H. R. 2337
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To amend the Internal Revenue Code of 1986 to provide for increased taxpayer
protections.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Taxpayer
Bill of Rights 2’’.
(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.—
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. Notification of reasons for termination of installment agreements.
Sec. 202. Administrative review of termination of installment agreement.
TITLE III—ABATEMENT OF INTEREST AND PENALTIES
Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after notice and de-
mand.
Sec. 304. Abatement of penalty for failure to make required deposits of payroll
taxes in certain cases.
TITLE IV—JOINT RETURNS
Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full payment of
tax.
Sec. 403. Disclosure of collection activities.
TITLE V—COLLECTION ACTIVITIES
Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
Sec. 503. Offers-in-compromise.
TITLE VI—INFORMATION RETURNS
Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of information returns.
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TITLE VII—AWARDING OF COSTS AND CERTAIN FEES
Sec. 701. United States must establish that its position in proceeding was substan-
tially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment proceedings.
TITLE VIII—MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR
UNAUTHORIZED COLLECTION ACTIONS
Sec. 801. Increase in limit on recovery of civil damages for unauthorized collection
actions.
Sec. 802. Court discretion to reduce award for litigation costs for failure to exhaust
administrative remedies.
TITLE IX—MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND
PAY OVER TAX
Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person liable for pen-
alty for failure to collect and pay over tax.
Sec. 903. Right of contribution where more than 1 person liable for penalty for fail-
ure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt from pen-
alty for failure to collect and pay over tax.
TITLE X—MODIFICATIONS OF RULES RELATING TO SUMMONSES
Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.
TITLE XI—RELIEF FROM RETROACTIVE APPLICATION OF TREASURY
DEPARTMENT REGULATIONS
Sec. 1101. Relief from retroactive application of Treasury Department regulations.
TITLE XII—MISCELLANEOUS PROVISIONS
Sec. 1201. Phone number of person providing payee statements required to be
shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent accounts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
Sec. 1207. Disclosure of returns and return information to designee of taxpayer.
Sec. 1208. Study of netting of interest on overpayments and liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-timely-filing rule.
Sec. 1211. Reports on misconduct of IRS employees.
TITLE XIII—REVENUE OFFSETS
Subtitle A—Application of Failure-to-Pay Penalty to Substitute Returns
Sec. 1301. Application of failure-to-pay penalty to substitute returns.
Subtitle B—Excise Taxes on Amounts of Private Excess Benefits
Sec. 1311. Excise taxes for failure by certain charitable organizations to meet cer-
tain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to file complete
and timely annual returns.
TITLE I—TAXPAYER ADVOCATE
SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER ADVOCATE
WITHIN INTERNAL REVENUE SERVICE.
(a) GENERAL RULE.—Section 7802 (relating to Commissioner
of Internal Revenue; Assistant Commissioner (Employee Plans and
H. R. 2337—3
Exempt Organizations)) is amended by adding at the end the follow-
ing new subsection:
‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—
‘‘(1) IN
GENERAL.—There is established in the Internal
Revenue Service an office to be known as the ‘Office of the
Taxpayer Advocate’. Such office shall be under the supervision
and direction of an official to be known as the ‘Taxpayer Advo-
cate’ who shall be appointed by and report directly to the
Commissioner of Internal Revenue. The Taxpayer Advocate
shall be entitled to compensation at the same rate as the
highest level official reporting directly to the Deputy Commis-
sioner of the Internal Revenue Service.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the function of the Office
of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving problems with
the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers have prob-
lems in dealings with the Internal Revenue Service,
‘‘(iii) to the extent possible, propose changes in
the administrative practices of the Internal Revenue
Service to mitigate problems identified under clause
(ii), and
‘‘(iv) identify potential legislative changes which
may be appropriate to mitigate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) OBJECTIVES.—Not later than June 30 of each
calendar year after 1995, the Taxpayer Advocate shall
report to the Committee on Ways and Means of the
House of Representatives and the Committee on
Finance of the Senate on the objectives of the Taxpayer
Advocate for the fiscal year beginning in such calendar
year. Any such report shall contain full and substantive
analysis, in addition to statistical information.
‘‘(ii) ACTIVITIES.—Not later than December 31 of
each calendar year after 1995, the Taxpayer Advocate
shall report to the Committee on Ways and Means
of the House of Representatives and the Committee
on Finance of the Senate on the activities of the Tax-
payer Advocate during the fiscal year ending during
such calendar year. Any such report shall contain full
and substantive analysis, in addition to statistical
information, and shall—
‘‘(I) identify the initiatives the Taxpayer Advo-
cate has taken on improving taxpayer services and
Internal Revenue Service responsiveness,
‘‘(II) contain recommendations received from
individuals with the authority to issue Taxpayer
Assistance Orders under section 7811,
‘‘(III) contain a summary of at least 20 of
the most serious problems encountered by tax-
payers, including a description of the nature of
such problems,
‘‘(IV) contain an inventory of the items
described in subclauses (I), (II), and (III) for which
action has been taken and the result of such action,
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‘‘(V) contain an inventory of the items
described in subclauses (I), (II), and (III) for which
action remains to be completed and the period
during which each item has remained on such
inventory,
‘‘(VI) contain an inventory of the items
described in subclauses (II) and (III) for which
no action has been taken, the period during which
each item has remained on such inventory, the
reasons for the inaction, and identify any Internal
Revenue Service official who is responsible for such
inaction,
‘‘(VII) identify any Taxpayer Assistance Order
which was not honored by the Internal Revenue
Service in a timely manner, as specified under
section 7811(b),
‘‘(VIII) contain recommendations for such
administrative and legislative action as may be
appropriate to resolve problems encountered by
taxpayers,
‘‘(IX) describe the extent to which regional
problem resolution officers participate in the selec-
tion and evaluation of local problem resolution offi-
cers, and
‘‘(X) include such other information as the Tax-
payer Advocate may deem advisable.
‘‘(iii) REPORT TO BE SUBMITTED DIRECTLY.—Each
report required under this subparagraph shall be pro-
vided directly to the Committees referred to in clauses
(i) and (ii) without any prior review or comment from
the Commissioner, the Secretary of the Treasury, any
other officer or employee of the Department of the
Treasury, or the Office of Management and Budget.
‘‘(3) RESPONSIBILITIES
OF
COMMISSIONER.—The Commis-
sioner of Internal Revenue shall establish procedures requiring
a formal response to all recommendations submitted to the
Commissioner by the Taxpayer Advocate within 3 months after
submission to the Commissioner.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 7811 (relating to Taxpayer Assistance Orders)
is amended—
(A) by striking ‘‘the Office of Ombudsman’’ in sub-
section (a) and inserting ‘‘the Office of the Taxpayer Advo-
cate’’, and
(B) by striking ‘‘Ombudsman’’ each place it appears
(including in the headings of subsections (e) and (f)) and
inserting ‘‘Taxpayer Advocate’’.
(2) The heading for section 7802 is amended to read as
follows:
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‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT
COMMISSIONERS; TAXPAYER ADVOCATE.’’.
(3) The table of sections for subchapter A of chapter 80
is amended by striking the item relating to section 7802 and
inserting the following new item:
‘‘Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; Taxpayer
Advocate.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE
ORDERS.
(a) TERMS OF ORDERS.—Subsection (b) of section 7811 (relating
to terms of Taxpayer Assistance Orders) is amended—
(1) by inserting ‘‘within a specified time period’’ after ‘‘the
Secretary’’, and
(2) by inserting ‘‘take any action as permitted by law,’’
after ‘‘cease any action,’’.
(b) LIMITATION ON AUTHORITY TO MODIFY OR RESCIND.—Section
7811(c) (relating to authority to modify or rescind) is amended
to read as follows:
‘‘(c) AUTHORITY TO MODIFY OR RESCIND.—Any Taxpayer Assist-
ance Order issued by the Taxpayer Advocate under this section
may be modified or rescinded—
‘‘(1) only by the Taxpayer Advocate, the Commissioner of
Internal Revenue, or the Deputy Commissioner of Internal
Revenue, and
‘‘(2) only if a written explanation of the reasons for the
modification or rescission is provided to the Taxpayer Advo-
cate.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
TITLE II—MODIFICATIONS TO INSTALL-
MENT AGREEMENT PROVISIONS
SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION OF INSTALL-
MENT AGREEMENTS.
(a) TERMINATIONS.—Subsection (b) of section 6159 (relating to
extent to which agreements remain in effect) is amended by adding
at the end the following new paragraph:
‘‘(5) NOTICE REQUIREMENTS.—The Secretary may not take
any action under paragraph (2), (3), or (4) unless—
‘‘(A) a notice of such action is provided to the taxpayer
not later than the day 30 days before the date of such
action, and
‘‘(B) such notice includes an explanation why the Sec-
retary intends to take such action.
The preceding sentence shall not apply in any case in which
the Secretary believes that collection of any tax to which an
agreement under this section relates is in jeopardy.’’.
(b) CONFORMING AMENDMENT.—Paragraph (3) of section 6159(b)
is amended to read as follows:
‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CONDITIONS.—If the
Secretary makes a determination that the financial condition
H. R. 2337—6
of a taxpayer with whom the Secretary has entered into an
agreement under subsection (a) has significantly changed, the
Secretary may alter, modify, or terminate such agreement.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date 6 months after the date of the enact-
ment of this Act.
SEC. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF INSTALL-
MENT AGREEMENT.
(a) GENERAL RULE.—Section 6159 (relating to agreements for
payment of tax liability in installments) is amended by adding
at the end the following new subsection:
‘‘(c) ADMINISTRATIVE REVIEW.—The Secretary shall establish
procedures for an independent administrative review of termi-
nations of installment agreements under this section for taxpayers
who request such a review.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on January 1, 1997.
TITLE III—ABATEMENT OF INTEREST
AND PENALTIES
SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.
(a) GENERAL RULE.—Paragraph (1) of section 6404(e) (relating
to abatement of interest in certain cases) is amended—
(1) by inserting ‘‘unreasonable’’ before ‘‘error’’ each place
it appears in subparagraphs (A) and (B), and
(2) by striking ‘‘in performing a ministerial act’’ each place
it appears and inserting ‘‘in performing a ministerial or mana-
gerial act’’.
(b) CLERICAL AMENDMENT.—The subsection heading for sub-
section (e) of section 6404 is amended—
(1) by striking ‘‘ASSESSMENTS’’ and inserting ‘‘ABATEMENT’’,
and
(2) by inserting ‘‘UNREASONABLE’’ before ‘‘ERRORS’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to interest accruing with respect to deficiencies or pay-
ments for taxable years beginning after the date of the enactment
of this Act.
SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.
(a) IN GENERAL.—Section 6404 is amended by adding at the
end the following new subsection:
‘‘(g) REVIEW
OF DENIAL
OF REQUEST
FOR ABATEMENT
OF
INTEREST.—
‘‘(1) IN GENERAL.—The Tax Court shall have jurisdiction
over any action brought by a taxpayer who meets the require-
ments referred to in section 7430(c)(4)(A)(iii) to determine
whether the Secretary’s failure to abate interest under this
section was an abuse of discretion, and may order an abate-
ment, if such action is brought within 180 days after the
date of the mailing of the Secretary’s final determination not
to abate such interest.
‘‘(2) SPECIAL RULES.—
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‘‘(A) DATE OF MAILING.—Rules similar to the rules of
section 6213 shall apply for purposes of determining the
date of the mailing referred to in paragraph (1).
‘‘(B) RELIEF.—Rules similar to the rules of section
6512(b) shall apply for purposes of this subsection.
‘‘(C) REVIEW.—An order of the Tax Court under this
subsection shall be reviewable in the same manner as
a decision of the Tax Court, but only with respect to the
matters determined in such order.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to requests for abatement after the date of the enact-
ment of this Act.
SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF
TAX AFTER NOTICE AND DEMAND.
(a) GENERAL RULE.—Paragraph (3) of section 6601(e) (relating
to payments made within 10 days after notice and demand) is
amended to read as follows:
‘‘(3) PAYMENTS
MADE
WITHIN
SPECIFIED
PERIOD
AFTER
NOTICE AND DEMAND.—If notice and demand is made for pay-
ment of any amount and if such amount is paid within 21
calendar days (10 business days if the amount for which such
notice and demand is made equals or exceeds $100,000) after
the date of such notice and demand, interest under this section
on the amount so paid shall not be imposed for the period
after the date of such notice and demand.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6601(e)(2) is amended by
striking ‘‘10 days from the date of notice and demand therefor’’
and inserting ‘‘21 calendar days from the date of notice and
demand therefor (10 business days if the amount for which
such notice and demand is made equals or exceeds $100,000)’’.
(2) Paragraph (3) of section 6651(a) is amended by striking
‘‘10 days of the date of the notice and demand therefor’’ and
inserting ‘‘21 calendar days from the date of notice and demand
therefor (10 business days if the amount for which such notice
and demand is made equals or exceeds $100,000)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply in the case of any notice and demand given after
December 31, 1996.
SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE REQUIRED
DEPOSITS OF PAYROLL TAXES IN CERTAIN CASES.
(a) IN GENERAL.—Section 6656 (relating to failure to make
deposit of taxes) is amended by adding at the end the following
new subsections:
‘‘(c) EXCEPTION FOR FIRST-TIME DEPOSITORS OF EMPLOYMENT
TAXES.—The Secretary may waive the penalty imposed by sub-
section (a) on a person’s inadvertent failure to deposit any employ-
ment tax if—
‘‘(1) such person meets the requirements referred to in
section 7430(c)(4)(A)(iii),
‘‘(2) such failure occurs during the 1st quarter that such
person was required to deposit any employment tax, and
‘‘(3) the return of such tax was filed on or before the
due date.
For purposes of this subsection, the term ‘employment taxes’ means
the taxes imposed by subtitle C.
H. R. 2337—8
‘‘(d) AUTHORITY TO ABATE PENALTY WHERE DEPOSIT SENT TO
SECRETARY.—The Secretary may abate the penalty imposed by sub-
section (a) with respect to the first time a depositor is required
to make a deposit if the amount required to be deposited is inadvert-
ently sent to the Secretary instead of to the appropriate government
depository.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to deposits required to be made after the date of the
enactment of this Act.
TITLE IV—JOINT RETURNS
SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.
The Secretary of the Treasury or his delegate and the Comptrol-
ler General of the United States shall each conduct separate studies
of—
(1) the effects of changing the liability for tax on a joint
return from being joint and several to being proportionate
to the tax attributable to each spouse,
(2) the effects of providing that, if a divorce decree allocates
liability for tax on a joint return filed before the divorce, the
Secretary may collect such liability only in accordance with
the decree,
(3) whether those provisions of the Internal Revenue Code
of 1986 intended to provide relief to innocent spouses provide
meaningful relief in all cases where such relief is appropriate,
and
(4) the effect of providing that community income (as
defined in section 66(d) of such Code) which, in accordance
with the rules contained in section 879(a) of such Code, would
be treated as the income of one spouse is exempt from a
levy for failure to pay any tax imposed by subtitle A by the
other spouse for a taxable year ending before their marriage.
The reports of such studies shall be submitted to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate within 6 months after the
date of the enactment of this Act.
SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS
WITHOUT FULL PAYMENT OF TAX.
(a) GENERAL RULE.—Paragraph (2) of section 6013(b) (relating
to limitations on filing of joint return after filing separate returns)
is amended by striking subparagraph (A) and redesignating the
following subparagraphs accordingly.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after the date of the enact-
ment of this Act.
SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.
(a) IN GENERAL.—Subsection (e) of section 6103 (relating to
disclosure to persons having material interest) is amended by add-
ing at the end the following new paragraph:
‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES WITH RESPECT
TO JOINT RETURN.—If any deficiency of tax with respect to
a joint return is assessed and the individuals filing such return
are no longer married or no longer reside in the same house-
hold, upon request in writing by either of such individuals,
H. R. 2337—9
the Secretary shall disclose in writing to the individual making
the request whether the Secretary has attempted to collect
such deficiency from such other individual, the general nature
of such collection activities, and the amount collected. The
preceding sentence shall not apply to any deficiency which
may not be collected by reason of section 6502.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to requests made after the date of the enactment of
this Act.
TITLE V—COLLECTION ACTIVITIES
SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.
(a) WITHDRAWAL OF CERTAIN NOTICES.—Section 6323 (relating
to validity and priority against certain persons) is amended by
adding at the end the following new subsection:
‘‘(j) WITHDRAWAL
OF NOTICE
IN CERTAIN CIRCUMSTANCES.—
‘‘(1) IN GENERAL.—The Secretary may withdraw a notice
of a lien filed under this section and this chapter shall be
applied as if the withdrawn notice had not been filed, if the
Secretary determines that—
‘‘(A) the filing of such notice was premature or other-
wise not in accordance with administrative procedures of
the Secretary,
‘‘(B) the taxpayer has entered into an agreement under
section 6159 to satisfy the tax liability for which the lien
was imposed by means of installment payments, unless
such agreement provides otherwise,
‘‘(C) the withdrawal of such notice will facilitate the
collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or the Taxpayer
Advocate, the withdrawal of such notice would be in the
best interests of the taxpayer (as determined by the Tax-
payer Advocate) and the United States.
Any such withdrawal shall be made by filing notice at the
same office as the withdrawn notice. A copy of such notice
of withdrawal shall be provided to the taxpayer.
‘‘(2) NOTICE
TO
CREDIT
AGENCIES, ETC.—Upon written
request by the taxpayer with respect to whom a notice of
a lien was withdrawn under paragraph (1), the Secretary shall
promptly make reasonable efforts to notify credit reporting
agencies, and any financial institution or creditor whose name
and address is specified in such request, of the withdrawal
of such notice. Any such request shall be in such form as
the Secretary may prescribe.’’.
(b) RETURN OF LEVIED PROPERTY IN CERTAIN CASES.—Section
6343 (relating to authority to release levy and return property)
is amended by adding at the end the following new subsection:
‘‘(d) RETURN OF PROPERTY IN CERTAIN CASES.—If—
‘‘(1) any property has been levied upon, and
‘‘(2) the Secretary determines that—
‘‘(A) the levy on such property was premature or other-
wise not in accordance with administrative procedures of
the Secretary,
‘‘(B) the taxpayer has entered into an agreement under
section 6159 to satisfy the tax liability for which the levy
H. R. 2337—10
was imposed by means of installment payments, unless
such agreement provides otherwise,
‘‘(C) the return of such property will facilitate the
collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or the Taxpayer
Advocate, the return of such property would be in the
best interests of the taxpayer (as determined by the Tax-
payer Advocate) and the United States,
the provisions of subsection (b) shall apply in the same manner
as if such property had been wrongly levied upon, except that
no interest shall be allowed under subsection (c).’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 502. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.
(a) FUEL, ETC.—Paragraph (2) of section 6334(a) (relating to
fuel, provisions, furniture, and personal effects exempt from levy)
is amended—
(1) by striking ‘‘If the taxpayer is the head of a family,
so’’ and inserting ‘‘So’’,
(2) by striking ‘‘his household’’ and inserting ‘‘the taxpayer’s
household’’, and
(3) by striking ‘‘$1,650 ($1,550 in the case of levies issued
during 1989)’’ and inserting ‘‘$2,500’’.
(b) BOOKS, ETC.—Paragraph (3) of section 6334(a) (relating
to books and tools of a trade, business, or profession) is amended
by striking ‘‘$1,100 ($1,050 in the case of levies issued during
1989)’’ and inserting ‘‘$1,250’’.
(c) INFLATION ADJUSTMENT.—Section 6334 (relating to property
exempt from levy) is amended by adding at the end the following
new subsection:
‘‘(f) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any calendar year begin-
ning after 1997, each dollar amount referred to in paragraphs
(2) and (3) of subsection (a) shall be increased by an amount
equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, by substituting ‘cal-
endar year 1996’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(2) ROUNDING.—If any dollar amount after being increased
under paragraph (1) is not a multiple of $10, such dollar amount
shall be rounded to the nearest multiple of $10.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect with respect to levies issued after December 31,
1996.
SEC. 503. OFFERS-IN-COMPROMISE.
(a) REVIEW REQUIREMENTS.—Subsection (b) of section 7122
(relating to records) is amended by striking ‘‘$500.’’ and inserting
‘‘$50,000. However, such compromise shall be subject to continuing
quality review by the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on the date of the enactment of this Act.
H. R. 2337—11
TITLE VI—INFORMATION RETURNS
SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION
RETURNS.
(a) GENERAL RULE.—Subchapter B of chapter 76 (relating to
proceedings by taxpayers and third parties) is amended by redesig-
nating section 7434 as section 7435 and by inserting after section
7433 the following new section:
‘‘SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMA-
TION RETURNS.
‘‘(a) IN GENERAL.—If any person willfully files a fraudulent
information return with respect to payments purported to be made
to any other person, such other person may bring a civil action
for damages against the person so filing such return.
‘‘(b) DAMAGES.—In any action brought under subsection (a),
upon a finding of liability on the part of the defendant, the defend-
ant shall be liable to the plaintiff in an amount equal to the
greater of $5,000 or the sum of—
‘‘(1) any actual damages sustained by the plaintiff as a
proximate result of the filing of the fraudulent information
return (including any costs attributable to resolving deficiencies
asserted as a result of such filing),
‘‘(2) the costs of the action, and
‘‘(3) in the court’s discretion, reasonable attorneys fees.
‘‘(c) PERIOD FOR BRINGING ACTION.—Notwithstanding any other
provision of law, an action to enforce the liability created under
this section may be brought without regard to the amount in
controversy and may be brought only within the later of—
‘‘(1) 6 years after the date of the filing of the fraudulent
information return, or
‘‘(2) 1 year after the date such fraudulent information
return would have been discovered by exercise of reasonable
care.
‘‘(d) COPY OF COMPLAINT FILED WITH IRS—Any person bringing
an action under subsection (a) shall provide a copy of the complaint
to the Internal Revenue Service upon the filing of such complaint
with the court.
‘‘(e) FINDING OF COURT TO INCLUDE CORRECT AMOUNT OF PAY-
MENT.—The decision of the court awarding damages in an action
brought under subsection (a) shall include a finding of the correct
amount which should have been reported in the information return.
‘‘(f) INFORMATION RETURN.—For purposes of this section, the
term ‘information return’ means any statement described in section
6724(d)(1)(A).’’.
(b) CLERICAL AMENDMENT.—The table of sections for subchapter
B of chapter 76 is amended by striking the item relating to section
7434 and inserting the following:
‘‘Sec. 7434. Civil damages for fraudulent filing of information returns.
‘‘Sec. 7435. Cross references.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to fraudulent information returns filed after the date
of the enactment of this Act.
H. R. 2337—12
SEC. 602. REQUIREMENT TO CONDUCT REASONABLE INVESTIGATIONS
OF INFORMATION RETURNS.
(a) GENERAL RULE.—Section 6201 (relating to assessment
authority) is amended by redesignating subsection (d) as subsection
(e) and by inserting after subsection (c) the following new sub-
section:
‘‘(d) REQUIRED REASONABLE VERIFICATION
OF INFORMATION
RETURNS.—In any court proceeding, if a taxpayer asserts a reason-
able dispute with respect to any item of income reported on an
information return filed with the Secretary under subpart B or
C of part III of subchapter A of chapter 61 by a third party
and the taxpayer has fully cooperated with the Secretary (including
providing, within a reasonable period of time, access to and inspec-
tion of all witnesses, information, and documents within the control
of the taxpayer as reasonably requested by the Secretary), the
Secretary shall have the burden of producing reasonable and pro-
bative information concerning such deficiency in addition to such
information return.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
TITLE VII—AWARDING OF COSTS AND
CERTAIN FEES
SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSITION IN
PROCEEDING WAS SUBSTANTIALLY JUSTIFIED.
(a) GENERAL RULE.—Subparagraph (A) of section 7430(c)(4)
(defining prevailing party) is amended by striking clause (i) and
by redesignating clauses (ii) and (iii) as clauses (i) and (ii), respec-
tively.
(b) BURDEN OF PROOF ON UNITED STATES.—Paragraph (4) of
section 7430(c) is amended by redesignating subparagraph (B) as
subparagraph (C) and by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) EXCEPTION IF UNITED STATES ESTABLISHES THAT
ITS POSITION WAS SUBSTANTIALLY JUSTIFIED.—
‘‘(i) GENERAL RULE.—A party shall not be treated
as the prevailing party in a proceeding to which sub-
section (a) applies if the United States establishes that
the position of the United States in the proceeding
was substantially justified.
‘‘(ii) 
PRESUMPTION
OF
NO
JUSTIFICATION
IF
INTERNAL REVENUE SERVICE DID NOT FOLLOW CERTAIN
PUBLISHED GUIDANCE.—For purposes of clause (i), the
position of the United States shall be presumed not
to be substantially justified if the Internal Revenue
Service did not follow its applicable published guidance
in the administrative proceeding. Such presumption
may be rebutted.
‘‘(iii) APPLICABLE PUBLISHED GUIDANCE.—For pur-
poses of clause (ii), the term ‘applicable published guid-
ance’ means—
‘‘(I) regulations, revenue rulings, revenue
procedures, information releases, notices, and
announcements, and
H. R. 2337—13
‘‘(II) any of the following which are issued
to the taxpayer: private letter rulings, technical
advice memoranda, and determination letters.’’.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 7430(c)(2) is amended by
striking ‘‘paragraph (4)(B)’’ and inserting ‘‘paragraph (4)(C)’’.
(2) Subparagraph (C) of section 7430(c)(4), as redesignated
by subsection (b), is amended by striking ‘‘subparagraph (A)’’
and inserting ‘‘this paragraph’’.
(3) Sections 6404(g) and 6656(c)(1), as amended by this
Act, are each amended by striking ‘‘section 7430(c)(4)(A)(iii)’’
and inserting ‘‘section 7430(c)(4)(A)(ii)’’.
(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.
SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.
(a) IN GENERAL.—Paragraph (1) of section 7430(c) (defining
reasonable litigation costs) is amended—
(1) by striking ‘‘$75’’ in clause (iii) of subparagraph (B)
and inserting ‘‘$110’’,
(2) by striking ‘‘an increase in the cost of living or’’ in
clause (iii) of subparagraph (B), and
(3) by adding after clause (iii) the following:
‘‘In the case of any calendar year beginning after 1996, the
dollar amount referred to in clause (iii) shall be increased
by an amount equal to such dollar amount multiplied by the
cost-of-living adjustment determined under section 1(f)(3) for
such calendar year, by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B) thereof. If any dollar
amount after being increased under the preceding sentence
is not a multiple of $10, such dollar amount shall be rounded
to the nearest multiple of $10.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN INTO
ACCOUNT.
(a) IN GENERAL.—Paragraph (1) of section 7430(b) (relating
to requirement that administrative remedies be exhausted) is
amended by adding at the end the following new sentence: ‘‘Any
failure to agree to an extension of the time for the assessment
of any tax shall not be taken into account for purposes of determin-
ing whether the prevailing party meets the requirements of the
preceding sentence.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY
JUDGMENT PROCEEDINGS.
(a) IN GENERAL.—Subsection (b) of section 7430 is amended
by striking paragraph (3) and by redesignating paragraph (4) as
paragraph (3).
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
H. R. 2337—14
TITLE VIII—MODIFICATION TO RECOV-
ERY OF CIVIL DAMAGES FOR UNAU-
THORIZED COLLECTION ACTIONS
SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES FOR
UNAUTHORIZED COLLECTION ACTIONS.
(a) GENERAL RULE.—Subsection (b) of section 7433 (relating
to damages) is amended by striking ‘‘$100,000’’ and inserting
‘‘$1,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to actions by officers or employees of the Internal
Revenue Service after the date of the enactment of this Act.
SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION
COSTS FOR FAILURE TO EXHAUST ADMINISTRATIVE
REMEDIES.
(a) GENERAL RULE.—Paragraph (1) of section 7433(d) (relating
to civil damages for certain unauthorized collection actions) is
amended to read as follows:
‘‘(1) AWARD FOR DAMAGES MAY BE REDUCED IF ADMINISTRA-
TIVE
REMEDIES
NOT
EXHAUSTED.—The amount of damages
awarded under subsection (b) may be reduced if the court
determines that the plaintiff has not exhausted the administra-
tive remedies available to such plaintiff within the Internal
Revenue Service.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
TITLE IX—MODIFICATIONS TO PENALTY
FOR FAILURE TO COLLECT AND PAY
OVER TAX
SEC. 901. PRELIMINARY NOTICE REQUIREMENT.
(a) IN GENERAL.—Section 6672 (relating to failure to collect
and pay over tax, or attempt to evade or defeat tax) is amended
by redesignating subsection (b) as subsection (c) and by inserting
after subsection (a) the following new subsection:
‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—
‘‘(1) IN GENERAL.—No penalty shall be imposed under sub-
section (a) unless the Secretary notifies the taxpayer in writing
by mail to an address as determined under section 6212(b)
that the taxpayer shall be subject to an assessment of such
penalty.
‘‘(2) TIMING OF NOTICE.—The mailing of the notice described
in paragraph (1) shall precede any notice and demand of any
penalty under subsection (a) by at least 60 days.
‘‘(3) STATUTE OF LIMITATIONS.—If a notice described in para-
graph (1) with respect to any penalty is mailed before the
expiration of the period provided by section 6501 for the assess-
ment of such penalty (determined without regard to this para-
graph), the period provided by such section for the assessment
of such penalty shall not expire before the later of—
H. R. 2337—15
‘‘(A) the date 90 days after the date on which such
notice was mailed, or
‘‘(B) if there is a timely protest of the proposed assess-
ment, the date 30 days after the Secretary makes a final
administrative determination with respect to such protest.
‘‘(4) EXCEPTION FOR JEOPARDY.—This subsection shall not
apply if the Secretary finds that the collection of the penalty
is in jeopardy.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to proposed assessments made after June 30, 1996.
SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE MORE THAN
1 PERSON LIABLE FOR PENALTY FOR FAILURE TO COL-
LECT AND PAY OVER TAX.
(a) IN GENERAL.—Subsection (e) of section 6103 (relating to
disclosure to persons having material interest), as amended by
section 403, is amended by adding at the end the following new
paragraph:
‘‘(9) DISCLOSURE OF CERTAIN INFORMATION WHERE MORE
THAN 1 PERSON SUBJECT TO PENALTY UNDER SECTION 6672.—
If the Secretary determines that a person is liable for a penalty
under section 6672(a) with respect to any failure, upon request
in writing of such person, the Secretary shall disclose in writing
to such person—
‘‘(A) the name of any other person whom the Secretary
has determined to be liable for such penalty with respect
to such failure, and
‘‘(B) whether the Secretary has attempted to collect
such penalty from such other person, the general nature
of such collection activities, and the amount collected.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1 PERSON
LIABLE FOR PENALTY FOR FAILURE TO COLLECT AND
PAY OVER TAX.
(a) IN GENERAL.—Section 6672 (relating to failure to collect
and pay over tax, or attempt to evade or defeat tax) is amended
by adding at the end the following new subsection:
‘‘(d) RIGHT OF CONTRIBUTION WHERE MORE THAN 1 PERSON
LIABLE
FOR PENALTY.—If more than 1 person is liable for the
penalty under subsection (a) with respect to any tax, each person
who paid such penalty shall be entitled to recover from other
persons who are liable for such penalty an amount equal to the
excess of the amount paid by such person over such person’s propor-
tionate share of the penalty. Any claim for such a recovery may
be made only in a proceeding which is separate from, and is not
joined or consolidated with—
‘‘(1) an action for collection of such penalty brought by
the United States, or
‘‘(2) a proceeding in which the United States files a counter-
claim or third-party complaint for the collection of such pen-
alty.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to penalties assessed after the date of the enactment
of this Act.
H. R. 2337—16
SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT ORGANIZA-
TIONS EXEMPT FROM PENALTY FOR FAILURE TO COL-
LECT AND PAY OVER TAX.
(a) IN GENERAL.—Section 6672 is amended by adding at the
end the following new subsection:
‘‘(e) EXCEPTION
FOR VOLUNTARY BOARD MEMBERS
OF TAX-
EXEMPT ORGANIZATIONS.—No penalty shall be imposed by sub-
section (a) on any unpaid, volunteer member of any board of trustees
or directors of an organization exempt from tax under subtitle
A if such member—
‘‘(1) is solely serving in an honorary capacity,
‘‘(2) does not participate in the day-to-day or financial
operations of the organization, and
‘‘(3) does not have actual knowledge of the failure on which
such penalty is imposed.
The preceding sentence shall not apply if it results in no person
being liable for the penalty imposed by subsection (a).’’.
(b) PUBLIC INFORMATION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treasury or the
Secretary’s delegate (hereafter in this subsection referred to
as the ‘‘Secretary’’) shall take such actions as may be appro-
priate to ensure that employees are aware of their responsibil-
ities under the Federal tax depository system, the cir-
cumstances under which employees may be liable for the pen-
alty imposed by section 6672 of the Internal Revenue Code
of 1986, and the responsibility to promptly report to the Internal
Revenue Service any failure referred to in subsection (a) of
such section 6672. Such actions shall include—
(A) printing of a warning on deposit coupon booklets
and the appropriate tax returns that certain employees
may be liable for the penalty imposed by such section
6672, and
(B) the development of a special information packet.
(2) DEVELOPMENT OF EXPLANATORY MATERIALS.—The Sec-
retary shall develop materials explaining the circumstances
under which board members of tax-exempt organizations
(including voluntary and honorary members) may be subject
to penalty under section 6672 of such Code. Such materials
shall be made available to tax-exempt organizations.
(3) IRS INSTRUCTIONS.—The Secretary shall clarify the
instructions to Internal Revenue Service employees on the
application of the penalty under section 6672 of such Code
with regard to voluntary members of boards of trustees or
directors of tax-exempt organizations.
TITLE X—MODIFICATIONS OF RULES
RELATING TO SUMMONSES
SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORD-
KEEPERS.
(a) IN GENERAL.—Paragraph (3) of section 7609(a) (relating
to third-party recordkeeper defined) is amended by striking ‘‘and’’
at the end of subparagraph (G), by striking the period at the
end of subparagraph (H) and inserting ‘‘; and’’, and by adding
at the end the following the subparagraph:
H. R. 2337—17
‘‘(I) any enrolled agent.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to summonses issued after the date of the enactment
of this Act.
SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.
(a) STANDARD
OF
REVIEW.—Subparagraph (A) of section
6503(k)(2) 
(defining 
designated 
summons) 
is 
amended 
by
redesignating clauses (i) and (ii) as clauses (ii) and (iii), respectively,
and by inserting before clause (ii) (as so redesignated) the following
new clause:
‘‘(i) the issuance of such summons is preceded by
a review of such issuance by the regional counsel of
the Office of Chief Counsel for the region in which
the examination of the corporation is being conducted,’’.
(b) LIMITATION ON PERSONS TO WHOM DESIGNATED SUMMONS
MAY BE ISSUED.—Paragraph (1) of section 6503(k) is amended
by striking ‘‘with respect to any return of tax by a corporation’’
and inserting ‘‘to a corporation (or to any other person to whom
the corporation has transferred records) with respect to any return
of tax by such corporation for a taxable year (or other period)
for which such corporation is being examined under the coordinated
examination program (or any successor program) of the Internal
Revenue Service’’.
(c) CLERICAL
AMENDMENT.—Section 6503 is amended by
redesignating subsections (k) and (l) (as amended by this section)
as subsections (j) and (k), respectively.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to summonses issued after the date of the enactment
of this Act.
SEC. 1003. ANNUAL REPORT TO CONGRESS CONCERNING DESIGNATED
SUMMONSES.
Not later than December 31 of each calendar year after 1995,
the Secretary of the Treasury or his delegate shall report to the
Committee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate on the number of
designated summonses (as defined in section 6503(j) of the Internal
Revenue Code of 1986) which were issued during the preceding
12 months.
TITLE XI—RELIEF FROM RETROACTIVE
APPLICATION OF TREASURY DEPART-
MENT REGULATIONS
SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF TREASURY
DEPARTMENT REGULATIONS.
(a) IN GENERAL.—Subsection (b) of section 7805 (relating to
rules and regulations) is amended to read as follows:
‘‘(b) RETROACTIVITY OF REGULATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise provided in this
subsection, no temporary, proposed, or final regulation relating
to the internal revenue laws shall apply to any taxable period
ending before the earliest of the following dates:
H. R. 2337—18
‘‘(A) The date on which such regulation is filed with
the Federal Register.
‘‘(B) In the case of any final regulation, the date on
which any proposed or temporary regulation to which such
final regulation relates was filed with the Federal Register.
‘‘(C) The date on which any notice substantially
describing the expected contents of any temporary, pro-
posed, or final regulation is issued to the public.
‘‘(2) EXCEPTION FOR PROMPTLY ISSUED REGULATIONS.—Para-
graph (1) shall not apply to regulations filed or issued within
18 months of the date of the enactment of the statutory provi-
sion to which the regulation relates.
‘‘(3) PREVENTION OF ABUSE.—The Secretary may provide
that any regulation may take effect or apply retroactively to
prevent abuse.
‘‘(4) CORRECTION OF PROCEDURAL DEFECTS.—The Secretary
may provide that any regulation may apply retroactively to
correct a procedural defect in the issuance of any prior regula-
tion.
‘‘(5) INTERNAL REGULATIONS.—The limitation of paragraph
(1) shall not apply to any regulation relating to internal Treas-
ury Department policies, practices, or procedures.
‘‘(6) CONGRESSIONAL
AUTHORIZATION.—The limitation of
paragraph (1) may be superseded by a legislative grant from
Congress authorizing the Secretary to prescribe the effective
date with respect to any regulation.
‘‘(7) ELECTION TO APPLY RETROACTIVELY.—The Secretary
may provide for any taxpayer to elect to apply any regulation
before the dates specified in paragraph (1).
‘‘(8) APPLICATION
TO
RULINGS.—The Secretary may pre-
scribe the extent, if any, to which any ruling (including any
judicial decision or any administrative determination other than
by regulation) relating to the internal revenue laws shall be
applied without retroactive effect.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply with respect to regulations which relate to statutory
provisions enacted on or after the date of the enactment of this
Act.
TITLE XII—MISCELLANEOUS
PROVISIONS
SEC. 1201. PHONE NUMBER OF PERSON PROVIDING PAYEE STATE-
MENTS REQUIRED TO BE SHOWN ON SUCH STATEMENT.
(a) GENERAL RULE.—The following provisions are each amended
by striking ‘‘name and address’’ and inserting ‘‘name, address, and
phone number of the information contact’’:
(1) Section 6041(d)(1).
(2) Section 6041A(e)(1).
(3) Section 6042(c)(1).
(4) Section 6044(e)(1).
(5) Section 6045(b)(1).
(6) Section 6049(c)(1)(A).
(7) Section 6050B(b)(1).
(8) Section 6050H(d)(1).
(9) Section 6050I(e)(1).
H. R. 2337—19
(10) Section 6050J(e).
(11) Section 6050K(b)(1).
(12) Section 6050N(b)(1).
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to statements required to be furnished after Decem-
ber 31, 1996 (determined without regard to any extension).
SEC. 1202. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the Treasury
or his delegate from any taxpayer and the Secretary cannot associ-
ate such payment with such taxpayer, the Secretary shall make
reasonable efforts to notify the taxpayer of such inability within
60 days after the receipt of such payment.
SEC. 1203. UNAUTHORIZED ENTICEMENT OF INFORMATION DISCLO-
SURE.
(a) IN GENERAL.—Subchapter B of chapter 76 (relating to
proceedings by taxpayers and third parties), as amended by section
601(a), is amended by redesignating section 7435 as section 7436
and by inserting after section 7434 the following new section:
‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICEMENT OF
INFORMATION DISCLOSURE.
‘‘(a) IN GENERAL.—If any officer or employee of the United
States intentionally compromises the determination or collection
of any tax due from an attorney, certified public accountant, or
enrolled agent representing a taxpayer in exchange for information
conveyed by the taxpayer to the attorney, certified public account-
ant, or enrolled agent for purposes of obtaining advice concerning
the taxpayer’s tax liability, such taxpayer may bring a civil action
for damages against the United States in a district court of the
United States. Such civil action shall be the exclusive remedy
for recovering damages resulting from such actions.
‘‘(b) DAMAGES.—In any action brought under subsection (a),
upon a finding of liability on the part of the defendant, the defend-
ant shall be liable to the plaintiff in an amount equal to the
lesser of $500,000 or the sum of—
‘‘(1) actual, direct economic damages sustained by the plain-
tiff as a proximate result of the information disclosure, and
‘‘(2) the costs of the action.
Damages shall not include the taxpayer’s liability for any civil
or criminal penalties, or other losses attributable to incarceration
or the imposition of other criminal sanctions.
‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to this section
shall be payable out of funds appropriated under section 1304
of title 31, United States Code.
‘‘(d) PERIOD FOR BRINGING ACTION.—Notwithstanding any other
provision of law, an action to enforce liability created under this
section may be brought without regard to the amount in controversy
and may be brought only within 2 years after the date the actions
creating such liability would have been discovered by exercise of
reasonable care.
‘‘(e) MANDATORY STAY.—Upon a certification by the Commis-
sioner or the Commissioner’s delegate that there is an ongoing
investigation or prosecution of the taxpayer, the district court before
which an action under this section is pending shall stay all proceed-
ings with respect to such action pending the conclusion of the
investigation or prosecution.