II 

112TH CONGRESS 

2D SESSION S. 2291 

To provide a taxpayer bill of rights for small businesses. 

IN THE SENATE OF THE UNITED STATES 

APRIL 17, 2012 

Mr. CORNYN (for himself, Ms. SNOWE, Mrs. HUTCHISON, and Mr. HELLER) 

introduced the following bill; which was read twice and referred to the 

Committee on Finance 

A BILL 

To provide a taxpayer bill of rights for small businesses. 

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; TABLE OF CONTENTS. 

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

5 ‘‘Small Business Taxpayer Bill of Rights Act of 2012’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Modification of standards for awarding of costs and certain fees. 

Sec. 3. Civil damages allowed for reckless or intentional disregard of internal 

revenue laws. 

Sec. 4. Modifications relating to certain offenses by officers and employees in 

connection with revenue laws. 

Sec. 5. Modifications relating to civil damages for unauthorized inspection or 

disclosure of returns and return information. 

Sec. 6. Interest abatement reviews. 


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Sec. 7. Ban on ex parte discussions. 

Sec. 8. Alternative dispute resolution procedures. 

Sec. 9. Extension of time for contesting IRS levy. 

Sec. 10. Waiver of installment agreement fee. 

Sec. 11. Suspension of running of period for filing petition of spousal relief and 

collection cases. 

Sec. 12. Venue for appeal of spousal relief and collection cases. 

Sec. 13. Increase in monetary penalties for certain unauthorized disclosures of 

information. 

Sec. 14. De novo tax court review of claims for equitable innocent spouse relief. 

Sec. 15. Ban on raising new issues on appeal. 

1 SEC. 2. MODIFICATION OF STANDARDS FOR AWARDING OF 

2 COSTS AND CERTAIN FEES. 

3 (a) SMALL BUSINESSES ELIGIBLE WITHOUT RE4 GARD TO NET WORTH.—Subparagraph (D) of section 

5 7430(c)(4) of the Internal Revenue Code of 1986 is 

6 amended by striking ‘‘and’’ at the end of clause (i), by 

7 striking the period at the end of clause (ii) and inserting 

8 ‘‘and’’, and by adding at the end the following new clause: 

9 ‘‘(iii) in the case of an eligible small 

10 business, the net worth limitation in clause 

11 (ii) of such section shall not apply.’’. 

12 (b) ELIGIBLE SMALL BUSINESS.—Paragraph (4) of 

13 section 7430(c) of the Internal Revenue Code of 1986 is 

14 amended by adding at the end the following new subpara15 graph: 

16 ‘‘(F) ELIGIBLE SMALL BUSINESS.—For 

17 purposes of subparagraph (D)(iii), the term ‘eli18 gible small business’ means, with respect to any 

19 proceeding commenced in a taxable year— 


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1 ‘‘(i) a corporation the stock of which 

2 is not publicly traded, 

3 ‘‘(ii) a partnership, or 

4 ‘‘(iii) a sole proprietorship, 

5 if the average annual gross receipts of such cor6 poration, partnership, or sole proprietorship for 

7 the 3-taxable-year period preceding such taxable 

8 year does not exceed $50,000,000. For pur9 poses of applying the test under the preceding 

10 sentence, rules similar to the rules of para11 graphs (2) and (3) of section 448(c) shall 

12 apply.’’. 

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

14 this section shall apply to proceedings commenced after 

15 the date of the enactment of this Act. 

16 SEC. 3. CIVIL DAMAGES ALLOWED FOR RECKLESS OR IN17 TENTIONAL DISREGARD OF INTERNAL REV18 ENUE LAWS. 

19 (a) INCREASE IN AMOUNT OF DAMAGES.—Section 

20 7433(b) of the Internal Revenue Code of 1986 is amended 

21 by striking ‘‘$1,000,000 ($100,000, in the case of neg22 ligence)’’ and inserting ‘‘$3,000,000 ($300,000, in the 

23 case of negligence)’’. 


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1 (b) EXTENSION OF TIME TO BRING ACTION.—Sec2 tion 7433(d)(3) of the Internal Revenue Code of 1986 is 

3 amended by striking ‘‘2 years’’ and inserting ‘‘5 years’’. 

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

5 this section shall apply to actions of employees of the In6 ternal Revenue Service after the date of the enactment 

7 of this Act. 

8 SEC. 4. MODIFICATIONS RELATING TO CERTAIN OFFENSES 

9 BY OFFICERS AND EMPLOYEES IN CONNEC10 TION WITH REVENUE LAWS. 

11 (a) INCREASE IN PENALTY.—Section 7214 of the In12 ternal Revenue Code of 1986 is amended— 

13 (1) by striking ‘‘$10,000’’ in subsection (a) and 

14 inserting ‘‘$25,000’’, and 

15 (2) by striking ‘‘$5,000’’ in subsection (b) and 

16 inserting ‘‘$10,000’’. 

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

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

19 of this Act. 

20 SEC. 5. MODIFICATIONS RELATING TO CIVIL DAMAGES FOR 

21 UNAUTHORIZED INSPECTION OR DISCLO22 SURE OF RETURNS AND RETURN INFORMA23 TION. 

24 (a) INCREASE IN AMOUNT OF DAMAGES.—Subpara25 graph (A) of section 7431(c)(1) of the Internal Revenue 


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1 Code of 1986 is amended by striking ‘‘$1,000’’ and insert2 ing ‘‘$10,000’’. 

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

4 this section shall apply to inspections and disclosure occur5 ring on and after the date of the enactment of this Act. 

6 SEC. 6. INTEREST ABATEMENT REVIEWS. 

7 (a) FILING PERIOD FOR INTEREST ABATEMENT

8 CASES.— 

9 (1) IN GENERAL.—Subsection (h) of section 

10 6404 of the Internal Revenue Code of 1986 is 

11 amended— 

12 (A) by striking ‘‘REVIEW OF DENIAL’’ in 

13 the heading and inserting ‘‘JUDICIAL REVIEW’’, 

14 and 

15 (B) by striking ‘‘ ‘if such action is 

16 brought’ ’’ and all that follows in paragraph (1) 

17 and inserting ‘‘if such action is brought— 

18 ‘‘(A) at any time after the earlier of— 

19 ‘‘(i) the date of the mailing of the 

20 Secretary’s final determination not to 

21 abate such interest, or 

22 ‘‘(ii) the date which is 180 days after 

23 the date of the filing with the Secretary (in 

24 such form as the Secretary may prescribe) 


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1 of a claim for abatement under this sec2 tion, and 

3 ‘‘(B) not later than the date which is 180 

4 days after the date described in subparagraph 

5 (A)(i).’’. 

6 (2) EFFECTIVE DATE.—The amendments made 

7 by this subsection shall apply to claims for abate8 ment of interest filed with the Secretary after the 

9 date of the enactment of this Act. 

10 (b) SMALL TAX CASE ELECTION FOR INTEREST

11 ABATEMENT CASES.— 

12 (1) IN GENERAL.—Subsection (f) of section 

13 7463 of the Internal Revenue Code of 1986 is 

14 amended— 

15 (A) by striking ‘‘and’’ at the end of para16 graph (1), 

17 (B) by striking the period at the end of 

18 paragraph (2) and inserting ‘‘, and’’, and 

19 (C) by adding at the end the following new 

20 paragraph: 

21 ‘‘(3) a petition to the Tax court under section 

22 6404(h) in which the amount of interest abatement 

23 sought does not exceed $50,000.’’. 

24 (2) EFFECTIVE DATE.—The amendments made 

25 by this subsection shall apply to— 


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1 (A) cases pending as of the day after the 

2 date of the enactment of this Act, and 

3 (B) cases commenced after such date of 

4 enactment. 

5 SEC. 7. BAN ON EX PARTE DISCUSSIONS. 

6 (a) IN GENERAL.—Notwithstanding section 

7 1001(a)(4) of the Internal Revenue Service Restructuring 

8 and Reform Act of 1998, the Internal Revenue Service 

9 shall prohibit any ex parte communications between offi10 cers in the Internal Revenue Service Office of Appeals and 

11 other Internal Revenue Service employees with respect to 

12 any matter pending before such officers. 

13 (b) TERMINATION OF EMPLOYMENT FOR MIS14 CONDUCT.—Subject to subsection (c), the Commissioner 

15 of Internal Revenue shall terminate the employment of 

16 any employee of the Internal Revenue Service if there is 

17 a final administrative or judicial determination that such 

18 employee committed any act or omission prohibited under 

19 subsection (a) in the performance of the employee’s official 

20 duties. Such termination shall be a removal for cause on 

21 charges of misconduct. 

22 (c) DETERMINATION OF COMMISSIONER.— 

23 (1) IN GENERAL.—The Commissioner of Inter24 nal Revenue may take a personnel action other than 


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1 termination for an act prohibited under subsection 

2 (a). 

3 (2) DISCRETION.—The exercise of authority 

4 under paragraph (1) shall be at the sole discretion 

5 of the Commissioner of Internal Revenue and may 

6 not be delegated to any other officer. The Commis7 sioner of Internal Revenue, in his sole discretion, 

8 may establish a procedure which will be used to de9 termine whether an individual should be referred to 

10 the Commissioner of Internal Revenue for a deter11 mination by the Commissioner under paragraph (1). 

12 (3) NO APPEAL.—Any determination of the 

13 Commissioner of Internal Revenue under this sub14 section may not be appealed in any administrative or 

15 judicial proceeding. 

16 (d) TIGTA REPORTING OF TERMINATION OR MITI17 GATION.—Section 7803(d)(1)(E) of the Internal Revenue 

18 Code of 1986 is amended by inserting ‘‘or section 7 of 

19 the Small Business Taxpayer Bill of Rights Act of 2012’’ 

20 after ‘‘1998’’. 

21 SEC. 8. ALTERNATIVE DISPUTE RESOLUTION PROCE22 DURES. 

23 (a) IN GENERAL.—Section 7123 of the Internal Rev24 enue Code of 1986 is amended by adding at the end the 

25 following new subsection: 


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1 ‘‘(c) AVAILABILITY OF DISPUTE RESOLUTIONS.— 

2 ‘‘(1) IN GENERAL.—The procedures prescribed 

3 under subsection (b)(1) and the pilot program estab4 lished under subsection (b)(2) shall provide that a 

5 taxpayer may request mediation or arbitration in 

6 any case unless the Secretary has specifically ex7 cluded the type of issue involved in such case or the 

8 class of cases to which such case belongs as not ap9 propriate for resolution under such subsection. The 

10 Secretary shall make any determination that ex11 cludes a type of issue or a class of cases public with12 in 5 working days and provide an explanation for 

13 each determination. 

14 ‘‘(2) INDEPENDENT MEDIATORS.— 

15 ‘‘(A) IN GENERAL.—The procedures pre16 scribed under subsection (b)(1) shall provide 

17 the taxpayer an opportunity to elect to have the 

18 mediation conducted by an independent, neutral 

19 individual not employed by the Office of Ap20 peals. 

21 ‘‘(B) COST AND SELECTION.— 

22 ‘‘(i) IN GENERAL.—Any taxpayer 

23 making an election under subparagraph 

24 (A) shall be required— 


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1 ‘‘(I) to share the costs of such 

2 independent mediator equally with the 

3 Office of Appeals, and 

4 ‘‘(II) to limit the selection of the 

5 mediator to a roster of recognized na6 tional or local neutral mediators. 

7 ‘‘(ii) EXCEPTION.—Clause (i)(I) shall 

8 not apply to any taxpayer who is an indi9 vidual or who was a small business in the 

10 preceding calendar year if such taxpayer 

11 had an adjusted gross income that did not 

12 exceed 250 percent of the poverty level, as 

13 determined in accordance with criteria es14 tablished by the Director of the Office of 

15 Management and Budget, in the taxable 

16 year preceding the request. 

17 ‘‘(iii) SMALL BUSINESS.—For pur18 poses of clause (ii), the term ‘small busi19 ness’ has the meaning given such term 

20 under section 41(b)(3)(D)(iii). 

21 ‘‘(3) AVAILABILITY OF PROCESS.—The proce22 dures prescribed under subsection (b)(1) and the 

23 pilot program established under subsection (b)(2) 

24 shall provide the opportunity to elect mediation or 

25 arbitration at the time when the case is first filed 


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1 with the Office of Appeals and at any time before 

2 deliberations in the appeal commence.’’. 

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

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

5 of this Act. 

6 SEC. 9. EXTENSION OF TIME FOR CONTESTING IRS LEVY. 

7 (a) EXTENSION OF TIME FOR RETURN OF PROPERTY

8 SUBJECT TO LEVY.—Subsection (b) of section 6343 of the 

9 Internal Revenue Code of 1986 is amended by striking ‘‘9 

10 months’’ and inserting ‘‘3 years’’. 

11 (b) PERIOD OF LIMITATION ON SUITS.—Subsection 

12 (c) of section 6532 of the Internal Revenue Code of 1986 

13 is amended— 

14 (1) in paragraph (1) by striking ‘‘9 months’’ 

15 and inserting ‘‘3 years’’, and 

16 (2) in paragraph (2) by striking ‘‘9-month’’ and 

17 inserting ‘‘3-year’’. 

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

19 this section shall apply to— 

20 (1) levies made after the date of the enactment 

21 of this Act, and 

22 (2) levies made on or before such date if the 9- 

23 month period has not expired under section 6343(b) 

24 of the Internal Revenue Code of 1986 (without re25 gard to this section) as of such date. 


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1 SEC. 10. WAIVER OF INSTALLMENT AGREEMENT FEE. 

2 (a) IN GENERAL.—Section 6159 of the Internal Rev3 enue Code of 1986 is amended by redesignating subsection 

4 (f) as subsection (g) and by inserting after subsection (e) 

5 the following new subsection: 

6 ‘‘(f) WAIVER OF INSTALLMENT AGREEMENT FEE.— 

7 The Secretary shall waive the fees imposed on installment 

8 agreements under this section for any taxpayer with an 

9 adjusted gross income that does not exceed 250 percent 

10 of the poverty level, as determined in accordance with cri11 teria established by the Director of the Office of Manage12 ment and Budget, and who has agreed to make payments 

13 under the installment agreement by electronic payment 

14 through a debit instrument.’’. 

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

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

17 of this Act. 

18 SEC. 11. SUSPENSION OF RUNNING OF PERIOD FOR FILING 

19 PETITION OF SPOUSAL RELIEF AND COLLEC20 TION CASES. 

21 (a) PETITIONS FOR SPOUSAL RELIEF.— 

22 (1) IN GENERAL.—Subsection (e) of section 

23 6015 of the Internal Revenue Code of 1986 is 

24 amended by adding at the end the following new 

25 paragraph: 


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1 ‘‘(6) SUSPENSION OF RUNNING OF PERIOD FOR

2 FILING PETITION IN TITLE 11 CASES.—In the case 

3 of an individual who is prohibited by reason of a 

4 case under title 11, United States Code, from filing 

5 a petition under paragraph (1)(A) with respect to a 

6 final determination of relief under this section, the 

7 running of the period prescribed by such paragraph 

8 for filing such a petition with respect to such final 

9 determination shall be suspended for the period dur10 ing which the individual is so prohibited from filing 

11 such a petition, and for 60 days thereafter.’’. 

12 (2) EFFECTIVE DATE.—The amendment made 

13 by this subsection shall apply to petitions filed under 

14 section 6015(e) of the Internal Revenue Code of 

15 1986 after the date of the enactment of this Act. 

16 (b) COLLECTION PROCEEDINGS.— 

17 (1) IN GENERAL.—Subsection (d) of section 

18 6330 of the Internal Revenue Code of 1986 is 

19 amended— 

20 (A) by striking ‘‘appeal such determination 

21 to the Tax Court’’ in paragraph (1) and insert22 ing ‘‘petition the Tax Court for review of such 

23 determination’’, 

24 (B) by striking ‘‘JUDICIAL REVIEW OF DE25 TERMINATION’’ in the heading of paragraph (1) 


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1 and inserting ‘‘PETITION FOR REVIEW BY TAX

2 COURT’’, 

3 (C) by redesignating paragraph (2) as 

4 paragraph (3), and 

5 (D) by inserting after paragraph (1) the 

6 following new paragraph: 

7 ‘‘(2) SUSPENSION OF RUNNING OF PERIOD FOR

8 FILING PETITION IN TITLE 11 CASES.—In the case 

9 of an individual who is prohibited by reason of a 

10 case under title 11, United States Code, from filing 

11 a petition under paragraph (1) with respect to a de12 termination under this section, the running of the 

13 period prescribed by such subsection for filing such 

14 a petition with respect to such determination shall 

15 be suspended for the period during which the indi16 vidual is so prohibited from filing such a petition, 

17 and for 30 days thereafter.’’. 

18 (2) CONFORMING AMENDMENT.—Subsection (c) 

19 of section 6320 of such Code is amended by striking 

20 ‘‘(2)(B)’’ and inserting ‘‘(3)(B)’’. 

21 (3) EFFECTIVE DATE.—The amendments made 

22 by this subsection shall apply to petitions filed under 

23 section 6330 of the Internal Revenue Code of 1986 

24 after the date of the enactment of this Act. 


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1 SEC. 12. VENUE FOR APPEAL OF SPOUSAL RELIEF AND 

2 COLLECTION CASES. 

3 (a) IN GENERAL.—Paragraph (1) of section 7482(b) 

4 of the Internal Revenue Code of 1986 is amended— 

5 (1) by striking ‘‘or’’ at the end of subparagraph 

6 (E), 

7 (2) by striking the period at the end of sub8 paragraph (F) and inserting a comma, and 

9 (3) by inserting after subparagraph (F) the fol10 lowing new subparagraphs: 

11 ‘‘(G) in the case of a petition under section 

12 6015(e), the legal residence of the petitioner, or 

13 ‘‘(H) in the case of a petition under sec14 tion 6320 or 6330— 

15 ‘‘(i) the legal residence of the peti16 tioner if the petitioner is an individual, and 

17 ‘‘(ii) the principal place of business or 

18 principal office or agency if the petitioner 

19 is an entity other than an individual.’’. 

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

21 this section shall apply to petitions filed after the date of 

22 enactment of this Act. 


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1 SEC. 13. INCREASE IN MONETARY PENALTIES FOR CER2 TAIN UNAUTHORIZED DISCLOSURES OF IN3 FORMATION. 

4 (a) IN GENERAL.—Paragraphs (1), (2), (3), and (4) 

5 of section 7213(a) of the Internal Revenue Code of 1986 

6 are each amended by striking ‘‘$5,000’’ and inserting 

7 ‘‘$10,000’’. 

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

9 this section shall apply to disclosures made after the date 

10 of the enactment of this Act. 

11 SEC. 14. DE NOVO TAX COURT REVIEW OF CLAIMS FOR EQ12 UITABLE INNOCENT SPOUSE RELIEF. 

13 (a) IN GENERAL.—Subparagraph (A) of section 

14 6015(e)(1) of the Internal Revenue Code of 1986 is 

15 amended by adding at the end the following new flush sen16 tence: 

17 ‘‘Any review of a determination by the Sec18 retary with respect to a claim for equitable re19 lief under subsection (f) shall be reviewed de 

20 novo by the Tax Court.’’. 

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

22 this section shall apply to petitions filed or pending before 

23 the Tax Court on and after the date of the enactment of 

24 this Act. 


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1 SEC. 15. BAN ON RAISING NEW ISSUES ON APPEAL. 

2 (a) IN GENERAL.—Chapter 77 of the Internal Rev3 enue Code of 1986 is amended by adding at the end the 

4 following new section: 

5 ‘‘SEC. 7529. PROHIBITION ON INTERNAL REVENUE SERVICE 

6 RAISING NEW ISSUES IN AN INTERNAL AP7 PEAL. 

8 ‘‘(a) IN GENERAL.—In reviewing an appeal of any 

9 determination initially made by the Internal Revenue 

10 Service, the Internal Revenue Service Office of Appeals 

11 may not consider or decide any issue that is not within 

12 the scope of the initial determination. 

13 ‘‘(b) CERTAIN ISSUES DEEMED OUTSIDE OF SCOPE

14 OF DETERMINATION.—For purposes of subsection (a), the 

15 following matters shall be considered to be not within the 

16 scope of a determination: 

17 ‘‘(1) Any issue that was not raised in a notice 

18 of deficiency or an examiner’s report which is the 

19 subject of the appeal. 

20 ‘‘(2) Any deficiency in tax which was not in21 cluded in the initial determination. 

22 ‘‘(3) Any theory or justification for a tax defi23 ciency which was not considered in the initial deter24 mination. 

25 ‘‘(c) NO INFERENCE WITH RESPECT TO ISSUES

26 RAISED BY TAXPAYERS.—Nothing in this section shall be 


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1 construed to provide any limitation in addition to any limi2 tations in effect on the date of the enactment of this sec3 tion on the right of a taxpayer to raise an issue, theory, 

4 or justification on an appeal from a determination initially 

5 made by the Internal Revenue Service that was not within 

6 the scope of the initial determination.’’. 

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

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

9 end the following new item: 

‘‘Sec. 7529. Prohibition on Internal Revenue Service raising new issues in an 

internal appeal.’’. 

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

11 this section shall apply to matters filed or pending with 

12 the Internal Revenue Service Office of Appeals on or after 

13 the date of the enactment of this Act. 

Æ 


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