II

104TH CONGRESS

1ST SESSION S. 258

To amend the Internal Revenue Code of 1986 to provide additional safeguards

to protect taxpayer rights.

IN THE SENATE OF THE UNITED STATES

JANUARY 23 (legislative day, JANUARY 10), 1995

Mr. PRYOR (for himself, Mr. GRASSLEY, Mr. REID, Mr. BRYAN, Mr. HATCH,

Mr. BAUCUS, Mr. MURKOWSKI, Mr. BREAUX, Mr. NICKLES, Mr. EXON,

Mr. COCHRAN, Mr. GLENN, Mr. COHEN, Mr. JOHNSTON, Mr. LOTT, Mr.

KERRY, Mr. SMITH, Ms. MIKULSKI, Mr. SARBANES, and Mr. SIMON) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

additional safeguards to protect taxpayer rights.

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 amend-
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1 ment or repeal is expressed in terms of an amendment

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (c) TABLE OF CONTENTS.—The table of contents of

6 this Act is as follows:

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. Taxpayer’s right to installment agreement.

Sec. 202. Running of failure to pay penalty suspended during period installment agreement in effect.

Sec. 203. Notification of reasons for termination or denial of installment agreements.

Sec. 204. Administrative review of denial of request for, or termination of, installment agreement.

TITLE III—INTEREST

Sec. 301. Expansion of authority to abate interest.

Sec. 302. Extension of interest-free period for payment of tax after notice and

demand.

TITLE IV—JOINT RETURNS

Sec. 401. Disclosure of collection activities.

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

TITLE V—COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.

Sec. 502. Offers-in-compromise.

Sec. 503. Notification of examination.

Sec. 504. Increase in limit on recovery of civil damages for unauthorized collection actions.

Sec. 505. Safeguards relating to designated summons.

TITLE VI—INFORMATION RETURNS

Sec. 601. Phone number of person providing payee statements required to be

shown on such statement.

Sec. 602. Civil damages for fraudulent filing of information returns.
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Sec. 603. Requirement to conduct reasonable investigations of information returns.

TITLE VII—MODIFICATIONS TO PENALTY FOR FAILURE TO

COLLECT AND PAY OVER TAX

Sec. 701. Preliminary notice requirement.

Sec. 702. Disclosure of certain information where more than 1 person subject

to penalty.

Sec. 703. Penalties under section 6672.

TITLE VIII—AWARDING OF COSTS AND CERTAIN FEES

Sec. 801. Motion for disclosure of information.

Sec. 802. Increased limit on attorney fees.

Sec. 803. Failure to agree to extension not taken into account.

Sec. 804. Authority for court to award reasonable administrative costs.

Sec. 805. Effective date.

TITLE IX—OTHER PROVISIONS

Sec. 901. Required content of certain notices.

Sec. 902. Treatment of substitute returns under section 6651.

Sec. 903. Relief from retroactive application of Treasury Department regulations.

Sec. 904. Required notice of certain payments.

Sec. 905. Unauthorized enticement of information disclosure.

TITLE X—FORM MODIFICATIONS; STUDIES

Sec. 1000. Definitions.

Subtitle A—Form Modifications

Sec. 1001. Explanation of certain provisions.

Sec. 1002. Improved procedures for notifying service of change of address or

name.

Sec. 1003. Rights and responsibilities of divorced individuals.

Subtitle B—Studies

Sec. 1011. Pilot program for appeal of enforcement actions.

Sec. 1012. Study on taxpayers with special needs.

Sec. 1013. Reports on taxpayer-rights education program.

Sec. 1014. Biennial reports on misconduct by Internal Revenue Service employees.

Sec. 1015. Study of notices of deficiency.

Sec. 1016. Notice and form accuracy study.
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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 including all problem resolution officers, shall be

15 under the supervision and direction of an official to

16 be known as the ‘Taxpayer Advocate’ who shall re17 port directly to the Commissioner of Internal Reve18 nue. The Taxpayer Advocate shall be entitled to

19 compensation at the same rate as the Chief Counsel

20 for the Internal Revenue Service.

21 ‘‘(2) FUNCTIONS OF OFFICE.—

22 ‘‘(A) IN GENERAL.—It shall be the func23 tion of the Office of Taxpayer Advocate to—

24 ‘‘(i) assist taxpayers in resolving prob25 lems with the Internal Revenue Service,
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1 ‘‘(ii) identify areas in which taxpayers

2 have problems in dealings with the Internal

3 Revenue Service,

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

5 changes in the administrative practices of

6 the Internal Revenue Service to mitigate

7 problems identified under clause (ii), and

8 ‘‘(iv) identify potential legislative

9 changes which may be appropriate to miti10 gate such problems.

11 ‘‘(B) ANNUAL REPORTS.—

12 ‘‘(i) OBJECTIVES.—Not later than

13 June 30 of each calendar year after 1994,

14 the Taxpayer Advocate shall report to the

15 Committee on Ways and Means of the

16 House of Representatives and the Commit17 tee on Finance of the Senate on the objec18 tives of the Taxpayer Advocate for the fis19 cal year beginning in such calendar year.

20 Any such report shall contain full and sub21 stantive analysis, in addition to statistical

22 information.

23 ‘‘(ii) ACTIVITIES.—Not later than De24 cember 31 of each calendar year after

25 1994, the Taxpayer Advocate shall report
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1 to the Committee on Ways and Means of

2 the House of Representatives and the

3 Committee on Finance of the Senate on

4 the activities of the Taxpayer Advocate

5 during the fiscal year ending during such

6 calendar year. Any such report shall con7 tain full and substantive analysis, in addi8 tion to statistical information, and shall—

9 ‘‘(I) identify the initiatives the

10 Taxpayer Advocate has taken on im11 proving taxpayer services and Internal

12 Revenue Service responsiveness,

13 ‘‘(II) contain recommendations

14 received from individuals with the au15 thority to issue taxpayer assistance

16 orders under section 7811,

17 ‘‘(III) contain a summary of at

18 least 20 of the most serious problems

19 encountered by taxpayers, including a

20 description of the nature of such prob21 lems,

22 ‘‘(IV) contain an inventory of the

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

24 and (III) for which action has been

25 taken and the result of such action,
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1 ‘‘(V) contain an inventory of the

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

3 and (III) for which action remains to

4 be completed and the period during

5 which each item has remained on such

6 inventory,

7 ‘‘(VI) contain an inventory of the

8 items described in subclauses (II) and

9 (III) for which no action has been

10 taken, the period during which each

11 item has remained on such inventory,

12 the reasons for the inaction, and iden13 tify any Internal Revenue Service offi14 cial who is responsible for such inac15 tion,

16 ‘‘(VII) identify any Taxpayer As17 sistance Order which was not honored

18 by the Internal Revenue Service in a

19 timely manner, as specified under sec20 tion 7811(b),

21 ‘‘(VIII) contain recommendations

22 for such administrative and legislative

23 action as may be appropriate to re24 solve problems encountered by tax25 payers, and
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1 ‘‘(IX) include such other infor2 mation as the Taxpayer Advocate may

3 deem advisable.

4 ‘‘(iii) REPORT TO BE SUBMITTED DI5 RECTLY.—Each report required under this

6 subparagraph shall be provided directly to

7 the Committees referred to in clauses (i)

8 and (ii) without any prior review or com9 ment from the Commissioner of the Inter10 nal Revenue Service, the Secretary of the

11 Treasury, any other officer or employee of

12 the Department of the Treasury, or the

13 Office of Management and Budget.

14 ‘‘(3) RESPONSIBILITIES OF COMMISSIONER OF

15 INTERNAL REVENUE SERVICE.—The Commissioner

16 of Internal Revenue shall establish procedures re17 quiring a formal response to all recommendations

18 submitted to the Commissioner by the Taxpayer

19 Advocate.’’

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 7811 (relating to taxpayer assist22 ance orders) is amended—

23 (A) by striking ‘‘the Office of Ombuds24 man’’ in subsection (a) and inserting ‘‘the Of25 fice of the Taxpayer Advocate’’, and
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1 (B) by striking ‘‘Ombudsman’’ each place

2 it appears (including in the headings of sub3 sections (e) and (f)) and inserting ‘‘Taxpayer

4 Advocate’’.

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

6 read as follows:

7 ‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; AS8 SISTANT COMMISSIONERS; TAXPAYER ADVO9 CATE.’’

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

11 chapter 80 of subtitle F is amended by striking the

12 item relating to section 7802 and inserting the

13 following new item:

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

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

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

16 of this Act.

17 SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER

18 ASSISTANCE ORDERS.

19 (a) TAXPAYER’S HARDSHIP.—Section 7811(a) (relat20 ing to authority to issue) is amended by striking ‘‘signifi21 cant’’.

22 (b) TERMS OF ORDERS.—Subsection (b) of section

23 7811 (relating to terms of taxpayer assistance orders) is

24 amended—
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1 (1) by inserting ‘‘within a specified time pe2 riod’’ after ‘‘the Secretary’’, and

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

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

5 (c) LIMITATION ON AUTHORITY TO MODIFY OR RE6 SCIND.—Section 7811(c) (relating to authority to modify

7 or rescind) is amended to read as follows:

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

9 Taxpayer Assistance Order issued by the Taxpayer Advo10 cate under this section may be modified or rescinded only

11 by the Taxpayer Advocate, the Commissioner, or any supe12 rior of either.’’

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

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

15 of this Act.

16 TITLE II—MODIFICATIONS TO

17 INSTALLMENT AGREEMENT

18 PROVISIONS

19 SEC. 201. TAXPAYER’S RIGHT TO INSTALLMENT AGREE20 MENT.

21 (a) IN GENERAL.—Subsection (a) of section 6159

22 (relating to agreements for payment of tax liability in in23 stallments) is amended to read as follows:

24 ‘‘(a) IN GENERAL.—
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1 ‘‘(1) AUTHORIZATION OF AGREEMENTS.—The

2 Secretary is authorized to enter into written agree3 ments with any taxpayer under which such taxpayer

4 is allowed to satisfy liability for payment of any tax

5 in installment payments if the Secretary determines

6 that such agreement will facilitate collection of such

7 liability.

8 ‘‘(2) AGREEMENT AS A MATTER OF RIGHT.—In

9 the case of any taxpayer other than a corporation,

10 the Secretary shall enter into such an agreement

11 if—

12 ‘‘(A) the taxpayer requests such an agree13 ment,

14 ‘‘(B) the tax liability is attributable to the

15 tax imposed under chapter 1 and is less than

16 $10,000, and

17 ‘‘(C) the taxpayer has paid any tax liability

18 for the 3 preceding taxable years at the time

19 such liability was due.

20 ‘‘(3) NOTICE.—The Secretary shall include in

21 the instructions for returns of the tax imposed under

22 chapter 1 the rights of taxpayers under this sub23 section and the steps necessary to exercise those

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

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

4 SEC. 202. RUNNING OF FAILURE TO PAY PENALTY SUS5 PENDED DURING PERIOD INSTALLMENT

6 AGREEMENT IN EFFECT.

7 (a) GENERAL RULE.—Section 6651 (relating to pen8 alty for failure to file tax return or to pay tax) is amended

9 by adding at the end the following new subsection:

10 ‘‘(g) TREATMENT OF INSTALLMENT AGREEMENTS

11 UNDER SECTION 6159.—If—

12 ‘‘(1) an agreement is entered into under section

13 6159 for the payment of any tax in installments,

14 and

15 ‘‘(2) the taxpayer requested the Secretary to

16 enter into the agreement on or before the due date

17 (including extensions) for the return of the tax,

18 the period during which such agreement is in effect shall

19 be disregarded in determining the amount of any addition

20 under paragraph (2) or (3) of subsection (a) with respect

21 to such tax.’’

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

23 subsection (a) shall apply to installment agreements en24 tered into after the date of the enactment of this Act.
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1 SEC. 203. NOTIFICATION OF REASONS FOR TERMINATION

2 OR DENIAL OF INSTALLMENT AGREEMENTS.

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

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

5 is amended by adding at the end the following new para6 graph:

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

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

9 or (4) unless—

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

11 the taxpayer not later than the day 30 days be12 fore the date of such action, and

13 ‘‘(B) such notice includes an explanation

14 why the Secretary intends to take such action.

15 The preceding sentence shall not apply in any case

16 in which the Secretary believes that collection of any

17 tax to which an agreement under this section relates

18 is in jeopardy.’’

19 (b) DENIALS.—Section 6159 (relating to agreements

20 for payment of tax liability in installments) is amended

21 by adding at the end the following new subsection:

22 ‘‘(c) NOTICE REQUIREMENTS FOR DENIALS.—The

23 Secretary may not deny any request for an installment

24 agreement under this section unless—
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1 ‘‘(1) a notice of the proposed denial is provided

2 to the taxpayer not later than the day 30 days be3 fore the date of such denial,

4 ‘‘(2) such notice includes an explanation why

5 the Secretary intends to deny such request, and

6 ‘‘(3) such notice includes a statement of the

7 taxpayer’s right to administrative review under sub8 section (d).

9 The preceding sentence shall not apply in any case in

10 which the Secretary believes that collection of any tax to

11 which a request for an agreement under this section re12 lates is in jeopardy.’’

13 (c) CONFORMING AMENDMENT.—Paragraph (3) of

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

15 ‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CON16 DITIONS.—If the Secretary makes a determination

17 that the financial condition of a taxpayer with whom

18 the Secretary has entered into an agreement under

19 subsection (a) has significantly changed, the Sec20 retary may alter, modify, or terminate such agree21 ment.’’

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

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

24 the date of the enactment of this Act.
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1 SEC. 204. ADMINISTRATIVE REVIEW OF DENIAL OF RE2 QUEST FOR, OR TERMINATION OF, INSTALL3 MENT AGREEMENT.

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

5 agreements for payment of tax liability in installments),

6 as amended by section 203(b), is amended by adding at

7 the end the following new subsection:

8 ‘‘(d) ADMINISTRATIVE REVIEW.—The Secretary shall

9 establish procedures for an independent administrative re10 view of denials of requests for, or terminations of, install11 ment agreements under this section.’’

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

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

14 TITLE III—INTEREST

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

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

17 6404(e) (relating to abatement of interest in certain cases)

18 is amended—

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

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

21 and

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

23 act’’ each place it appears.

24 (b) MANDATORY ABATEMENT FOR SMALL TAX25 PAYERS.—The first sentence of section 6404(e)(1) is

26 amended by inserting ‘‘in the case of a taxpayer not de-
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1 scribed in section 7430(c)(4)(A)(iii) and shall abate the

2 assessment of such interest until the date demand for pay3 ment is made in the case of a taxpayer described in section

4 7430(c)(4)(A)(iii)’’ before the period at the end.

5 (c) CLERICAL AMENDMENT.—The subsection head6 ing for subsection (e) of section 6404 is amended by strik7 ing ‘‘Assessments’’ and inserting ‘‘Abatement’’.

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

9 this section shall apply to interest accruing with respect

10 to deficiencies or payments for taxable years beginning

11 after the date of the enactment of this Act.

12 SEC. 302. EXTENSION OF INTEREST-FREE PERIOD FOR

13 PAYMENT OF TAX AFTER NOTICE AND DE14 MAND.

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

16 6601(e) (relating to payments made within 10 days after

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

18 ‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE19 RIOD AFTER NOTICE AND DEMAND.—If notice and

20 demand is made for payment of any amount and if

21 such amount is paid within 21 days (10 days if the

22 amount for which such notice and demand is made

23 equals or exceeds $100,000) after the date of such

24 notice and demand, interest under this section on
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1 the amount so paid shall not be imposed for the pe2 riod after the date of such notice and demand.’’

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

4 section 6651(a) (relating to addition to tax for failure to

5 file tax return or pay tax) is amended by striking ‘‘10

6 days’’ and inserting ‘‘21 days (10 days if the amount for

7 which such notice and demand is made equals or exceeds

8 $100,000)’’.

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

10 this section shall apply in the case of any notice and de11 mand given after December 31, 1995.

12 TITLE IV—JOINT RETURNS

13 SEC. 401. DISCLOSURE OF COLLECTION ACTIVITIES.

14 (a) GENERAL RULE.—Subsection (e) of section 6103

15 (relating to disclosure to persons having material interest)

16 is amended by adding at the end the following new para17 graph:

18 ‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES

19 WITH RESPECT TO JOINT RETURN.—If any defi20 ciency of tax with respect to a joint return is as21 sessed and the individuals filing such return are no

22 longer married or no longer reside in the same

23 household, upon request in writing of either of such

24 individuals, the Secretary may disclose in writing to

25 the individual making the request whether the Sec-
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1 retary has attempted to collect such deficiency from

2 such other individual, the general nature of such col3 lection activities, and the amount collected.’’

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

5 subsection (a) shall take effect on the date of the enact6 ment of this Act.

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

8 RETURNS WITHOUT FULL PAYMENT OF TAX.

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

10 6013(b) (relating to limitations on filing of joint return

11 after filing separate returns) is amended by striking sub12 paragraph (A) and redesignating the following subpara13 graphs accordingly.

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

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

16 the date of the enactment of this Act.

17 TITLE V—COLLECTION

18 ACTIVITIES

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

20 (a) WITHDRAWAL OF CERTAIN NOTICES.—Section

21 6323 (relating to validity and priority against certain per22 sons) is amended by adding at the end the following new

23 subsection:

24 ‘‘(j) WITHDRAWAL OF NOTICE IN CERTAIN CIR25 CUMSTANCES.—
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1 ‘‘(1) IN GENERAL.—The Secretary may with2 draw a notice of a lien filed under this section and

3 this chapter shall be applied as if the withdrawn no4 tice had not been filed, if the Secretary determines

5 that—

6 ‘‘(A) the filing of such notice was pre7 mature or otherwise not in accordance with ad8 ministrative procedures of the Secretary,

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

10 agreement under section 6159 to satisfy the tax

11 liability for which the lien was imposed by

12 means of installment payments, unless such

13 agreement provides otherwise,

14 ‘‘(C) the withdrawal of such notice will fa15 cilitate the collection of the tax liability, or

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

17 the Taxpayer Advocate, the withdrawal of such

18 notice would be in the best interests of the tax19 payer (as determined by the Taxpayer Advo20 cate) and the United States.

21 Any such withdrawal shall be made by filing notice

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

23 of such notice of withdrawal shall be provided to the

24 taxpayer.
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1 ‘‘(2) NOTICE TO CREDIT AGENCIES, ETC.—

2 Upon written request by the taxpayer with respect

3 to whom a notice of a lien was withdrawn under

4 paragraph (1), the Secretary shall promptly make

5 reasonable efforts to notify credit reporting agencies,

6 and any financial institution or creditor whose name

7 and address is specified in such request, of the with8 drawal of such notice. Any such request shall be in

9 such form as the Secretary may prescribe.’’

10 (b) RETURN OF LEVIED PROPERTY IN CERTAIN

11 CASES.—Section 6343 (relating to authority to release

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

13 end the following new subsection:

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

15 If—

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

17 ‘‘(2) the Secretary determines that—

18 ‘‘(A) the levy on such property was pre19 mature or otherwise not in accordance with ad20 ministrative procedures of the Secretary,

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

22 agreement under section 6159 to satisfy the tax

23 liability for which the levy was imposed by

24 means of installment payments, unless such

25 agreement provides otherwise,
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1 ‘‘(C) the return of such property will facili2 tate the collection of the tax liability, or

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

4 the Taxpayer Advocate, the return of such

5 property would be in the best interests of the

6 taxpayer (as determined by the Taxpayer Advo7 cate) and the United States,

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

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

10 except that no interest shall be allowed under subsection

11 (c).’’

12 (c) MODIFICATIONS IN CERTAIN LEVY EXEMPTION

13 AMOUNTS.—

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

15 6334(a) (relating to fuel, provisions, furniture, and

16 personal effects exempt from levy) is amended—

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

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

19 (B) by striking ‘‘$1,650 ($1,550 in the

20 case of levies issued during 1989)’’ and insert21 ing ‘‘$1,750’’.

22 (2) BOOKS, ETC.—Paragraph (3) of section

23 6334(a) (relating to books and tools of a trade, busi24 ness, or profession exempt from levy) is amended by
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1 striking ‘‘$1,100 ($1,050 in the case of levies issued

2 during 1989)’’ and inserting ‘‘$1,250’’.

3 (3) INDEXED FOR INFLATION.—Section 6334

4 (relating to property exempt from levy) is amended

5 by adding at the end the following new subsection:

6 ‘‘(f) INFLATION ADJUSTMENTS.—

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

8 year beginning after 1996, each dollar amount re9 ferred to in paragraphs (2) and (3) of subsection (a)

10 shall be increased by an amount equal to—

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

12 ‘‘(B) the cost-of-living adjustment deter13 mined under section 1(f)(3) for such calendar

14 year, by substituting ‘calendar year 1995’ for

15 ‘calendar year 1992’ in subparagraph (B)

16 thereof.

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

18 being increased under paragraph (1) is not a mul19 tiple of $10, such dollar amount shall be rounded to

20 the nearest multiple of $10 (or, if such dollar

21 amount is a multiple of $5, such dollar amount shall

22 be increased to the next higher multiple of $10).’’

23 (d) EFFECTIVE DATES.—

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the amendments made by this section
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1 shall take effect on the date of the enactment of this

2 Act.

3 (2) EXEMPT AMOUNTS.—The amendments

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

5 to levies issued after December 31, 1995.

6 SEC. 502. OFFERS-IN-COMPROMISE.

7 (a) GENERAL RULE.—Subsection (a) of section 7122

8 (relating to compromises) is amended by adding at the end

9 the following new sentence: ‘‘The Secretary may make

10 such a compromise in any case where the Secretary deter11 mines that such compromise would be in the best interests

12 of the United States.’’

13 (b) REVIEW REQUIREMENTS.—Subsection (b) of sec14 tion 7122 (relating to records) is amended by striking

15 ‘‘$500.’’ and inserting ‘‘$50,000. However, such com16 promise shall be subject to continuing quality review by

17 the Secretary.’’

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

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

20 of this Act.

21 SEC. 503. NOTIFICATION OF EXAMINATION.

22 (a) IN GENERAL.—Section 7605 (relating to restric23 tions on examination of taxpayer) is amended by redesig24 nating subsection (c) as subsection (d) and by inserting

25 after subsection (b) the following new subsection:
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1 ‘‘(c) NOTIFICATION REQUIREMENT.—No examina2 tion described in subsection (a) shall be made unless the

3 Secretary notifies the taxpayer in writing by mail to an

4 address determined under section 6212(b) that the tax5 payer is under examination and provides the taxpayer with

6 an explanation of the process as described in section

7 7521(b)(1). The preceding sentence shall not apply in the

8 case of any examination if the Secretary determines

9 that—

10 ‘‘(1) such examination is in connection with a

11 criminal investigation or is with respect to a tax the

12 collection of which is in jeopardy, or

13 ‘‘(2) the application of the preceding sentence

14 would be inconsistent with national security needs or

15 would interfere with the effective conduct of a con16 fidential law enforcement or foreign counterintel17 ligence activity.’’

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

19 section 7521(b) (relating to safeguards) is amended by

20 striking ‘‘or at’’.

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

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

23 of this Act.
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1 SEC. 504. INCREASE IN LIMIT ON RECOVERY OF CIVIL

2 DAMAGES FOR UNAUTHORIZED COLLECTION

3 ACTIONS.

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

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

6 and inserting ‘‘$1,000,000’’.

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

8 subsection (a) shall apply to actions by officers or employ9 ees of the Internal Revenue Service after the date of the

10 enactment of this Act.

11 SEC. 505. SAFEGUARDS RELATING TO DESIGNATED SUM12 MONS.

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

14 section 6503(k)(2) (defining designated summons) is

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

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

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

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

19 preceded by a review of such issuance by

20 the regional counsel of the Office of Chief

21 Counsel for the region in which the exam22 ination of the corporation is being con23 ducted,’’.

24 (b) NOTICE REQUIREMENTS FOR ISSUANCE.—Sec25 tion 6503(k) is amended by adding at the end the follow26 ing new paragraph:
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1 ‘‘(4) NOTICE REQUIREMENTS.—With respect to

2 any summons referred to in paragraph (1)(A) issued

3 to any person other than the corporation, the Sec4 retary shall promptly notify the corporation, in writ5 ing, that such summons has been issued with respect

6 to such corporation’s return of tax.’’

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

8 this section shall apply to summons issued after the date

9 of the enactment of this Act.

10 TITLE VI—INFORMATION

11 RETURNS

12 SEC. 601. PHONE NUMBER OF PERSON PROVIDING PAYEE

13 STATEMENTS REQUIRED TO BE SHOWN ON

14 SUCH STATEMENT.

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

16 each amended by striking ‘‘name and address’’ and insert17 ing ‘‘name, address, and phone number of the information

18 contact’’:

19 (1) Section 6041(d)(1).

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

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

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

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

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

25 (7) Section 6050B(b)(1).
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1 (8) Section 6050H(d)(1).

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

3 (10) Section 6050J(e).

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

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

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

7 subsection (a) shall apply to statements required to be fur8 nished after December 31, 1995 (determined without

9 regard to any extension).

10 SEC. 602. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN11 FORMATION RETURNS.

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

13 (relating to proceedings by taxpayers and third parties)

14 is amended by redesignating section 7434 as section 7435

15 and by inserting after section 7433 the following new

16 section:

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

18 INFORMATION RETURNS.

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

20 false or fraudulent information return with respect to pay21 ments purported to be made to any other person, such

22 other person may bring a civil action for damages against

23 the person so filing such return.

24 ‘‘(b) DAMAGES.—In any action brought under sub25 section (a), upon a finding of liability on the part of the
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1 defendant, the defendant shall be liable to the plaintiff in

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

3 ‘‘(1) any actual damages sustained by the plain4 tiff as a proximate result of the filing of the false

5 or fraudulent information return (including any

6 costs attributable to resolving deficiencies asserted

7 as a result of such filing), and

8 ‘‘(2) the costs of the action.

9 ‘‘(c) PERIOD FOR BRINGING ACTION.—Notwith10 standing any other provision of law, an action to enforce

11 the liability created under this section may be brought

12 without regard to the amount in controversy and may be

13 brought only within the later of—

14 ‘‘(1) 6 years after the date of the filing of the

15 false or fraudulent information return, or

16 ‘‘(2) 1 year after the date such false or fraudu17 lent information return would have been discovered

18 by exercise of reasonable care.

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

20 person bringing an action under subsection (a) shall pro21 vide a copy of the complaint to the Internal Revenue Serv22 ice upon the filing of such complaint with the court.

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

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

25 action brought under subsection (a) shall include a finding
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1 of the correct amount which should have been reported

2 in the information return.

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

4 section, the term ‘information return’ means any state5 ment described in section 6724(d)(1)(A).’’

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

7 for subchapter B of chapter 76 is amended by striking

8 the item relating to section 7434 and inserting the

9 following:

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

‘‘Sec. 7435. Cross references.’’

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

11 this section shall apply to false or fraudulent information

12 returns filed after the date of the enactment of this Act.

13 SEC. 603. REQUIREMENT TO CONDUCT REASONABLE IN14 VESTIGATIONS OF INFORMATION RETURNS.

15 (a) GENERAL RULE.—Section 6201 (relating to as16 sessment authority) is amended by redesignating sub17 section (d) as subsection (e) and by inserting after sub18 section (c) the following new subsection:

19 ‘‘(d) REQUIRED REASONABLE INVESTIGATION OF IN20 FORMATION RETURNS.—If a taxpayer asserts a reason21 able dispute with respect to any item of income reported

22 on an information return filed with the Secretary under

23 chapter 61 by a third party, the Secretary, when making

24 a determination of a deficiency based on such information
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1 return, shall have the burden of proof with respect to such

2 determination unless the Secretary has conducted a rea3 sonable investigation to corroborate the accuracy of such

4 information return.’’

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

6 subsection (a) shall take effect on the date of the enact7 ment of this Act.

8 TITLE VII—MODIFICATIONS TO

9 PENALTY FOR FAILURE TO

10 COLLECT AND PAY OVER TAX

11 SEC. 701. PRELIMINARY NOTICE REQUIREMENT.

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

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

14 tax) is amended by redesignating subsection (b) as sub15 section (c) and by inserting after subsection (a) the follow16 ing new subsection:

17 ‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—

18 ‘‘(1) IN GENERAL.—No penalty shall be im19 posed under subsection (a) unless the Secretary noti20 fies the taxpayer in writing by mail to an address as

21 determined under section 6212(b) that the taxpayer

22 shall be subject to an assessment of such penalty.

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

24 notice described in paragraph (1) shall precede any
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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 date 90 days after the date on which such notice

11 was mailed.

12 ‘‘(4) EXCEPTION FOR JEOPARDY.—This sub13 section shall not apply if the Secretary finds that the

14 collection of the penalty is in jeopardy.’’

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

16 subsection (a) shall apply to assessments made after June

17 30, 1994.

18 SEC. 702. DISCLOSURE OF CERTAIN INFORMATION WHERE

19 MORE THAN 1 PERSON SUBJECT TO PEN20 ALTY.

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

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

23 as amended by section 401(a), is amended by adding at

24 the end the following new paragraph:
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1 ‘‘(9) DISCLOSURE OF CERTAIN INFORMATION

2 WHERE MORE THAN 1 PERSON SUBJECT TO PEN3 ALTY UNDER SECTION 6672.—If the Secretary deter4 mines that a person is liable for a penalty under sec5 tion 6672(a) with respect to any failure, upon re6 quest in writing of such person, the Secretary shall

7 disclose in writing to such person—

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

9 the Secretary has determined to be liable for

10 such penalty with respect to such failure, and

11 ‘‘(B) whether the Secretary has attempted

12 to collect such penalty from such other person,

13 the general nature of such collection activities,

14 and the amount collected.’’

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

16 subsection (a) shall take effect on the date of the enact17 ment of this Act.

18 SEC. 703. PENALTIES UNDER SECTION 6672.

19 (a) PUBLIC INFORMATION REQUIREMENTS.—The

20 Secretary of the Treasury or the Secretary’s delegate

21 (hereafter in this section referred to as the ‘‘Secretary’’)

22 shall take such actions as may be appropriate to ensure

23 that employees are aware of their responsibilities under

24 the Federal tax depository system, the circumstances

25 under which employees may be liable for the penalty im-
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1 posed by section 6672 of the Internal Revenue Code of

2 1986, and the responsibility to promptly report to the In3 ternal Revenue Service any failure referred to in sub4 section (a) of such section 6672. Such actions shall in5 clude—

6 (1) printing of a warning on deposit coupon

7 booklets and the appropriate tax returns that certain

8 employees may be liable for the penalty imposed by

9 such section 6672, and

10 (2) the development of a special information

11 packet.

12 (b) BOARD MEMBERS OF TAX-EXEMPT ORGANIZA13 TIONS.—

14 (1) VOLUNTARY BOARD MEMBERS.—

15 (A) IN GENERAL.—The penalty under sec16 tion 6672 of the Internal Revenue Code of 1986

17 shall not be imposed on unpaid, volunteer mem18 bers of any board of trustees or directors of an

19 organization referred to in section 501 of such

20 Code to the extent such members are solely

21 serving in an honorary capacity, do not partici22 pate in the day-to-day or financial operations of

23 the organization, and do not have actual knowl24 edge of the failure on which such penalty is im25 posed.
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1 (B) APPLICATION OF PARAGRAPH.—This

2 paragraph shall not apply if it results in no per3 son being held liable for the penalty described

4 in section 6672(a) of the Internal Revenue

5 Code of 1986.

6 (2) DEVELOPMENT OF EXPLANATORY MATE7 RIALS.—The Secretary shall develop materials ex8 plaining the circumstances under which board mem9 bers of tax-exempt organizations (including vol10 untary and honorary members) may be subject to

11 penalty under section 6672 of such Code. Such ma12 terials shall be made available to tax-exempt organi13 zations.

14 (3) IRS INSTRUCTIONS.—The Secretary shall

15 clarify the instructions to Internal Revenue Service

16 employees on the application of the penalty under

17 section 6672 of such Code with regard to voluntary

18 members of boards of trustees or directors of tax19 exempt organizations.

20 (c) PROMPT NOTIFICATION.—To the maximum ex21 tent practicable, the Secretary shall notify all persons who

22 have failed to make timely and complete deposit of any

23 taxes described in section 6672 of the Internal Revenue

24 Code of 1986 of such failure within 30 days after the re25 turn was filed reflecting such failure or after the date on
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1 which the Secretary is first aware of such failure. If the

2 person failing to make the deposit is not an individual,

3 the Secretary shall notify the entity subject to such deposit

4 requirement and that entity shall notify, within 15 days

5 of the notification by the Secretary, all officers, general

6 partners, trustees, or other managers of the failure.

7 TITLE VIII—AWARDING OF

8 COSTS AND CERTAIN FEES

9 SEC. 801. MOTION FOR DISCLOSURE OF INFORMATION.

10 Paragraph (4) of section 7430(c) (defining prevailing

11 party) is amended by adding at the end the following new

12 subparagraph:

13 ‘‘(C) MOTION FOR DISCLOSURE OF INFOR14 MATION.—Once a taxpayer substantially pre15 vails as described in subparagraph (A)(ii), the

16 taxpayer may file a motion for an order requir17 ing the disclosure (within a reasonable period of

18 time specified by the court) of all information

19 and copies of relevant records in the possession

20 of the Internal Revenue Service with respect to

21 such taxpayer’s case and the substantial jus22 tification for the position taken by the Internal

23 Revenue Service.’’
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1 SEC. 802. INCREASED LIMIT ON ATTORNEY FEES.

2 Paragraph (1) of section 7430(c) (defining reason3 able litigation costs) is amended—

4 (1) by striking ‘‘$75’’ in clause (iii) of subpara5 graph (B) and inserting ‘‘$110’’,

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

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

8 (3) by adding after clause (iii) the following:

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

10 1995, the dollar amount referred to in clause (iii)

11 shall be increased by an amount equal to such dollar

12 amount multiplied by the cost-of-living adjustment

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

14 year, by substituting ‘calendar year 1994’ for ‘cal15 endar year 1992’ in subparagraph (B) thereof. If

16 any dollar amount after being increased under the

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

18 dollar amount shall be rounded to the nearest mul19 tiple of $10 (or, if such dollar amount is a multiple

20 of $5, such dollar amount shall be increased to the

21 next higher multiple of $10).’’

22 SEC. 803. FAILURE TO AGREE TO EXTENSION NOT TAKEN

23 INTO ACCOUNT.

24 Paragraph (1) of section 7430(b) (relating to require25 ment that administrative remedies be exhausted) is

26 amended by adding at the end the following new sentence:
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1 ‘‘Any failure to agree to an extension of the time for the

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

3 purposes of determining whether the prevailing party

4 meets the requirements of the preceding sentence.’’

5 SEC. 804. AUTHORITY FOR COURT TO AWARD REASONABLE

6 ADMINISTRATIVE COSTS.

7 Section 7430(c)(7)(B) is amended to read as follows:

8 ‘‘(B) the position taken in an administra9 tive proceeding to which subsection (a) applies.’’

10 SEC. 805. EFFECTIVE DATE.

11 The amendments made by this title shall apply in the

12 case of proceedings commenced after the date of the enact13 ment of this Act.

14 TITLE IX—OTHER PROVISIONS

15 SEC. 901. REQUIRED CONTENT OF CERTAIN NOTICES.

16 (a) GENERAL RULE.—Subsection (a) of section 7522

17 (relating to content of tax due, deficiency, and other no18 tices) is amended by striking ‘‘shall describe the basis for,

19 and identify’’ and inserting ‘‘shall set forth the adjust20 ments which are the basis for, and shall identify’’.

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

22 subsection (a) shall apply to notices sent after the date

23 6 months after the date of the enactment of this Act.
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1 SEC. 902. TREATMENT OF SUBSTITUTE RETURNS UNDER

2 SECTION 6651.

3 (a) GENERAL RULE.—Section 6651 (relating to fail4 ure to file tax return or to pay tax), as amended by section

5 202(a), is amended by adding at the end the following new

6 subsection:

7 ‘‘(h) TREATMENT OF RETURNS PREPARED BY SEC8 RETARY UNDER SECTION 6020(b).—In the case of any

9 return made by the Secretary under section 6020(b)—

10 ‘‘(1) such return shall be disregarded for pur11 poses of determining the amount of the addition

12 under paragraph (1) of subsection (a), but

13 ‘‘(2) such return shall be treated as the return

14 filed by the taxpayer for purposes of determining the

15 amount of the addition under paragraphs (2) and

16 (3) of subsection (a).’’

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

18 subsection (a) shall apply in the case of any return the

19 due date for which (determined without regard to exten20 sions) is after the date of the enactment of this Act.

21 SEC. 903. RELIEF FROM RETROACTIVE APPLICATION OF

22 TREASURY DEPARTMENT REGULATIONS.

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

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

25 follows:

26 ‘‘(b) RETROACTIVITY OF REGULATIONS.—
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1 ‘‘(1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, no temporary, proposed, or

3 final regulation relating to the internal revenue laws

4 shall apply to any taxable period ending before the

5 earliest of the following dates:

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

7 filed with the Federal Register.

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

9 the date on which any proposed or temporary

10 regulation to which such final regulation relates

11 was filed with the Federal Register.

12 ‘‘(C) The date on which any notice sub13 stantially describing the expected contents of

14 any temporary, proposed, or final regulation is

15 issued to the public.

16 ‘‘(2) PREVENTION OF ABUSE.—The Secretary

17 may provide that any regulation may take effect or

18 apply retroactively to prevent abuse of a statute to

19 which the regulation relates.

20 ‘‘(3) CORRECTION OF PROCEDURAL DE21 FECTS.—The Secretary may provide that any regu22 lation may apply retroactively to correct a proce23 dural defect in the issuance of any prior regulation.

24 ‘‘(4) INTERNAL REGULATIONS.—The limitation

25 of paragraph (1) shall not apply to any regulation
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1 relating to internal Treasury Department policies,

2 practices, or procedures.

3 ‘‘(5) CONGRESSIONAL AUTHORIZATION.—The

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

5 legislative grant from Congress authorizing the Sec6 retary to prescribe the effective date with respect to

7 any regulation.

8 ‘‘(6) ELECTION TO APPLY RETROACTIVELY.—

9 The Secretary may provide for any taxpayer to elect

10 to apply any regulation before the dates specified in

11 paragraph (1).

12 ‘‘(7) APPLICATION TO RULINGS.—The Sec13 retary may prescribe the extent, if any, to which any

14 ruling (including any judicial decision or any admin15 istrative determination other than by regulation) re16 lating to the internal revenue laws shall be applied

17 without retroactive effect.’’

18 (b) EFFECTIVE DATE.—

19 (1) IN GENERAL.—Except as provided in para20 graph (2), the amendment made by subsection (a)

21 shall apply with respect to—

22 (A) any temporary or proposed regulation

23 filed on or after January 5, 1993, and
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1 (B) any temporary or proposed regulation

2 filed before January 5, 1993, and filed as a

3 final regulation after such date.

4 (2) SPECIAL RULE.—Section 7805(b)(2) of the

5 Internal Revenue Code of 1986 (as added by sub6 section (a)) shall apply only to statutes enacted on

7 or after the date of the enactment of this Act.

8 SEC. 904. REQUIRED NOTICE OF CERTAIN PAYMENTS.

9 If any payment is received by the Secretary of the

10 Treasury or the Secretary’s delegate (hereafter in this sec11 tion referred to as the ‘‘Secretary’’) from any taxpayer

12 and the Secretary cannot associate such payment with any

13 outstanding tax liability of such taxpayer, the Secretary

14 shall make reasonable efforts to notify the taxpayer of

15 such inability within 60 days after the receipt of such

16 payment.

17 SEC. 905. UNAUTHORIZED ENTICEMENT OF INFORMATION

18 DISCLOSURE.

19 (a) IN GENERAL.—Subchapter B of chapter 76 (re20 lating to proceedings by taxpayers and third parties), as

21 amended by section 602(a), is amended by redesignating

22 section 7435 as section 7436 and by inserting after sec23 tion 7434 the following new section:
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1 ‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE2 MENT OF INFORMATION DISCLOSURE.

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

4 United States intentionally compromises the determina5 tion or collection of any tax due from an attorney, certified

6 public accountant, or enrolled agent representing a tax7 payer in exchange for information conveyed by the tax8 payer to the attorney, certified public accountant, or en9 rolled agent for purposes of obtaining advice concerning

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

11 action for damages against the United States in a district

12 court of the United States. Such civil action shall be the

13 exclusive remedy for recovering damages resulting from

14 such actions.

15 ‘‘(b) DAMAGES.—In any action brought under sub16 section (a), upon a finding of liability on the part of the

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

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

19 of—

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

21 by the plaintiff as a proximate result of the informa22 tion disclosure, and

23 ‘‘(2) the costs of the action.

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

25 civil or criminal penalties, or other losses attributable to

26 incarceration or the imposition of other criminal sanctions.
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1 ‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to

2 this section shall be payable out of funds appropriated

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

4 ‘‘(d) PERIOD FOR BRINGING ACTION.—Notwith5 standing any other provision of law, an action to enforce

6 liability created under this section may be brought without

7 regard to the amount in controversy and may be brought

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

9 liability would have been discovered by exercise of reason10 able care.

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

12 Commissioner or the Commissioner’s delegate that there

13 is an ongoing investigation or prosecution of the taxpayer,

14 the district court before which an action under this section

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

16 action pending the conclusion of the investigation or

17 prosecution.

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

19 shall not apply to information conveyed to an attorney,

20 certified public accountant, or enrolled agent for the pur21 pose of perpetrating a fraud or crime.’’

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

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

24 602(b), is amended by striking the item relating to section

25 7435 and by adding at the end the following new items:
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‘‘Sec. 7435. Civil damages for unauthorized enticement of information disclosure.

‘‘Sec. 7436. Cross references.’’

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

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

3 enactment of this Act.

4 TITLE X—FORM

5 MODIFICATIONS; STUDIES

6 SEC. 1000. DEFINITIONS.

7 For purposes of this title:

8 (1) SECRETARY.—The term ‘‘Secretary’’ means

9 the Secretary of the Treasury or his delegate.

10 (2) 1986 CODE.—The term ‘‘1986 Code’’

11 means the Internal Revenue Code of 1986.

12 (3) TAX-WRITING COMMITTEES.—The term

13 ‘‘tax-writing Committees’’ means the Committee on

14 Ways and Means of the House of Representatives

15 and the Committee on Finance of the Senate.

16 Subtitle A—Form Modifications

17 SEC. 1001. EXPLANATION OF CERTAIN PROVISIONS.

18 (a) GENERAL RULE.—The Secretary shall take such

19 actions as may be appropriate to ensure that taxpayers

20 are aware of the provisions of the 1986 Code permitting

21 payment of tax in installments, extensions of time for pay22 ment of tax, and compromises of tax liability. Such actions

23 shall include revising the instructions for filing income tax
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1 returns so that such instructions include an explanation

2 of—

3 (1) the procedures for requesting the benefits of

4 such provisions, and

5 (2) the terms and conditions under which the

6 benefits of such provisions are available.

7 (b) COLLECTION NOTICES.—In any notice of an

8 underpayment of tax or proposed underpayment of tax

9 sent by the Secretary to any taxpayer, the Secretary shall

10 include a notification of the availability of the provisions

11 of sections 6159, 6161, and 7122 of the 1986 Code.

12 SEC. 1002. IMPROVED PROCEDURES FOR NOTIFYING SERV13 ICE OF CHANGE OF ADDRESS OR NAME.

14 The Secretary shall provide improved procedures for

15 taxpayers to notify the Secretary of changes in names and

16 addresses. Not later than June 30, 1996, the Secretary

17 shall institute procedures for timely updating all Internal

18 Revenue Service records with change-of-address informa19 tion provided to the Secretary by taxpayers.

20 SEC. 1003. RIGHTS AND RESPONSIBILITIES OF DIVORCED

21 INDIVIDUALS.

22 The Secretary shall include in the Internal Revenue

23 Service publication entitled ‘‘Your Rights As A Taxpayer’’

24 a section on the rights and responsibilities of divorced

25 individuals.
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1 Subtitle B—Studies

2 SEC. 1011. PILOT PROGRAM FOR APPEAL OF ENFORCE3 MENT ACTIONS.

4 (a) GENERAL RULE.—The Secretary shall establish

5 a 1-year pilot program for appeals of enforcement actions

6 (including lien, levy, and seizure actions) to the Appeals

7 Division of the Internal Revenue Service—

8 (1) where the deficiency was assessed without

9 actual knowledge of the taxpayer,

10 (2) where the deficiency was assessed without

11 an opportunity for administrative appeal, and

12 (3) in other appropriate circumstances.

13 (b) REPORT.—Not later than June 30, 1996, the

14 Secretary shall submit to the tax-writing Committees a re15 port on the pilot program established under subsection (a),

16 together with such recommendations as he may deem

17 advisable.

18 SEC. 1012. STUDY ON TAXPAYERS WITH SPECIAL NEEDS.

19 (a) GENERAL RULE.—The Secretary shall conduct a

20 study on ways to assist the elderly, physically impaired,

21 foreign-language speaking, and other taxpayers with spe22 cial needs to comply with the internal revenue laws.

23 (b) REPORT.—Not later than June 30, 1996, the

24 Secretary shall submit to the tax-writing Committees a re-
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1 port on the study conducted under subsection (a), together

2 with such recommendations as he may deem advisable.

3 SEC. 1013. REPORTS ON TAXPAYER-RIGHTS EDUCATION

4 PROGRAM.

5 Not later than April 1, 1996, the Secretary shall sub6 mit a report to the tax-writing Committees on the scope

7 and content of the Internal Revenue Service’s taxpayer8 rights education program for its officers and employees.

9 Not later than June 30, 1996, the Secretary shall submit

10 a report to the tax-writing Committees on the effectiveness

11 of the program referred to in the preceding sentence.

12 SEC. 1014. BIENNIAL REPORTS ON MISCONDUCT BY INTER13 NAL REVENUE SERVICE EMPLOYEES.

14 Not later than June 30, 1996, and during June of

15 each second calendar year thereafter, the Secretary shall

16 report to the tax-writing Committees on all cases involving

17 complaints about misconduct of Internal Revenue Service

18 employees and the disposition of such complaints.

19 SEC. 1015. STUDY OF NOTICES OF DEFICIENCY.

20 (a) GENERAL RULE.—The Comptroller General shall

21 conduct a study on—

22 (1) the effectiveness of current Internal Reve23 nue Service efforts to notify taxpayers with regard

24 to tax deficiencies under section 6212 of the 1986

25 Code,
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1 (2) the number of registered or certified letters

2 and other notices returned to the Internal Revenue

3 Service as undeliverable,

4 (3) any followup action taken by the Internal

5 Revenue Service to locate taxpayers who did not re6 ceive actual notice,

7 (4) the effect that failures to receive notice of

8 such deficiencies have on taxpayers, and

9 (5) recommendations to improve Internal Reve10 nue Service notification of taxpayers.

11 (b) REPORT.—Not later than June 30, 1996, the

12 Comptroller General shall submit to the tax-writing Com13 mittees a report on the study conducted under subsection

14 (a), together with such recommendations as he may deem

15 advisable.

16 SEC. 1016. NOTICE AND FORM ACCURACY STUDY.

17 (a) GENERAL RULE.—The Comptroller General shall

18 conduct annual studies of the accuracy of 25 of the most

19 commonly used Internal Revenue Service forms, notices,

20 and publications. In conducting any such study, the Comp21 troller General shall examine the suitability and usefulness

22 of Internal Revenue Service telephone numbers on Inter23 nal Revenue Service notices and shall solicit and consider

24 the comments of organizations representing taxpayers,

25 employers, and tax professionals.
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1 (b) REPORTS.—The Comptroller General shall sub2 mit to the tax-writing Committees a report on each study

3 conducted under subsection (a), together with such rec4 ommendations as he may deem advisable. The first such

5 report shall be submitted not later than June 30, 1996.

Æ

S 258 IS——2

S 258 IS——3

S 258 IS——4