I

104TH CONGRESS

1ST SESSION H. R. 661

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

to protect taxpayer rights.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 24, 1995

Mr. THORNTON introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

additional safeguards to protect taxpayer rights.

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

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

4 TABLE OF CONTENTS.

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

6 ‘‘Taxpayer Bill of Rights 2’’.

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

10 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.—The table of contents of

4 this Act is as follows:

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

TITLE I—TAXPAYER ADVOCATE

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

Sec. 102. Expansion of authority to issue taxpayer assistance orders.

TITLE II—MODIFICATIONS TO INSTALLMENT AGREEMENT

PROVISIONS

Sec. 201. Taxpayer’s right to installment agreement.

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

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

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

TITLE III—INTEREST

Sec. 301. Expansion of authority to abate interest.

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

demand.

TITLE IV—JOINT RETURNS

Sec. 401. Disclosure of collection activities.

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

TITLE V—COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.

Sec. 502. Offers-in-compromise.

Sec. 503. Notification of examination.

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

Sec. 505. Safeguards relating to designated summons.

TITLE VI—INFORMATION RETURNS

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

shown on such statement.

Sec. 602. Civil damages for fraudulent filing of information returns.

Sec. 603. Requirement to conduct reasonable investigations of information returns.
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TITLE VII—MODIFICATIONS TO PENALTY FOR FAILURE TO

COLLECT AND PAY OVER TAX

Sec. 701. Preliminary notice requirement.

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

to penalty.

Sec. 703. Penalties under section 6672.

TITLE VIII—AWARDING OF COSTS AND CERTAIN FEES

Sec. 801. Motion for disclosure of information.

Sec. 802. Increased limit on attorney fees.

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

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

Sec. 805. Effective date.

TITLE IX—OTHER PROVISIONS

Sec. 901. Required content of certain notices.

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

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

Sec. 904. Required notice of certain payments.

Sec. 905. Unauthorized enticement of information disclosure.

TITLE X—FORM MODIFICATIONS; STUDIES

Sec. 1000. Definitions.

Subtitle A—Form Modifications

Sec. 1001. Explanation of certain provisions.

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

name.

Sec. 1003. Rights and responsibilities of divorced individuals.

Subtitle B—Studies

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

Sec. 1012. Study on taxpayers with special needs.

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

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

Sec. 1015. Study of notices of deficiency.

Sec. 1016. Notice and form accuracy study.

1 TITLE I—TAXPAYER ADVOCATE

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

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

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

2 amended by adding at the end the following new sub3 section:

4 ‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—

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

6 Internal Revenue Service an office to be known as

7 the ‘Office of the Taxpayer Advocate’. Such office,

8 including all problem resolution officers, shall be

9 under the supervision and direction of an official to

10 be known as the ‘Taxpayer Advocate’ who shall re11 port directly to the Commissioner of Internal Reve12 nue. The Taxpayer Advocate shall be entitled to

13 compensation at the same rate as the Chief Counsel

14 for the Internal Revenue Service.

15 ‘‘(2) FUNCTIONS OF OFFICE.—

16 ‘‘(A) IN GENERAL.—It shall be the func17 tion of the Office of Taxpayer Advocate to—

18 ‘‘(i) assist taxpayers in resolving prob19 lems with the Internal Revenue Service,

20 ‘‘(ii) identify areas in which taxpayers

21 have problems in dealings with the Internal

22 Revenue Service,

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

24 changes in the administrative practices of
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1 the Internal Revenue Service to mitigate

2 problems identified under clause (ii), and

3 ‘‘(iv) identify potential legislative

4 changes which may be appropriate to miti5 gate such problems.

6 ‘‘(B) ANNUAL REPORTS.—

7 ‘‘(i) OBJECTIVES.—Not later than

8 June 30 of each calendar year after 1994,

9 the Taxpayer Advocate shall report to the

10 Committee on Ways and Means of the

11 House of Representatives and the Commit12 tee on Finance of the Senate on the objec13 tives of the Taxpayer Advocate for the fis14 cal year beginning in such calendar year.

15 Any such report shall contain full and sub16 stantive analysis, in addition to statistical

17 information.

18 ‘‘(ii) ACTIVITIES.—Not later than De19 cember 31 of each calendar year after

20 1994, the Taxpayer Advocate shall report

21 to the Committee on Ways and Means of

22 the House of Representatives and the

23 Committee on Finance of the Senate on

24 the activities of the Taxpayer Advocate

25 during the fiscal year ending during such
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1 calendar year. Any such report shall con2 tain full and substantive analysis, in addi3 tion to statistical information, and shall—

4 ‘‘(I) identify the initiatives the

5 Taxpayer Advocate has taken on im6 proving taxpayer services and Internal

7 Revenue Service responsiveness,

8 ‘‘(II) contain recommendations

9 received from individuals with the au10 thority to issue taxpayer assistance

11 orders under section 7811,

12 ‘‘(III) contain a summary of at

13 least 20 of the most serious problems

14 encountered by taxpayers, including a

15 description of the nature of such prob16 lems,

17 ‘‘(IV) contain an inventory of the

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

19 and (III) for which action has been

20 taken and the result of such action,

21 ‘‘(V) contain an inventory of the

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

23 and (III) for which action remains to

24 be completed and the period during
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1 which each item has remained on such

2 inventory,

3 ‘‘(VI) contain an inventory of the

4 items described in subclauses (II) and

5 (III) for which no action has been

6 taken, the period during which each

7 item has remained on such inventory,

8 the reasons for the inaction, and iden9 tify any Internal Revenue Service offi10 cial who is responsible for such inac11 tion,

12 ‘‘(VII) identify any Taxpayer As13 sistance Order which was not honored

14 by the Internal Revenue Service in a

15 timely manner, as specified under sec16 tion 7811(b),

17 ‘‘(VIII) contain recommendations

18 for such administrative and legislative

19 action as may be appropriate to re20 solve problems encountered by tax21 payers, and

22 ‘‘(IX) include such other infor23 mation as the Taxpayer Advocate may

24 deem advisable.
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1 ‘‘(iii) REPORT TO BE SUBMITTED DI2 RECTLY.—Each report required under this

3 subparagraph shall be provided directly to

4 the Committees referred to in clauses (i)

5 and (ii) without any prior review or com6 ment from the Commissioner of the Inter7 nal Revenue Service, the Secretary of the

8 Treasury, any other officer or employee of

9 the Department of the Treasury, or the

10 Office of Management and Budget.

11 ‘‘(3) RESPONSIBILITIES OF COMMISSIONER OF

12 INTERNAL REVENUE SERVICE.—The Commissioner

13 of Internal Revenue shall establish procedures re14 quiring a formal response to all recommendations

15 submitted to the Commissioner by the Taxpayer

16 Advocate.’’

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 7811 (relating to taxpayer assist19 ance orders) is amended—

20 (A) by striking ‘‘the Office of Ombuds21 man’’ in subsection (a) and inserting ‘‘the Of22 fice of the Taxpayer Advocate’’, and

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

24 it appears (including in the headings of sub-
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1 sections (e) and (f)) and inserting ‘‘Taxpayer

2 Advocate’’.

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

4 read as follows:

5 ‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; AS6 SISTANT COMMISSIONERS; TAXPAYER ADVO7 CATE.’’

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

9 chapter 80 of subtitle F is amended by striking the

10 item relating to section 7802 and inserting the

11 following new item:

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

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

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

14 of this Act.

15 SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER

16 ASSISTANCE ORDERS.

17 (a) TAXPAYER’S HARDSHIP.—Section 7811(a) (relat18 ing to authority to issue) is amended by striking ‘‘signifi19 cant’’.

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

21 7811 (relating to terms of taxpayer assistance orders) is

22 amended—

23 (1) by inserting ‘‘within a specified time pe24 riod’’ after ‘‘the Secretary’’, and
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1 (2) by inserting ‘‘take any action as permitted

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

3 (c) LIMITATION ON AUTHORITY TO MODIFY OR RE4 SCIND.—Section 7811(c) (relating to authority to modify

5 or rescind) is amended to read as follows:

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

7 Taxpayer Assistance Order issued by the Taxpayer Advo8 cate under this section may be modified or rescinded only

9 by the Taxpayer Advocate, the Commissioner, or any supe10 rior of either.’’

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

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

13 of this Act.

14 TITLE II—MODIFICATIONS TO

15 INSTALLMENT AGREEMENT

16 PROVISIONS

17 SEC. 201. TAXPAYER’S RIGHT TO INSTALLMENT AGREE18 MENT.

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

20 (relating to agreements for payment of tax liability in in21 stallments) is amended to read as follows:

22 ‘‘(a) IN GENERAL.—

23 ‘‘(1) AUTHORIZATION OF AGREEMENTS.—The

24 Secretary is authorized to enter into written agree25 ments with any taxpayer under which such taxpayer
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1 is allowed to satisfy liability for payment of any tax

2 in installment payments if the Secretary determines

3 that such agreement will facilitate collection of such

4 liability.

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

6 the case of any taxpayer other than a corporation,

7 the Secretary shall enter into such an agreement

8 if—

9 ‘‘(A) the taxpayer requests such an agree10 ment,

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

12 tax imposed under chapter 1 and is less than

13 $10,000, and

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

15 for the 3 preceding taxable years at the time

16 such liability was due.

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

18 the instructions for returns of the tax imposed under

19 chapter 1 the rights of taxpayers under this sub20 section and the steps necessary to exercise those

21 rights.’’

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

23 subsection (a) shall take effect on the date of the enact24 ment of this Act.
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1 SEC. 202. RUNNING OF FAILURE TO PAY PENALTY SUS2 PENDED DURING PERIOD INSTALLMENT

3 AGREEMENT IN EFFECT.

4 (a) GENERAL RULE.—Section 6651 (relating to pen5 alty for failure to file tax return or to pay tax) is amended

6 by adding at the end the following new subsection:

7 ‘‘(g) TREATMENT OF INSTALLMENT AGREEMENTS

8 UNDER SECTION 6159.—If—

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

10 6159 for the payment of any tax in installments,

11 and

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

13 enter into the agreement on or before the due date

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

15 the period during which such agreement is in effect shall

16 be disregarded in determining the amount of any addition

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

18 to such tax.’’

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

20 subsection (a) shall apply to installment agreements en21 tered into after the date of the enactment of this Act.

22 SEC. 203. NOTIFICATION OF REASONS FOR TERMINATION

23 OR DENIAL OF INSTALLMENT AGREEMENTS.

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

25 (relating to extent to which agreements remain in effect)
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1 is amended by adding at the end the following new para2 graph:

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

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

5 or (4) unless—

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

7 the taxpayer not later than the day 30 days be8 fore the date of such action, and

9 ‘‘(B) such notice includes an explanation

10 why the Secretary intends to take such action.

11 The preceding sentence shall not apply in any case

12 in which the Secretary believes that collection of any

13 tax to which an agreement under this section relates

14 is in jeopardy.’’

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

16 for payment of tax liability in installments) is amended

17 by adding at the end the following new subsection:

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

19 Secretary may not deny any request for an installment

20 agreement under this section unless—

21 ‘‘(1) a notice of the proposed denial is provided

22 to the taxpayer not later than the day 30 days be23 fore the date of such denial,

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

25 the Secretary intends to deny such request, and
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1 ‘‘(3) such notice includes a statement of the

2 taxpayer’s right to administrative review under sub3 section (d).

4 The preceding sentence shall not apply in any case in

5 which the Secretary believes that collection of any tax to

6 which a request for an agreement under this section re7 lates is in jeopardy.’’

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

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

10 ‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CON11 DITIONS.—If the Secretary makes a determination

12 that the financial condition of a taxpayer with whom

13 the Secretary has entered into an agreement under

14 subsection (a) has significantly changed, the Sec15 retary may alter, modify, or terminate such agree16 ment.’’

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

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

19 the date of the enactment of this Act.

20 SEC. 204. ADMINISTRATIVE REVIEW OF DENIAL OF RE21 QUEST FOR, OR TERMINATION OF, INSTALL22 MENT AGREEMENT.

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

24 agreements for payment of tax liability in installments),
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1 as amended by section 203(b), is amended by adding at

2 the end the following new subsection:

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

4 establish procedures for an independent administrative re5 view of denials of requests for, or terminations of, install6 ment agreements under this section.’’

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

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

9 TITLE III—INTEREST

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

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

12 6404(e) (relating to abatement of interest in certain cases)

13 is amended—

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

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

16 and

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

18 act’’ each place it appears.

19 (b) MANDATORY ABATEMENT FOR SMALL TAX20 PAYERS.—The first sentence of section 6404(e)(1) is

21 amended by inserting ‘‘in the case of a taxpayer not de22 scribed in section 7430(c)(4)(A)(iii) and shall abate the

23 assessment of such interest until the date demand for pay24 ment is made in the case of a taxpayer described in section

25 7430(c)(4)(A)(iii)’’ before the period at the end.
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1 (c) CLERICAL AMENDMENT.—The subsection head2 ing for subsection (e) of section 6404 is amended by strik3 ing ‘‘Assessments’’ and inserting ‘‘Abatement’’.

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

5 this section shall apply to interest accruing with respect

6 to deficiencies or payments for taxable years beginning

7 after the date of the enactment of this Act.

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

9 PAYMENT OF TAX AFTER NOTICE AND DE10 MAND.

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

12 6601(e) (relating to payments made within 10 days after

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

14 ‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE15 RIOD AFTER NOTICE AND DEMAND.—If notice and

16 demand is made for payment of any amount and if

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

18 amount for which such notice and demand is made

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

20 notice and demand, interest under this section on

21 the amount so paid shall not be imposed for the pe22 riod after the date of such notice and demand.’’

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

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

25 file tax return or pay tax) is amended by striking ‘‘10
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1 days’’ and inserting ‘‘21 days (10 days if the amount for

2 which such notice and demand is made equals or exceeds

3 $100,000)’’.

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

5 this section shall apply in the case of any notice and de6 mand given after December 31, 1995.

7 TITLE IV—JOINT RETURNS

8 SEC. 401. DISCLOSURE OF COLLECTION ACTIVITIES.

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

10 (relating to disclosure to persons having material interest)

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

13 ‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES

14 WITH RESPECT TO JOINT RETURN.—If any defi15 ciency of tax with respect to a joint return is as16 sessed and the individuals filing such return are no

17 longer married or no longer reside in the same

18 household, upon request in writing of either of such

19 individuals, the Secretary may disclose in writing to

20 the individual making the request whether the Sec21 retary has attempted to collect such deficiency from

22 such other individual, the general nature of such col23 lection activities, and the amount collected.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

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

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

5 RETURNS WITHOUT FULL PAYMENT OF TAX.

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

7 6013(b) (relating to limitations on filing of joint return

8 after filing separate returns) is amended by striking sub9 paragraph (A) and redesignating the following subpara10 graphs accordingly.

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

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

13 the date of the enactment of this Act.

14 TITLE V—COLLECTION

15 ACTIVITIES

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

17 (a) WITHDRAWAL OF CERTAIN NOTICES.—Section

18 6323 (relating to validity and priority against certain per19 sons) is amended by adding at the end the following new

20 subsection:

21 ‘‘(j) WITHDRAWAL OF NOTICE IN CERTAIN CIR22 CUMSTANCES.—

23 ‘‘(1) IN GENERAL.—The Secretary may with24 draw a notice of a lien filed under this section and

25 this chapter shall be applied as if the withdrawn no-
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1 tice had not been filed, if the Secretary determines

2 that—

3 ‘‘(A) the filing of such notice was pre4 mature or otherwise not in accordance with ad5 ministrative procedures of the Secretary,

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

7 agreement under section 6159 to satisfy the tax

8 liability for which the lien was imposed by

9 means of installment payments, unless such

10 agreement provides otherwise,

11 ‘‘(C) the withdrawal of such notice will fa12 cilitate the collection of the tax liability, or

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

14 the Taxpayer Advocate, the withdrawal of such

15 notice would be in the best interests of the tax16 payer (as determined by the Taxpayer Advo17 cate) and the United States.

18 Any such withdrawal shall be made by filing notice

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

20 of such notice of withdrawal shall be provided to the

21 taxpayer.

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

23 Upon written request by the taxpayer with respect

24 to whom a notice of a lien was withdrawn under

25 paragraph (1), the Secretary shall promptly make
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1 reasonable efforts to notify credit reporting agencies,

2 and any financial institution or creditor whose name

3 and address is specified in such request, of the with4 drawal of such notice. Any such request shall be in

5 such form as the Secretary may prescribe.’’

6 (b) RETURN OF LEVIED PROPERTY IN CERTAIN

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

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

9 end the following new subsection:

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

11 If—

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

13 ‘‘(2) the Secretary determines that—

14 ‘‘(A) the levy on such property was pre15 mature or otherwise not in accordance with ad16 ministrative procedures of the Secretary,

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

18 agreement under section 6159 to satisfy the tax

19 liability for which the levy was imposed by

20 means of installment payments, unless such

21 agreement provides otherwise,

22 ‘‘(C) the return of such property will facili23 tate the collection of the tax liability, or

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

25 the Taxpayer Advocate, the return of such
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1 property would be in the best interests of the

2 taxpayer (as determined by the Taxpayer Advo3 cate) and the United States,

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

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

6 except that no interest shall be allowed under subsection

7 (c).’’

8 (c) MODIFICATIONS IN CERTAIN LEVY EXEMPTION

9 AMOUNTS.—

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

11 6334(a) (relating to fuel, provisions, furniture, and

12 personal effects exempt from levy) is amended—

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

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

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

16 case of levies issued during 1989)’’ and insert17 ing ‘‘$1,750’’.

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

19 6334(a) (relating to books and tools of a trade, busi20 ness, or profession exempt from levy) is amended by

21 striking ‘‘$1,100 ($1,050 in the case of levies issued

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

23 (3) INDEXED FOR INFLATION.—Section 6334

24 (relating to property exempt from levy) is amended

25 by adding at the end the following new subsection:
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1 ‘‘(f) INFLATION ADJUSTMENTS.—

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

3 year beginning after 1996, each dollar amount re4 ferred to in paragraphs (2) and (3) of subsection (a)

5 shall be increased by an amount equal to—

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

7 ‘‘(B) the cost-of-living adjustment deter8 mined under section 1(f)(3) for such calendar

9 year, by substituting ‘calendar year 1995’ for

10 ‘calendar year 1992’ in subparagraph (B)

11 thereof.

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

13 being increased under paragraph (1) is not a mul14 tiple of $10, such dollar amount shall be rounded to

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

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

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

18 (d) EFFECTIVE DATES.—

19 (1) IN GENERAL.—Except as provided in para20 graph (2), the amendments made by this section

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

22 Act.

23 (2) EXEMPT AMOUNTS.—The amendments

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

25 to levies issued after December 31, 1995.
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1 SEC. 502. OFFERS-IN-COMPROMISE.

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

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

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

5 such a compromise in any case where the Secretary deter6 mines that such compromise would be in the best interests

7 of the United States.’’

8 (b) REVIEW REQUIREMENTS.—Subsection (b) of sec9 tion 7122 (relating to records) is amended by striking

10 ‘‘$500.’’ and inserting ‘‘$50,000. However, such com11 promise shall be subject to continuing quality review by

12 the Secretary.’’

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

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

15 of this Act.

16 SEC. 503. NOTIFICATION OF EXAMINATION.

17 (a) IN GENERAL.—Section 7605 (relating to restric18 tions on examination of taxpayer) is amended by redesig19 nating subsection (c) as subsection (d) and by inserting

20 after subsection (b) the following new subsection:

21 ‘‘(c) NOTIFICATION REQUIREMENT.—No examina22 tion described in subsection (a) shall be made unless the

23 Secretary notifies the taxpayer in writing by mail to an

24 address determined under section 6212(b) that the tax25 payer is under examination and provides the taxpayer with

26 an explanation of the process as described in section
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1 7521(b)(1). The preceding sentence shall not apply in the

2 case of any examination if the Secretary determines

3 that—

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

5 criminal investigation or is with respect to a tax the

6 collection of which is in jeopardy, or

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

8 would be inconsistent with national security needs or

9 would interfere with the effective conduct of a con10 fidential law enforcement or foreign counterintel11 ligence activity.’’

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

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

14 striking ‘‘or at’’.

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

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

17 of this Act.

18 SEC. 504. INCREASE IN LIMIT ON RECOVERY OF CIVIL

19 DAMAGES FOR UNAUTHORIZED COLLECTION

20 ACTIONS.

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

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

23 and inserting ‘‘$1,000,000’’.

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

25 subsection (a) shall apply to actions by officers or employ-
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1 ees of the Internal Revenue Service after the date of the

2 enactment of this Act.

3 SEC. 505. SAFEGUARDS RELATING TO DESIGNATED SUM4 MONS.

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

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

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

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

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

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

11 preceded by a review of such issuance by

12 the regional counsel of the Office of Chief

13 Counsel for the region in which the exam14 ination of the corporation is being con15 ducted,’’.

16 (b) NOTICE REQUIREMENTS FOR ISSUANCE.—Sec17 tion 6503(k) is amended by adding at the end the follow18 ing new paragraph:

19 ‘‘(4) NOTICE REQUIREMENTS.—With respect to

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

21 to any person other than the corporation, the Sec22 retary shall promptly notify the corporation, in writ23 ing, that such summons has been issued with respect

24 to such corporation’s return of tax.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to summons issued after the date

3 of the enactment of this Act.

4 TITLE VI—INFORMATION

5 RETURNS

6 SEC. 601. PHONE NUMBER OF PERSON PROVIDING PAYEE

7 STATEMENTS REQUIRED TO BE SHOWN ON

8 SUCH STATEMENT.

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

10 each amended by striking ‘‘name and address’’ and insert11 ing ‘‘name, address, and phone number of the information

12 contact’’:

13 (1) Section 6041(d)(1).

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

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

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

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

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

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

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

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

22 (10) Section 6050J(e).

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

24 (12) Section 6050N(b)(1).
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply to statements required to be fur3 nished after December 31, 1995 (determined without

4 regard to any extension).

5 SEC. 602. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN6 FORMATION RETURNS.

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

8 (relating to proceedings by taxpayers and third parties)

9 is amended by redesignating section 7434 as section 7435

10 and by inserting after section 7433 the following new

11 section:

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

13 INFORMATION RETURNS.

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

15 false or fraudulent information return with respect to pay16 ments purported to be made to any other person, such

17 other person may bring a civil action for damages against

18 the person so filing such return.

19 ‘‘(b) DAMAGES.—In any action brought under sub20 section (a), upon a finding of liability on the part of the

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

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

23 ‘‘(1) any actual damages sustained by the plain24 tiff as a proximate result of the filing of the false

25 or fraudulent information return (including any
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1 costs attributable to resolving deficiencies asserted

2 as a result of such filing), and

3 ‘‘(2) the costs of the action.

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

6 the liability created under this section may be brought

7 without regard to the amount in controversy and may be

8 brought only within the later of—

9 ‘‘(1) 6 years after the date of the filing of the

10 false or fraudulent information return, or

11 ‘‘(2) 1 year after the date such false or fraudu12 lent information return would have been discovered

13 by exercise of reasonable care.

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

15 person bringing an action under subsection (a) shall pro16 vide a copy of the complaint to the Internal Revenue Serv17 ice upon the filing of such complaint with the court.

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

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

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

21 of the correct amount which should have been reported

22 in the information return.

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

24 section, the term ‘information return’ means any state25 ment described in section 6724(d)(1)(A).’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for subchapter B of chapter 76 is amended by striking

3 the item relating to section 7434 and inserting the

4 following:

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

‘‘Sec. 7435. Cross references.’’

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

6 this section shall apply to false or fraudulent information

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

8 SEC. 603. REQUIREMENT TO CONDUCT REASONABLE IN9 VESTIGATIONS OF INFORMATION RETURNS.

10 (a) GENERAL RULE.—Section 6201 (relating to as11 sessment authority) is amended by redesignating sub12 section (d) as subsection (e) and by inserting after sub13 section (c) the following new subsection:

14 ‘‘(d) REQUIRED REASONABLE INVESTIGATION OF IN15 FORMATION RETURNS.—If a taxpayer asserts a reason16 able dispute with respect to any item of income reported

17 on an information return filed with the Secretary under

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

19 a determination of a deficiency based on such information

20 return, shall have the burden of proof with respect to such

21 determination unless the Secretary has conducted a rea22 sonable investigation to corroborate the accuracy of such

23 information return.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

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

4 TITLE VII—MODIFICATIONS TO

5 PENALTY FOR FAILURE TO

6 COLLECT AND PAY OVER TAX

7 SEC. 701. PRELIMINARY NOTICE REQUIREMENT.

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

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

10 tax) is amended by redesignating subsection (b) as sub11 section (c) and by inserting after subsection (a) the follow12 ing new subsection:

13 ‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—

14 ‘‘(1) IN GENERAL.—No penalty shall be im15 posed under subsection (a) unless the Secretary noti16 fies the taxpayer in writing by mail to an address as

17 determined under section 6212(b) that the taxpayer

18 shall be subject to an assessment of such penalty.

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

20 notice described in paragraph (1) shall precede any

21 notice and demand of any penalty under subsection

22 (a) by at least 60 days.

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

24 described in paragraph (1) with respect to any pen25 alty is mailed before the expiration of the period
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1 provided by section 6501 for the assessment of such

2 penalty (determined without regard to this para3 graph), the period provided by such section for the

4 assessment of such penalty shall not expire before

5 the date 90 days after the date on which such notice

6 was mailed.

7 ‘‘(4) EXCEPTION FOR JEOPARDY.—This sub8 section shall not apply if the Secretary finds that the

9 collection of the penalty is in jeopardy.’’

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

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

12 30, 1994.

13 SEC. 702. DISCLOSURE OF CERTAIN INFORMATION WHERE

14 MORE THAN 1 PERSON SUBJECT TO PEN15 ALTY.

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

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

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

19 the end the following new paragraph:

20 ‘‘(9) DISCLOSURE OF CERTAIN INFORMATION

21 WHERE MORE THAN 1 PERSON SUBJECT TO PEN22 ALTY UNDER SECTION 6672.—If the Secretary deter23 mines that a person is liable for a penalty under sec24 tion 6672(a) with respect to any failure, upon re-
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1 quest in writing of such person, the Secretary shall

2 disclose in writing to such person—

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

4 the Secretary has determined to be liable for

5 such penalty with respect to such failure, and

6 ‘‘(B) whether the Secretary has attempted

7 to collect such penalty from such other person,

8 the general nature of such collection activities,

9 and the amount collected.’’

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

11 subsection (a) shall take effect on the date of the enact12 ment of this Act.

13 SEC. 703. PENALTIES UNDER SECTION 6672.

14 (a) PUBLIC INFORMATION REQUIREMENTS.—The

15 Secretary of the Treasury or the Secretary’s delegate

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

17 shall take such actions as may be appropriate to ensure

18 that employees are aware of their responsibilities under

19 the Federal tax depository system, the circumstances

20 under which employees may be liable for the penalty im21 posed by section 6672 of the Internal Revenue Code of

22 1986, and the responsibility to promptly report to the In23 ternal Revenue Service any failure referred to in sub24 section (a) of such section 6672. Such actions shall in25 clude—
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1 (1) printing of a warning on deposit coupon

2 booklets and the appropriate tax returns that certain

3 employees may be liable for the penalty imposed by

4 such section 6672, and

5 (2) the development of a special information

6 packet.

7 (b) BOARD MEMBERS OF TAX-EXEMPT ORGANIZA8 TIONS.—

9 (1) VOLUNTARY BOARD MEMBERS.—

10 (A) IN GENERAL.—The penalty under sec11 tion 6672 of the Internal Revenue Code of 1986

12 shall not be imposed on unpaid, volunteer mem13 bers of any board of trustees or directors of an

14 organization referred to in section 501 of such

15 Code to the extent such members are solely

16 serving in an honorary capacity, do not partici17 pate in the day-to-day or financial operations of

18 the organization, and do not have actual knowl19 edge of the failure on which such penalty is im20 posed.

21 (B) APPLICATION OF PARAGRAPH.—This

22 paragraph shall not apply if it results in no per23 son being held liable for the penalty described

24 in section 6672(a) of the Internal Revenue

25 Code of 1986.
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1 (2) DEVELOPMENT OF EXPLANATORY MATE2 RIALS.—The Secretary shall develop materials ex3 plaining the circumstances under which board mem4 bers of tax-exempt organizations (including vol5 untary and honorary members) may be subject to

6 penalty under section 6672 of such Code. Such ma7 terials shall be made available to tax-exempt organi8 zations.

9 (3) IRS INSTRUCTIONS.—The Secretary shall

10 clarify the instructions to Internal Revenue Service

11 employees on the application of the penalty under

12 section 6672 of such Code with regard to voluntary

13 members of boards of trustees or directors of tax14 exempt organizations.

15 (c) PROMPT NOTIFICATION.—To the maximum ex16 tent practicable, the Secretary shall notify all persons who

17 have failed to make timely and complete deposit of any

18 taxes described in section 6672 of the Internal Revenue

19 Code of 1986 of such failure within 30 days after the re20 turn was filed reflecting such failure or after the date on

21 which the Secretary is first aware of such failure. If the

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

23 the Secretary shall notify the entity subject to such deposit

24 requirement and that entity shall notify, within 15 days
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1 of the notification by the Secretary, all officers, general

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

3 TITLE VIII—AWARDING OF

4 COSTS AND CERTAIN FEES

5 SEC. 801. MOTION FOR DISCLOSURE OF INFORMATION.

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

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

8 subparagraph:

9 ‘‘(C) MOTION FOR DISCLOSURE OF INFOR10 MATION.—Once a taxpayer substantially pre11 vails as described in subparagraph (A)(ii), the

12 taxpayer may file a motion for an order requir13 ing the disclosure (within a reasonable period of

14 time specified by the court) of all information

15 and copies of relevant records in the possession

16 of the Internal Revenue Service with respect to

17 such taxpayer’s case and the substantial jus18 tification for the position taken by the Internal

19 Revenue Service.’’

20 SEC. 802. INCREASED LIMIT ON ATTORNEY FEES.

21 Paragraph (1) of section 7430(c) (defining reason22 able litigation costs) is amended—

23 (1) by striking ‘‘$75’’ in clause (iii) of subpara24 graph (B) and inserting ‘‘$110’’,
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1 (2) by striking ‘‘an increase in the cost of living

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

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

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

5 1995, the dollar amount referred to in clause (iii)

6 shall be increased by an amount equal to such dollar

7 amount multiplied by the cost-of-living adjustment

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

9 year, by substituting ‘calendar year 1994’ for ‘cal10 endar year 1992’ in subparagraph (B) thereof. If

11 any dollar amount after being increased under the

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

13 dollar amount shall be rounded to the nearest mul14 tiple of $10 (or, if such dollar amount is a multiple

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

16 next higher multiple of $10).’’

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

18 INTO ACCOUNT.

19 Paragraph (1) of section 7430(b) (relating to require20 ment that administrative remedies be exhausted) is

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

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

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

24 purposes of determining whether the prevailing party

25 meets the requirements of the preceding sentence.’’
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1 SEC. 804. AUTHORITY FOR COURT TO AWARD REASONABLE

2 ADMINISTRATIVE COSTS.

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

4 ‘‘(B) the position taken in an administra5 tive proceeding to which subsection (a) applies.’’

6 SEC. 805. EFFECTIVE DATE.

7 The amendments made by this title shall apply in the

8 case of proceedings commenced after the date of the enact9 ment of this Act.

10 TITLE IX—OTHER PROVISIONS

11 SEC. 901. REQUIRED CONTENT OF CERTAIN NOTICES.

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

13 (relating to content of tax due, deficiency, and other no14 tices) is amended by striking ‘‘shall describe the basis for,

15 and identify’’ and inserting ‘‘shall set forth the adjust16 ments which are the basis for, and shall identify’’.

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

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

19 6 months after the date of the enactment of this Act.

20 SEC. 902. TREATMENT OF SUBSTITUTE RETURNS UNDER

21 SECTION 6651.

22 (a) GENERAL RULE.—Section 6651 (relating to fail23 ure to file tax return or to pay tax), as amended by section

24 202(a), is amended by adding at the end the following new

25 subsection:
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1 ‘‘(h) TREATMENT OF RETURNS PREPARED BY SEC2 RETARY UNDER SECTION 6020(b).—In the case of any

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

4 ‘‘(1) such return shall be disregarded for pur5 poses of determining the amount of the addition

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

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

8 filed by the taxpayer for purposes of determining the

9 amount of the addition under paragraphs (2) and

10 (3) of subsection (a).’’

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

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

13 due date for which (determined without regard to exten14 sions) is after the date of the enactment of this Act.

15 SEC. 903. RELIEF FROM RETROACTIVE APPLICATION OF

16 TREASURY DEPARTMENT REGULATIONS.

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

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

19 follows:

20 ‘‘(b) RETROACTIVITY OF REGULATIONS.—

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided in this subsection, no temporary, proposed, or

23 final regulation relating to the internal revenue laws

24 shall apply to any taxable period ending before the

25 earliest of the following dates:
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1 ‘‘(A) The date on which such regulation is

2 filed with the Federal Register.

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

4 the date on which any proposed or temporary

5 regulation to which such final regulation relates

6 was filed with the Federal Register.

7 ‘‘(C) The date on which any notice sub8 stantially describing the expected contents of

9 any temporary, proposed, or final regulation is

10 issued to the public.

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

12 may provide that any regulation may take effect or

13 apply retroactively to prevent abuse of a statute to

14 which the regulation relates.

15 ‘‘(3) CORRECTION OF PROCEDURAL DE16 FECTS.—The Secretary may provide that any regu17 lation may apply retroactively to correct a proce18 dural defect in the issuance of any prior regulation.

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

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

21 relating to internal Treasury Department policies,

22 practices, or procedures.

23 ‘‘(5) CONGRESSIONAL AUTHORIZATION.—The

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

25 legislative grant from Congress authorizing the Sec-
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1 retary to prescribe the effective date with respect to

2 any regulation.

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

4 The Secretary may provide for any taxpayer to elect

5 to apply any regulation before the dates specified in

6 paragraph (1).

7 ‘‘(7) APPLICATION TO RULINGS.—The Sec8 retary may prescribe the extent, if any, to which any

9 ruling (including any judicial decision or any admin10 istrative determination other than by regulation) re11 lating to the internal revenue laws shall be applied

12 without retroactive effect.’’

13 (b) EFFECTIVE DATE.—

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendment made by subsection (a)

16 shall apply with respect to—

17 (A) any temporary or proposed regulation

18 filed on or after January 5, 1993, and

19 (B) any temporary or proposed regulation

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

21 final regulation after such date.

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

23 Internal Revenue Code of 1986 (as added by sub24 section (a)) shall apply only to statutes enacted on

25 or after the date of the enactment of this Act.
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1 SEC. 904. REQUIRED NOTICE OF CERTAIN PAYMENTS.

2 If any payment is received by the Secretary of the

3 Treasury or the Secretary’s delegate (hereafter in this sec4 tion referred to as the ‘‘Secretary’’) from any taxpayer

5 and the Secretary cannot associate such payment with any

6 outstanding tax liability of such taxpayer, the Secretary

7 shall make reasonable efforts to notify the taxpayer of

8 such inability within 60 days after the receipt of such

9 payment.

10 SEC. 905. UNAUTHORIZED ENTICEMENT OF INFORMATION

11 DISCLOSURE.

12 (a) IN GENERAL.—Subchapter B of chapter 76 (re13 lating to proceedings by taxpayers and third parties), as

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

15 section 7435 as section 7436 and by inserting after sec16 tion 7434 the following new section:

17 ‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE18 MENT OF INFORMATION DISCLOSURE.

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

20 United States intentionally compromises the determina21 tion or collection of any tax due from an attorney, certified

22 public accountant, or enrolled agent representing a tax23 payer in exchange for information conveyed by the tax24 payer to the attorney, certified public accountant, or en25 rolled agent for purposes of obtaining advice concerning

26 the taxpayer’s tax liability, such taxpayer may bring a civil
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1 action for damages against the United States in a district

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

3 exclusive remedy for recovering damages resulting from

4 such actions.

5 ‘‘(b) DAMAGES.—In any action brought under sub6 section (a), upon a finding of liability on the part of the

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

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

9 of—

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

11 by the plaintiff as a proximate result of the informa12 tion disclosure, and

13 ‘‘(2) the costs of the action.

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

15 civil or criminal penalties, or other losses attributable to

16 incarceration or the imposition of other criminal sanctions.

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

18 this section shall be payable out of funds appropriated

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

20 ‘‘(d) PERIOD FOR BRINGING ACTION.—Notwith21 standing any other provision of law, an action to enforce

22 liability created under this section may be brought without

23 regard to the amount in controversy and may be brought

24 only within 2 years after the date the actions creating such
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1 liability would have been discovered by exercise of reason2 able care.

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

4 Commissioner or the Commissioner’s delegate that there

5 is an ongoing investigation or prosecution of the taxpayer,

6 the district court before which an action under this section

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

8 action pending the conclusion of the investigation or

9 prosecution.

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

11 shall not apply to information conveyed to an attorney,

12 certified public accountant, or enrolled agent for the pur13 pose of perpetrating a fraud or crime.’’

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

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

16 602(b), is amended by striking the item relating to section

17 7435 and by adding at the end the following new items:

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

‘‘Sec. 7436. Cross references.’’

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

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

20 enactment of this Act.

21 TITLE X—FORM

22 MODIFICATIONS; STUDIES

23 SEC. 1000. DEFINITIONS.

24 For purposes of this title:
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1 (1) SECRETARY.—The term ‘‘Secretary’’ means

2 the Secretary of the Treasury or his delegate.

3 (2) 1986 CODE.—The term ‘‘1986 Code’’

4 means the Internal Revenue Code of 1986.

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

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

7 Ways and Means of the House of Representatives

8 and the Committee on Finance of the Senate.

9 Subtitle A—Form Modifications

10 SEC. 1001. EXPLANATION OF CERTAIN PROVISIONS.

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

12 actions as may be appropriate to ensure that taxpayers

13 are aware of the provisions of the 1986 Code permitting

14 payment of tax in installments, extensions of time for pay15 ment of tax, and compromises of tax liability. Such actions

16 shall include revising the instructions for filing income tax

17 returns so that such instructions include an explanation

18 of—

19 (1) the procedures for requesting the benefits of

20 such provisions, and

21 (2) the terms and conditions under which the

22 benefits of such provisions are available.

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

24 underpayment of tax or proposed underpayment of tax

25 sent by the Secretary to any taxpayer, the Secretary shall
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1 include a notification of the availability of the provisions

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

3 SEC. 1002. IMPROVED PROCEDURES FOR NOTIFYING SERV4 ICE OF CHANGE OF ADDRESS OR NAME.

5 The Secretary shall provide improved procedures for

6 taxpayers to notify the Secretary of changes in names and

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

8 shall institute procedures for timely updating all Internal

9 Revenue Service records with change-of-address informa10 tion provided to the Secretary by taxpayers.

11 SEC. 1003. RIGHTS AND RESPONSIBILITIES OF DIVORCED

12 INDIVIDUALS.

13 The Secretary shall include in the Internal Revenue

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

15 a section on the rights and responsibilities of divorced

16 individuals.

17 Subtitle B—Studies

18 SEC. 1011. PILOT PROGRAM FOR APPEAL OF ENFORCE19 MENT ACTIONS.

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

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

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

23 Division of the Internal Revenue Service—

24 (1) where the deficiency was assessed without

25 actual knowledge of the taxpayer,
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1 (2) where the deficiency was assessed without

2 an opportunity for administrative appeal, and

3 (3) in other appropriate circumstances.

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

5 Secretary shall submit to the tax-writing Committees a re6 port on the pilot program established under subsection (a),

7 together with such recommendations as he may deem

8 advisable.

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

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

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

12 foreign-language speaking, and other taxpayers with spe13 cial needs to comply with the internal revenue laws.

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

15 Secretary shall submit to the tax-writing Committees a re16 port on the study conducted under subsection (a), together

17 with such recommendations as he may deem advisable.

18 SEC. 1013. REPORTS ON TAXPAYER-RIGHTS EDUCATION

19 PROGRAM.

20 Not later than April 1, 1996, the Secretary shall sub21 mit a report to the tax-writing Committees on the scope

22 and content of the Internal Revenue Service’s taxpayer23 rights education program for its officers and employees.

24 Not later than June 30, 1996, the Secretary shall submit
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1 a report to the tax-writing Committees on the effectiveness

2 of the program referred to in the preceding sentence.

3 SEC. 1014. BIENNIAL REPORTS ON MISCONDUCT BY INTER4 NAL REVENUE SERVICE EMPLOYEES.

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

6 each second calendar year thereafter, the Secretary shall

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

8 complaints about misconduct of Internal Revenue Service

9 employees and the disposition of such complaints.

10 SEC. 1015. STUDY OF NOTICES OF DEFICIENCY.

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

12 conduct a study on—

13 (1) the effectiveness of current Internal Reve14 nue Service efforts to notify taxpayers with regard

15 to tax deficiencies under section 6212 of the 1986

16 Code,

17 (2) the number of registered or certified letters

18 and other notices returned to the Internal Revenue

19 Service as undeliverable,

20 (3) any followup action taken by the Internal

21 Revenue Service to locate taxpayers who did not re22 ceive actual notice,

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

24 such deficiencies have on taxpayers, and
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1 (5) recommendations to improve Internal Reve2 nue Service notification of taxpayers.

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

4 Comptroller General shall submit to the tax-writing Com5 mittees a report on the study conducted under subsection

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

7 advisable.

8 SEC. 1016. NOTICE AND FORM ACCURACY STUDY.

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

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

11 commonly used Internal Revenue Service forms, notices,

12 and publications. In conducting any such study, the Comp13 troller General shall examine the suitability and usefulness

14 of Internal Revenue Service telephone numbers on Inter15 nal Revenue Service notices and shall solicit and consider

16 the comments of organizations representing taxpayers,

17 employers, and tax professionals.

18 (b) REPORTS.—The Comptroller General shall sub19 mit to the tax-writing Committees a report on each study

20 conducted under subsection (a), together with such rec21 ommendations as he may deem advisable. The first such

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

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HR 661 IH——3
49

•HR 661 IH

HR 661 IH——4