IB
Union Calendar No. 234
107TH CONGRESS
2D SESSION
H. R. 3991
[Report No. 107–394]
To amend the Internal Revenue Code of 1986 to protect taxpayers and
ensure accountability of the Internal Revenue Service.
IN THE HOUSE OF REPRESENTATIVES
MARCH 19, 2002
Mr. HOUGHTON introduced the following bill; which was referred to the
Committee on Ways and Means
APRIL 9, 2002
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on March 19, 2002]
A BILL
To amend the Internal Revenue Code of 1986 to protect
taxpayers and ensure accountability of the Internal Rev-
enue Service.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Taxpayer Protection and IRS Accountability 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—PENALTIES AND INTEREST
Sec. 101. Failure to pay estimated tax penalty converted to interest charge on ac-
cumulated unpaid balance.
Sec. 102. Exclusion from gross income for interest on overpayments of income tax
by individuals.
Sec. 103. Abatement of interest.
Sec. 104. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 105. Expansion of interest netting for individuals.
Sec. 106. Waiver of certain penalties for first-time unintentional minor errors.
Sec. 107. Frivolous tax submissions.
Sec. 108. Clarification of application of tax deposit penalty.
TITLE II—FAIRNESS OF COLLECTION PROCEDURES
Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Extension of time for return of property.
Sec. 203. Individuals held harmless on wrongful levy, etc. on individual retire-
ment plan.
Sec. 204. Seven-day threshold on tolling of statute of limitations during tax re-
view.
Sec. 205. Study of liens and levies.
TITLE III—EFFICIENCY OF TAX ADMINISTRATION
Sec. 301. Revisions relating to termination of employment of Internal Revenue
Service employees for misconduct.
Sec. 302. Confirmation of authority of Tax Court to apply doctrine of equitable
recoupment.
Sec. 303. Jurisdiction of Tax Court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. 15-day delay in due date for electronically filed individual income tax
returns.
TITLE IV—CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 402. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
Sec. 403. Disclosure in judicial or administrative tax proceedings of return and
return information of persons who are not party to such pro-
ceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification information with re-
spect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of brows-
ing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to section
501(c)(3) organizations.
TITLE V—MISCELLANEOUS
Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt organizations.
Sec. 503. Employee misconduct report to include summary of complaints by cat-
egory.
Sec. 504. Annual report on awards of costs and certain fees in administrative
and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of failure to file.
Sec. 508. Amendment to Treasury auction reforms.
Sec. 509. Enrolled agents.
Sec. 510. Financial Management Service fees.
Sec. 511. Capital gain treatment under section 631(b) to apply to outright sales
by land owner.
TITLE VI—LOW-INCOME TAXPAYER CLINICS
Sec. 601. Low-income taxpayer clinics.
TITLE VII—REVISIONS TO SECTION 527 ORGANIZATION
DISCLOSURE PROVISIONS
Sec. 701. Modifications of reporting requirements for certain State and local po-
litical organizations.
Sec. 702. Notification of interaction of reporting requirements.
Sec. 703. Technical corrections to section 527 organization disclosure provisions.
TITLE I—PENALTIES AND
INTEREST
SEC. 101. 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).’’;