Taxpayer Bill of Rights Enhancement Act of 2017

To amend the Internal Revenue Code of 1986 to enhance taxpayer rights, and for other purposes. 1. Short title, etc (a) Short title This Act may be cited as the Taxpayer Bill of Rights Enhancement Act of 2017 (b) Amendment of 1986 Code Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title, etc. TITLE I—The right to privacy Sec. 101. Civil damages for unauthorized disclosure or inspection. Sec. 102. Compliance by contractors with confidentiality safeguards. TITLE II—The right to appeal in an independent forum and to challenge the Internal Revenue Service position and be heard Sec. 201. Increase in limitations on civil damages for certain unauthorized collection actions. Sec. 202. Extension of time limit for contesting IRS levy. TITLE III—The right to a fair and just tax system Sec. 301. Waiver of user fee for installment agreements using automated withdrawals. Sec. 302. Individuals held harmless on improper levy on retirement plans. Sec. 303. Office of Chief Counsel review of offers-in-compromise. Sec. 304. Increase in and expansion of individual estimated tax exception. Sec. 305. Modifications to computation of individual estimated tax. Sec. 306. Corporate estimated tax. Sec. 307. Increase in large corporation threshold for estimated tax payments. Sec. 308. Expansion of interest netting. Sec. 309. Clarification of application of Federal tax deposit penalty. TITLE IV—The right to be informed Sec. 401. Collection activities with respect to joint return disclosable to either spouse based on oral request. Sec. 402. Mandatory electronic filing for annual returns of exempt organizations. TITLE V—The right to quality service Sec. 501. Free electronic filing. Sec. 502. Access to appeals. I The right to privacy 101. Civil damages for unauthorized disclosure or inspection (a) Notice to Taxpayer Subsection (e) of section 7431 The Secretary shall also notify such taxpayer if the Internal Revenue Service or, upon notice to the Secretary by a Federal or State agency, if such Federal or State agency, proposes an administrative determination as to disciplinary or adverse action against an employee arising from the employee’s unauthorized inspection or disclosure of the taxpayer’s return or return information. The notice described in this subsection shall include the date of the inspection or disclosure and the rights of the taxpayer under such administrative determination. (b) Payment Authority Clarified (1) In general Section 7431 (i) Payment Authority Claims pursuant to subsection (a)(1) shall be payable out of funds appropriated under section 1304 of title 31, United States Code. . (2) Annual reports of payments The Secretary of the Treasury shall annually report to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives regarding payments made from the United States Judgment Fund under section 7431(i) (c) Burden of Proof for Good Faith Exception Rests With Person Making Inspection or Disclosure Section 7431(b) In any proceeding involving the existence of a good faith but erroneous interpretation of section 6103, the burden of proof with respect to such issue shall be on the person who made the inspection or disclosure, or in the case of a suit pursuant to paragraph (a)(1), the United States. . (d) Reports Subsection (p) of section 6103 (9) Report on willful unauthorized disclosure and inspection As part of the report required by paragraph (3)(C) for each calendar year, the Secretary shall furnish information regarding the willful unauthorized disclosure and inspection of returns and return information, including the number, status, and results of— (A) administrative investigations, (B) civil lawsuits brought under section 7431 (including the amounts for which such lawsuits were settled and the amounts of damages awarded), and (C) criminal prosecutions. . (e) Increase in amount of damages per violation (1) In general Subparagraph (A) of section 7431(c)(1) (A) the sum of— (i) $5,000 for each act of unauthorized inspection of a return or return information with respect to which such defendant is found liable, and (ii) $10,000 for each act of unauthorized disclosure of a return or return information with respect to which such defendant is found liable, or . (2) Punitive damages (A) In general Section 7431(c) (2) in the case of willful inspection or disclosure or an inspection or disclosure which is the result of gross negligence, punitive damages, plus . (B) Conforming amendment Subparagraph (B) of section 7431(c)(1) (B) the actual damages sustained by the plaintiff as a result of such unauthorized inspection or disclosure, plus . (f) Effective Dates (1) Notice The amendment made by subsection (a) shall apply to determinations made after the date which is 180 days after the date of the enactment of this Act. (2) Payment authority The amendment made by subsection (b)(1) shall take effect on the date which is 180 days after the date of the enactment of this Act. (3) Burden of proof The amendments made by subsection (c) shall apply to inspections and disclosures occurring on and after the date which is 180 days after the date of the enactment of this Act. (4) Reports Subsection (b)(2) and the amendment made by subsection (d) shall apply to calendar years ending after the date which is 180 days after the date of the enactment of this Act. (5) Increase in damages The amendment made by subsection (e) shall apply to proceedings commenced after the date of the enactment of this Act. 102. Compliance by contractors with confidentiality safeguards (a) In General Section 6103(p), as amended by this Act, is amended by adding at the end the following new paragraph: (10) Disclosure to contractors and other agents Notwithstanding any other provision of this section, no return or return information shall be disclosed to any contractor or other agent of a Federal, State, or local agency unless such agency, to the satisfaction of the Secretary— (A) has requirements in effect which require each such contractor or other agent which would have access to returns or return information to provide safeguards (within the meaning of paragraph (4)) to protect the confidentiality of such returns or return information, (B) agrees to conduct an on-site review every 3 years (or a mid-point review in the case of contracts or agreements of less than 3 years in duration) of each contractor or other agent to determine compliance with such requirements, (C) submits the findings of the most recent review conducted under subparagraph (B) to the Secretary as part of the report required by paragraph (4)(E), and (D) certifies to the Secretary for the most recent annual period that such contractor or other agent is in compliance with all such requirements. The certification required by subparagraph (D) shall include the name and address of each contractor and other agent, a description of the contract or agreement with such contractor or other agent, and the duration of such contract or agreement. The requirements of this paragraph shall not apply to disclosures pursuant to subsection (n) for purposes of Federal tax administration. . (b) Conforming Amendment Subparagraph (B) of section 6103(p)(8) or paragraph (10) subparagraph (A) (c) Effective Date (1) In general The amendments made by this section shall apply to disclosures made after the date of the enactment of this Act. (2) Certifications The first certification under section 6103(p)(10)(D) II The right to appeal in an independent forum and to challenge the Internal Revenue Service position and be heard 201. Increase in limitations on civil damages for certain unauthorized collection actions (a) In general Section 7433(b) $1,000,000 ($100,000 $1,500,000 ($150,000 (b) Punitive damages in the case of reckless or intentional action Subsection (b) of section 7433 (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and by moving such subparagraphs 2 ems to the right, (2) by striking In any action (1) In general In any action , and (3) by adding at the end the following new paragraph: (2) Punitive damages for willful and reckless actions In any action brought under subsection (a) or petition filed under subsection (e) in which the defendant is found to be liable and to have acted recklessly or intentionally, the court may award the plaintiff punitive damages. . (c) Period for bringing action Paragraph (3) of section 7433(d) the date the right of action accrues the later of the date of on which administrative remedies available within the Internal Revenue Service have been exhausted or the date on which the taxpayer reasonably could have discovered that the actions of the officer or employee were done in disregard of a provision of this title or any regulation promulgated under this title (d) Effective date The amendments made by this section shall apply in the case of proceedings commenced after the date of the enactment of this Act. 202. Extension of time limit for contesting IRS levy (a) Extension of Time for Return of Property Subject to Levy Subsection (b) of section 6343 9 months 2 years (b) Period of Limitation on Suits Subsection (c) of section 6532 (1) by striking 9 months 2 years (2) by striking 9-month 2-year (c) Effective Date The amendments made by this section shall apply to— (1) levies made after the date of the enactment of this Act, and (2) levies made on or before such date if the 9-month period has not expired under section 6343(b) III The right to a fair and just tax system 301. Waiver of user fee for installment agreements using automated withdrawals (a) In General Section 6159 (e) Waiver of user fees for installment agreements using automated withdrawals In the case of a taxpayer who enters into an installment agreement in which automated installment payments are agreed to, the Secretary shall waive the fee (if any) for entering into the installment agreement. . (b) Effective Date The amendments made by this section shall apply to agreements entered into on or after the date which is 180 days after the date of the enactment of this Act. 302. Individuals held harmless on improper levy on retirement plans (a) In General Section 6343 (f) Individuals Held Harmless on Wrongful Levy, etc. on Retirement Plan (1) In general If the Secretary determines that an individual's account or benefit under an eligible retirement plan (as defined in section 402(c)(8)(B)) has been levied upon in a case to which subsection (b) or (d)(2)(A) applies and property or an amount of money is returned to the individual— (A) the individual may contribute such property or an amount equal to the sum of— (i) the amount of money so returned by the Secretary, and (ii) interest paid under subsection (c) on such amount of money, into such eligible retirement plan if such contribution is permitted by the plan, or into an individual retirement plan (other than an endowment contract) to which a rollover contribution of a distribution from such eligible retirement plan is permitted, but only if such contribution is made not later than the due date (not including extensions) for filing the return of tax for the taxable year in which such property or amount of money is returned, and (B) the Secretary shall, at the time such property or amount of money is returned, notify such individual that a contribution described in subparagraph (A) may be made. (2) Treatment as rollover The distribution on account of the levy and any contribution under paragraph (1) with respect to the return of such distribution shall be treated for purposes of this title as if such distribution and contribution were described in section 402(c), 402A(c)(3), 403(a)(4), 403(b)(8), 408(d)(3), 408A(d)(3), or 457(e)(16), whichever is applicable; except that— (A) the contribution shall be treated as having been made for the taxable year in which the distribution on account of the levy occurred, and the interest paid under subsection (c) shall be treated as earnings within the plan after the contribution and shall not be included in gross income, and (B) such contribution shall not be taken into account under section 408(d)(3)(B). (3) Refund, etc., of income tax on levy (A) In general If any amount is includible in gross income for a taxable year by reason of a distribution on account of a levy referred to in paragraph (1) and any portion of such amount is treated as a rollover contribution under paragraph (2), any tax imposed by chapter 1 on such portion shall not be assessed, and if assessed shall be abated, and if collected shall be credited or refunded as an overpayment made on the due date for filing the return of tax for such taxable year. (B) Exception Subparagraph (A) shall not apply to a rollover contribution under this subsection which is made from an eligible retirement plan which is not a Roth IRA or a designated Roth account (within the meaning of section 402A) to a Roth IRA or a designated Roth account under an eligible retirement plan. (4) Interest Notwithstanding subsection (d), interest shall be allowed under subsection (c) in a case in which the Secretary makes a determination described in subsection (d)(2)(A) with respect to a levy upon an individual retirement plan. (5) Treatment of inherited accounts For purposes of paragraph (1)(A), section 408(d)(3)(C) shall be disregarded in determining whether an individual retirement plan is a plan to which a rollover contribution of a distribution from the plan levied upon is permitted. . (b) Effective Date The amendment made by this section shall apply to amounts paid under subsections (b), (c), and (d)(2)(A) of section 6343 303. Office of Chief Counsel review of offers-in-compromise (a) In General Section 7122(b) Whenever a compromise his delegate If the Secretary determines that an opinion of the General Counsel for the Department of the Treasury, or the Counsel’s delegate, is required with respect to a compromise, there shall be placed on file in the office of the Secretary such opinion (b) Conforming Amendments Section 7122(b) (c) Effective Date The amendments made by this section shall apply to offers-in-compromise submitted or pending on or after the date of the enactment of this Act. 304. Increase in and expansion of individual estimated tax exception (a) In general Paragraph (1) of section 6654(e) (1) Where tax is small amount (A) In general No addition to tax shall be imposed under subsection (a) for any taxable year if— (i) the excess (if any) of the tax shown on the return for such taxable year (or, if no return is filed, the tax) over the sum of— (I) the estimated tax paid for such taxable year, plus (II) credit allowable under section 31, is less than (ii) $2,000. (B) Exception (i) In general No amount of estimated tax paid for a taxable year shall be taken into account under subparagraph (A)(i)(I) after the first due date (as determined under subsection (c)(2)) for which the individual's required installment was greater than zero and more than 10 percent of the required installment was not paid by such date. (ii) Order of crediting payments In determining whether a payment was made for purposes of clause (i), a payment of estimated tax shall be credited against unpaid required installments in the order in which such installments are required to be paid. . (b) Effective Date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 305. Modifications to computation of individual estimated tax (a) In general Section 6654 (a) Addition to the Tax (1) In general Except as otherwise provided in this section, in the case of any underpayment of estimated tax by an individual for a taxable year, there shall be added to the tax under chapter 1, the tax under chapter 2, and the tax under chapter 2A for such taxable year the sum of the amounts determined under paragraph (2) for each day for which there is an underpayment. (2) Amount of addition to tax The amount determined under this paragraph for any day shall be the product of— (A) the underpayment rate established under subsection (b)(2) for such day, multiplied by (B) the amount of the underpayment for such day. (b) Amount of underpayment; underpayment rate For purposes of subsection (a)— (1) Amount The amount of underpayment on any day shall be the excess (if any) of— (A) the sum of the required installments for the taxable year the due dates for which are on or before such day, over (B) the sum of the amounts of estimated tax payments made for such taxable year on or before such day. (2) Determination of underpayment rate (A) In general The underpayment rate with respect to any day in an installment underpayment period shall be the underpayment rate established under section 6621 for the first day of the calendar quarter in which such installment underpayment period begins. (B) Installment underpayment period For purposes of subparagraph (A), the term installment underpayment period (C) Daily rate The rate determined under subparagraph (A) shall be applied on a daily basis and shall be based on the assumption of 365 days in a calendar year. (3) Termination of estimated tax underpayment No day after the end of the installment underpayment period for the 4th required installment specified in paragraph (2)(B) for a taxable year shall be treated as a day of underpayment with respect to such taxable year. . (b) Effective Date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 306. Corporate estimated tax (a) Increase in Small Tax Amount Exception Section 6655(f) $500 $2,000 (b) Effective Date The amendment made by this section shall apply to taxable years beginning after December 31, 2017. 307. Increase in large corporation threshold for estimated tax payments (a) In General Section 6655(g)(2) (1) by striking $1,000,000 $1,500,000 (2) by striking the $1,000,000 amount specified in subparagraph (A) the amount in effect for the taxable year under subparagraph (A) (3) by inserting after subparagraph (B) the following new subparagraph: (C) Inflation adjustment (i) In general In the case of any taxable year beginning in a calendar year after 2018, the $1,500,000 amount in subparagraph (A) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 calendar year 1992 (ii) Rounding If any dollar amount, after being increased under paragraph (1), is not a multiple of $1,000, such dollar amount shall be rounded to the next lowest multiple of $1,000. . (b) Effective Date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 308. Expansion of interest netting (a) In General Subsection (d) of section 6621 Solely for purposes of the preceding sentence, section 6611(e) shall not apply. (b) Effective Date The amendment made by this section shall apply to interest accrued after December 31, 2017. 309. Clarification of application of Federal tax deposit penalty Nothing in section 6656 IV The right to be informed 401. Collection activities with respect to joint return disclosable to either spouse based on oral request (a) In General Paragraph (8) of section 6103(e) in writing (b) Effective Date The amendment made by this section shall apply to requests made after the date of the enactment of this Act. 402. Mandatory electronic filing for annual returns of exempt organizations (a) In general Section 6033 (n) Mandatory electronic filing Any organization required to file a return under this section shall file such return in electronic form. . (b) Inspection of electronically filed annual returns Subsection (b) of section 6104 Any annual return required to be filed electronically under section 6033(n) shall be made available by the Secretary to the public in machine readable format. (c) Effective date (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. (2) Transitional relief (A) Small organizations (i) In general In the case of any small organizations, or any other organizations for which the Secretary determines the application of the amendments made by subsection (a) would cause undue burden without a delay, the Secretary may delay the application of such amendments, but not later than taxable years beginning 2 years after the date of the enactment of this Act. (ii) Small organization For purposes of clause (i), the term small organization (I) the gross receipts of which for the taxable year are less than $200,000, and (II) the aggregate gross assets of which at the end of the taxable year are less than $500,000. (B) Organizations filing form 990–T In the case of any organization described in section 511(a)(2) V The right to quality service 501. Free electronic filing (a) In general The Secretary of the Treasury (or the Secretary's delegate) shall, in cooperation with the private sector technology industry, maintain a program that provides free individual income tax preparation and electronic filing services to low-income taxpayers and elderly taxpayers. (b) Requirements of program The Secretary shall by regulation or other guidance prescribe with respect to the program— (1) the qualifications, selection process, and contract term for businesses participating in the program, (2) a process for periodic review of businesses participating in the program, (3) procedures for terminating business participation in the program for failure to comply with any program requirements, and (4) such other procedures as the Secretary determines are necessary or appropriate to carry out the purposes of the program. (c) Free File program The Internal Revenue Service Free File program, as set forth in the notice published in the Federal Register on November 4, 2002 (67 Fed. Reg. 67247), shall be treated as meeting the requirements of subsection (a). 502. Access to appeals Subsection (b) of section 3465 of the Internal Revenue Service Restructuring and Reform Act of 1998 is amended by striking an appeals officer is regularly available within each State there is at least one appeals officer and one settlement officer located and permanently available in each State, the District of Columbia, and Puerto Rico

Summary: Taxpayer Bill of Rights Enhancement Act of 2017 This bill amends the Internal Revenue Code, with respect to provisions affecting taxpayer rights, to: increase penalties for unauthorized disclosure or inspection of taxpayer information and allow punitive damages for willful unauthorized inspection or disclosure; prohibit the disclosure of taxpayer information to any contractor or other agent of a governmental entity without confidentiality safeguards; increase the limit on civil damages for unauthorized collection actions by Internal Revenue Service (IRS) employees and allow punitive damages for reckless or intentional actions; extend to two years the time limit for contesting a tax levy or for seeking a return of wrongfully levied property; waive user fees for taxpayers who agree to automated installment payments; allow amounts that have been wrongfully levied from retirement accounts to be recontributed without regard to contribution limits; modify the requirements and exceptions that apply to payments of estimated taxes; require the disclosure of collection activities relating to a joint account upon the oral request of either spouse (currently, a written request is required); and require tax-exempt organizations to file their tax returns in electronic form. The IRS must maintain a program that provides free tax preparation and electronic filing services to low-income and elderly taxpayers. The bill amends the Internal Revenue Service Restructuring and Reform Act of 1998 to require at least one IRS appeals officer and one settlement officer to be located and permanently available in each state, the District of Columbia, and Puerto Rico.