II

105TH CONGRESS

1ST SESSION S. 1096

To restructure the Internal Revenue Service, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 31, 1997

Mr. KERREY (for himself and Mr. GRASSLEY) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To restructure the Internal Revenue Service, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

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

6 ‘‘Internal Revenue Service Restructuring and Reform Act

7 of 1997’’.

8 (b) AMENDMENT OF 1986 CODE.—Except as other9 wise expressly provided, whenever in this Act an amend10 ment or repeal is expressed in terms of an amendment

11 to, or repeal of, a section or other provision, the reference
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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.

Sec. 2. Congressional findings and declaration of purposes.

TITLE I—EXECUTIVE BRANCH GOVERNANCE AND SENIOR

MANAGEMENT OF THE INTERNAL REVENUE SERVICE

Subtitle A—Executive Branch Governance and Senior Management

Sec. 101. Internal Revenue Service Oversight Board.

Sec. 102. Commissioner of Internal Revenue; Chief Counsel; other officials.

Sec. 103. Other personnel.

Subtitle B—Personnel Flexibilities

Sec. 111. Personnel flexibilities.

TITLE II—ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.

Sec. 202. Extension of time to file for electronic filers.

Sec. 203. Paperless electronic filing.

Sec. 204. Regulation of preparers.

Sec. 205. Paperless payment.

Sec. 206. Return-free tax system.

Sec. 207. Access to account information.

TITLE III—TAXPAYER PROTECTION AND RIGHTS

Sec. 301. Expansion of authority to issue taxpayer assistance orders.

Sec. 302. Expansion of authority to award costs and certain fees.

Sec. 303. Civil damages for negligence in collection actions.

Sec. 304. Disclosure of criteria for examination selection.

Sec. 305. Archival of records of Internal Revenue Service.

Sec. 306. Tax return information.

Sec. 307. Freedom of information.

Sec. 308. Offers-in-compromise.

Sec. 309. Elimination of interest differential on overpayments and underpayments.

Sec. 310. Elimination of application of failure to pay penalty during period of

installment agreement.

Sec. 311. Safe harbor for qualification for installment agreements.

Sec. 312. Payment of taxes.

Sec. 313. Low income taxpayer clinics.

Sec. 314. Jurisdiction of the Tax Court.

Sec. 315. Cataloging complaints.

Sec. 316. Procedures involving taxpayer interviews.

Sec. 317. Explanation of joint and several liability.

Sec. 318. Procedures relating to extensions of statute of limitations by agreement.

Sec. 319. Review of penalty administration.

Sec. 320. Study of treatment of all taxpayers as separate filing units.
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Sec. 321. Study of burden of proof.

TITLE IV—CONGRESSIONAL ACCOUNTABILITY FOR THE

INTERNAL REVENUE SERVICE

Subtitle A—Oversight

Sec. 401. Expansion of powers of the Joint Committee on Taxation.

Sec. 402. Coordinated oversight reports.

Subtitle B—Budget

Sec. 411. Budget discretion.

Sec. 412. Funding for century date change.

Sec. 413. Financial management advisory group.

Subtitle C—Tax Law Complexity

Sec. 421. Role of Internal Revenue Service.

Sec. 422. Tax complexity analysis.

Sec. 423. Simplified tax and wage reporting system.

Sec. 424. Compliance burden estimates.

1 SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF

2 PURPOSES.

3 (a) The Congress finds the following:

4 (1) The structure of the Internal Revenue Serv5 ice should be strengthened to ensure focus and bet6 ter target its budgeting, staffing, and technology to

7 serve the American taxpayer and collect the Federal

8 revenue.

9 (2) The American public expects timely, accu10 rate, and respectful service from the Internal Reve11 nue Service.

12 (3) The job of the Internal Revenue Service is

13 to operate as an efficient financial management or14 ganization.

15 (4) The bulk of the Federal revenue is gen16 erated through voluntary compliance. Taxpayer serv-
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1 ice and education, as well as targeted compliance

2 and enforcement initiatives, increase voluntary com3 pliance.

4 (5) While the Internal Revenue Service must

5 maintain a strong enforcement presence, its core and

6 the core of the Federal revenue stream lie in a re7 vamped, modern, technologically advanced organiza8 tion that can track finances, send out clear notices,

9 and assist taxpayers promptly and efficiently.

10 (6) The Internal Revenue Service governance,

11 management, and oversight structures must: develop

12 and maintain a shared vision with continuity; set

13 and maintain priorities and strategic direction; im14 pose accountability on senior management; provide

15 oversight through a credible board, including mem16 bers who bring private sector expertise to the Inter17 nal Revenue Service; develop appropriate measures

18 of success; align budget and technology with prior19 ities and strategic direction; and coordinate over20 sight and identify problems at an early stage.

21 (7) The Internal Revenue Service must use in22 formation technology as an enabler of its strategic

23 objectives.

24 (8) Electronic filing can increase cost savings

25 and compliance.
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1 (9) In order to ensure that fewer taxpayers are

2 subject to improper treatment by the Internal Reve3 nue Service, Congress and the agency need to focus

4 on preventing problems before they occur.

5 (10) There currently is no mechanism in place

6 to ensure that Members of Congress have a complete

7 understanding of how tax legislation will affect tax8 payers and the Internal Revenue Service and to cre9 ate incentives to simplify the tax law, and to ensure

10 that Congress hears directly from the Internal Reve11 nue Service during the legislative process.

12 (b) The purposes of this Act are as follows:

13 (1) To restructure the Internal Revenue Serv14 ice, transforming it into a world class service organi15 zation.

16 (2) To establish taxpayer satisfaction as the

17 goal of the Internal Revenue Service, such that the

18 Internal Revenue Service should only initiate contact

19 with a taxpayer if the agency is prepared to devote

20 the resources necessary for a proper and timely reso21 lution of the matter.

22 (3) To provide for direct accountability to the

23 President for tax administration, an Internal Reve24 nue Service Oversight Board, a strengthened Com25 missioner of Internal Revenue, and coordinated con-
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1 gressional oversight to ensure that there are clear

2 lines of accountability and that the leadership of the

3 Internal Revenue Service has the continuity and ex4 pertise to guide the agency.

5 (4) To enable the Internal Revenue Service to

6 recruit and train a first-class workforce that will be

7 rewarded for performance and held accountable for

8 working with taxpayers to solve problems.

9 (5) To establish paperless filing as the pre10 ferred and most convenient means of filing tax re11 turns for the vast majority of taxpayers within 10

12 years of enactment of this Act.

13 (6) To provide additional taxpayer protections

14 and rights and to ensure that taxpayers receive fair,

15 impartial, timely, and courteous treatment from the

16 Internal Revenue Service.

17 (7) To establish the resolution of the century

18 date change problem as the highest technology prior19 ity of the Internal Revenue Service.

20 (8) To establish procedures to minimize com21 plexity in the tax law and simplify tax administra22 tion, and provide Congress with an independent view

23 of tax administration from the Internal Revenue

24 Service.
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1 TITLE I—EXECUTIVE BRANCH

2 GOVERNANCE AND SENIOR

3 MANAGEMENT OF THE INTER4 NAL REVENUE SERVICE

5 Subtitle A—Executive Branch Gov6 ernance and Senior Manage7 ment

8 SEC. 101. INTERNAL REVENUE SERVICE OVERSIGHT

9 BOARD.

10 (a) IN GENERAL.—Section 7802 (relating to the

11 Commissioner of Internal Revenue) is amended to read as

12 follows:

13 ‘‘SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT

14 BOARD.

15 ‘‘(a) ESTABLISHMENT.—There is established within

16 the Department of the Treasury the Internal Revenue

17 Service Oversight Board (in this subchapter referred to

18 as the ‘Board’).

19 ‘‘(b) MEMBERSHIP.—

20 ‘‘(1) COMPOSITION.—The Board shall be com21 posed of 9 members, of whom—

22 ‘‘(A) 7 shall be individuals who are not

23 full-time Federal officers or employees, who are

24 appointed by the President, by and with the ad25 vice and consent of the Senate, and who shall
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1 be considered special government employees

2 pursuant to paragraph (2),

3 ‘‘(B) 1 shall be the Secretary of the Treas4 ury or, if the Secretary so designates, the Dep5 uty Secretary of the Treasury, and

6 ‘‘(C) 1 shall be a representative of an orga7 nization that represents a substantial number

8 of Internal Revenue Service employees who is

9 appointed by the President, by and with the ad10 vice and consent of the Senate.

11 ‘‘(2) SPECIAL GOVERNMENT EMPLOYEES.—

12 ‘‘(A) QUALIFICATIONS.—Members of the

13 Board described in paragraph (1)(A) shall be

14 appointed solely on the basis of their profes15 sional experience and expertise in the following

16 areas:

17 ‘‘(i) Management of large service or18 ganizations.

19 ‘‘(ii) Customer service.

20 ‘‘(iii) Compliance.

21 ‘‘(iv) Information technology.

22 ‘‘(v) Organization development.

23 ‘‘(vi) The needs and concerns of tax24 payers.
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1 In the aggregate, the members of the Board de2 scribed in paragraph (1)(A) should collectively

3 bring to bear expertise in these enumerated

4 areas.

5 ‘‘(B) TERMS.—Each member who is de6 scribed in paragraph (1)(A) shall be appointed

7 for a term of 5 years, except that of the mem8 bers first appointed—

9 ‘‘(i) 1 member shall be appointed for

10 a term of 1 year,

11 ‘‘(ii) 1 member shall be appointed for

12 a term of 2 years,

13 ‘‘(iii) 2 members shall be appointed

14 for a term of 3 years, and

15 ‘‘(iv) 1 member shall be appointed for

16 a term of 4 years.

17 ‘‘(C) REAPPOINTMENT.—An individual

18 who is described in paragraph (1)(A) may be

19 appointed to no more than two 5-year terms on

20 the Board.

21 ‘‘(D) SPECIAL GOVERNMENT EMPLOY22 EES.—During such periods as they are per23 forming services for the Board, members who

24 are not Federal officers or employees shall be

25 treated as special government employees (as de-
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1 fined in section 202 of title 18, United States

2 Code).

3 ‘‘(E) CLAIMS.—

4 ‘‘(i) IN GENERAL.—Members of the

5 Board who are described in paragraph

6 (1)(A) shall have no personal liability

7 under Federal law with respect to any

8 claim arising out of or resulting from an

9 act or omission by such member within the

10 scope of service as a member. The preced11 ing sentence shall not be construed to limit

12 personal liability for criminal acts or omis13 sions, willful or malicious conduct, acts or

14 omissions for private gain, or any other act

15 or omission outside the scope of the service

16 of such member on the Board.

17 ‘‘(ii) EFFECT ON OTHER LAW.—This

18 subparagraph shall not be construed—

19 ‘‘(I) to affect any other immuni20 ties and protections that may be avail21 able to such member under applicable

22 law with respect to such transactions,

23 ‘‘(II) to affect any other right or

24 remedy against the United States

25 under applicable law, or
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1 ‘‘(III) to limit or alter in any way

2 the immunities that are available

3 under applicable law for Federal offi4 cers and employees not described in

5 this subparagraph.

6 ‘‘(3) VACANCY.—Any vacancy on the Board—

7 ‘‘(A) shall not affect the powers of the

8 Board, and

9 ‘‘(B) shall be filled in the same manner as

10 the original appointment.

11 ‘‘(4) REMOVAL.—

12 ‘‘(A) IN GENERAL.—A member of the

13 Board may be removed at the will of the Presi14 dent.

15 ‘‘(B) SECRETARY OR DELEGATE.—An indi16 vidual described in subsection (b)(1)(B) shall be

17 removed upon termination of employment.

18 ‘‘(C) REPRESENTATIVE OF INTERNAL REV19 ENUE SERVICE EMPLOYEES.—A member who is

20 from an organization that represents a substan21 tial number of Internal Revenue Service em22 ployees shall be removed upon termination of

23 employment, membership, or other affiliation

24 with such organization.

25 ‘‘(c) GENERAL RESPONSIBILITIES.—
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1 ‘‘(1) IN GENERAL.—The Board shall oversee

2 the Internal Revenue Service in the administration,

3 management, conduct, direction, and supervision of

4 the execution and application of the internal revenue

5 laws or related statutes and tax conventions to

6 which the United States is a party.

7 ‘‘(2) EXCEPTIONS.—The Board shall have no

8 responsibilities or authority with respect to—

9 ‘‘(A) the development and formulation of

10 Federal tax policy relating to existing or pro11 posed internal revenue laws, related statutes,

12 and tax conventions,

13 ‘‘(B) specific law enforcement activities of

14 the Internal Revenue Service, including compli15 ance activities such as criminal investigations,

16 examinations, and collection activities, or

17 ‘‘(C) specific activities of the Internal Rev18 enue Service delegated to employees of the In19 ternal Revenue Service pursuant to delegation

20 orders in effect as of the date of the enactment

21 of this subsection, including delegation order

22 106 relating to procurement authority, except

23 to the extent that such delegation orders are

24 modified subsequently by the Secretary.
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1 ‘‘(3) RESTRICTION ON DISCLOSURE OF RETURN

2 INFORMATION TO BOARD MEMBERS.—No return, re3 turn information, or taxpayer return information (as

4 defined in section 6103(b)) may be disclosed to any

5 member of the Board described in subsection

6 (b)(1)(A) or (C). Any request for information not

7 permitted to be disclosed under the preceding sen8 tence, and any contact relating to a specific tax9 payer, made by a member of the Board to an officer

10 or employee of the Internal Revenue Service shall be

11 reported by such officer or employee to the Secretary

12 and the Joint Committee on Taxation.

13 ‘‘(d) SPECIFIC RESPONSIBILITIES.—The Board shall

14 have the following specific responsibilities:

15 ‘‘(1) STRATEGIC PLANS.—To review and ap16 prove strategic plans of the Internal Revenue Serv17 ice, including the establishment of—

18 ‘‘(A) mission and objectives, and standards

19 of performance relative to either, and

20 ‘‘(B) annual and long-range strategic

21 plans.

22 ‘‘(2) OPERATIONAL PLANS.—To review the

23 operational functions of the Internal Revenue Serv24 ice, including—
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1 ‘‘(A) plans for modernization of the tax

2 system,

3 ‘‘(B) plans for outsourcing or managed

4 competition, and

5 ‘‘(C) plans for training and education.

6 ‘‘(3) MANAGEMENT.—To provide for—

7 ‘‘(A) the selection and appointment, eval8 uation, and removal of the Commissioner of In9 ternal Revenue,

10 ‘‘(B) the review of the Commissioner’s se11 lection, evaluation, and compensation of senior

12 managers, and

13 ‘‘(C) the review of the Commissioner’s

14 plans for reorganization of the Internal Reve15 nue Service.

16 ‘‘(4) BUDGET.—To—

17 ‘‘(A) review and approve the budget re18 quest of the Internal Revenue Service prepared

19 by the Commissioner,

20 ‘‘(B) submit such budget request to the

21 Secretary of the Treasury,

22 ‘‘(C) ensure that the budget request sup23 ports the annual and long-range strategic plans,

24 and
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1 ‘‘(D) ensure appropriate financial audits of

2 the Internal Revenue Service.

3 The Secretary shall submit the budget request referred to

4 in subparagraph (B) for any fiscal year to the President

5 who shall submit such request, without revision, to Con6 gress together with the President’s annual budget request

7 for the Internal Revenue Service for such fiscal year.

8 ‘‘(e) BOARD PERSONNEL MATTERS.—

9 ‘‘(1) COMPENSATION OF MEMBERS.—

10 ‘‘(A) IN GENERAL.—Each member of the

11 Board who is described in subsection (b)(1)(A)

12 shall be compensated at a rate of $30,000 per

13 year. All other members of the Board shall

14 serve without compensation for such service.

15 ‘‘(B) CHAIRPERSON.—In lieu of the

16 amount specified in subparagraph (A), the

17 Chairperson of the Board shall be compensated

18 at a rate of $50,000 per year if such Chair19 person is described in subsection (b)(1)(A).

20 ‘‘(2) TRAVEL EXPENSES.—The members of the

21 Board shall be allowed travel expenses, including per

22 diem in lieu of subsistence, at rates authorized for

23 employees of agencies under subchapter I of chapter

24 57 of title 5, United States Code, while away from
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1 their homes or regular places of business in the per2 formance of services for the Board.

3 ‘‘(3) STAFF.—On the request of the Chair4 person of the Board, the Commissioner shall detail

5 to the Board such personnel as may be necessary to

6 enable the Board to perform its duties. Such detail

7 shall be without interruption or loss of civil service

8 status or privilege.

9 ‘‘(4) PROCUREMENT OF TEMPORARY AND

10 INTERMITTENT SERVICES.—The Chairperson of the

11 Board may procure temporary and intermittent serv12 ices under section 3109(b) of title 5, United States

13 Code.

14 ‘‘(f) ADMINISTRATIVE MATTERS.—

15 ‘‘(1) CHAIR.—The members of the Board shall

16 elect a chairperson for a 2-year term.

17 ‘‘(2) COMMITTEES.—The Board may establish

18 such committees as the Board determines appro19 priate.

20 ‘‘(3) MEETINGS.—The Board shall meet at

21 least once each month and at such other times as

22 the Board determines appropriate.

23 ‘‘(4) REPORTS.—The Board shall each year re24 port to the President and the Congress with respect
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1 to the conduct of its responsibilities under this

2 title.’’.

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 4946(c) (relating to definitions and

5 special rules for chapter 42) is amended—

6 (A) by striking ‘‘or’’ at the end of para7 graph (5),

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

9 paragraph (6) and inserting ‘‘, or’’, and

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

11 paragraph:

12 ‘‘(7) a member of the Internal Revenue Service

13 Oversight Board.’’.

14 (2) The table of sections for subchapter A of

15 chapter 80 is amended by striking the item relating

16 to section 7802 and inserting the following new

17 item:

‘‘Sec. 7802. Internal Revenue Service Oversight Board.’’

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. 102. COMMISSIONER OF INTERNAL REVENUE; CHIEF

22 COUNSEL; OTHER OFFICIALS.

23 (a) IN GENERAL.—Section 7803 (relating to other

24 personnel) is amended to read as follows:
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1 ‘‘SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; CHIEF

2 COUNSEL; OTHER OFFICIALS.

3 ‘‘(a) COMMISSIONER OF INTERNAL REVENUE.—

4 ‘‘(1) APPOINTMENT.—There shall be in the De5 partment of the Treasury a Commissioner of Inter6 nal Revenue who shall be appointed by the Internal

7 Revenue Service Oversight Board to a 5-year term

8 and compensated without regard to chapters 33, 51,

9 and 53 of title 5, United States Code. The appoint10 ment shall be made on the basis of demonstrated

11 ability in management and without regard to politi12 cal affiliation or activity. The Board may reappoint

13 the Commissioner to subsequent terms so long as

14 performance is satisfactory or better.

15 ‘‘(2) DUTIES.—The Commissioner shall—

16 ‘‘(A) administer, manage, conduct, direct,

17 and supervise the execution and application of

18 the internal revenue laws or related statutes

19 and tax conventions to which the United States

20 is a party; and

21 ‘‘(B) when a vacancy occurs, recommend a

22 candidate for appointment as Chief Counsel for

23 the Internal Revenue Service to the President,

24 and may recommend the removal of such Chief

25 Counsel to the President.
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1 ‘‘(3) CONSULTATION WITH BOARD.—The Com2 missioner shall consult with the Board on all mat3 ters set forth in paragraphs (2) and (3) (other than

4 subparagraph (A)) of section 7802(d)(2).

5 ‘‘(4) PAY.—The Commissioner is authorized to

6 be paid at an annual rate of basic pay not to exceed

7 the maximum rate of basic pay of level II of the Ex8 ecutive Schedule under section 5311 of title 5, Unit9 ed States Code, including any applicable locality10 based comparability payment that may be authorized

11 under section 5304 of such title 5.

12 ‘‘(b) CHIEF COUNSEL FOR THE INTERNAL REVENUE

13 SERVICE.—

14 ‘‘(1) APPOINTMENT.—There shall be in the De15 partment of the Treasury a Chief Counsel for the

16 Internal Revenue Service who shall be appointed by

17 the President, by and with the advice and consent

18 of the Senate.

19 ‘‘(2) DUTIES.—The Chief Counsel shall be the

20 chief law officer for the Internal Revenue Service

21 and shall perform such duties as may be prescribed

22 by the Secretary of the Treasury. To the extent that

23 the Chief Counsel performs duties relating to the de24 velopment of rules and regulations promulgated
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1 under this title, final decision making authority shall

2 remain with the Secretary.

3 ‘‘(3) PAY.—The Chief Counsel is authorized to

4 be paid at an annual rate of basic pay not to exceed

5 the maximum rate of basic pay of level III of the

6 Executive Schedule under section 5311 of title 5,

7 United States Code, including any applicable local8 ity-based comparability payment that may be au9 thorized under section 5304 of such title 5.

10 ‘‘(c) ASSISTANT COMMISSIONER FOR EMPLOYEE

11 PLANS AND EXEMPT ORGANIZATIONS.—

12 ‘‘(1) ESTABLISHMENT OF OFFICE.—There is

13 established within the Internal Revenue Service an

14 office to be known as the ‘Office of Employee Plans

15 and Exempt Organizations’ to be under the super16 vision and direction of an Assistant Commissioner of

17 Internal Revenue. As head of the Office, the Assist18 ant Commissioner shall be responsible for carrying

19 out such functions as the Secretary may prescribe

20 with respect to organizations exempt from tax under

21 section 501(a) and with respect to plans to which

22 part I of subchapter D of chapter 1 applies (and

23 with respect to organizations designed to be exempt

24 under such section and plans designed to be plans

25 to which such part applies) and other nonqualified
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1 deferred compensation arrangements. The Assistant

2 Commissioner shall report annually to the Commis3 sioner with respect to the Assistant Commissioner’s

4 responsibilities under this section.

5 ‘‘(2) AUTHORIZATION OF APPROPRIATIONS.—

6 There is authorized to be appropriated to the Inter7 nal Revenue Service solely to carry out the functions

8 of the Office an amount equal to the sum of—

9 ‘‘(A) so much of the collection from taxes

10 under section 4940 (relating to excise tax based

11 on investment income) as would have been col12 lected if the rate of tax under such section was

13 2 percent during the second preceding fiscal

14 year, and

15 ‘‘(B) the greater of—

16 ‘‘(i) an amount equal to the amount

17 described in subparagraph (A), or

18 ‘‘(ii) $30,000,000.

19 ‘‘(3) USER FEES.—All user fees collected by the

20 Office shall be dedicated to carry out the functions

21 of the Office.

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

23 ‘‘(1) IN GENERAL.—

24 ‘‘(A) There is established in the Internal

25 Revenue Service an office to be known as the
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1 ‘Office of the Taxpayer Advocate’. Such office

2 shall be under the supervision and direction of

3 an official to be known as the ‘Taxpayer Advo4 cate’ who shall be appointed by and report di5 rectly to the Commissioner of Internal Revenue,

6 with the approval of the Internal Revenue Serv7 ice Oversight Board. The Taxpayer Advocate

8 shall be entitled to compensation at the same

9 rate as the highest level official reporting di10 rectly to the Commissioner of Internal Revenue.

11 ‘‘(B) As a qualification for appointment as

12 the Taxpayer Advocate, an individual must have

13 substantial experience representing taxpayers

14 before the Internal Revenue Service or with tax15 payer rights issues.

16 ‘‘(C) An individual who, before being ap17 pointed as the Taxpayer Advocate, was an offi18 cer or employee of the Internal Revenue Service

19 may be so appointed only if such individual

20 agrees not to accept any employment with the

21 Internal Revenue Service for at least 5 years

22 after ceasing to be the Taxpayer Advocate.

23 ‘‘(2) FUNCTIONS OF OFFICE.—

24 ‘‘(A) IN GENERAL.—It shall be the func25 tion of the Office of Taxpayer Advocate to—
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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.
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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,
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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 (I), (II),

13 and (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),
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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,

11 ‘‘(X) identify areas of the tax law

12 that impose significant compliance

13 burdens on taxpayers or the Internal

14 Revenue Service, including specific

15 recommendations for remedying these

16 problems,

17 ‘‘(XI) in conjunction with the

18 National Director of Appeals, identify

19 the 10 most litigated issues for each

20 category of taxpayers (e.g., individ21 uals, self-employed individuals, and

22 small businesses), including rec23 ommendations for mitigating such dis24 putes, and
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1 ‘‘(XII) 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 described in clauses (i)

8 and (ii) without any prior review or com9 ment from the Commissioner, the Internal

10 Revenue Service Oversight Board, the Sec11 retary of the Treasury, any other officer or

12 employee of the Department of the Treas13 ury, or the Office of Management and

14 Budget.

15 ‘‘(C) OTHER RESPONSIBILITIES.—The

16 Taxpayer Advocate shall—

17 ‘‘(i) monitor the coverage and geo18 graphic allocation of problem resolution of19 ficers,

20 ‘‘(ii) develop guidance to be distrib21 uted to all Internal Revenue Service offi22 cers and employees outlining the criteria

23 for referral of taxpayer inquiries to prob24 lem resolution officers,
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•S 1096 IS

1 ‘‘(iii) ensure that the local telephone

2 numbers for the problem resolution officer

3 in each internal revenue district is pub4 lished and available to taxpayers, and

5 ‘‘(iv) in conjunction with the Commis6 sioner, develop career paths for problem

7 resolution officers choosing to make a ca8 reer in the Office of the Taxpayer Advo9 cate.

10 ‘‘(3) RESPONSIBILITIES OF COMMISSIONER.—

11 The Commissioner shall establish procedures requir12 ing a formal response to all recommendations sub13 mitted to the Commissioner by the Taxpayer Advo14 cate within 3 months after submission to the Com15 missioner.’’.

16 (b) AMENDMENT OF PRESIDENT’S AUTHORITY TO

17 APPOINT CHIEF COUNSEL FOR INTERNAL REVENUE

18 SERVICE.—

19 (1) Paragraph (2) of section 7801(b) (relating

20 to the office of General Counsel for the Department)

21 is amended to read as follows:

22 ‘‘(2) ASSISTANT GENERAL COUNSELS.—The

23 Secretary of the Treasury may appoint, without re24 gard to the provisions of the civil service laws, and
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•S 1096 IS

1 fix the duties of not to exceed five assistant General

2 Counsels.’’.

3 (2)(A) Subsection (f)(2) of section 301 of title

4 31, United States Code, is amended by striking ‘‘an

5 Assistant General Counsel who shall be the’’ and in6 serting ‘‘a’’.

7 (B) Section 301 of such title 31 is amended by

8 adding at the end the following new subsection:

9 ‘‘(h) CROSS REFERENCE.—For provisions relating to

10 the appointment of officers and employees of the Internal

11 Revenue Service, see subchapter A of chapter 80 of the

12 Internal Revenue Code of 1986.’’.

13 (c) CONFORMING AMENDMENTS.—

14 (1) The table of sections for subchapter A of

15 chapter 80 is amended by striking the item relating

16 to section 7803 and inserting the following new

17 item:

‘‘Sec. 7803. Commissioner of Internal Revenue; Chief Counsel;

other officials.’’

18 (2) Subsection (b) of section 5109 of title 5,

19 United States Code, is amended by striking

20 ‘‘7802(b)’’ and inserting ‘‘7803(c)’’.

21 (d) 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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•S 1096 IS

1 SEC. 103. OTHER PERSONNEL.

2 (a) IN GENERAL.—Section 7804 (relating to the ef3 fect of reorganization plans) is amended to read as follows:

4 ‘‘SEC. 7804. OTHER PERSONNEL.

5 ‘‘(a) APPOINTMENT AND SUPERVISION.—The Com6 missioner of Internal Revenue is authorized to employ

7 such number of persons as the Commissioner deems prop8 er for the administration and enforcement of the internal

9 revenue laws, and the Commissioner shall issue all nec10 essary directions, instructions, orders, and rules applicable

11 to such persons.

12 ‘‘(b) POSTS OF DUTY OF EMPLOYEES IN FIELD

13 SERVICE OR TRAVELING.—

14 ‘‘(1) DESIGNATION OF POST OF DUTY.—The

15 Commissioner shall determine and designate the

16 posts of duty of all such persons engaged in field

17 work or traveling on official business outside of the

18 District of Columbia.

19 ‘‘(2) DETAIL OF PERSONNEL FROM FIELD

20 SERVICE.—The Commissioner may order any such

21 person engaged in field work to duty in the District

22 of Columbia, for such periods as the Commissioner

23 may prescribe, and to any designated post of duty

24 outside the District of Columbia upon the comple25 tion of such duty.
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•S 1096 IS

1 ‘‘(c) DELINQUENT INTERNAL REVENUE OFFICERS

2 AND EMPLOYEES.—If any officer or employee of the

3 Treasury Department acting in connection with the inter4 nal revenue laws fails to account for and pay over any

5 amount of money or property collected or received by him

6 in connection with the internal revenue laws, the Secretary

7 shall issue notice and demand to such officer or employee

8 for payment of the amount which he failed to account for

9 and pay over, and, upon failure to pay the amount de10 manded within the time specified in such notice, the

11 amount so demanded shall be deemed imposed upon such

12 officer or employee and assessed upon the date of such

13 notice and demand, and the provisions of chapter 64 and

14 all other provisions of law relating to the collection of as15 sessed taxes shall be applicable in respect of such

16 amount.’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Subsection (b) of section 6344 is amended

19 by striking ‘‘section 7803(d)’’ and inserting ‘‘section

20 7804(c)’’.

21 (2) The table of sections for subchapter A of

22 chapter 80 is amended by striking the item relating

23 to section 7804 and inserting the following new

24 item:

‘‘Sec. 7804. Other personnel.’’
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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 Subtitle B—Personnel Flexibilities

5 SEC. 111. PERSONNEL FLEXIBILITIES.

6 (a) IN GENERAL.—Part III of title 5, United States

7 Code, is amended by adding at the end the following new

8 subpart:

9 ‘‘Subpart I—Miscellaneous

10 ‘‘CHAPTER 93—PERSONNEL FLEXIBILI11 TIES RELATING TO THE INTERNAL

12 REVENUE SERVICE

‘‘Sec.

‘‘9301. General requirements.

‘‘9302. Flexibilities relating to performance management.

‘‘9303. Classification and pay flexibilities.

‘‘9304. Staffing flexibilities.

‘‘9305. Flexibilities relating to demonstration projects.

13 ‘‘§ 9301. General requirements

14 ‘‘(a) CONFORMANCE WITH MERIT SYSTEM PRIN15 CIPLES, ETC.—Any flexibilities under this chapter shall

16 be exercised in a manner consistent with—

17 ‘‘(1) chapter 23, relating to merit system prin18 ciples and prohibited personnel practices; and

19 ‘‘(2) provisions of this title (outside of this sub20 part) relating to preference eligibles.

21 ‘‘(b) REQUIREMENT RELATING TO UNITS REP22 RESENTED BY LABOR ORGANIZATIONS.—
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•S 1096 IS

1 ‘‘(1) WRITTEN AGREEMENT REQUIRED.—Em2 ployees within a unit with respect to which a labor

3 organization is accorded exclusive recognition under

4 chapter 71 shall not be subject to the exercise of any

5 flexibility under section 9302, 9303, 9304, or 9305,

6 unless there is a written agreement between the In7 ternal Revenue Service and the organization permit8 ting such exercise.

9 ‘‘(2) DEFINITION OF A WRITTEN AGREE10 MENT.—In order to satisfy paragraph (1), a written

11 agreement—

12 ‘‘(A) need not be a collective bargaining

13 agreement within the meaning of section

14 7103(8); and

15 ‘‘(B) may not be an agreement imposed by

16 the Federal Service Impasses Panel under sec17 tion 7119.

18 ‘‘(c) FLEXIBILITIES FOR WHICH OPM APPROVAL IS

19 REQUIRED.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), flexibilities under this chapter may be ex22 ercised by the Internal Revenue Service without

23 prior approval of the Office of Personnel Manage24 ment.
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•S 1096 IS

1 ‘‘(2) EXCEPTIONS.—The flexibilities under sub2 sections (c) through (e) of section 9303 may be exer3 cised by the Internal Revenue Service only after a

4 specific plan describing how those flexibilities are to

5 be exercised has been submitted to and approved, in

6 writing, by the Director of the Office of Personnel

7 Management.

8 ‘‘§ 9302. Flexibilities relating to performance manage9 ment

10 ‘‘(a) IN GENERAL.—The Commissioner of Internal

11 Revenue shall, within 180 days after the date of the enact12 ment of this chapter, establish a performance management

13 system which—

14 ‘‘(1) subject to section 9301(b), shall cover all

15 employees of the Internal Revenue Service other

16 than—

17 ‘‘(A) the members of the Internal Revenue

18 Service Oversight Board;

19 ‘‘(B) the Commissioner of Internal Reve20 nue; and

21 ‘‘(C) the Chief Counsel for the Internal

22 Revenue Service;

23 ‘‘(2) shall maintain individual accountability

24 by—
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•S 1096 IS

1 ‘‘(A) establishing retention standards

2 which—

3 ‘‘(i) shall permit the accurate evalua4 tion of each employee’s performance on the

5 basis of criteria relating to the duties and

6 responsibilities of the position held by such

7 employee; and

8 ‘‘(ii) shall be communicated to an em9 ployee before the start of any period with

10 respect to which the performance of such

11 employee is to be evaluated using such

12 standards;

13 ‘‘(B) providing for periodic performance

14 evaluations to determine whether retention

15 standards are being met; and

16 ‘‘(C) with respect to any employee whose

17 performance does not meet retention standards,

18 using the results of such employee’s perform19 ance evaluation as a basis for—

20 ‘‘(i) denying increases in basic pay,

21 promotions, and credit for performance

22 under section 3502; and

23 ‘‘(ii) the taking of other appropriate

24 action, such as a reassignment or an action

25 under chapter 43; and
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•S 1096 IS

1 ‘‘(3) shall provide for—

2 ‘‘(A) establishing goals or objectives for in3 dividual, group, or organizational performance

4 (or any combination thereof), consistent with

5 Internal Revenue Service performance planning

6 procedures, including those established under

7 the Government Performance and Results Act

8 of 1993, the Information Technology Manage9 ment Reform Act of 1996, Revenue Procedure

10 64–22 (as in effect on July 30, 1997), and tax11 payer service surveys, and communicating such

12 goals or objectives to employees;

13 ‘‘(B) using such goals and objectives to

14 make performance distinctions among employ15 ees or groups of employees; and

16 ‘‘(C) using assessments under this para17 graph, in combination with performance evalua18 tions under paragraph (2), as a basis for grant19 ing employee awards, adjusting an employee’s

20 rate of basic pay, and taking such other person21 nel action as may be appropriate.

22 For purposes of this title, performance of an employee

23 during any period in which such employee is subject to

24 retention standards under paragraph (2) shall be consid25 ered to be ‘unacceptable’ if the performance of such em-
37

•S 1096 IS

1 ployee during such period fails to meet any of those stand2 ards.

3 ‘‘(b) AWARDS.—

4 ‘‘(1) FOR SUPERIOR ACCOMPLISHMENTS.—In

5 the case of an employee of the Internal Revenue

6 Service, section 4502(b) shall be applied by sub7 stituting ‘with the approval of the Commissioner of

8 Internal Revenue’ for ‘with the approval of the Of9 fice’.

10 ‘‘(2) FOR EMPLOYEES WHO REPORT DIRECTLY

11 TO THE COMMISSIONER.—

12 ‘‘(A) IN GENERAL.—In the case of an em13 ployee of the Internal Revenue Service who re14 ports directly to the Commissioner of Internal

15 Revenue, a cash award in an amount up to 50

16 percent of such employee’s annual rate of basic

17 pay may be made if the Commissioner finds

18 such an award to be warranted based on such

19 employee’s performance.

20 ‘‘(B) NATURE OF AN AWARD.—A cash

21 award under this paragraph shall not be consid22 ered to be part of basic pay.

23 ‘‘(C) TAX ENFORCEMENT RESULTS.—A

24 cash award under this paragraph may not be

25 based solely on tax enforcement results.
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•S 1096 IS

1 ‘‘(D) ELIGIBLE EMPLOYEES.—Whether or

2 not an employee is an employee who reports di3 rectly to the Commissioner of Internal Revenue

4 shall, for purposes of this paragraph, be deter5 mined under regulations which the Commis6 sioner shall prescribe.

7 ‘‘(E) LIMITATION ON COMPENSATION.—

8 For purposes of applying section 5307 to an

9 employee in connection with any calendar year

10 to which an award made under this paragraph

11 to such employee is attributable, subsection

12 (a)(1) of such section shall be applied by sub13 stituting ‘to equal or exceed the annual rate of

14 compensation for the President for such cal15 endar year’ for ‘to exceed the annual rate of

16 basic pay payable for level I of the Executive

17 Schedule, as of the end of such calendar year’.

18 ‘‘(3) BASED ON SAVINGS.—

19 ‘‘(A) IN GENERAL.—The Commissioner of

20 Internal Revenue may authorize the payment of

21 cash awards to employees based on documented

22 financial savings achieved by a group or organi23 zation which such employees comprise, if such

24 payments are made pursuant to a plan which—
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•S 1096 IS

1 ‘‘(i) specifies minimum levels of serv2 ice and quality to be maintained while

3 achieving such financial savings; and

4 ‘‘(ii) is in conformance with criteria

5 prescribed by the Office of Personnel Man6 agement.

7 ‘‘(B) FUNDING.—A cash award under this

8 paragraph may be paid from the fund or appro9 priation available to the activity primarily bene10 fiting or the various activities benefiting.

11 ‘‘(C) TAX ENFORCEMENT RESULTS.—A

12 cash award under this paragraph may not be

13 based solely on tax enforcement results.

14 ‘‘(c) OTHER PROVISIONS.—

15 ‘‘(1) NOTICE PROVISIONS.—In applying sections

16 4303(b)(1)(A) and 7513(b)(1) to employees of the

17 Internal Revenue Service, ‘15 days’ shall be sub18 stituted for ‘30 days’.

19 ‘‘(2) APPEALS.—Notwithstanding the second

20 sentence of section 5335(c), an employee of the In21 ternal Revenue Service shall not have a right to ap22 peal the denial of a periodic step increase under sec23 tion 5335 to the Merit Systems Protection Board.

24 ‘‘§ 9303. Classification and pay flexibilities

25 ‘‘(a) BROAD-BANDED SYSTEMS.—
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•S 1096 IS

1 ‘‘(1) DEFINITIONS.—For purposes of this sub2 section—

3 ‘‘(A) the term ‘broad-banded system’

4 means a system under which positions are clas5 sified and pay for service in any such position

6 is fixed through the use of pay bands, rather

7 than under—

8 ‘‘(i) chapter 51 and subchapter III of

9 chapter 53; or

10 ‘‘(ii) subchapter IV of chapter 53; and

11 ‘‘(B) the term ‘pay band’ means, with re12 spect to positions in 1 or more occupational se13 ries, a pay range—

14 ‘‘(i) consisting of—

15 ‘‘(I) 2 or more consecutive grades

16 of the General Schedule; or

17 ‘‘(II) 2 or more consecutive pay

18 ranges of such other pay or wage

19 schedule as would otherwise apply

20 (but for this section); and

21 ‘‘(ii) the minimum rate for which is

22 the minimum rate for the lower (or lowest)

23 grade or range in the pay band and the

24 maximum rate for which is the maximum

25 rate for the higher (or highest) grade or
41

•S 1096 IS

1 range in the pay band, including any local2 ity-based and other similar comparability

3 payments.

4 ‘‘(2) AUTHORITY.—The Commissioner of Inter5 nal Revenue may, subject to criteria to be prescribed

6 by the Office of Personnel Management, establish

7 one or more broad-banded systems covering all or

8 any portion of its workforce which would otherwise

9 be subject to the provisions of law cited in clause (i)

10 or (ii) of subsection (a)(1)(A), except for any posi11 tion classified by statute.

12 ‘‘(3) CRITERIA.—The criteria to be prescribed

13 by the Office shall, at a minimum—

14 ‘‘(A) ensure that the structure of any

15 broad-banded system maintains the principle of

16 equal pay for substantially equal work;

17 ‘‘(B) establish the minimum (but not less

18 than 2) and maximum number of grades or pay

19 ranges that may be combined into pay bands;

20 ‘‘(C) establish requirements for adjusting

21 the pay of an employee within a pay band;

22 ‘‘(D) establish requirements for setting the

23 pay of a supervisory employee whose position is

24 in a pay band or who supervises employees

25 whose positions are in pay bands; and
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•S 1096 IS

1 ‘‘(E) establish requirements and meth2 odologies for setting the pay of an employee

3 upon conversion to a broad-banded system, ini4 tial appointment, change of position or type of

5 appointment (including promotion, demotion,

6 transfer, reassignment, reinstatement, place7 ment in another pay band, or movement to a

8 different geographic location), and movement

9 between a broad-banded system and another

10 pay system.

11 ‘‘(4) INFORMATION.—The Commissioner of In12 ternal Revenue shall submit to the Office such infor13 mation relating to its broad-banded systems as the

14 Office may require.

15 ‘‘(5) REVIEW AND REVOCATION AUTHORITY.—

16 The Office may, with respect to any broad-banded

17 system under this subsection, and in accordance

18 with regulations which it shall prescribe, exercise

19 with respect to any broad-banded system under this

20 subsection authorities similar to those available to it

21 under sections 5110 and 5111 with respect to classi22 fications under chapter 51.

23 ‘‘(b) SINGLE PAY-BAND SYSTEM.—

24 ‘‘(1) IN GENERAL.—The Commissioner of In25 ternal Revenue may, with respect to employees who
43

•S 1096 IS

1 remain subject to chapter 51 and subchapter III of

2 chapter 53 (or subchapter IV of chapter 53), fix

3 rates of pay under a single pay-band system.

4 ‘‘(2) DEFINITION.—For purposes of this sub5 section, the term ‘single pay-band system’ means,

6 for pay-setting purposes, a system similar to the

7 pay-setting aspects of a broad-banded system under

8 subsection (a), but consisting of only a single grade

9 or pay range, under which pay may be fixed at any

10 rate not less than the minimum and not more than

11 the maximum rate which (but for this section) would

12 otherwise apply with respect to the grade or pay

13 range involved, including any locality-based and

14 other similar comparability payments.

15 ‘‘(3) SPECIAL RULES.—

16 ‘‘(A) PROMOTION OR TRANSFER.—An em17 ployee under this subsection who is promoted or

18 transferred to a position in a higher grade shall

19 be entitled to basic pay at a rate determined

20 under criteria prescribed by the Office of Per21 sonnel Management based on section 5334(b).

22 ‘‘(B) PERFORMANCE INCREASES.—In lieu

23 of periodic step-increases under section 5335,

24 an employees under this subsection who meets

25 retention standards under section
44

•S 1096 IS

1 9302(a)(2)(A) shall be entitled to performance

2 increases under criteria prescribed by the Of3 fice. An increase under this subparagraph shall

4 be equal to one-ninth of the difference between

5 the minimum and maximum rates of pay for

6 the applicable grade or pay range

7 ‘‘(C) INCREASES FOR EXCEPTIONAL PER8 FORMANCE.—In lieu of additional step-increases

9 under section 5336, an employee under this

10 subsection who has demonstrated exceptional

11 performance shall be eligible for a pay increase

12 under this subparagraph under criteria pre13 scribed by the Office. An increase under this

14 subparagraph may not exceed the amount of an

15 increase under subparagraph (B).

16 ‘‘(c) ALTERNATIVE CLASSIFICATION SYSTEMS.—

17 ‘‘(1) IN GENERAL.—Subject to section 9301(c),

18 the Commissioner of Internal Revenue may establish

19 1 or more alternative classification systems that in20 clude any positions or groups of positions that the

21 Commissioner determines, for reasons of effective

22 administration—

23 ‘‘(A) should not be classified under chapter

24 51 or paid under the General Schedule;
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•S 1096 IS

1 ‘‘(B) should not be classified or paid under

2 subchapter IV of chapter 53; or

3 ‘‘(C) should not be paid under section

4 5376.

5 ‘‘(2) LIMITATIONS.—An alternative classifica6 tion system under this subsection may not—

7 ‘‘(A) with respect to any position that (but

8 for this section) would otherwise be subject to

9 the provisions of law cited in subparagraph (A)

10 or (B) of paragraph (1), establish a rate of

11 basic pay in excess of the maximum rate for

12 grade GS–15 of the General Schedule, including

13 any locality-based and other similar comparabil14 ity payments; and

15 ‘‘(B) with respect to any position that (but

16 for this section) would otherwise be subject to

17 the provision of law cited in paragraph (1)(C),

18 establish a rate of basic pay in excess of the an19 nual rate of basic pay of the Commissioner of

20 Internal Revenue.

21 ‘‘(d) GRADE AND PAY RETENTION.—Subject to sec22 tion 9301(c), the Commissioner of Internal Revenue may,

23 with respect to employees who are covered by a broad24 banded system under subsection (a) or an alternative clas-
46

•S 1096 IS

1 sification system under subsection (c), provide for vari2 ations from the provisions of subchapter VI of chapter 53.

3 ‘‘(e) RECRUITMENT AND RETENTION BONUSES; RE4 TENTION ALLOWANCES.—Subject to section 9301(c), the

5 Commissioner of Internal Revenue may, with respect to

6 its employees, provide for variations from the provisions

7 of sections 5753 and 5754.

8 ‘‘§ 9304. Staffing flexibilities

9 ‘‘(a) IN GENERAL.—

10 ‘‘(1) PERMANENT APPOINTMENT IN THE COM11 PETITIVE SERVICE.—Except as otherwise provided

12 by this subsection, an employee of the Internal Reve13 nue Service may be selected for a permanent ap14 pointment in the competitive service in the Internal

15 Revenue Service through internal competitive pro16 motion procedures when the following conditions are

17 met:

18 ‘‘(A) The employee has completed 2 years

19 of current continuous service in the competitive

20 service under a term appointment or any com21 bination of term appointments.

22 ‘‘(B) Such term appointment or appoint23 ments were made under competitive procedures

24 prescribed for permanent appointments.
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•S 1096 IS

1 ‘‘(C) The employee’s performance under

2 such term appointment or appointments met es3 tablished retention standards.

4 ‘‘(D) The vacancy announcement for the

5 term appointment from which the conversion is

6 made stated that there was a potential for sub7 sequent conversion to a permanent appoint8 ment.

9 ‘‘(2) CONDITION.—An appointment under this

10 subsection may be made only to a position the duties

11 and responsibilities of which are similar to those of

12 the position held by the employee at the time of con13 version (referred to in paragraph (1)(D)).

14 ‘‘(b) RATING SYSTEMS.—

15 ‘‘(1) IN GENERAL.—Notwithstanding sub16 chapter I of chapter 33, the Commissioner of Inter17 nal Revenue may establish category rating systems

18 for evaluating job applicants for positions in the

19 competitive service, under which qualified candidates

20 are divided into 2 or more quality categories on the

21 basis of relative degrees of merit, rather than as22 signed individual numerical ratings. Each applicant

23 who meets the minimum qualification requirements

24 for the position to be filled shall be assigned to an

25 appropriate category based on an evaluation of the
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•S 1096 IS

1 applicant’s knowledge, skills, and abilities relative to

2 those needed for successful performance in the job

3 to be filled.

4 ‘‘(2) TREATMENT OF PREFERENCE ELIGI5 BLES.—Within each quality category established

6 under paragraph (1), preference eligibles shall be

7 listed ahead of individuals who are not preference

8 eligibles. For other than scientific and professional

9 positions at or higher than GS–9 (or equivalent),

10 preference eligibles who have a compensable service11 connected disability of 10 percent or more, and who

12 meet the minimum qualification standards, shall be

13 listed in the highest quality category.

14 ‘‘(3) SELECTION PROCESS.—An appointing au15 thority may select any applicant from the highest

16 quality category or, if fewer than 3 candidates have

17 been assigned to the highest quality category, from

18 a merged category consisting of the highest and sec19 ond highest quality categories. Notwithstanding the

20 preceding sentence, the appointing authority may

21 not pass over a preference eligible in the same or a

22 higher category from which selection is made, unless

23 the requirements of section 3317(b) or 3318(b), as

24 applicable, are satisfied, except that in no event may

25 certification of a preference eligible under this sub-
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•S 1096 IS

1 section be discontinued by the Internal Revenue

2 Service under section 3317(b) before the end of the

3 6-month period beginning on the date of such em4 ployee’s first certification.

5 ‘‘(c) MAXIMUM PERIOD FOR WHICH EMPLOYEE MAY

6 BE DETAILED.—The 120-day limitation under section

7 3341(b)(1) for details and renewals of details shall not

8 apply with respect to the Internal Revenue Service.

9 ‘‘(d) INVOLUNTARY REASSIGNMENTS AND REMOVALS

10 OF CAREER APPOINTEES IN THE SENIOR EXECUTIVE

11 SERVICE.—Neither section 3395(e)(1) nor section

12 3592(b)(1) shall apply with respect to the Internal Reve13 nue Service.

14 ‘‘(e) PROBATIONARY PERIODS.—Notwithstanding

15 any other provision of law or regulation, the Commissioner

16 of Internal Revenue may establish a period of probation

17 under section 3321 of up to 3 years for any position if,

18 as determined by the Commissioner, a shorter period

19 would be insufficient for the incumbent to demonstrate

20 complete proficiency in such position.

21 ‘‘(f) PROVISIONS THAT REMAIN APPLICABLE.—No

22 provision of this section exempts the Internal Revenue

23 Service from—
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•S 1096 IS

1 ‘‘(1) any employment priorities established

2 under direction of the President for the placement of

3 surplus or displaced employees; or

4 ‘‘(2) its obligations under any court order or

5 decree relating to the employment practices of the

6 Internal Revenue Service.

7 ‘‘§ 9305. Flexibilities relating to demonstration

8 projects

9 ‘‘(a) IN GENERAL.—For purposes of applying section

10 4703 with respect to the Internal Revenue Service—

11 ‘‘(1) paragraph (1) of subsection (b) of such

12 section shall be deemed to read as follows:

13 ‘‘ ‘(1) develop a plan for such project which de14 scribes its purpose, the employees to be covered, the

15 project itself, its anticipated outcomes, and the

16 method of evaluating the project;’;

17 ‘‘(2) paragraph (3) of subsection (b) of such

18 section shall be disregarded;

19 ‘‘(3) paragraph (4) of subsection (b) of such

20 section shall be applied by substituting ‘30 days’ for

21 ‘180 days’;

22 ‘‘(4) paragraph (6) of subsection (b) of such

23 section shall be deemed to read as follows:

24 ‘‘ ‘(6) provide each House of the Congress with

25 the final version of the plan.’;
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•S 1096 IS

1 ‘‘(5) paragraph (1) of subsection (c) of such

2 section shall be deemed to read as follows:

3 ‘‘ ‘(1) subchapter V of chapter 63 or subpart G

4 of part III;’; and

5 ‘‘(6) subsection (d)(1) of such section shall be

6 disregarded.

7 ‘‘(b) NUMERICAL LIMITATION.—For purposes of ap8 plying the numerical limitation under subsection (d)(2) of

9 section 4703, a demonstration project shall not be counted

10 if or to the extent that it involves the Internal Revenue

11 Service.’’

12 (b) CLERICAL AMENDMENT.—The analysis for part

13 III of title 5, United States Code, is amended by adding

14 at the end the following:

‘‘Subpart I—Miscellaneous

‘‘93. Personnel Flexibilities Relating to the Internal Revenue

Service .............................................................................................. 9301’’.

15 (c) EFFECTIVE DATE.—This section shall take effect

16 on the date of the enactment of this Act.

17 TITLE II—ELECTRONIC FILING

18 SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION

19 RETURNS.

20 (a) IN GENERAL.—It is the policy of the Congress

21 that paperless filing should be the preferred and most con22 venient means of filing tax and information returns, and
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1 that by the year 2007, no more than 20 percent of all

2 tax returns should be filed on paper.

3 (b) STRATEGIC PLAN.—

4 (1) IN GENERAL.—Not later than 180 days

5 after the date of the enactment of this Act, the Sec6 retary of the Treasury or the Secretary’s delegate

7 (hereafter in this section referred to as the ‘‘Sec8 retary’’) shall implement a plan to eliminate bar9 riers, provide incentives, and use competitive market

10 forces to increase electronic filing gradually over the

11 next 10 years while maintaining processing times for

12 paper returns at 40 days.

13 (2) ELECTRONIC COMMERCE ADVISORY

14 GROUP.—To ensure that the Secretary receives input

15 from the private sector in the development and im16 plementation of the plan required by paragraph (1),

17 the Secretary shall convene an electronic commerce

18 advisory group to include representatives from the

19 tax practitioner, preparer, and computerized tax

20 processor communities and other representatives

21 from the electronic filing industry.

22 (c) INCENTIVES.—

23 (1) IN GENERAL.—Not later than 180 days

24 after the date of the enactment of this Act, the Sec25 retary shall implement procedures to provide for the
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•S 1096 IS

1 payment of incentives to transmitters of qualified

2 electronically filed returns, based on the fair market

3 value of costs to transmit returns electronically.

4 (2) QUALIFIED ELECTRONICALLY FILED RE5 TURNS.—For purposes of this section, the term

6 ‘‘qualified electronically filed return’’ means a return

7 that—

8 (A) is transmitted electronically to the In9 ternal Revenue Service,

10 (B) for which the taxpayer was not

11 charged for the cost of such transmission, and

12 (C) in the case of returns transmitted after

13 December 31, 2004, was prepared by a paid

14 preparer who does not submit any return after

15 such date to the Internal Revenue Service on

16 paper.

17 (d) ANNUAL REPORTS.—Not later than June 30 of

18 each calendar year after 1997, the Chairperson of the In19 ternal Revenue Service Oversight Board, the Secretary,

20 and the Chairperson of the electronic commerce advisory

21 group established under subsection (b)(2) shall report to

22 the Committees on Ways and Means, Appropriations, and

23 Government Reform and Oversight of the House of Rep24 resentatives, the Committees on Finance, Appropriations,
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1 and Government Affairs of the Senate, and the Joint Com2 mittee on Taxation, on—

3 (1) the progress of the Internal Revenue Serv4 ice in meeting the policy set forth in subsection (a);

5 (2) the status of the plan required by sub6 section (b); and

7 (3) the necessity of action by the Congress to

8 assist the Internal Revenue Service to satisfy the

9 policy set forth in subsection (a).

10 SEC. 202. EXTENSION OF TIME TO FILE FOR ELECTRONIC

11 FILERS.

12 (a) IN GENERAL.—Subsection (a) of section 6072

13 (relating to the time for filing income tax returns) is

14 amended—

15 (1) by striking ‘‘(a) GENERAL RULE.—In the

16 case of’’ and inserting the following:

17 ‘‘(a) GENERAL RULES.—

18 ‘‘(1) PAPER RETURNS.—Except as provided in

19 paragraph (2), in the case of’’,

20 (2) by moving the text 2 ems to the right, and

21 (3) by adding at the end the following new

22 paragraph:

23 ‘‘(2) ELECTRONICALLY FILED RETURNS.—In

24 the case of returns filed electronically, returns made

25 on the basis of the calendar year shall be filed on
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1 or before the 15th day of May following the close of

2 the calendar year and returns made on the basis of

3 a fiscal year shall be filed on or before the 15th day

4 of the fifth month following the close of the fiscal

5 year.’’

6 (b) RETURNS OF CORPORATIONS.—Subsection (b) of

7 section 6072 (relating to the time for filing income tax

8 returns) is amended—

9 (1) by moving the text 2 ems to the right, and

10 (2) by adding at the end the following new

11 paragraph:

12 ‘‘(2) ELECTRONICALLY FILED RETURNS.—In

13 the case of returns filed electronically, returns made

14 on the basis of the calendar year shall be filed on

15 or before the 15th day of April following the close

16 of the calendar year and returns made on the basis

17 of a fiscal year shall be filed on or before the 15th

18 day of the 4th month following the close of the fiscal

19 year.’’

20 (c) INFORMATION RETURNS.—Part V of chapter 61

21 (relating to information and returns) is amended by add22 ing the following new section:
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1 ‘‘SEC. 6073. TIME FOR FILING CERTAIN INFORMATION RE2 TURNS.

3 ‘‘(a) ELECTRONICALLY FILED RETURNS.—In the

4 case of returns made under subparts B and C of part III

5 of this chapter that are filed electronically, such returns

6 shall be filed on or before March 31 of the year following

7 the calendar year to which such returns relate.

8 ‘‘(b) NOTICE TO RECIPIENTS.—Notwithstanding sub9 section (a), receipts for employees required under section

10 6051 and any statements otherwise required to be fur11 nished to persons with respect to whom information is re12 quired, shall be furnished to such persons on or before

13 January 31 of the calendar year in which the return under

14 subsection (a) is required to be filed.

15 ‘‘(c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to returns required to be filed after

17 December 31, 1999.’’

18 (d) RETURNS OF PARTNERSHIPS.—Part V of chapter

19 61 (relating to information and returns) is amended by

20 adding the following new section:

21 ‘‘SEC. 6074. TIME FOR FILING PARTNERSHIP RETURNS.

22 ‘‘(a) IN GENERAL.—Except as provided in subsection

23 (b), returns made under section 6031 shall be filed on or

24 before the 15th day of the 3d month following the close

25 of the taxable year of the partnership, except that the re26 turn of a partnership consisting entirely of nonresident
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1 aliens shall be filed on or before the 15th day of the 6th

2 month following the close of the taxable year of the part3 nership.

4 ‘‘(b) ELECTRONICALLY FILED RETURNS.—In the

5 case of returns filed electronically, returns shall be filed

6 on or before the 15th day of the 4th month following the

7 close of the taxable year of the partnership.’’

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

9 this section shall apply to returns for taxable years begin10 ning after December 31, 1998.

11 SEC. 203. PAPERLESS ELECTRONIC FILING.

12 (a) IN GENERAL.—Section 6061 (relating to signing

13 of returns and other documents) is amended—

14 (1) by striking ‘‘Except as otherwise provided

15 by’’ and inserting the following:

16 ‘‘(a) GENERAL RULE.—Except as otherwise provided

17 by subsection (b) and’’, and

18 (2) by adding at the end the following new sub19 section:

20 ‘‘(b) ELECTRONIC SIGNATURES.—The Secretary

21 shall develop procedures for the acceptance of signatures

22 in digital or other electronic form. Until such time as such

23 procedures are in place, the Secretary shall accept elec24 tronically filed returns and other documents on which the

25 required signature(s) appears in typewritten form, but fil-
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1 ers of such documents shall be required to retain a signed

2 paper original of all such filings, to be made available to

3 the Secretary for inspection, until the expiration of the

4 applicable period of limitations set forth in chapter 66.’’.

5 (b) DEADLINE FOR ESTABLISHING PROCEDURES.—

6 Not later than December 31, 1998, the Secretary of the

7 Treasury or the Secretary’s delegate shall establish proce8 dures to accept, in electronic form, any other information,

9 statements, elections, or schedules, from taxpayers filing

10 returns electronically, so that such taxpayers will not be

11 required to file any paper.

12 (c) PROCEDURES FOR COMMUNICATIONS BETWEEN

13 IRS AND PREPARER OF ELECTRONICALLY-FILED RE14 TURNS.—Such Secretary shall establish procedures for

15 taxpayers to authorize, on electronically filed returns, the

16 preparer of such returns to communicate with the Internal

17 Revenue Service on matters included on such returns.

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

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

20 of this Act.

21 SEC. 204. REGULATION OF PREPARERS.

22 (a) IN GENERAL.—Subsection (a) of section 330 of

23 title 31, United States Code, is amended—

24 (1) by striking ‘‘Treasury; and’’ in paragraph

25 (1) and inserting ‘‘Treasury and all other persons
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1 engaged in the business of preparing returns or oth2 erwise accepting compensation for advising in the

3 preparation of returns,’’,

4 (2) by striking the period at the end of para5 graph (2) and inserting ‘‘, and’’, and

6 (3) by adding at the end the following:

7 ‘‘(3) establish uniform procedures for regulating

8 preparers of paper and electronic tax and informa9 tion returns.

10 No demonstration shall be required under paragraph (2)

11 for persons solely engaged in the business of preparing

12 returns or otherwise accepting compensation for advising

13 in the preparation of returns.’’

14 (b) DIRECTOR OF PRACTICE.—Such section 330 is

15 amended by adding at the end the following new sub16 section:

17 ‘‘(d) DIRECTOR OF PRACTICE.—There is established

18 within the Department of the Treasury an office to be

19 known as the ‘Office of the Director of Practice’ to be

20 under the supervision and direction of an official to be

21 known as the ‘Director of Practice’. The Director of Prac22 tice shall be responsible for regulation of all practice be23 fore the Department of the Treasury.’’.
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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. 205. PAPERLESS PAYMENT.

5 (a) IN GENERAL.—Section 6311 (relating to payment

6 by check or money order) is amended to read as follows:

7 ‘‘SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPT8 ABLE MEANS.

9 ‘‘(a) AUTHORITY TO RECEIVE.—It shall be lawful for

10 the Secretary to receive for internal revenue taxes (or in

11 payment of internal revenue stamps) any commercially ac12 ceptable means that the Secretary deems appropriate to

13 the extent and under the conditions provided in regula14 tions prescribed by the Secretary.

15 ‘‘(b) ULTIMATE LIABILITY.—If a check, money

16 order, or other method of payment, including payment by

17 credit card, debit card, charge card, or electronic funds

18 transfer so received is not duly paid, or is paid and subse19 quently charged back to the Secretary, the person by

20 whom such check, money order, or other method of pay21 ment has been tendered shall remain liable for the pay22 ment of the tax or for the stamps, and for all legal pen23 alties and additions, to the same extent as if such check,

24 money order, or other method of payment had not been

25 tendered.
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1 ‘‘(c) LIABILITY OF BANKS AND OTHERS.—If any cer2 tified, treasurer’s, or cashier’s check (or other guaranteed

3 draft), or any money order, or any means of payment that

4 has been guaranteed by a financial institution (such as

5 a credit card, debit card, charge card, or electronic funds

6 transfer transaction which has been guaranteed expressly

7 by a financial institution) so received is not duly paid, the

8 United States shall, in addition to its right to exact pay9 ment from the party originally indebted therefor, have a

10 lien for—

11 ‘‘(1) the amount of such check (or draft) upon

12 all assets of the financial institution on which

13 drawn,

14 ‘‘(2) the amount of such money order upon all

15 the assets of the issuer therefor,

16 ‘‘(3) the guaranteed amount of any other trans17 action upon all the assets of the institution making

18 such guarantee,

19 and such amount shall be paid out of such assets in pref20 erence to any other claims whatsoever against such finan21 cial institution, issuer, or guaranteeing institution, except

22 the necessary costs and expenses of administration and

23 the reimbursement of the United States for the amount

24 expended in the redemption of the circulating notes of

25 such financial institution.
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1 ‘‘(d) PAYMENT BY OTHER MEANS.—

2 ‘‘(1) AUTHORITY TO PRESCRIBE REGULA3 TIONS.—The Secretary shall prescribe such regula4 tions as the Secretary deems necessary to receive

5 payment by commercially acceptable means, includ6 ing regulations that—

7 ‘‘(A) specify which methods of payment by

8 commercially acceptable means will be accept9 able;

10 ‘‘(B) specify when payment by such means

11 will be considered received;

12 ‘‘(C) identify types of nontax matters re13 lated to payment by such means that are to be

14 resolved by persons ultimately liable for pay15 ment and financial intermediaries, without the

16 involvement of the Secretary; and

17 ‘‘(D) ensure that tax matters will be re18 solved by the Secretary, without the involve19 ment of financial intermediaries.

20 ‘‘(2) AUTHORITY TO ENTER INTO CON21 TRACTS.—Notwithstanding section 3718(f) of title

22 31, United States Code, the Secretary is authorized

23 to enter into contracts to obtain services relating to

24 receiving payment by other means when cost bene25 ficial to the Government.
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1 ‘‘(3) SPECIAL PROVISIONS FOR USE OF CREDIT

2 CARDS.—If use of credit cards is accepted as a

3 method of payment of taxes pursuant to subsection

4 (a)—

5 ‘‘(A) a payment of internal revenue taxes

6 (or a payment for internal revenue stamps) by

7 a person by use of a credit card shall not be

8 subject to section 161 of the Truth-in-Lending

9 Act (15 U.S.C. 1666), or to any similar provi10 sions of State law, if the error alleged by the

11 person is an error relating to the underlying tax

12 liability, rather than an error relating to the

13 credit card account such as a computational

14 error or numerical transposition in the credit

15 card transaction or an issue as to whether the

16 person authorized payment by use of the credit

17 card;

18 ‘‘(B) a payment of internal revenue taxes

19 (or a payment for internal revenue stamps)

20 shall not be subject to section 170 of the Truth

21 in Lending Act (15 U.S.C. 1666i), or to any

22 similar provisions of State law;

23 ‘‘(C) a payment of internal revenue taxes

24 (or a payment for internal revenue stamps) by

25 a person by use of a debit card shall not be
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1 subject to section 908 of the Electronic Fund

2 Transfer Act (15 U.S.C. 1693f), or to any simi3 lar provisions of State law, if the error alleged

4 by the person is an error relating to the under5 lying tax liability, rather than an error relating

6 to the debit card account such as a computa7 tional error or numerical transposition in the

8 debit card transaction or an issue as to whether

9 the person authorized payment by use of the

10 debit card;

11 ‘‘(D) the term ‘creditor’ under section

12 103(f) of the Truth in Lending Act (15 U.S.C.

13 1602(f)) shall not include the Secretary with re14 spect to credit card transactions in payment of

15 internal revenue taxes (or payment for internal

16 revenue stamps); and

17 ‘‘(E) notwithstanding any other provision

18 of law to the contrary, in the case of payment

19 made by credit card or debit card transaction in

20 an amount owed to a person as a result of the

21 correction of an error under section 161 of the

22 Truth in Lending Act (15 U.S.C. 1666) or sec23 tion 908 of the Electronic Fund Transfer Act

24 (15 U.S.C 1693(f)), the Secretary is authorized

25 to provide such amount to such person as a
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1 credit to that person’s credit card or debit card

2 account through the applicable credit card or

3 debit card system.

4 ‘‘(e) CONFIDENTIALITY OF INFORMATION.—

5 ‘‘(1) IN GENERAL.—Except as otherwise au6 thorized by this subsection, no person may use or

7 disclose any information relating to credit or debit

8 card transactions obtained pursuant to section

9 6103(k)(8) other than for purposes directly related

10 to the processing of such transactions, or the billing

11 or collection of amounts charged or debited pursuant

12 thereto.

13 ‘‘(2) EXCEPTIONS.—

14 ‘‘(A) Debit or credit card issuers or others

15 acting on behalf of such issuers may also use

16 and disclose such information for purposes di17 rectly related to servicing an issuer’s accounts.

18 ‘‘(B) Debit or credit card issuers or others

19 directly involved in the processing of credit or

20 debit card transactions or the billing or collec21 tion of amounts charged or debited thereto may

22 also use and disclose such information for pur23 poses directly related to—

24 ‘‘(i) statistical risk and profitability

25 assessment,
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1 ‘‘(ii) transferring receivables, ac2 counts, or interest therein,

3 ‘‘(iii) auditing the account informa4 tion,

5 ‘‘(iv) complying with Federal, State,

6 or local law, and

7 ‘‘(v) properly authorized civil, crimi8 nal, or regulatory investigation by Federal,

9 State, or local authorities.

10 ‘‘(3) PROCEDURES.—Use and disclosure of in11 formation under this paragraph shall be made only

12 to the extent authorized by written procedures pro13 mulgated by the Secretary.

14 ‘‘(4) CROSS REFERENCE.—

‘‘For provision providing for civil damages for violation of paragraph (1), see section 7431.’’

15 (b) SEPARATE APPROPRIATION REQUIRED FOR PAY16 MENT OF CREDIT CARD FEES.—No amount may be paid

17 by the United States to a credit card issuer for the right

18 to receive payments of internal revenue taxes by credit

19 card without a separate appropriation therefor.

20 (c) CLERICAL AMENDMENT.—The table of sections

21 for subchapter B of chapter 64 is amended by striking

22 the item relating to section 6311 and inserting the follow23 ing:

‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’
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1 (d) AMENDMENTS TO SECTION 6103 AND 7431 WITH

2 RESPECT TO DISCLOSURE AUTHORIZATION.—

3 (1) Subsection (k) of section 6103 (relating to

4 confidentiality and disclosure of returns and return

5 information) is amended by adding at the end the

6 following new paragraph—

7 ‘‘(8) DISCLOSURE OF INFORMATION TO ADMIN8 ISTER SECTION 6311.—The Secretary may disclose

9 returns or return information to financial institu10 tions and others to the extent the Secretary deems

11 necessary for the administration of section 6311.

12 Disclosures of information for purposes other than

13 to accept payments by check or money orders shall

14 be made only to the extent authorized by written

15 procedures promulgated by the Secretary.’’.

16 (2) Section 7431 (relating to civil damages for

17 unauthorized disclosure of returns and return infor18 mation) is amended by adding at the end the follow19 ing new subsection:

20 ‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED

21 UNDER SECTION 6103(k)(8).—For purposes of this sec22 tion, any reference to section 6103 shall be treated as in23 cluding a reference to section 6311(e).’’.

24 (3) Section 6103(p)(3)(A) is amended by strik25 ing ‘‘or (6)’’ and inserting ‘‘(6), or (8)’’.
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on the day which is 9 months

3 after the date of the enactment of this Act.

4 SEC. 206. RETURN-FREE TAX SYSTEM.

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

6 the Secretary’s delegate shall develop procedures for the

7 implementation of a return-free tax system under which

8 individuals would be permitted to comply with the Internal

9 Revenue Code of 1986 without making the return required

10 under section 6012 of such Code for taxable years begin11 ning after 2007.

12 (b) REPORT.—Not later than June 30 of each cal13 endar year after 1999, such Secretary shall report to the

14 Committee on Ways and Means of the House of Rep15 resentatives, the Committee on Finance of the Senate, and

16 the Joint Committee on Taxation on—

17 (1) the procedures developed pursuant to sub18 section (a),

19 (2) the number and classes of taxpayers that

20 would be permitted to use the procedures developed

21 pursuant to subsection (a),

22 (3) the changes to the Internal Revenue Code

23 of 1986 that could enhance the use of such a sys24 tem, and
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1 (4) what additional resources the Internal Reve2 nue Service would need to implement such a system.

3 SEC. 207. ACCESS TO ACCOUNT INFORMATION.

4 Not later than December 31, 2006, the Secretary of

5 the Treasury or the Secretary’s delegate shall develop pro6 cedures under which a taxpayer filing returns electroni7 cally would be able to review the taxpayer’s account elec8 tronically, including all necessary safeguards to ensure the

9 privacy of such account information.

10 TITLE III—TAXPAYER

11 PROTECTION AND RIGHTS

12 SEC. 301. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER

13 ASSISTANCE ORDERS.

14 (a) IN GENERAL.—Section 7811(a) (relating to tax15 payer assistance orders) is amended—

16 (1) by striking ‘‘Upon application’’ and insert17 ing the following:

18 ‘‘(1) IN GENERAL.—Upon application’’,

19 (2) by moving the text 2 ems to the right, and

20 (3) by adding at the end the following new

21 paragraph:

22 ‘‘(2) DETERMINATION OF HARDSHIP.—For pur23 poses of determining whether a taxpayer is suffering

24 or about to suffer a significant hardship, the Tax25 payer Advocate should consider—
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1 ‘‘(A) whether the Internal Revenue Service

2 employee to which such order would issue is fol3 lowing applicable published administrative guid4 ance, including the Internal Revenue Manual,

5 ‘‘(B) whether there is an immediate threat

6 of adverse action,

7 ‘‘(C) whether there has been a delay of

8 more than 30 days in resolving taxpayer ac9 count problems, and

10 ‘‘(D) the prospect that the taxpayer will

11 have to pay significant professional fees for rep12 resentation.’’.

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

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

15 of this Act.

16 SEC. 302. EXPANSION OF AUTHORITY TO AWARD COSTS

17 AND CERTAIN FEES.

18 (a) AUTHORITY TO AWARD HIGHER ATTORNEY’S

19 FEES BASED ON COMPLEXITY OF ISSUES.—Clause (iii)

20 of section 7430(c)(1)(B) (relating to the award of costs

21 and certain fees) is amended by inserting ‘‘, or the dif22 ficulty of the issues presented in the case or the local avail23 ability of tax expertise,’’ before ‘‘justifies a higher rate’’.

24 (b) AWARD OF ADMINISTRATIVE COSTS INCURRED

25 AFTER 30-DAY LETTER.—
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1 (1) Paragraph (2) of section 7430(c) is amend2 ed by striking the last sentence and insert the fol3 lowing:

4 ‘‘Such term shall only include costs incurred on or

5 after whichever of the following is the earliest: (i)

6 the date of the receipt by the taxpayer of the notice

7 of the decision of the Internal Revenue Service Of8 fice of Appeals, (ii) the date of the notice of defi9 ciency, or (iii) the date on which the 1st letter of

10 proposed deficiency which allows the taxpayer an op11 portunity for administrative review in the Internal

12 Revenue Service Office of Appeals is sent.’’

13 (2) Subparagraph (B) of section 7430(c)(7) is

14 amended by striking ‘‘or’’ and the end of clause (i),

15 by striking the period at the end of clause (ii) and

16 inserting ‘‘, or’’, and by adding at the end the fol17 lowing new clause:

18 ‘‘(iii) the date on which the 1st letter

19 of proposed deficiency which allows the

20 taxpayer an opportunity for administrative

21 review in the Internal Revenue Service Of22 fice of Appeals is sent.’’

23 (c) AWARD OF FEES FOR CERTAIN ADDITIONAL

24 SERVICES.—Paragraph (3) of section 7430(c) is amended

25 by adding at the end the following new sentence: ‘‘Such
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1 term also includes such amounts as the court calculates,

2 based on hours worked and costs expended, for services

3 of an individual (whether or not an attorney) who is au4 thorized to practice before the Tax Court or before the

5 Internal Revenue Service and who represents the taxpayer

6 for no more than a nominal fee.’’

7 (d) DETERMINATION OF PREVAILING PARTY.—Para8 graph (4) of section 7430(c) is amended—

9 (A) by inserting at the end of subpara10 graph (A) the following new flush sentence:

11 ‘‘For purposes of this section, such section

12 2412(d)(2)(B) shall be applied by substituting

13 ‘$5,000,000’ for the amount otherwise applica14 ble to individuals, and ‘$35,000,000’ for the

15 amount otherwise applicable to businesses.’’,

16 and

17 (B) by adding at the end the following new

18 subparagraph:

19 ‘‘(D) SAFE HARBOR.—The position of the

20 United States was not substantially justified if

21 the United States has not prevailed on the

22 same issue in at least 3 United States Courts

23 of Appeal.’’
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to proceedings beginning after the

3 date of the enactment of this Act.

4 SEC. 303. CIVIL DAMAGES FOR NEGLIGENCE IN COLLEC5 TION ACTIONS.

6 (a) IN GENERAL.—Section 7433 (relating to civil

7 damages for certain unauthorized collection actions) is

8 amended—

9 (1) in subsection (a), by inserting ‘‘, or by rea10 son of negligence,’’ after ‘‘recklessly or inten11 tionally’’, and

12 (2) in subsection (b)—

13 (A) in the matter preceding paragraph (1),

14 by inserting ‘‘($100,000, in the case of neg15 ligence)’’ after ‘‘$1,000,000’’, and

16 (B) in paragraph (1), by inserting ‘‘or neg17 ligent’’ after ‘‘reckless or intentional’’.

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

19 this section shall apply to actions of officers or employees

20 of the Internal Revenue Service after the date of the en21 actment of this Act.

22 SEC. 304. DISCLOSURE OF CRITERIA FOR EXAMINATION

23 SELECTION.

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

25 the Secretary’s delegate shall, as soon as practicable, but
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1 not later than 180 days after the date of the enactment

2 of this Act, incorporate into the statement required by sec3 tion 6227 of the Omnibus Taxpayer Bill of Rights (Inter4 nal Revenue Service Publication No. 1) a statement which

5 sets forth in simple and nontechnical terms the criteria

6 and procedures for selecting taxpayers for examination.

7 Such statement shall not include any information the dis8 closure of which would be detrimental to law enforcement,

9 but shall specify the general procedures used by the Inter10 nal Revenue Service, including the extent to which tax11 payers are selected for examination on the basis of infor12 mation available in the media or on the basis of informa13 tion provided to the Internal Revenue Service by inform14 ants.

15 (b) TRANSMISSION TO COMMITTEES OF CON16 GRESS.—Such Secretary shall transmit drafts of the state17 ment required under subsection (a) (or proposed revisions

18 to any such statement) to the Committee on Ways and

19 Means of the House of Representatives, the Committee on

20 Finance of the Senate, and the Joint Committee on Tax21 ation on the same day.

22 SEC. 305. ARCHIVAL OF RECORDS OF INTERNAL REVENUE

23 SERVICE.

24 (a) IN GENERAL.—Subsection (l) of section 6103 (re25 lating to confidentiality and disclosure of returns and re-
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1 turn information) is amended by adding at the end the

2 following new paragraph:

3 ‘‘(16) DISCLOSURE TO NATIONAL ARCHIVES

4 AND RECORDS ADMINISTRATION.—The Secretary

5 shall, upon written request from the Archivist of the

6 United States, disclose to the Archivist all records of

7 the Internal Revenue Service for purposes of sched8 uling such records for destruction or for retention in

9 the National Archives. Any such information that is

10 retained in the National Archives shall not be dis11 closed without the express written approval of the

12 Secretary.’’

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

14 this section shall apply to requests made by the Archivist

15 after the date of the enactment of this Act.

16 SEC. 306. TAX RETURN INFORMATION.

17 The Joint Committee on Taxation shall convene a

18 study of the scope and use of provisions regarding tax19 payer confidentiality, and shall report the findings of such

20 study, together with such recommendations as it deems

21 appropriate, to the Congress no later than one year after

22 the date of the enactment of this Act. Such study shall

23 be led by a panel of experts, to be appointed by the Joint

24 Committee on Taxation, which shall examine the present

25 protections for taxpayer privacy, the need for third parties
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1 to use tax return information, and the ability to achieve

2 greater levels of voluntary compliance by allowing the pub3 lic to know who is legally required to do so, but does not

4 file tax returns.

5 SEC. 307. FREEDOM OF INFORMATION.

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

7 the Secretary’s delegate shall, as soon as practicable, but

8 not later than 180 days after the date of the enactment

9 of this Act, develop procedures under which expedited ac10 cess will be granted to requests under section 551 of title

11 5, United States Code, when—

12 (1) there exists widespread and exceptional

13 media interest in the requested information, and

14 (2) expedited processing is warranted because

15 the information sought involves possible questions

16 about the government’s integrity which affect public

17 confidence.

18 In addition, such procedures shall require the Internal

19 Revenue Service to provide an explanation to the person

20 making the request if the request is not satisfied within

21 30 days, including a summary of actions taken to date

22 and the expected completion date. Finally, to the extent

23 that any such request is not satisfied in full within 60

24 days, such person may seek a determination of whether
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1 such request should be granted by the appropriate Federal

2 district court.

3 (b) TRANSMISSION TO COMMITTEES OF CON4 GRESS.—Such Secretary shall transmit drafts of the pro5 cedures required under subsection (a) (or proposed revi6 sions to any such procedures) to the Committee on Ways

7 and Means of the House of Representatives, the Commit8 tee on Finance of the Senate, and the Joint Committee

9 on Taxation on the same day.

10 SEC. 308. OFFERS-IN-COMPROMISE.

11 (a) IN GENERAL.—Section 7122 (relating to offers12 in-compromise) is amended by adding at the end the fol13 lowing new subsection:

14 ‘‘(c) ALLOWANCES.—The Secretary shall develop and

15 publish schedules of national and local allowances to en16 sure that taxpayers entering into a compromise have an

17 adequate means to provide for basic living expenses.’’

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

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

20 of this Act.

21 SEC. 309. ELIMINATION OF INTEREST DIFFERENTIAL ON

22 OVERPAYMENTS AND UNDERPAYMENTS.

23 (a) IN GENERAL.—Subsection (a) of section 6621

24 (relating to the determination of rate of interest) is

25 amended to read as follows:
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1 ‘‘(a) GENERAL RULE.—

2 ‘‘(1) RATE.—The rate established under this

3 section shall be the sum of—

4 ‘‘(A) the Federal short-term rate deter5 mined under subsection (b), plus

6 ‘‘(B) the number of percentage points

7 specified by the Secretary.

8 ‘‘(2) DETERMINATION OF PERCENTAGE

9 POINTS.—The number of percentage points specified

10 by the Secretary for purposes of paragraph (1)(B)

11 shall be the number which the Secretary estimates

12 will result in the same net revenue to the Treasury

13 as would have resulted without regard to the amend14 ments made by section 309 of the Internal Revenue

15 Service Restructuring and Reform Act of 1997.’’

16 (b) CONFORMING AMENDMENTS.—

17 (1) Section 6621 is amended by striking sub18 section (c).

19 (2) The following provisions are each amended

20 by striking ‘‘overpayment rate’’ and inserting

21 ‘‘rate’’: Sections 42(j)(2)(B), 167(g)(2)(C),

22 460(b)(2)(C), 6343(c), 6427(i)(3)(B), 6611(a), and

23 7426(g).

24 (3) The following provisions are each amended

25 by striking ‘‘underpayment rate’’ and inserting
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1 ‘‘rate’’: Sections 42(k)(4)(A)(ii), 148(f)(4)(C)(x)(II),

2 148(f)(7)(C)(ii), 453A(c)(2)(B), 644(a)(2)(B),

3 852(e)(3)(A), 4497(c)(2), 6332(d)(1), 6601(a),

4 6602, 6654(a)(1), 6655(a)(1), and 6655(h)(1).

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

6 this section shall apply for purposes of determining inter7 ests for periods after the date of the enactment of this

8 Act.

9 SEC. 310. ELIMINATION OF APPLICATION OF FAILURE TO

10 PAY PENALTY DURING PERIOD OF INSTALL11 MENT AGREEMENT.

12 (a) IN GENERAL.—Subsection (c) of section 6651

13 (relating to the penalty for failure to file tax return or

14 to pay tax) is amended by adding at the end the following

15 new paragraph:

16 ‘‘(3) TOLLING DURING PERIOD OF INSTALL17 MENT AGREEMENT.—If the amount required to be

18 paid is the subject of an agreement for payment of

19 tax liability in installments made pursuant to section

20 6159, the additions imposed under subsection (a)

21 shall not apply so long as such agreement remains

22 in effect.’’

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

24 this section shall apply to agreements entered into after

25 the date of the enactment of this Act.
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1 SEC. 311. SAFE HARBOR FOR QUALIFICATION FOR IN2 STALLMENT AGREEMENTS.

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

4 (relating to agreements for payment of tax liability in in5 stallments) is amended—

6 (1) by striking ‘‘The Secretary is’’ and inserting

7 the following:

8 ‘‘(1) IN GENERAL.—The Secretary is’’,

9 (2) by moving the test 2 ems to the right, and

10 (3) by adding at the end the following new

11 paragraph:

12 ‘‘(2) SAFE HARBOR.—The Secretary shall enter

13 into an agreement to accept the payment of a tax li14 ability in installments if—

15 ‘‘(A) the amount of such liability does not

16 exceed $10,000,

17 ‘‘(B) the taxpayer has not failed to file any

18 tax return or pay any tax required to be shown

19 thereon during the immediately preceding 5

20 years, and

21 ‘‘(C) the taxpayer has not entered into any

22 prior installment agreement under this para23 graph.’’

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

25 this section shall apply to agreements entered into after

26 the date of the enactment of this Act.
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1 SEC. 312. PAYMENT OF TAXES.

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

3 his delegate shall establish such rules, regulations, and

4 procedures as are necessary to require payment of taxes

5 by check or money order to be made payable to the Treas6 urer, United States of America.

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

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

9 of this Act.

10 SEC. 313. LOW INCOME TAXPAYER CLINICS.

11 (a) IN GENERAL.—Chapter 77 (relating to mis12 cellaneous provisions) is amended by adding at the end

13 thereof the following new section:

14 ‘‘SEC. 7525. LOW INCOME TAXPAYER CLINICS.

15 ‘‘(a) IN GENERAL.—The Secretary shall make grants

16 to provide matching funds for the development, expansion,

17 or continuation of qualified low income taxpayer clinics.

18 ‘‘(b) DEFINITIONS.—For purposes of this section—

19 ‘‘(1) QUALIFIED LOW INCOME TAXPAYER CLIN20 IC.—

21 ‘‘(A) IN GENERAL.—The term ‘qualified

22 low income taxpayer clinic’ means a clinic

23 that—

24 ‘‘(i) represents low income taxpayers

25 in controversies with the Internal Revenue

26 Service,
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1 ‘‘(ii) operates programs to inform in2 dividuals for whom English is a second

3 language about their rights and respon4 sibilities under this title, and

5 ‘‘(iii) does not charge more than a

6 nominal fee for its services, except for re7 imbursement of actual costs incurred.

8 ‘‘(B) REPRESENTATION OF LOW INCOME

9 TAXPAYERS.—A clinic meets the requirements

10 of subparagraph (A)(i) if—

11 ‘‘(i) at least 90 percent of the tax12 payers represented by the clinic have in13 come which does not exceed 250 percent of

14 the poverty level, as determined in accord15 ance with criteria established by the Direc16 tor of the Office of Management and

17 Budget, and

18 ‘‘(ii) the amount in controversy for

19 any taxable year generally does not exceed

20 the amount specified in section 7463.

21 ‘‘(2) CLINIC.—The term ‘clinic’ includes—

22 ‘‘(A) a clinical program at an accredited

23 law school in which students represent low in24 come taxpayers in controversies arising under

25 this title, and
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1 ‘‘(B) an organization exempt from tax

2 under section 501(c) which satisfies the require3 ments of paragraph (1) through representation

4 of taxpayers or referral of taxpayers to qualified

5 representatives.

6 ‘‘(3) QUALIFIED REPRESENTATIVE.—The term

7 ‘qualified representative’ means any individual

8 (whether or not an attorney) who is authorized to

9 practice before the Internal Revenue Service or the

10 applicable court.

11 ‘‘(c) SPECIAL RULES AND LIMITATIONS.—

12 ‘‘(1) AGGREGATE LIMITATION.—Unless other13 wise provided by specific appropriation, the Sec14 retary shall not allocate more than $3,000,000 per

15 year (exclusive of costs of administering the pro16 gram) to grants under this section.

17 ‘‘(2) LIMITATION ON INDIVIDUAL GRANTS.—A

18 grant under this section shall not exceed $100,000

19 per year.

20 ‘‘(3) MULTI-YEAR GRANTS.—Upon application

21 of a qualified low income taxpayer clinic, the Sec22 retary is authorized to award a multi-year grant not

23 to exceed 3 years.
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1 ‘‘(4) CRITERIA FOR AWARDS.—In determining

2 whether to make a grant under this section, the Sec3 retary shall consider—

4 ‘‘(A) the numbers of taxpayers who will be

5 served by the clinic, including the number of

6 taxpayers in the geographical area for whom

7 English is a second language,

8 ‘‘(B) the existence of other low income tax9 payer clinics serving the same population,

10 ‘‘(C) the quality of the program offered by

11 the low income taxpayer clinic, including the

12 qualifications of its administrators and qualified

13 representatives, and its track record, if any, in

14 providing service to low income taxpayers, and

15 ‘‘(D) alternative funding sources available

16 to the clinic, including amounts received from

17 other grants and contributions, and the endow18 ment and resources of the educational institu19 tion sponsoring the clinic.

20 ‘‘(5) REQUIREMENT OF MATCHING FUNDS.—A

21 low income taxpayer clinic must provide matching

22 funds on a dollar for dollar basis for all grants pro23 vided under this section. Matching funds may in24 clude—
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1 ‘‘(A) the salary (including fringe benefits)

2 of a faculty member at an educational institu3 tion who is teaching in the clinic;

4 ‘‘(B) the salaries of administrative person5 nel employed in the clinic; and

6 ‘‘(C) the cost of equipment used in the

7 clinic.

8 Indirect expenses, including general overhead of the

9 educational institution sponsoring the clinic, shall

10 not be counted as matching funds.’’.

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

12 for chapter 77 is amended by adding at the end the follow13 ing new section:

‘‘Sec. 7525. Low income taxpayer clinics.’’

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. 314. JURISDICTION OF THE TAX COURT.

18 (a) INTEREST DETERMINATIONS.—Subsection (c) of

19 section 7481 (relating to the date when Tax Court deci20 sions become final) is amended—

21 (1) by inserting ‘‘or underpayment’’ after

22 ‘‘overpayment’’ each place it appears, and

23 (2) by striking ‘‘petition’’ in paragraph (3) and

24 inserting ‘‘motion’’.
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1 (b) EXTENSION OF TIME FOR PAYMENT OF ESTATE

2 TAX.—Section 6166 (relating to the extension of time for

3 payment of estate tax) is amended—

4 (1) by redesignating subsection (k) as sub5 section (l), and

6 (2) by inserting after subsection (j) the follow7 ing new subsection:

8 ‘‘(k) JUDICIAL REVIEW.—The Tax Court shall have

9 jurisdiction to review disputes regarding initial or continu10 ing eligibility for extensions of time for payment under

11 this section, including disputes regarding the proper

12 amount of installment payments required herein.’’

13 (c) SMALL CASE CALENDAR.—

14 (1) Subsection (a) of section 7463 (relating to

15 disputes involving $10,000 or less) is amended by

16 striking ‘‘$10,000’’ each place it appears and insert17 ing ‘‘$25,000’’.

18 (2) The section heading for section 7463 is

19 amended by striking ‘‘$10,000’’ and inserting

20 ‘‘$25,000’’.

21 (3) The item relating to section 7463 in the

22 table of sections for part II of subchapter C of chap23 ter 76 is amended by striking ‘‘$10,000’’ and insert24 ing ‘‘$25,000’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to proceedings commencing after

3 the date of the enactment of this Act.

4 SEC. 315. CATALOGING COMPLAINTS.

5 (a) IN GENERAL.—The Commissioner of Internal

6 Revenue shall, as soon as practicable, but not later than

7 180 days after the date of the enactment of this Act, de8 velop procedures to catalog and review taxpayer com9 plaints of misconduct by Internal Revenue Service employ10 ees. Such procedures should include guidelines for internal

11 review and discipline of employees, as warranted by the

12 scope of such complaints.

13 (b) HOTLINE.— The Commissioner of Internal Reve14 nue shall, as soon as practicable, but not later than 180

15 days after the date of the enactment of this Act, establish

16 a toll-free telephone number for taxpayers to register com17 plaints of misconduct by Internal Revenue Service employ18 ees, and shall publish such number in Publication 1.

19 SEC. 316. PROCEDURES INVOLVING TAXPAYER INTER20 VIEWS.

21 (a) IN GENERAL.—Paragraph (1) of section 7521(b)

22 (relating to procedures involving taxpayer interviews) is

23 amended to read as follows:
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1 ‘‘(1) EXPLANATIONS OF PROCESSES.—An offi2 cer or employee of the Internal Revenue Service

3 shall—

4 ‘‘(A) before or at an initial interview, pro5 vide to the taxpayer—

6 ‘‘(i) in the case of an in-person inter7 view with the taxpayer relating to the de8 termination of any tax, an explanation of

9 the audit process and the taxpayer’s rights

10 under such process, or

11 ‘‘(ii) in the case of an in-person inter12 view with the taxpayer relating to the col13 lection of any tax, an explanation of the

14 collection process and the taxpayer’s rights

15 under such process, and

16 ‘‘(B) before an in-person initial interview

17 with the taxpayer relating to the determination

18 of any tax—

19 ‘‘(i) inquire whether the taxpayer is

20 represented by an individual described in

21 subsection (c),

22 ‘‘(ii) explain that the taxpayer has the

23 right to have the interview take place in a

24 reasonable place and that such place does

25 not have to be the taxpayer’s home,
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1 ‘‘(iii) explain the reasons for the selec2 tion of the taxpayer’s return for examina3 tion, and

4 ‘‘(iv) provide the taxpayer with a writ5 ten explanation of the applicable burdens

6 of proof on taxpayers and the Internal

7 Revenue Service.

8 If the taxpayer is represented by an individual de9 scribed in subsection (c), the interview may not pro10 ceed without the presence of such individual unless

11 the taxpayer consents.’’

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

13 this section shall apply to interviews and examinations

14 taking place after the date of the enactment of this Act.

15 SEC. 317. EXPLANATION OF JOINT AND SEVERAL

16 LIABILITY.

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

18 the Secretary’s delegate shall, as soon as practicable, but

19 not later than 180 days after the date of the enactment

20 of this Act, establish procedures to clearly alert taxpayers

21 of their joint and several liabilities on all tax forms, publi22 cations, and instructions. Such procedures shall include

23 explanations of the possible consequences of joint and sev24 eral liability.
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1 (b) TRANSMISSION TO COMMITTEES OF CON2 GRESS.—Such Secretary shall transmit drafts of the pro3 cedures required under subsection (a) (or proposed revi4 sions to any such procedures) to the Committee on Ways

5 and Means of the House of Representatives, the Commit6 tee on Finance of the Senate, and the Joint Committee

7 on Taxation on the same day.

8 SEC. 318. PROCEDURES RELATING TO EXTENSIONS OF

9 STATUTE OF LIMITATIONS BY AGREEMENT.

10 (a) IN GENERAL.—Paragraph (4) of section 6501(c)

11 (relating to the period for limitations on assessment and

12 collection) is amended—

13 (1) by striking ‘‘Where’’ and inserting the fol14 lowing:

15 ‘‘(A) IN GENERAL.—Where’’,

16 (2) by moving the text 2 ems to the right, and

17 (3) by adding at the end the following new sub18 paragraph:

19 ‘‘(B) NOTICE TO TAXPAYER OF RIGHT TO

20 REFUSE OR LIMIT EXTENSION.—The Secretary

21 shall notify the taxpayer of the taxpayer’s right

22 to refuse to extend the period of limitations, or

23 to limit such extension to particular issues, on

24 each occasion when the taxpayer is requested to

25 provide such consent.’’
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to requests to extend the period

3 of limitations made after the date of the enactment of this

4 Act.

5 SEC. 319. REVIEW OF PENALTY ADMINISTRATION.

6 The Taxpayer Advocate shall prepare a study and

7 provide an independent report to the Committee on Ways

8 and Means of the House of Representatives, the Commit9 tee on Finance of the Senate, and the Joint Committee

10 on Taxation, no later than July 30, 1998, reviewing the

11 administration and implementation by the Internal Reve12 nue Service of the penalty reform recommendations made

13 in the Omnibus Budget Reconciliation Act of 1989, includ14 ing legislative and administrative recommendations to sim15 plify penalty administration and reduce taxpayer burden.

16 SEC. 320. STUDY OF TREATMENT OF ALL TAXPAYERS AS

17 SEPARATE FILING UNITS.

18 The Secretary of the Treasury or his delegate and

19 the Comptroller General of the United States shall each

20 conduct separate studies on the feasibility of treating each

21 individual separately for purposes of the Internal Revenue

22 Code of 1986, including recommendations for eliminating

23 the marriage penalty, addressing community property is24 sues, and reducing burden for divorced and separated tax25 payers. The reports of each study shall be delivered to the
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1 Committee on Ways and Means of the House of Rep2 resentatives, the Committee on Finance of the Senate, and

3 the Joint Committee on Taxation no later than 180 days

4 after the date of the enactment of this Act.

5 SEC. 321. STUDY OF BURDEN OF PROOF.

6 The Comptroller General of the United States shall

7 prepare a report on the burdens of proof for taxpayers

8 and the Internal Revenue Service for controversies arising

9 under the Internal Revenue Code of 1986, which shall be

10 delivered to the Committee on Ways and Means of the

11 House of Representatives, the Committee on Finance of

12 the Senate, and the Joint Committee on Taxation no later

13 than 180 days after the date of the enactment of this Act.

14 Such report shall highlight the differences between these

15 burdens and the burdens imposed in other disputes with

16 the Federal Government, and should comment on the im17 pact of changing these burdens on tax administration and

18 taxpayer rights.
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1 TITLE IV—CONGRESSIONAL AC2 COUNTABILITY FOR THE IN3 TERNAL REVENUE SERVICE

4 Subtitle A—Oversight

5 SEC. 401. EXPANSION OF POWERS OF THE JOINT COMMIT6 TEE ON TAXATION.

7 (a) IN GENERAL.—Section 8021 (relating to the pow8 ers of the Joint Committee on Taxation) is amended by

9 adding at the end the following new subsections:

10 ‘‘(e) CONSULTANT SERVICES.—The Joint Committee

11 is authorized to procure the services of experts and con12 sultants in accordance with section 3109(b) of title 5,

13 United States Code.

14 ‘‘(f) INVESTIGATIONS.—The Joint Committee shall

15 review all requests (other than requests by a Committee

16 or Subcommittee) for investigations of the Internal Reve17 nue Service by the General Accounting Office, and approve

18 such requests when appropriate, with a view towards

19 eliminating overlapping investigations, ensuring that the

20 General Accounting Office has the capacity to handle the

21 investigation, and ensuring that investigations focus on

22 areas of primary importance to tax administration.

23 ‘‘(g) RELATING TO JOINT HEARINGS.—

24 ‘‘(1) IN GENERAL.—The Chief of Staff, and

25 such other staff as are appointed pursuant to section
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1 8004, shall provide such assistance as is required for

2 joint hearings described in paragraph (2).

3 ‘‘(2) JOINT HEARINGS.—On or before April 1

4 of each calendar year after 1997, there shall be a

5 joint hearing of two members of the majority and

6 one member of the minority from each of the Com7 mittees on Finance, Appropriations, and Govern8 ment Affairs of the Senate, and the Committees on

9 Ways and Means, Appropriations, and Government

10 Reform and Oversight of the House of Representa11 tives, to review the strategic plans and budget for

12 the Internal Revenue Service. After the conclusion of

13 the annual filing season, there shall be a second an14 nual joint hearing to review other matters outlined

15 in section 8022(3)(C).’’.

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

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

18 of this Act.

19 SEC. 402. COORDINATED OVERSIGHT REPORTS.

20 (a) IN GENERAL.—Paragraph (3) of section 8022

21 (relating to the duties of the Joint Committee on Tax22 ation) is amended to read as follows:

23 ‘‘(3) REPORTS.—

24 ‘‘(A) To report, from time to time, to the

25 Committee on Finance and the Committee on
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1 Ways and Means, and, in its discretion, to the

2 Senate or House of Representatives, or both,

3 the results of its investigations, together with

4 such recommendations as it may deem advis5 able.

6 ‘‘(B) To report, annually, to the Commit7 tee on Finance and the Committee on Ways

8 and Means on the overall state of the Federal

9 tax system, together with recommendations

10 with respect to possible simplification proposals

11 and other matters relating to the administra12 tion of the Federal tax system as it may deem

13 advisable.

14 ‘‘(C) To report, annually, to the Commit15 tees on Finance, Appropriations, and Govern16 ment Affairs of the Senate, and to the Commit17 tees on Ways and Means, Appropriations, and

18 Government Reform and Oversight of the

19 House of Representatives, with respect to—

20 ‘‘(i) strategic and business plans for

21 the Internal Revenue Service;

22 ‘‘(ii) progress of the Internal Revenue

23 Service in meeting its objectives;
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1 ‘‘(iii) the budget for the Internal Rev2 enue Service and whether it supports its

3 objectives;

4 ‘‘(iv) progress of the Internal Revenue

5 Service in improving taxpayer service and

6 compliance;

7 ‘‘(v) progress of the Internal Revenue

8 Service on technology modernization; and

9 ‘‘(vi) the annual filing season.’’.

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

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

12 of this Act.

13 Subtitle B—Budget

14 SEC. 411. BUDGET DISCRETION.

15 (a) IN GENERAL.—

16 (1) ADJUSTMENTS.—For purposes of the Con17 gressional Budget Act of 1974 and the Balanced

18 Budget and Emergency Deficit Control Act of

19 1985—

20 (A) the discretionary spending limits under

21 section 601(a)(2) of the Congressional Budget

22 Act of 1974 (and those limits as cumulatively

23 adjusted) for the current fiscal year and each

24 outyear;
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1 (B) the allocations to the Committees on

2 Appropriations under sections 302(a) and

3 602(a) of the Congressional Budget Act of

4 1974; and

5 (C) the levels for major functional category

6 800 (General Government) and the appropriate

7 budgetary aggregates in the most recently

8 agreed to concurrent resolution on the budget,

9 shall be adjusted to reflect the amounts of additional

10 new budget authority or additional outlays reported

11 by the Committee on Appropriations in appropria12 tions legislation (or by the committee of conference

13 on such legislation) for the Internal Revenue Serv14 ice.

15 (2) LIMITATION.—Any adjustments made pur16 suant to paragraph (1) may be made for new initia17 tives on an annual basis only for—

18 (A) improvements in taxpayer services, in19 cluding building an integrated database of tax20 payer information accessible to front-line Inter21 nal Revenue Service personnel; or

22 (B) other improvements that the Director

23 of the Congressional Budget Office certifies to

24 the Chairpersons of the Committees on Budget

25 of the Senate and the House of Representatives
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1 that such budget authority will not increase the

2 Federal budget deficit,

3 except that funding for ongoing programs shall be

4 provided through the normal appropriations process.

5 (b) REVISED LIMITS, ALLOCATIONS, LEVELS, AND

6 AGGREGATES.—Upon the reporting of legislation pursu7 ant to subsection (a), and again upon the submission of

8 a conference report on such legislation in either House (if

9 a conference report is submitted), the Chairpersons of the

10 Committees on the Budget of the Senate and the House

11 of Representatives shall file with their respective Houses

12 appropriately revised—

13 (1) discretionary spending limits under section

14 601(a)(2) of the Congressional Budget Act of 1974

15 (and those limits as cumulatively adjusted) for the

16 current fiscal year and each outyear;

17 (2) allocations to the Committee on Appropria18 tions under sections 302(a) and 602(a) of that Act;

19 and

20 (3) levels for major functional category 800

21 (General Government) and the appropriate budg22 etary aggregates in the most recently agreed to con23 current resolution on the budget, to carry out this

24 subsection.
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1 These revised discretionary spending limits, allocations,

2 functional levels, and aggregates shall be considered for

3 purposes of congressional enforcement of that Act as the

4 discretionary spending limits, allocations, functional levels,

5 and aggregates.

6 (c) REPORTING REVISED ALLOCATIONS.—The Com7 mittees on Appropriations of the Senate and the House

8 of Representatives may report appropriately revised allo9 cations pursuant to sections 302(b) and 602(b) of the

10 Congressional Budget Act of 1974 to carry out this sec11 tion.

12 (d) CONTINGENCIES.—This section shall not apply to

13 any additional new budget authority or additional outlays

14 unless the Director of the Congressional Budget Office

15 certifies to the Chairpersons of the Committees on Appro16 priation of the Senate and the House of Representatives

17 that the Director or any other outside authority has veri18 fied that—

19 (1) the Internal Revenue Service has provided

20 them with reasonably accurate cost and revenue in21 formation;

22 (2) the Internal Revenue Service has imple23 mented adequate quality service measures consistent

24 with taxpayer rights;
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1 (3) the Internal Revenue Service has obtained

2 a clean opinion on its financial audit of appropriated

3 accounts; and

4 (4) the Internal Revenue Service has made sig5 nificant progress towards receiving a clean opinion

6 on its financial audit of custodial accounts.

7 SEC. 412. FUNDING FOR CENTURY DATE CHANGE.

8 It is the sense of Congress that funding for the Inter9 nal Revenue Service efforts to resolve the century date

10 change computing problems should be funded fully to pro11 vide for certain resolution of such problems.

12 SEC. 413. FINANCIAL MANAGEMENT ADVISORY GROUP.

13 The Commissioner shall convene a financial manage14 ment advisory group consisting of individuals with exper15 tise in governmental accounting and auditing from both

16 the private sector and the Government to advise the Com17 missioner on financial management issues, including—

18 (1) the continued partnership between the In19 ternal Revenue Service and the General Accounting

20 Office;

21 (2) the financial accounting aspects of the In22 ternal Revenue Service’s system modernization;

23 (3) the necessity and utility of year-round au24 diting; and
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1 (4) the Commissioner’s plans for improving its

2 financial management system.

3 Subtitle C—Tax Law Complexity

4 SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.

5 It is the sense of Congress that the Internal Revenue

6 Service should provide the Congress with an independent

7 view of tax administration, and that during the legislative

8 process, the tax writing committees of the Congress should

9 hear from front-line technical experts at the Internal Rev10 enue Service with respect to the administrability of pend11 ing amendments to the Internal Revenue Code of 1986.

12 SEC. 422. TAX COMPLEXITY ANALYSIS.

13 (a) IN GENERAL.—Chapter 92 (relating to powers

14 and duties of the Joint Committee on Taxation) is amend15 ed by adding at the end the following new section:

16 ‘‘SEC. 8024. TAX COMPLEXITY ANALYSIS.

17 ‘‘(a) IN GENERAL.—

18 ‘‘(1) REPORTED BILLS AND RESOLUTIONS.—

19 When a committee of the Senate or House of Rep20 resentatives reports a bill or joint resolution that in21 cludes any provision amending the Internal Revenue

22 Code of 1986, the report for such bill or joint resolu23 tion shall contain a Tax Complexity Analysis pre24 pared by the Joint Committee on Taxation for each

25 provision therein.
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1 ‘‘(2) AMENDED BILLS AND JOINT RESOLU2 TIONS; CONFERENCE REPORTS.—If a bill or joint

3 resolution is passed in an amended form (including

4 if passed by one House as an amendment in the na5 ture of a substitute for the text of a bill or joint res6 olution from the other House) or is reported by a

7 committee of conference in amended form, and the

8 amended form contains an amendment to the Inter9 nal Revenue Code of 1986 not previously considered

10 by either House, then the committee of conference

11 shall ensure that the Joint Committee on Taxation

12 prepares a Tax Complexity Analysis for each provi13 sion therein.

14 ‘‘(b) CONTENT OF COMPLEXITY ANALYSIS.—Each

15 Tax Complexity Analysis must address—

16 ‘‘(1) whether the provision is new, modifies or

17 replaces existing law, and whether hearings were

18 held to discuss the proposal and whether the Inter19 nal Revenue Service provided input as to its admin20 istrability;

21 ‘‘(2) when the provision becomes effective, and

22 corresponding compliance requirements on taxpayers

23 (e.g., effective on date of enactment, phased in, or

24 retroactive);
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1 ‘‘(3) whether new Internal Revenue Service

2 forms or worksheets are needed, whether existing

3 forms or worksheets must be modified, and whether

4 the effective date allows sufficient time for the Inter5 nal Revenue Service to prepare such forms and edu6 cate taxpayers;

7 ‘‘(4) necessity of additional interpretive guid8 ance (e.g., regulations, rulings, and notices);

9 ‘‘(5) the extent to which the proposal relies on

10 concepts contained in existing law, including defini11 tions;

12 ‘‘(6) effect on existing record keeping require13 ments and the activities of taxpayers, complexity of

14 calculations and likely behavioral responses, and

15 standard business practices and resource require16 ments;

17 ‘‘(7) number, type, and sophistication of af18 fected taxpayers; and

19 ‘‘(8) whether the proposal requires the Internal

20 Revenue Service to assume responsibilities not di21 rectly related to raising revenue which could be han22 dled through another Federal agency.

23 ‘‘(c) LEGISLATION SUBJECT TO POINT OF ORDER.—

24 ‘‘(1) IN GENERAL.—It shall not be in order in

25 the Senate or the House of Representatives to con-
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1 sider any bill, joint resolution, amendment, motion,

2 or conference report that is not accompanied by a

3 Tax Complexity Analysis for each provision therein.

4 ‘‘(2) IN THE SENATE.—Upon a point of order

5 being made by any Senator against any provision

6 under this section, and the point of order being sus7 tained by the Chair, such specific provision shall be

8 deemed stricken from the bill, resolution, amend9 ment, amendment in disagreement, or conference re10 port, and may not be offered as an amendment from

11 the floor.

12 ‘‘(3) IN THE HOUSE OF REPRESENTATIVES.—

13 ‘‘(A) It shall not be in order in the House

14 of Representatives to consider a rule or order

15 that waives the application of paragraph (1).

16 ‘‘(B) In order to be cognizable by the

17 Chair, a point of order under this section must

18 specify the precise language on which it is pre19 mised.

20 ‘‘(C) As disposition of points of order

21 under this section, the Chair shall put the ques22 tion of consideration with respect to the propo23 sition that is the subject of the points of order.

24 ‘‘(D) A question of consideration under

25 this section shall be debatable for 10 minutes
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1 by each Member initiating a point of order and

2 for 10 minutes by an opponent on each point

3 of order, but shall otherwise by decided without

4 intervening motion except one that the House

5 adjourn or that the Committee of the Whole

6 rise, as the case may be.

7 ‘‘(E) The disposition of the question of

8 consideration under this subsection with respect

9 to a bill or joint resolution shall be considered

10 also to determine the question of consideration

11 under this subsection with respect to an amend12 ment made in order as original text.

13 ‘‘(d) RESPONSIBILITIES OF THE COMMISSIONER.—

14 The Commissioner shall provide the Joint Committee on

15 Taxation with such information as is necessary to prepare

16 a Tax Complexity Analysis on each instance in which such

17 an analysis is required.’’

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

19 for chapter 92 is amended by adding at the end the follow20 ing new item:

‘‘Sec. 8024. Tax complexity analysis.’’

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

22 this section shall apply to legislation considered on or after

23 the earlier of January 1, 1998, or the 90th day after the

24 date of the enactment of an additional appropriation to
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1 carry out section 8024 of the Internal Revenue Code of

2 1986, as added by this section.

3 SEC. 423. SIMPLIFIED TAX AND WAGE REPORTING SYSTEM.

4 (a) POLICY.—It is the policy of the Congress that em5 ployers should have a single point of filing tax and wage

6 reporting information.

7 (b) ELECTRONIC FILING OF INFORMATION RE8 TURNS.—The Social Security Administration shall estab9 lish procedures no later than December 31, 1998, to ac10 cept electronic submissions of tax and wage reporting in11 formation from employers, and to forward such informa12 tion to the Internal Revenue Service, and to the tax ad13 ministrators of the States, upon request and reimburse14 ment of expenses. For purposes of this paragraph, recipi15 ents of tax and wage reporting information from the Social

16 Security Administration shall reimburse the Social Secu17 rity Administration for its incremental expenses associated

18 with accepting and furnishing such information.

19 SEC. 424. COMPLIANCE BURDEN ESTIMATES.

20 The Joint Committee on Taxation shall prepare a

21 study of the feasibility of developing a baseline estimate

22 of taxpayers’ compliance burdens against which future leg23 islative proposals could be measured.

Æ