In the House of Representatives, U. S.,
April 18, 2002.
Resolved, That the House agree to the amendment of the
Senate to the bill (H.R. 586) entitled ‘‘An Act to amend the
Internal Revenue Code of 1986 to provide that the exclusion
from gross income for foster care payments shall also apply
to payments by qualified placement agencies, and for other
purposes’’, with the following
HOUSE AMENDMENTS TO SENATE AMENDMENT:
In lieu of the matter proposed to be inserted by the
Senate, strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Tax
Relief Guarantee Act of 2002’’.
(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 consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—TAX REDUCTIONS MADE PERMANENT
Sec. 101. Tax reductions made permanent.
Sec. 102. Protection of social security and medicare.
TITLE II—TAXPAYER PROTECTION AND IRS ACCOUNTABILITY
Sec. 201. Short title.
Subtitle A—Penalties and Interest
Sec. 211. Failure to pay estimated tax penalty converted to interest charge on ac-
cumulated unpaid balance.
Sec. 212. Exclusion from gross income for interest on overpayments of income tax
by individuals.
Sec. 213. Abatement of interest.
Sec. 214. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 215. Expansion of interest netting for individuals.
Sec. 216. Waiver of certain penalties for first-time unintentional minor errors.
Sec. 217. Frivolous tax submissions.
Sec. 218. Clarification of application of Federal tax deposit penalty.
Subtitle B—Fairness of Collection Procedures
Sec. 221. Partial payment of tax liability in installment agreements.
Sec. 222. Extension of time for return of property.
Sec. 223. Individuals held harmless on wrongful levy, etc. on individual retire-
ment plan.
Sec. 224. Seven-day threshold on tolling of statute of limitations during tax re-
view.
Sec. 225. Study of liens and levies.
Subtitle C—Efficiency of Tax Administration
Sec. 231. Revisions relating to termination of employment of Internal Revenue
Service employees for misconduct.
Sec. 232. Confirmation of authority of Tax Court to apply doctrine of equitable
recoupment.
Sec. 233. Jurisdiction of Tax Court over collection due process cases.
Sec. 234. Office of Chief Counsel review of offers in compromise.
Sec. 235. 15-day delay in due date for electronically filed individual income tax
returns.
Subtitle D—Confidentiality and Disclosure
Sec. 241. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 242. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
Sec. 243. Disclosure in judicial or administrative tax proceedings of return and
return information of persons who are not party to such pro-
ceedings.
Sec. 244. Prohibition of disclosure of taxpayer identification information with re-
spect to disclosure of accepted offers-in-compromise.
Sec. 245. Compliance by contractors with confidentiality safeguards.
Sec. 246. Higher standards for requests for and consents to disclosure.
Sec. 247. Notice to taxpayer concerning administrative determination of brows-
ing; annual report.
Sec. 248. Expanded disclosure in emergency circumstances.
Sec. 249. Disclosure of taxpayer identity for tax refund purposes.
Subtitle E—Miscellaneous
Sec. 251. Clarification of definition of church tax inquiry.
Sec. 252. Expansion of declaratory judgment remedy to tax-exempt organizations.
Sec. 253. Employee misconduct report to include summary of complaints by cat-
egory.
Sec. 254. Annual report on awards of costs and certain fees in administrative
and court proceedings.
Sec. 255. Annual report on abatement of penalties.
Sec. 256. Better means of communicating with taxpayers.
Sec. 257. Explanation of statute of limitations and consequences of failure to file.
Sec. 258. Amendment to Treasury auction reforms.
Sec. 259. Enrolled agents.
Sec. 260. Financial management service fees.
Sec. 261. Capital gain treatment under section 631(b) to apply to outright sales
by land owner.
Sec. 262. Acceleration of effective date for expansion of adoption tax credit and
adoption assistance programs.
Subtitle F—Low-Income Taxpayer Clinics
Sec. 271. Low-income taxpayer clinics.
TITLE I—TAX REDUCTIONS
MADE PERMANENT
SEC. 101. TAX REDUCTIONS MADE PERMANENT.
Title IX of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 is hereby repealed.
SEC. 102. PROTECTION OF SOCIAL SECURITY AND MEDI-
CARE.
The amounts transferred to any trust fund under the
Social Security Act shall be determined as if the Economic
Growth and Tax Relief Reconciliation Act of 2001 had not
been enacted.
TITLE 
II—TAXPAYER 
PROTEC-
TION 
AND 
IRS 
ACCOUNT-
ABILITY
SEC. 201. SHORT TITLE.
This title may be cited as the ‘‘Taxpayer Protection
and IRS Accountability Act of 2002’’.
Subtitle A—Penalties and Interest
SEC. 211. FAILURE TO PAY ESTIMATED TAX PENALTY CON-
VERTED TO INTEREST CHARGE ON ACCUMU-
LATED UNPAID BALANCE.
(a) PENALTY MOVED
TO INTEREST CHAPTER
OF
CODE.—The Internal Revenue Code of 1986 is amended by
redesignating section 6654 as section 6641 and by moving
section 6641 (as so redesignated) from part I of subchapter
A of chapter 68 to the end of subchapter E of chapter 67
(as added by subsection (e)(1) of this section).
(b) PENALTY CONVERTED TO INTEREST CHARGE.—
The heading and subsections (a) and (b) of section 6641
(as so redesignated) are amended to read as follows:
‘‘SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY
ESTIMATED INCOME TAX.
‘‘(a) IN GENERAL.—Interest shall be paid on any un-
derpayment of estimated tax by an individual for a taxable
year for each day of such underpayment. The amount of
such interest for any day shall be the product of the under-
payment rate established under subsection (b)(2) multiplied
by the amount of the underpayment.
‘‘(b) AMOUNT OF UNDERPAYMENT; INTEREST RATE.—
For purposes of subsection (a)—
‘‘(1) AMOUNT.—The amount of the under-
payment on any day shall be the excess 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 (if any) of es-
timated tax payments made on or before such
day on such required installments.
‘‘(2) DETERMINATION OF INTEREST RATE.—
‘‘(A) IN GENERAL.—The underpayment rate
with respect to any day in an installment under-
payment period shall be the underpayment rate
established under section 6621 for the first day
of the calendar quarter in which such install-
ment underpayment period begins.
‘‘(B) INSTALLMENT
UNDERPAYMENT
PE-
RIOD.—For purposes of subparagraph (A), the
term ‘installment underpayment period’ means
the period beginning on the day after the due
date for a required installment and ending on
the due date for the subsequent required install-
ment (or in the case of the 4th required install-
ment, the 15th day of the 4th month following
the close of a taxable year).
‘‘(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 INTER-
EST.—No day after the end of the installment under-
payment period for the 4th required installment spec-
ified in paragraph (2)(B) for a taxable year shall be
treated as a day of underpayment with respect to
such taxable year.’’.
(c) INCREASE
IN SAFE HARBOR WHERE TAX
IS
SMALL.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
6641(d)(1)(B) (as so redesignated) is amended to read
as follows:
‘‘(i) the lesser of—
‘‘(I) 90 percent of the tax shown
on the return for the taxable year (or,
if no return is filed, 90 percent of the
tax for such year), or
‘‘(II) the tax shown on the return
for the taxable year (or, if no return is
filed, the tax for such year) reduced
(but not below zero) by $2,000, or’’.
(2) CONFORMING
AMENDMENT.—Subsection (e)
of section 6641 (as so redesignated) is amended by
striking paragraph (1) and redesignating paragraphs
(2) and (3) as paragraphs (1) and (2), respectively.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (1) and (2) of subsection (e) (as
redesignated by subsection (c)(2)) and subsection (h)
of section 6641 (as so designated) are each amended
by striking ‘‘addition to tax’’ each place it occurs and
inserting ‘‘interest’’.
(2) Section 167(g)(5)(D) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(3) Section 460(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(4) Section 3510(b) is amended—
(A) by striking ‘‘section 6654’’ in para-
graph (1) and inserting ‘‘section 6641’’;
(B) by amending paragraph (2)(B) to read
as follows:
‘‘(B) no interest would be required to be
paid (but for this section) under 6641 for such
taxable year by reason of the $2,000 amount
specified in section 6641(d)(1)(B)(i)(II).’’;
(C) by striking ‘‘section 6654(d)(2)’’ in
paragraph 
(3) 
and 
inserting 
‘‘section
6641(d)(2)’’; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(6) Section 6601(h) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(7) Section 6621(b)(2)(B) is amended by striking
‘‘addition to tax under section 6654’’ and inserting
‘‘interest required to be paid under section 6641’’.
(8) Section 6622(b) is amended—
(A) by striking ‘‘PENALTY
FOR’’ in the
heading; and
(B) by striking ‘‘addition to tax under sec-
tion 6654 or 6655’’ and inserting ‘‘interest re-
quired to be paid under section 6641 or addition
to tax under section 6655’’.
(9) Section 6658(a) is amended—
(A) by striking ‘‘6654, or 6655’’ and insert-
ing ‘‘or 6655, and no interest shall be required
to be paid under section 6641,’’; and
(B) by inserting ‘‘or paying interest’’ after
‘‘the tax’’ in paragraph (2)(B)(ii).
(10) Section 6665(b) is amended—
(A) in the matter preceding paragraph (1)
by striking ‘‘, 6654,’’; and
(B) in paragraph (2) by striking ‘‘6654 or’’.
(11) Section 7203 is amended by striking ‘‘sec-
tion 6654 or 6655’’ and inserting ‘‘section 6655 or in-
terest required to be paid under section 6641’’.
(e) CLERICAL AMENDMENTS.—
(1) Chapter 67 is amended by inserting after
subchapter D the following:
‘‘Subchapter E—Interest on Failure by
Individual to Pay Estimated Income Tax
‘‘Sec. 6641. Interest on failure by individual to pay estimated in-
come tax.’’.
(2) The table of subchapters for chapter 67 is
amended by adding at the end the following new
items:
‘‘Subchapter D. Notice requirements.
‘‘Subchapter E. Interest on failure by individual to pay estimated
income tax.’’.
(3) The table of sections for part I of subchapter
A of chapter 68 is amended by striking the item relat-
ing to section 6654.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to installment payments for taxable
years beginning after December 31, 2002.
SEC. 212. EXCLUSION FROM GROSS INCOME FOR INTEREST
ON OVERPAYMENTS OF INCOME TAX BY INDI-
VIDUALS.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 (relating to items specifically excluded from gross income)
is amended by inserting after section 139 the following new
section:
‘‘SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTER-
EST ON OVERPAYMENTS OF INCOME TAX BY
INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual, gross
income shall not include interest paid under section 6611
on any overpayment of tax imposed by this subtitle.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply in
the case of a failure to claim items resulting in the overpay-
ment on the original return if the Secretary determines that
the principal purpose of such failure is to take advantage
of subsection (a).
‘‘(c) SPECIAL RULE FOR DETERMINING MODIFIED AD-
JUSTED GROSS INCOME.—For purposes of this title, interest
not included in gross income under subsection (a) shall not
be treated as interest which is exempt from tax for purposes
of sections 32(i)(2)(B) and 6012(d) or any computation in
which interest exempt from tax under this title is added
to adjusted gross income.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter B of chapter 1 is amended by insert-
ing after the item relating to section 139 the following new
item:
‘‘Sec. 139A. Exclusion from gross income for interest on overpay-
ments of income tax by individuals.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to interest received in calendar years
beginning after the date of the enactment of this Act.
SEC. 213. ABATEMENT OF INTEREST.
(a) ABATEMENT OF INTEREST WITH RESPECT TO ER-
RONEOUS REFUND CHECK WITHOUT REGARD TO SIZE OF
REFUND.—Paragraph (2) of section 6404(e) is amended by
striking ‘‘unless—’’ and all that follows and inserting ‘‘un-
less the taxpayer (or a related party) has in any way
caused such erroneous refund.’’.
(b) ABATEMENT OF INTEREST TO EXTENT INTEREST
IS ATTRIBUTABLE TO TAXPAYER RELIANCE ON WRITTEN
STATEMENTS OF THE IRS.—Subsection (f) of section 6404
is amended—
(1) in the subsection heading, by striking ‘‘PEN-
ALTY OR ADDITION’’ and inserting ‘‘INTEREST, PEN-
ALTY, OR ADDITION’’; and
(2) in paragraph (1) and in subparagraph (B)
of paragraph (2), by striking ‘‘penalty or addition’’
and inserting ‘‘interest, penalty, or addition’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to interest accruing on or
after the date of the enactment of this Act.
SEC. 214. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS.
(a) IN GENERAL.—Subchapter A of chapter 67 (relat-
ing to interest on underpayments) is amended by adding
at the end the following new section:
‘‘SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS,
ETC.
‘‘(a) AUTHORITY TO MAKE DEPOSITS OTHER THAN
AS PAYMENT OF TAX.—A taxpayer may make a cash de-
posit with the Secretary which may be used by the Sec-
retary to pay any tax imposed under subtitle A or B or
chapter 41, 42, 43, or 44 which has not been assessed at
the time of the deposit. Such a deposit shall be made in
such manner as the Secretary shall prescribe.
‘‘(b) NO INTEREST IMPOSED.—To the extent that such
deposit is used by the Secretary to pay tax, for purposes
of section 6601 (relating to interest on underpayments), the
tax shall be treated as paid when the deposit is made.
‘‘(c) RETURN OF DEPOSIT.—Except in a case where
the Secretary determines that collection of tax is in jeop-
ardy, the Secretary shall return to the taxpayer any
amount of the deposit (to the extent not used for a payment
of tax) which the taxpayer requests in writing.
‘‘(d) PAYMENT OF INTEREST.—
‘‘(1) IN GENERAL.—For purposes of section 6611
(relating to interest on overpayments), a deposit
which is returned to a taxpayer shall be treated as a
payment of tax for any period to the extent (and only
to the extent) attributable to a disputable tax for such
period. Under regulations prescribed by the Secretary,
rules similar to the rules of section 6611(b)(2) shall
apply.
‘‘(2) DISPUTABLE TAX.—
‘‘(A) IN
GENERAL.—For purposes of this
section, the term ‘disputable tax’ means the
amount of tax specified at the time of the deposit
as the taxpayer’s reasonable estimate of the max-
imum amount of any tax attributable to disput-
able items.
‘‘(B) SAFE HARBOR BASED ON 30-DAY LET-
TER.—In the case of a taxpayer who has been
issued a 30-day letter, the maximum amount of
tax under subparagraph (A) shall not be less
than the amount of the proposed deficiency speci-
fied in such letter.
‘‘(3) OTHER
DEFINITIONS.—For purposes of
paragraph (2)—
‘‘(A) DISPUTABLE ITEM.—The term ‘disput-
able item’ means any item of income, gain, loss,
deduction, or credit if the taxpayer—
‘‘(i) has a reasonable basis for its
treatment of such item, and
‘‘(ii) reasonably believes that the Sec-
retary also has a reasonable basis for dis-
allowing the taxpayer’s treatment of such
item.
‘‘(B) 30-DAY
LETTER.—The term ‘30-day
letter’ means the first letter of proposed defi-
ciency which allows the taxpayer an opportunity
for administrative review in the Internal Rev-
enue Service Office of Appeals.
‘‘(4) RATE OF INTEREST.—The rate of interest
allowable under this subsection shall be the Federal
short-term rate determined under section 6621(b),
compounded daily.
‘‘(e) USE OF DEPOSITS.—
‘‘(1) PAYMENT
OF
TAX.—Except as otherwise
provided by the taxpayer, deposits shall be treated as
used for the payment of tax in the order deposited.
‘‘(B) RETURNS OF DEPOSITS.—Deposits shall be
treated as returned to the taxpayer on a last-in, first-
out basis.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
subchapter A of chapter 67 is amended by adding at the
end the following new item:
‘‘Sec. 6603. Deposits made to suspend running of interest on poten-
tial underpayments, etc.’’.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to deposits made after the
date of the enactment of this Act.
(2) COORDINATION WITH DEPOSITS MADE UNDER
REVENUE
PROCEDURE
84–58.—In the case of an
amount held by the Secretary of the Treasury or his
delegate on the date of the enactment of this Act as
a deposit in the nature of a cash bond deposit pursu-
ant to Revenue Procedure 84–58, the date that the
taxpayer identifies such amount as a deposit made
pursuant to section 6603 of the Internal Revenue
Code (as added by this Act) shall be treated as the
date such amount is deposited for purposes of such
section 6603.
SEC. 215. EXPANSION OF INTEREST NETTING FOR INDIVID-
UALS.
(a) IN GENERAL.—Subsection (d) of section 6621 (re-
lating to elimination of interest on overlapping periods of
tax overpayments and underpayments) is amended by add-
ing at the end the following: ‘‘Solely for purposes of the pre-
ceding sentence, section 6611(e) shall not apply in the case
of an individual.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to interest accrued after December
31, 2002.
SEC. 216. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME
UNINTENTIONAL MINOR ERRORS.
(a) IN GENERAL.—Section 6651 (relating to failure to
file tax return or to pay tax) is amended by adding at the
end the following new subsection:
‘‘(i) TREATMENT
OF FIRST-TIME UNINTENTIONAL
MINOR ERRORS.—
‘‘(1) IN GENERAL.—In the case of a return of tax
imposed by subtitle A filed by an individual, the Sec-
retary may waive an addition to tax under subsection
(a) if—
‘‘(A) the individual has a history of compli-
ance with the requirements of this title,
‘‘(B) it is shown that the failure is due to
an unintentional minor error,