

11 violation being investigated and

12 whether the operation is being con13 ducted under grand jury auspices, and

14 ‘‘(IV) the results of the operation

15 including the results of criminal pro16 ceedings.’’

17 (2) AUDITS REQUIRED WITHOUT REGARD TO

18 AMOUNTS INVOLVED.—Subparagraph (C) of section

19 7608(c)(5) is amended to read as follows:

20 ‘‘(C) UNDERCOVER INVESTIGATIVE OPER21 ATION.—The term ‘undercover investigative op22 eration’ means any undercover investigative op23 eration of the Service; except that, for purposes

24 of subparagraphs (A) and (C) of paragraph (4),

25 such term only includes an operation which is
50

•HR 2337 IH

1 exempt from section 3302 or 9102 of title 31,

2 United States Code.’’

3 (3) EFFECTIVE DATE.—The amendments made

4 by this subsection shall take effect on the date of the

5 enactment of this Act.

6 SEC. 1207. DISCLOSURE OF FORM 8300 INFORMATION ON

7 CASH TRANSACTIONS.

8 (a) IN GENERAL.—Subsection (l) of section 6103 (re9 lating to disclosure of returns and return information for

10 purposes other than tax administration) is amended by

11 adding at the end the following new paragraph:

12 ‘‘(15) DISCLOSURE OF RETURNS FILED UNDER

13 SECTION 6050I.—The Secretary may, upon written

14 request, disclose to officers and employees of—

15 ‘‘(A) any Federal agency,

16 ‘‘(B) any agency of a State or local govern17 ment, or

18 ‘‘(C) any agency of the government of a

19 foreign country,

20 information contained on returns filed under section

21 6050I. Any such disclosure shall be made on the

22 same basis, and subject to the same conditions, as

23 apply to disclosures of information on reports filed

24 under section 5313 of title 31, United States Code;

25 except that no disclosure under this paragraph shall
51

•HR 2337 IH

1 be made for purposes of the administration of any

2 tax law.’’

3 (b) CONFORMING AMENDMENTS.—

4 (1) Subsection (i) of section 6103 is amended

5 by striking paragraph (8).

6 (2) Subparagraph (A) of section 6103(p)(3) is

7 amended—

8 (A) by striking ‘‘(7)(A)(ii), or (8)’’ and in9 serting ‘‘or (7)(A)(ii)’’, and

10 (B) by striking ‘‘or (14)’’ and inserting

11 ‘‘(14), or (15)’’.

12 (3) The material preceding subparagraph (A) of

13 section 6103(p)(4) is amended—

14 (A) by striking ‘‘(5), or (8)’’ and inserting

15 ‘‘or (5)’’,

16 (B) by striking ‘‘(i)(3)(B)(i), or (8)’’ and

17 inserting ‘‘(i)(3)(B)(i),’’, and

18 (C) by striking ‘‘or (12)’’ and inserting

19 ‘‘(12), or (15)’’.

20 (4) Clause (ii) of section 6103(p)(4)(F) is

21 amended—

22 (A) by striking ‘‘(5), or (8)’’ and inserting

23 ‘‘or (5)’’, and

24 (B) by striking ‘‘or (14)’’ and inserting

25 ‘‘(14), or (15)’’.
52

•HR 2337 IH

1 (5) Paragraph (2) of section 7213(a) is amend2 ed by striking ‘‘or (12)’’ and inserting ‘‘(12), or

3 (15)’’.

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

5 this section shall take effect on the date of the enactment

6 of this Act.

7 SEC. 1208. DISCLOSURE OF RETURNS AND RETURN INFOR8 MATION TO DESIGNEE OF TAXPAYER.

9 Subsection (c) of section 6103 (relating to disclosure

10 of returns and return information to designee of taxpayer)

11 is amended by striking ‘‘written request for or consent to

12 such disclosure’’ and inserting ‘‘request for or consent to

13 such disclosure’’.

14 SEC. 1209. STUDY OF NETTING OF INTEREST ON OVERPAY15 MENTS AND LIABILITIES.

16 (a) IN GENERAL.—The Secretary of the Treasury or

17 his delegate shall—

18 (1) conduct a study of the manner in which the

19 Internal Revenue Service has implemented the net20 ting of interest on overpayments and underpayments

21 and of the policy and administrative implications of

22 global netting, and

23 (2) before submitting the report of such study,

24 hold a public hearing to receive comments on the

25 matters included in such study.
53

•HR 2337 IH

1 (b) REPORT.—The report of such study shall be sub2 mitted not later than 6 months after the date of the enact3 ment of this Act to the Committee on Ways and Means

4 of the House of Representatives and the Committee on

5 Finance of the Senate.

Æ

HR 2337 IH——2

HR 2337 IH——3

HR 2337 IH——4

HR 2337 IH——5