192
(2) 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. Internal Revenue Service Oversight Board.’’
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall take effect on the date of the enact-
ment of this Act.
(2) INITIAL NOMINATIONS TO INTERNAL REVE-
NUE
SERVICE
OVERSIGHT
BOARD.—The President
shall submit the initial nominations under section
7802 of the Internal Revenue Code of 1986, as added
by this section, to the Senate not later than 6 months
after the date of the enactment of this Act.
(3) EFFECT ON ACTIONS PRIOR TO APPOINTMENT
OF OVERSIGHT BOARD.—Nothing in this section shall
be construed to invalidate the actions and authority
of the Internal Revenue Service prior to the appoint-
ment of the members of the Internal Revenue Service
Oversight Board.
(4) 
SPECIAL
RULE
FOR
REORGANIZATION
PLAN.—The authority of the Internal Revenue Service
Oversight Board under section 7802(d)(3)(E) of such
Code (as so added) to approve major reorganization
plans shall not apply to the reorganization plan
under section 1001 of this Act.
193
SEC. 1102. COMMISSIONER OF INTERNAL REVENUE; OTHER
OFFICIALS.
(a) IN GENERAL.—Section 7803 (relating to other per-
sonnel) is amended to read as follows:
‘‘SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER
OFFICIALS.
‘‘(a) COMMISSIONER OF INTERNAL REVENUE.—
‘‘(1) APPOINTMENT.—
‘‘(A) IN GENERAL.—There shall be in the
Department of the Treasury a Commissioner of
Internal Revenue who shall be appointed by the
President, by and with the advice and consent of
the Senate, to a 5-year term. Such appointment
shall be made from individuals who, among
other qualifications, have a demonstrated ability
in management.
‘‘(B) VACANCY.—Any individual appointed
to fill a vacancy in the position of Commissioner
occurring before the expiration of the term for
which such individual’s predecessor was ap-
pointed shall be appointed only for the remain-
der of that term.
‘‘(C) REMOVAL.—The Commissioner may be
removed at the will of the President.
‘‘(D) REAPPOINTMENT.—The Commissioner
may be appointed to more than one 5-year term.
194
‘‘(2) DUTIES.—The Commissioner shall have
such duties and powers as the Secretary may pre-
scribe, including the power to—
‘‘(A) administer, manage, conduct, direct,
and supervise the execution and application of
the internal revenue laws or related statutes and
tax conventions to which the United States is a
party,
‘‘(B) recommend to the President a can-
didate for appointment as Chief Counsel for the
Internal Revenue Service when a vacancy occurs,
and recommend to the President the removal of
such Chief Counsel, and
‘‘(C) recommend to the Oversight Board
candidates for appointment as National Tax-
payer Advocate when a vacancy occurs.
If the Secretary determines not to delegate a power
specified in subparagraph (A), (B), or (C), such deter-
mination may not take effect until 30 days after the
Secretary notifies the Committees on Ways and
Means, Government Reform and Oversight, and Ap-
propriations of the House of Representatives and the
Committees on Finance, Governmental Affairs, and
Appropriations of the Senate.
195
‘‘(3) CONSULTATION
WITH
BOARD.—The Com-
missioner shall consult with the Oversight Board on
all matters set forth in paragraphs (2) and (3) (other
than paragraph (3)(A)) of section 7802(d).
‘‘(b) CHIEF COUNSEL FOR THE INTERNAL REVENUE
SERVICE.—
‘‘(1) APPOINTMENT.—There shall be in the De-
partment of the Treasury a Chief Counsel for the In-
ternal Revenue Service who shall be appointed by the
President, by and with the consent of the Senate.
‘‘(2) DUTIES.—The Chief Counsel shall be the
chief law officer for the Internal Revenue Service and
shall perform such duties as may be prescribed by the
Secretary, including the duty—
‘‘(A) to be legal advisor to the Commissioner
and the Commissioner’s officers and employees,
‘‘(B) to furnish legal opinions for the prepa-
ration and review of rulings and memoranda of
technical advice,
‘‘(C) to prepare, review, and assist in the
preparation of proposed legislation, treaties, reg-
ulations, and Executive Orders relating to laws
which affect the Internal Revenue Service,
‘‘(D) to represent the Commissioner in cases
before the Tax Court, and
196
‘‘(E) to determine which civil actions should
be litigated under the laws relating to the Inter-
nal Revenue Service and prepare recommenda-
tions for the Department of Justice regarding the
commencement of such actions.
If the Secretary determines not to delegate a power
specified in subparagraph (A), (B), (C), (D), or (E),
such determination may not take effect until 30 days
after the Secretary notifies the Committees on Ways
and Means, Government Reform and Oversight, and
Appropriations of the House of Representatives and
the Committees on Finance, Governmental Affairs,
and Appropriations of the Senate.
‘‘(3) REPORT
TO
COMMISSIONER.—The Chief
Counsel shall report directly to the Commissioner of
Internal Revenue.
‘‘(c) OFFICE OF THE TAXPAYER ADVOCATE.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN GENERAL.—There is established in
the Internal Revenue Service an office to be
known as the ‘Office of the Taxpayer Advocate’.
‘‘(B) NATIONAL TAXPAYER ADVOCATE.—
‘‘(i) IN GENERAL.—The Office of the
Taxpayer Advocate shall be under the su-
pervision and direction of an official to be
197
known as the ‘National Taxpayer Advocate’.
The National Taxpayer Advocate shall re-
port directly to the Commissioner of Inter-
nal Revenue and shall be entitled to com-
pensation at the same rate as the highest
level official reporting directly to the Com-
missioner of Internal Revenue.
‘‘(ii) 
APPOINTMENT.—The 
National
Taxpayer Advocate shall be appointed by
the Secretary of the Treasury from among
the 3 individuals nominated by the Over-
sight Board under section 7802(d)(3).
‘‘(iii) 
RESTRICTION
ON
EMPLOY-
MENT.—An individual may be appointed as
the National Taxpayer Advocate only if
such individual was not an officer or em-
ployee of the Internal Revenue Service dur-
ing the 2-year period ending with such ap-
pointment and such individual agrees not
to accept any employment with the Internal
Revenue Service for at least 5 years after
ceasing to be the National Taxpayer Advo-
cate.
‘‘(2) FUNCTIONS OF OFFICE.—
198
‘‘(A) IN GENERAL.—It shall be the function
of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems 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 miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) 
OBJECTIVES.—Not 
later 
than
June 30 of each calendar year, the National
Taxpayer Advocate shall report to the Com-
mittee on Ways and Means of the House of
Representatives and the Committee on Fi-
nance of the Senate on the objectives of the
Office of the Taxpayer Advocate for the fis-
cal year beginning in such calendar year.
Any such report shall contain full and sub-
199
stantive analysis, in addition to statistical
information.
‘‘(ii) ACTIVITIES.—Not later than De-
cember 31 of each calendar year, the Na-
tional 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 Office of the Taxpayer Advocate dur-
ing the fiscal year ending during such cal-
endar year. Any such report shall contain
full and substantive analysis, in addition to
statistical information, and shall—
‘‘(I) identify the initiatives the
Office of the Taxpayer Advocate has
taken on improving taxpayer services
and Internal Revenue Service respon-
siveness,
‘‘(II) contain recommendations
received from individuals with the au-
thority to issue Taxpayer Assistance
Orders under section 7811,
‘‘(III) contain a summary of at
least 20 of the most serious problems
encountered by taxpayers, including a
200
description of the nature of such prob-
lems,
‘‘(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,
‘‘(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 (I), (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 iden-
tify any Internal Revenue Service offi-
cial who is responsible for such inac-
tion,
‘‘(VII) identify any Taxpayer As-
sistance Order which was not honored
by the Internal Revenue Service in a
201
timely manner, as specified under sec-
tion 7811(b),
‘‘(VIII) contain recommendations
for such administrative and legislative
action as may be appropriate to re-
solve problems encountered by tax-
payers,
‘‘(IX) identify areas of the tax
law that impose significant compliance
burdens on taxpayers or the Internal
Revenue Service, including specific rec-
ommendations for remedying these
problems,
‘‘(X) identify the 10 most litigated
issues for each category of taxpayers,
including recommendations for miti-
gating such disputes, and
‘‘(XI) include such other informa-
tion as the National Taxpayer Advo-
cate may deem advisable.
‘‘(iii) REPORT TO BE SUBMITTED DI-
RECTLY.—Each report required under this
subparagraph shall be provided directly to
the committees described in clause (i) with-
out any prior review or comment from the
202
Commissioner, the Secretary of the Treas-
ury, the Oversight Board, any other officer
or employee of the Department of the Treas-
ury, or the Office of Management and
Budget.
‘‘(C) OTHER RESPONSIBILITIES.—The Na-
tional Taxpayer Advocate shall—
‘‘(i) monitor the coverage and geo-
graphic allocation of local offices of tax-
payer advocates,
‘‘(ii) develop guidance to be distributed
to all Internal Revenue Service officers and
employees outlining the criteria for referral
of taxpayer inquiries to local offices of tax-
payer advocates,
‘‘(iii) ensure that the local telephone
number for each local office of the taxpayer
advocate is published and available to tax-
payers served by the office, and
‘‘(iv) in conjunction with the Commis-
sioner, develop career paths for local tax-
payer advocates choosing to make a career
in the Office of the Taxpayer Advocate.
‘‘(D) PERSONNEL ACTIONS.—
203
‘‘(i) IN GENERAL.—The National Tax-
payer Advocate shall have the responsibility
and authority to—
‘‘(I) appoint at least 1 local tax-
payer advocate for each State, and
‘‘(II) evaluate and take personnel
actions (including dismissal) with re-
spect to any employee of any local of-
fice of a taxpayer advocate described in
subclause (I).
‘‘(ii) CONSULTATION.—The National
Taxpayer Advocate may consult with the
appropriate supervisory personnel of the In-
ternal Revenue Service in carrying out the
National Taxpayer Advocate’s responsibil-
ities under this subparagraph.
‘‘(3) RESPONSIBILITIES OF COMMISSIONER.—The
Commissioner shall establish procedures requiring a
formal response to all recommendations submitted to
the Commissioner by the National Taxpayer Advocate
within 3 months after submission to the Commis-
sioner.
‘‘(4) OPERATION OF LOCAL OFFICES.—
‘‘(A) IN
GENERAL.—Each local taxpayer
advocate—
205
‘‘(1) ANNUAL
REPORTING.—The Treasury In-
spector General for Tax Administration shall include
in one of the semiannual reports under section 5 of
the Inspector General Act of 1978—
‘‘(A) an evaluation of the compliance of the
Internal Revenue Service with—
‘‘(i) restrictions under section 1204 of
the Internal Revenue Service Restructuring
and Reform Act of 1998 on the use of en-
forcement statistics to evaluate Internal
Revenue Service employees,
‘‘(ii) restrictions under section 7521 on
directly contacting taxpayers who have in-
dicated that they prefer their representatives
be contacted,
‘‘(iii) required procedures under sec-
tion 6320 for approval of a notice of a lien,
‘‘(iv) required procedures under sub-
chapter D of chapter 64 for seizure of prop-
erty for collection of taxes, including re-
quired procedures under section 6330 for
approval of a levy or notice of levy, and
‘‘(v) restrictions under section 3708 of
the Internal Revenue Service Restructuring
206
and Reform Act of 1998 on designation of
taxpayers,
‘‘(B) a review and a certification of whether
or not the Secretary is complying with the re-
quirements of section 6103(e)(8) to disclose infor-
mation to an individual filing a joint return on
collection activity involving the other individual
filing the return,
‘‘(C) information regarding extensions of
the statute of limitations for assessment and col-
lection of tax under section 6501 and the provi-
sion of notice to taxpayers regarding requests for
such extension,
‘‘(D) an evaluation of the adequacy and se-
curity of the technology of the Internal Revenue
Service,
‘‘(E) any termination or mitigation under
section 1203 of the Internal Revenue Service Re-
structuring and Reform Act of 1998, and
‘‘(F) information regarding improper de-
nial of requests for information from the Inter-
nal Revenue Service identified under paragraph
(2).
‘‘(2) SEMIANNUAL REPORTS.—
207
‘‘(A) IN GENERAL.—The Treasury Inspector
General for Tax Administration shall include in
each semiannual report under section 5 of the
Inspector General Act of 1978—
‘‘(i) the number of taxpayer complaints
during the reporting period;
‘‘(ii) the number of employee mis-
conduct and taxpayer abuse allegations re-
ceived during the period from taxpayers,
Internal Revenue Service employees, and
other sources;
‘‘(iii) a summary of the status of such
complaints and allegations; and
‘‘(iv) a summary of the disposition of
such complaints and allegations, including
the outcome of any Department of Justice
action and any monies paid as a settlement
of such complaints and allegations.
‘‘(B) Clauses (iii) and (iv) of subparagraph
(B) shall only apply to complaints and allega-
tions of serious employee misconduct.
‘‘(3) OTHER RESPONSIBILITIES.—The Treasury
Inspector General for Tax Administration shall—
‘‘(A) conduct periodic audits of not less
than 1 percent of the total number of determina-
208
tions made by the Internal Revenue Service to
deny written requests to disclose information to
taxpayers on the basis of section 6103 of this
title or section 552(b)(7) of title 5, United States
Code, and
‘‘(B) establish and maintain a toll-free tele-
phone number for taxpayers to use to confiden-
tially register complaints of misconduct by Inter-
nal Revenue Service employees and incorporate
the telephone number in the statement required
by section 6227 of the Omnibus Taxpayer Bill of
Rights (Internal Revenue Service Publication
No. 1).’’
(b) NOTICE OF RIGHT TO CONTACT OFFICE INCLUDED
IN NOTICE OF DEFICIENCY.—Section 6212(a) (relating to
notice of deficiency) is amended by adding at the end the
following: ‘‘Such notice shall include a notice to the tax-
payer of the taxpayer’s right to contact a local office of the
taxpayer advocate and the location and phone number of
the appropriate office.’’
(c) EXPANSION OF AUTHORITY TO ISSUE TAXPAYER
ASSISTANCE ORDERS.—Section 7811(a) (relating to tax-
payer assistance orders) is amended to read as follows:
‘‘(a) AUTHORITY TO ISSUE.—
209
‘‘(1) IN GENERAL.—Upon application filed by a
taxpayer with the Office of the Taxpayer Advocate (in
such form, manner, and at such time as the Secretary
shall by regulations prescribe), the National Taxpayer
Advocate may issue a Taxpayer Assistance Order if,
in the determination of the National Taxpayer Advo-
cate—
‘‘(A) the taxpayer is suffering or about to
suffer a significant hardship as a result of the
manner in which the internal revenue laws are
being administered by the Secretary, or
‘‘(B) the issuance of a Taxpayer Assistance
Order is otherwise appropriate considering the
circumstances of the taxpayer.
‘‘(2) DETERMINATION OF HARDSHIP.—For pur-
poses of paragraph (1), a significant hardship shall
include—
‘‘(A) an immediate threat of adverse action,
‘‘(B) a delay of more than 30 days in re-
solving taxpayer account problems,
‘‘(C) the incurring by the taxpayer of sig-
nificant costs (including fees for professional rep-
resentation) if relief is not granted, or
210
‘‘(D) irreparable injury to, or a long-term
adverse impact on, the taxpayer if relief is not
granted.
‘‘(3) STANDARD WHERE ADMINISTRATIVE GUID-
ANCE NOT FOLLOWED.—In cases where any Internal
Revenue Service employee is not following applicable
published administrative guidance (including the In-
ternal Revenue Manual), the National Taxpayer Ad-
vocate shall construe the factors taken into account in
determining whether to issue a taxpayer assistance
order in the manner most favorable to the taxpayer.’’
(d) CONFORMING AMENDMENTS RELATING
TO NA-
TIONAL TAXPAYER ADVOCATE.—
(1) The following provisions are each amended
by striking ‘‘Taxpayer Advocate’’ each place it ap-
pears and inserting ‘‘National Taxpayer Advocate’’:
(A) Section 6323(j)(1)(D) (relating to with-
drawal of notice in certain circumstances).
(B) Section 6343(d)(2)(D) (relating to re-
turn of property in certain cases).
(C) Section 7811(b)(2)(D) (relating to terms
of a Taxpayer Assistance Order).
(D) Section 7811(c) (relating to authority
to modify or rescind).
212
Plans and Exempt Organizations of the Internal Rev-
enue Service’’ and inserting ‘‘Secretary’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
take effect on the date of the enactment of this Act.
(2) CHIEF COUNSEL.—Section 7803(b)(3) of the
Internal Revenue Code of 1986, as added by this sec-
tion, shall take effect on the date that is 90 days after
the date of the enactment of this Act.
(3) NATIONAL
TAXPAYER
ADVOCATE.—During
the period before the appointment of the Internal Rev-
enue Service Oversight Board and notwithstanding
section 7803(c)(1)(B)(ii) of the Internal Revenue Code
of 1986, as added by this section, the National Tax-
payer Advocate shall be appointed by the Secretary of
the Treasury from among individuals who have a
background in customer service as well as tax law
and who have experience in representing individual
taxpayers. The Commissioner of Internal Revenue
shall submit to the Secretary a list of nominations for
consideration under the preceding sentence.
(4) CURRENT OFFICERS.—
(A) In the case of an individual serving as
Commissioner of Internal Revenue on the date of
213
the enactment of this Act who was appointed to
such position before such date, the 5-year term
required by section 7803(a)(1) of the Internal
Revenue Code of 1986, as added by this section,
shall begin as of the date of such appointment.
(B) Clauses (ii) and (iii) of section
7803(c)(1)(B) of such Code, as added by this sec-
tion, shall not apply to the individual serving as
Taxpayer Advocate on the date of the enactment
of this Act.
SEC. 1103. TREASURY INSPECTOR GENERAL FOR TAX AD-
MINISTRATION.
(a) ESTABLISHMENT OF 2 INSPECTORS GENERAL IN
THE DEPARTMENT OF THE TREASURY.—Section 2 of the
Inspector General Act of 1978 (5 U.S.C. App.) is amended
by striking the matter following paragraph (3) and insert-
ing the following:
‘‘there is established—
‘‘(A) in each of such establishments an office
of Inspector General, subject to subparagraph
(B); and
‘‘(B) in the establishment of the Department
of the Treasury—
‘‘(i) an Office of Inspector General of
the Department of the Treasury; and
214
‘‘(ii) an Office of Treasury Inspector
General for Tax Administration.’’
(b) AMENDMENTS TO SECTION 8D OF THE INSPECTOR
GENERAL ACT OF 1978.—
(1) LIMITATION ON AUTHORITY OF INSPECTOR
GENERAL.—Section 8D(a) of the Inspector General
Act of 1978 (5 U.S.C. App.) is amended by adding
at the end the following:
‘‘(4) The Secretary of the Treasury may not ex-
ercise any power under paragraph (1) or (2) with re-
spect to the Treasury Inspector General for Tax Ad-
ministration.’’
(2) DUTIES OF INSPECTOR GENERAL OF THE DE-
PARTMENT OF THE TREASURY; RELATIONSHIP TO THE
TREASURY INSPECTOR GENERAL FOR TAX ADMINIS-
TRATION.—Section 8D(b) of such Act is amended—
(A) by inserting ‘‘(1)’’ after ‘‘(b)’’; and
(B) by adding at the end the following:
‘‘(2) The Inspector General of the Department of
the Treasury shall exercise all duties and responsibil-
ities of an Inspector General for the Department of
the Treasury other than the duties and responsibil-
ities exercised by the Treasury Inspector General for
Tax Administration.
215
‘‘(3) The Secretary of the Treasury shall estab-
lish procedures under which the Inspector General of
the Department of the Treasury and the Treasury In-
spector General for Tax Administration will—
‘‘(A) determine how audits and investiga-
tions are allocated in cases of overlapping juris-
diction, and
‘‘(B) provide for coordination, cooperation,
and efficiency in the conduct of such audits and
investigations.’’
(3) ACCESS TO RETURNS AND RETURN INFORMA-
TION.—Section 8D(e) of such Act is amended—
(A) in paragraph (1), by striking ‘‘Inspec-
tor General’’ and inserting ‘‘Treasury Inspector
General for Tax Administration’’;
(B) in paragraph (2), by striking all begin-
ning with ‘‘(2)’’ through subparagraph (B);
(C)(i) by redesignating subparagraph (C) of
paragraph (2) as paragraph (2) of such sub-
section; and
(ii) in such redesignated paragraph (2), by
striking ‘‘Inspector General’’ and inserting
‘‘Treasury Inspector General for Tax Adminis-
tration’’; and
216
(D)(i) by redesignating subparagraph (D)
of such paragraph as paragraph (3) of such sub-
section; and
(ii) in such redesignated paragraph (3), by
striking ‘‘Inspector General’’ and inserting
‘‘Treasury Inspector General for Tax Adminis-
tration’’.
(4) EFFECT ON CERTAIN FINAL DECISIONS OF
THE
SECRETARY.—Section 8D(f) of such Act is
amended by striking ‘‘Inspector General’’ and insert-
ing ‘‘Inspector General of the Department of the
Treasury or the Treasury Inspector General for Tax
Administration’’.
(5) REPEAL OF LIMITATION ON REPORTS TO THE
ATTORNEY
GENERAL.—Section 8D of such Act is
amended by striking subsection (g).
(6) TRANSMISSION OF REPORTS.—Section 8D(h)
of such Act is amended—
(A) 
by 
striking 
‘‘(h)’’ 
and 
inserting
‘‘(g)(1)’’;
(B) by striking ‘‘and the Committees on
Government Operations and Ways and Means of
the House of Representatives’’ and inserting
‘‘and the Committees on Government Reform
217
and Oversight and Ways and Means of the
House of Representatives’’; and
(C) by adding at the end the following:
‘‘(2) Any report made by the Treasury Inspector Gen-
eral for Tax Administration that is required to be transmit-
ted by the Secretary of the Treasury to the appropriate com-
mittees or subcommittees of Congress under section 5(d)
shall also be transmitted, within the 7-day period specified
under such subsection, to the Internal Revenue Service
Oversight Board and the Commissioner of Internal Reve-
nue.’’
(7) TREASURY
INSPECTOR
GENERAL
FOR
TAX
ADMINISTRATION.—Section 8D of the Act is amended
by adding at the end the following:
‘‘(h) The Treasury Inspector General for Tax Adminis-
tration shall exercise all duties and responsibilities of an
Inspector General of an establishment with respect to the
Department of the Treasury and the Secretary of the Treas-
ury on all matters relating to the Internal Revenue Service.
The Treasury Inspector General for Tax Administration
shall have sole authority under this Act to conduct an audit
or investigation of the Internal Revenue Service Oversight
Board and the Chief Counsel for the Internal Revenue Serv-
ice.
218
‘‘(i) In addition to the requirements of the first sen-
tence of section 3(a), the Treasury Inspector General for
Tax Administration should have experience in tax adminis-
tration and demonstrated ability to lead a large and com-
plex organization.
‘‘(j) An individual appointed to the position of Treas-
ury Inspector General for Tax Administration, the Assist-
ant Inspector General for Auditing of the Office of the
Treasury Inspector General for Tax Administration under
section 3(d)(1), the Assistant Inspector General for Inves-
tigations of the Office of the Treasury Inspector General for
Tax Administration under section 3(d)(2), or any position
of Deputy Inspector General of the Office of the Treasury
Inspector General for Tax Administration may not be an
employee of the Internal Revenue Service—
‘‘(1) during the 2-year period preceding the date
of appointment to such position; or
‘‘(2) during the 5-year period following the date
such individual ends service in such position.
‘‘(k)(1) In addition to the duties and responsibilities
exercised by an inspector general of an establishment, the
Treasury Inspector General for Tax Administration—
‘‘(A) shall have the duty to enforce criminal pro-
visions under section 7608(b) of the Internal Revenue
Code of 1986;
219
‘‘(B) in addition to the functions authorized
under section 7608(b)(2) of such Code, may carry
firearms;
‘‘(C) shall be responsible for protecting the Inter-
nal Revenue Service against external attempts to cor-
rupt or threaten employees of the Internal Revenue
Service; and
‘‘(D) may designate any employee in the Office
of the Treasury Inspector General for Tax Adminis-
tration to enforce such laws and perform such func-
tions referred to under subparagraphs (A), (B), and
(C).
‘‘(2)(A) In performing a law enforcement function
under paragraph (1), the Treasury Inspector General for
Tax Administration shall report any reasonable grounds to
believe there has been a violation of Federal criminal law
to the Attorney General at an appropriate time as deter-
mined by the Treasury Inspector General for Tax Adminis-
tration, notwithstanding section 4(d).
‘‘(B) In the administration of section 5(d) and sub-
section (g)(2) of this section, the Secretary of the Treasury
may transmit the required report with respect to the Treas-
ury Inspector General for Tax Administration at an appro-
priate time as determined by the Secretary, if the problem,
abuse, or deficiency relates to—
220
‘‘(i) the performance of a law enforcement func-
tion under paragraph (1); and
‘‘(ii) sensitive information concerning matters
under subsection (a)(1)(A) through (F).
‘‘(3) Nothing in this subsection shall be construed to
affect the authority of any other person to carry out or en-
force any provision specified in paragraph (1).
‘‘(l)(1) The Treasury Inspector General for Tax Ad-
ministration shall timely conduct an audit or investigation
relating to the Internal Revenue Service upon the written
request of the Commissioner of Internal Revenue or the In-
ternal Revenue Service Oversight Board.
‘‘(2)(A) Any final report of an audit conducted by the
Treasury Inspector General for Tax Administration shall
be timely submitted by the Inspector General to the Com-
missioner of Internal Revenue and the Internal Revenue
Service Oversight Board.
‘‘(B) The Treasury Inspector General for Tax Admin-
istration shall periodically submit to the Commissioner and
Board a list of investigations for which a final report has
been completed by the Inspector General and shall provide
a copy of any such report upon request of the Commissioner
or Board.
221
‘‘(C) This paragraph applies regardless of whether the
applicable audit or investigation is requested under para-
graph (1).’’
(c) TRANSFER OF FUNCTIONS.—
(1) IN GENERAL.—Section 9(a)(1) of the Inspec-
tor General Act of 1978 (5 U.S.C. App.) is amended
in subparagraph (L)—
(A) by inserting ‘‘(i)’’ after ‘‘(L)’’;
(B) by inserting ‘‘and’’ after the semicolon;
and
(C) by adding at the end the following:
‘‘(ii) of the Treasury Inspector General
for Tax Administration, effective 180 days
after the date of the enactment of the Inter-
nal Revenue Service Restructuring and Re-
form Act of 1998, the Office of Chief Inspec-
tor of the Internal Revenue Service;’’.
(2) TERMINATION OF OFFICE OF CHIEF INSPEC-
TOR.—Effective upon the transfer of functions under
the amendment made by paragraph (1), the Office of
Chief Inspector of the Internal Revenue Service is ter-
minated.
(3) RETENTION
OF
CERTAIN
INTERNAL
AUDIT
PERSONNEL.—In making the transfer under the
amendment made by paragraph (1), the Commis-
222
sioner of Internal Revenue shall designate and retain
an appropriate number (not in excess of 300) of in-
ternal audit full-time equivalent employee positions
necessary for management relating to the Internal
Revenue Service.
(4) ADDITIONAL PERSONNEL TRANSFERS.—Effec-
tive 180 days after the date of the enactment of this
Act, the Secretary of the Treasury shall transfer 21
full-time equivalent positions from the Office of the
Inspector General of the Department of the Treasury
to the Office of the Treasury Inspector General for
Tax Administration.
(d) AUDITS
AND REPORTS
OF AGENCY FINANCIAL
STATEMENTS.—Subject to section 3521(g) of title 31,
United States Code—
(1) the Inspector General of the Department of
the Treasury shall, subject to paragraph (2)—
(A) audit each financial statement in ac-
cordance with section 3521(e) of such title; and
(B) prepare and submit each report re-
quired under section 3521(f) of such title; and
(2) the Treasury Inspector General for Tax Ad-
ministration shall—
(A) audit that portion of each financial
statement referred to under paragraph (1)(A)
223
that relates to custodial and administrative ac-
counts of the Internal Revenue Service; and
(B) prepare that portion of each report re-
ferred to under paragraph (1)(B) that relates to
custodial and administrative accounts of the In-
ternal Revenue Service.
(e) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) TRANSFER OF FUNCTIONS.—Section 8D(b) of
the Inspector General Act of 1978 (5 U.S.C. App.) is
amended by striking ‘‘and the internal audits and in-
ternal investigations performed by the Office of Assist-
ant Commissioner (Inspection) of the Internal Reve-
nue Service’’.
(2) AMENDMENTS RELATING TO REFERENCES TO
THE INSPECTOR GENERAL OF THE DEPARTMENT OF
THE TREASURY.—
(A) LIMITATION
ON
AUTHORITY.—Section
8D(a) of the Inspector General Act of 1978 (5
U.S.C. App.) is amended—
(i) in the first sentence of paragraph
(1), by inserting ‘‘of the Department of the
Treasury’’ after ‘‘Inspector General’’;
(ii) in paragraph (2), by inserting ‘‘of
the Department of the Treasury’’ after ‘‘pro-
hibit the Inspector General’’; and
224
(iii) in paragraph (3)—
(I) in the first sentence, by insert-
ing ‘‘of the Department of the Treas-
ury’’ after ‘‘notify the Inspector Gen-
eral’’; and
(II) in the second sentence, by in-
serting ‘‘of the Department of the
Treasury’’ after ‘‘notice, the Inspector
General’’.
(B) DUTIES.—Section 8D(b) of such Act is
amended in the second sentence by inserting ‘‘of
the Department of the Treasury’’ after ‘‘Inspector
General’’.
(C) AUDITS AND INVESTIGATIONS.—Section
8D (c) and (d) of such Act are amended by in-
serting ‘‘of the Department of the Treasury’’
after ‘‘Inspector General’’ each place it appears.
(3) REFERENCES.—The second section 8G of the
Inspector General Act of 1978 (relating to rule of con-
struction of special provisions) is amended—
(A) by striking ‘‘SEC. 8G’’ and inserting
‘‘SEC. 8H’’;
(B) by striking ‘‘or 8E’’ and inserting ‘‘8E
or 8F’’; and
225
(C) by striking ‘‘section 8F(a)’’ and insert-
ing ‘‘section 8G(a)’’.
(4) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—Section 7608(b)(1) of the Internal Revenue
Code of 1986 is amended by striking ‘‘or of the Inter-
nal Security Division’’.
SEC. 1104. OTHER PERSONNEL.
(a) IN GENERAL.—Section 7804 (relating to the effect
of reorganization plans) is amended to read as follows:
‘‘SEC. 7804. OTHER PERSONNEL.
‘‘(a) APPOINTMENT AND SUPERVISION.—Unless other-
wise prescribed by the Secretary, the Commissioner of Inter-
nal Revenue is authorized to employ such number of persons
as the Commissioner deems proper for the administration
and enforcement of the internal revenue laws, and the Com-
missioner shall issue all necessary directions, instructions,
orders, and rules applicable to such persons.
‘‘(b) POSTS OF DUTY OF EMPLOYEES IN FIELD SERV-
ICE OR TRAVELING.—Unless otherwise prescribed by the
Secretary—
‘‘(1) DESIGNATION
OF
POST
OF
DUTY.—The
Commissioner shall determine and designate the posts
of duty of all such persons engaged in field work or
traveling on official business outside of the District of
Columbia.
226
‘‘(2) DETAIL OF PERSONNEL FROM FIELD SERV-
ICE.—The Commissioner may order any such person
engaged in field work to duty in the District of Co-
lumbia, for such periods as the Commissioner may
prescribe, and to any designated post of duty outside
the District of Columbia upon the completion of such
duty.
‘‘(c) DELINQUENT INTERNAL REVENUE OFFICERS AND
EMPLOYEES.—If any officer or employee of the Treasury
Department acting in connection with the internal revenue
laws fails to account for and pay over any amount of money
or property collected or received by him in connection with
the internal revenue laws, the Secretary shall issue notice
and demand to such officer or employee for payment of the
amount which he failed to account for and pay over, and,
upon failure to pay the amount demanded within the time
specified in such notice, the amount so demanded shall be
deemed imposed upon such officer or employee and assessed
upon the date of such notice and demand, and the provi-
sions of chapter 64 and all other provisions of law relating
to the collection of assessed taxes shall be applicable in re-
spect of such amount.’’
(b) CONFORMING AMENDMENTS.—
227
(1) Subsection (b) of section 6344 is amended by
striking ‘‘section 7803(d)’’ and inserting ‘‘section
7804(c)’’.
(2) The table of sections for subchapter A of
chapter 80 is amended by striking the item relating
to section 7804 and inserting the following new item:
‘‘Sec. 7804. Other personnel.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 1105. PROHIBITION ON EXECUTIVE BRANCH INFLU-
ENCE OVER TAXPAYER AUDITS AND OTHER
INVESTIGATIONS.
(a) IN GENERAL.—Part I of subchapter A of chapter
75 (relating to crimes, other offenses, and forfeitures) is
amended by adding after section 7216 the following new
section:
‘‘SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLU-
ENCE OVER TAXPAYER AUDITS AND OTHER
INVESTIGATIONS.
‘‘(a) PROHIBITION.—It shall be unlawful for any ap-
plicable person to request, directly or indirectly, any officer
or employee of the Internal Revenue Service to conduct or
terminate an audit or other investigation of any particular
taxpayer with respect to the tax liability of such taxpayer.
228
‘‘(b) REPORTING REQUIREMENT.—Any officer or em-
ployee of the Internal Revenue Service receiving any request
prohibited by subsection (a) shall report the receipt of such
request to the Treasury Inspector General for Tax Adminis-
tration.
‘‘(c) EXCEPTIONS.—Subsection (a) shall not apply to
any written request made—
‘‘(1) to an applicable person by or on behalf of
the taxpayer and forwarded by such applicable person
to the Internal Revenue Service,
‘‘(2) by an applicable person for disclosure of re-
turn or return information under section 6103 if such
request is made in accordance with the requirements
of such section, or
‘‘(3) by the Secretary of the Treasury as a con-
sequence of the implementation of a change in tax
policy.
‘‘(d) PENALTY.—Any person who willfully violates
subsection (a) or fails to report under subsection (b) shall
be punished upon conviction by a fine in any amount not
exceeding $5,000, or imprisonment of not more than 5
years, or both, together with the costs of prosecution.
‘‘(e) APPLICABLE PERSON.—For purposes of this sec-
tion, the term ‘applicable person’ means—
229
‘‘(1) the President, the Vice President, any em-
ployee of the executive office of the President, and any
employee of the executive office of the Vice President,
and
‘‘(2) any individual (other than the Attorney
General of the United States) serving in a position
specified in section 5312 of title 5, United States
Code.’’
(b) CLERICAL AMENDMENT.—The table of sections for
part I of subchapter A of chapter 75 is amended by adding
after the item relating to section 7216 the following new
item:
‘‘Sec. 7217. Prohibition on executive branch influence over taxpayer
audits and other investigations.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to requests made after the date of the
enactment of this Act.
Subtitle C—Personnel Flexibilities
SEC. 1201. IMPROVEMENTS IN PERSONNEL FLEXIBILITIES.
(a) IN GENERAL.—Part III of title 5, United States
Code, is amended by adding at the end the following new
subpart:
230
‘‘Subpart I—Miscellaneous
‘‘CHAPTER 95—PERSONNEL FLEXIBILITIES
RELATING TO THE INTERNAL REVE-
NUE SERVICE
‘‘Sec.
‘‘9501. Internal Revenue Service personnel flexibilities.
‘‘9502. Pay authority for critical positions.
‘‘9503. Streamlined critical pay authority.
‘‘9504. Recruitment, retention, and relocation incentives.
‘‘9505. Performance awards for senior executives.
‘‘9506. Limited appointments to career reserved Senior Executive Service posi-
tions.
‘‘9507. Streamlined demonstration project authority.
‘‘9508. General workforce performance management system.
‘‘9509. General workforce classification and pay.
‘‘9510. General workforce staffing.
‘‘§ 9501. Internal Revenue Service personnel flexibili-
ties
‘‘(a) Any flexibilities provided by sections 9502
through 9510 of this chapter shall be exercised in a manner
consistent with—
‘‘(1) chapter 23 (relating to merit system prin-
ciples and prohibited personnel practices);
‘‘(2) provisions relating to preference eligibles;
‘‘(3) except as otherwise specifically provided,
section 5307 (relating to the aggregate limitation on
pay);
‘‘(4) except as otherwise specifically provided,
chapter 71 (relating to labor-management relations);
and
231
‘‘(5) subject to subsections (b) and (c) of section
1104, as though such authorities were delegated to the
Secretary of the Treasury under section 1104(a)(2).
‘‘(b) The Secretary of the Treasury shall provide the
Office of Personnel Management with any information that
Office requires in carrying out its responsibilities under
this section.
‘‘(c) Employees within a unit to which a labor organi-
zation is accorded exclusive recognition under chapter 71
shall not be subject to any flexibility provided by sections
9507 through 9510 of this chapter unless the exclusive rep-
resentative and the Internal Revenue Service have entered
into a written agreement which specifically provides for the
exercise of that flexibility. Such written agreement may be
imposed by the Federal Services Impasses Panel under sec-
tion 7119.
‘‘§ 9502. Pay authority for critical positions
‘‘(a) When the Secretary of the Treasury seeks a grant
of authority under section 5377 for critical pay for 1 or
more positions at the Internal Revenue Service, the Office
of Management and Budget may fix the rate of basic pay,
notwithstanding sections 5377(d)(2) and 5307, at any rate
up to the salary set in accordance with section 104 of title
3.
232
‘‘(b) Notwithstanding section 5307, no allowance, dif-
ferential, bonus, award, or similar cash payment may be
paid to any employee receiving critical pay at a rate fixed
under subsection (a), in any calendar year if, or to the ex-
tent that, the employee’s total annual compensation will ex-
ceed the maximum amount of total annual compensation
payable at the salary set in accordance with section 104
of title 3.
‘‘§ 9503. Streamlined critical pay authority
‘‘(a) Notwithstanding section 9502, and without re-
gard to the provisions of this title governing appointments
in the competitive service or the Senior Executive Service
and chapters 51 and 53 (relating to classification and pay
rates), the Secretary of the Treasury may, for a period of
10 years after the date of enactment of this section, estab-
lish, fix the compensation of, and appoint individuals to,
designated critical administrative, technical, and profes-
sional positions needed to carry out the functions of the In-
ternal Revenue Service, if—
‘‘(1) the positions—
‘‘(A) require expertise of an extremely high
level in an administrative, technical, or profes-
sional field; and
233
‘‘(B) are critical to the Internal Revenue
Service’s successful accomplishment of an impor-
tant mission;
‘‘(2) exercise of the authority is necessary to re-
cruit or retain an individual exceptionally well quali-
fied for the position;
‘‘(3) the number of such positions does not exceed
40 at any one time;
‘‘(4) designation of such positions are approved
by the Secretary of the Treasury;
‘‘(5) the terms of such appointments are limited
to no more than 4 years;
‘‘(6) appointees to such positions were not Inter-
nal Revenue Service employees immediately prior to
such appointment;
‘‘(7) total annual compensation for any ap-
pointee to such positions does not exceed the highest
total annual compensation payable at the rate deter-
mined under section 104 of title 3; and
‘‘(8) all such positions are excluded from the col-
lective bargaining unit.
‘‘(b) Individuals appointed under this section shall not
be considered to be employees for purposes of subchapter II
of chapter 75.
234
‘‘§ 9504. Recruitment, retention, and relocation incen-
tives
‘‘For a period of 10 years after the date of enactment
of this section and subject to approval by the Office of Per-
sonnel Management, the Secretary of the Treasury may pro-
vide for variations from sections 5753 and 5754 governing
payment of recruitment, relocation, and retention incen-
tives.
‘‘§ 9505. Performance awards for senior executives
‘‘(a) For a period of 10 years after the date of enact-
ment of this section, Internal Revenue Service senior execu-
tives who have program management responsibility over
significant functions of the Internal Revenue Service may
be paid a performance bonus without regard to the limita-
tion in section 5384(b)(2) if the Secretary of the Treasury
finds such award warranted based on the executive’s per-
formance.
‘‘(b) In evaluating an executive’s performance for pur-
poses of an award under this section, the Secretary of the
Treasury shall take into account the executive’s contribu-
tions toward the successful accomplishment of goals and ob-
jectives established under the Government Performance and
Results Act of 1993, division E of the Clinger-Cohen Act
of 1996 (Public Law 104–106; 110 Stat. 679), Revenue Pro-
cedure 64–22 (as in effect on July 30, 1997), taxpayer serv-
ice surveys, and other performance metrics or plans estab-
235
lished in consultation with the Internal Revenue Service
Oversight Board.
‘‘(c) Any award in excess of 20 percent of an execu-
tive’s rate of basic pay shall be approved by the Secretary
of the Treasury.
‘‘(d) Notwithstanding section 5384(b)(3), the Secretary
of the Treasury shall determine the aggregate amount of
performance awards available to be paid during any fiscal
year under this section and section 5384 to career senior
executives in the Internal Revenue Service. Such amount
may not exceed an amount equal to 5 percent of the aggre-
gate amount of basic pay paid to career senior executives
in the Internal Revenue Service during the preceding fiscal
year. The Internal Revenue Service shall not be included
in the determination under section 5384(b)(3) of the aggre-
gate amount of performance awards payable to career sen-
ior executives in the Department of the Treasury other than
the Internal Revenue Service.
‘‘(e) Notwithstanding section 5307, a performance
bonus award may not be paid to an executive in a calendar
year if, or to the extent that, the executive’s total annual
compensation will exceed the maximum amount of total an-
nual compensation payable at the rate determined under
section 104 of title 3.
236
‘‘§ 9506. Limited appointments to career reserved Sen-
ior Executive Service positions
‘‘(a) In the application of section 3132, a ‘career re-
served position’ in the Internal Revenue Service means a
position designated under section 3132(b) which may be
filled only by—
‘‘(1) a career appointee, or
‘‘(2) a limited emergency appointee or a limited
term appointee—
‘‘(A) who, immediately upon entering the
career reserved position, was serving under a ca-
reer or career-conditional appointment outside
the Senior Executive Service; or
‘‘(B) whose limited emergency or limited
term appointment is approved in advance by the
Office of Personnel Management.
‘‘(b)(1) The number of positions described under sub-
section (a) which are filled by an appointee as described
under paragraph (2) of such subsection may not exceed 10
percent of the total number of Senior Executive Service po-
sitions in the Internal Revenue Service.
‘‘(2) Notwithstanding section 3132—
‘‘(A) the term of an appointee described under
subsection (a)(2) may be for any period not to exceed
3 years; and
‘‘(B) such an appointee may serve—
237
‘‘(i) 2 such terms; or
‘‘(ii) 2 such terms in addition to any unex-
pired term applicable at the time of appoint-
ment.
‘‘§ 9507. Streamlined demonstration project authority
‘‘(a) The exercise of any of the flexibilities under sec-
tions 9502 through 9510 shall not affect the authority of
the Secretary of the Treasury to implement for the Internal
Revenue Service a demonstration project subject to chapter
47, as provided in subsection (b).
‘‘(b) In applying section 4703 to a demonstration
project described in section 4701(a)(4) which involves the
Internal Revenue Service—
‘‘(1) section 4703(b)(1) shall be deemed to read
as follows:
‘‘ ‘(1) develop a plan for such project which de-
scribes its purpose, the employees to be covered, the
project itself, its anticipated outcomes, and the meth-
od of evaluating the project;’;
‘‘(2) section 4703(b)(3) shall not apply;
‘‘(3) the 180-day notification period in section
4703(b)(4) shall be deemed to be a notification period
of 30 days;
‘‘(4) section 4703(b)(6) shall be deemed to read
as follows:
238
‘‘ ‘(6) provides each House of Congress with the
final version of the plan.’;
‘‘(5) section 4703(c)(1) shall be deemed to read
as follows:
‘‘ ‘(1) subchapter V of chapter 63 or subpart G
of part III of this title;’;
‘‘(6) the requirements of paragraphs (1)(A) and
(2) of section 4703(d) shall not apply; and
‘‘(7) 
notwithstanding 
section 
4703(d)(1)(B),
based on an evaluation as provided in section
4703(h), the Office of Personnel Management and the
Secretary of the Treasury, except as otherwise pro-
vided by this subsection, may waive the termination
date of a demonstration project under section 4703(d).
‘‘(c) At least 90 days before waiving the termination
date under subsection (b)(7), the Office of Personnel Man-
agement shall publish in the Federal Register a notice of
its intention to waive the termination date and shall inform
in writing both Houses of Congress of its intention.
‘‘§ 9508. General workforce performance management
system
‘‘(a) In lieu of a performance appraisal system estab-
lished under section 4302, the Secretary of the Treasury
may establish for all or part of the Internal Revenue Service
a performance management system that—
239
‘‘(1) maintains individual accountability by—
‘‘(A) establishing 1 or more retention stand-
ards for each employee related to the work of the
employee and expressed in terms of individual
performance, and communicating such retention
standards to employees;
‘‘(B) making periodic determinations of
whether each employee meets or does not meet the
employee’s established retention standards; and
‘‘(C) taking actions, in accordance with ap-
plicable laws and regulations, with respect to
any employee whose performance does not meet
established retention standards, including deny-
ing any increases in basic pay, promotions, and
credit for performance under section 3502, and
taking 1 or more of the following actions:
‘‘(i) Reassignment.
‘‘(ii) An action under chapter 43 or
chapter 75 of this title.
‘‘(iii) Any other appropriate action to
resolve the performance problem; and
‘‘(2) except as provided under section 1204 of the
Internal Revenue Service Restructuring and Reform
Act of 1998, strengthens the system’s effectiveness
by—
240
‘‘(A) establishing goals or objectives for in-
dividual, group, or organizational performance
(or any combination thereof), consistent with the
Internal Revenue Service’s performance planning
procedures, including those established under the
Government Performance and Results Act of
1993, division E of the Clinger-Cohen Act of
1996 (Public Law 104–106; 110 Stat. 679), Rev-
enue Procedure 64–22 (as in effect on July 30,
1997), and taxpayer service surveys, and com-
municating such goals or objectives to employees;
‘‘(B) using such goals and objectives to
make performance distinctions among employees
or groups of employees; and
‘‘(C) using performance assessments as a
basis for granting employee awards, adjusting
an employee’s rate of basic pay, and other ap-
propriate personnel actions, in accordance with
applicable laws and regulations.
‘‘(b)(1) For purposes of subsection (a)(2), the term
‘performance assessment’ means a determination of whether
or not retention standards established under subsection
(a)(1)(A) are met, and any additional performance deter-
mination made on the basis of performance goals and objec-
tives established under subsection (a)(2)(A).
241
‘‘(2) For purposes of this title, the term ‘unacceptable
performance’ with respect to an employee of the Internal
Revenue Service covered by a performance management sys-
tem established under this section means performance of the
employee which fails to meet a retention standard estab-
lished under this section.
‘‘(c)(1) The Secretary of the Treasury may establish
an awards program designed to provide incentives for and
recognition of organizational, group, and individual
achievements by providing for granting awards to employ-
ees who, as individuals or members of a group, contribute
to meeting the performance goals and objectives established
under this chapter by such means as a superior individual
or group accomplishment, a documented productivity gain,
or sustained superior performance.
‘‘(2) A cash award under subchapter I of chapter 45
may be granted to an employee of the Internal Revenue
Service without the need for any approval under section
4502(b).
‘‘(d)(1) In applying sections 4303(b)(1)(A) and
7513(b)(1) to employees of the Internal Revenue Service, ‘30
days’ may be deemed to be ‘15 days’.
‘‘(2) Notwithstanding the second sentence of section
5335(c), an employee of the Internal Revenue Service shall
not have a right to appeal the denial of a periodic step
242
increase under section 5335 to the Merit Systems Protection
Board.
‘‘§ 9509. General workforce classification and pay
‘‘(a) For purposes of this section, the term ‘broad-band-
ed system’ means a system for grouping positions for pay,
job evaluation, and other purposes that is different from
the system established under chapter 51 and subchapter III
of chapter 53 as a result of combining grades and related
ranges of rates of pay in 1 or more occupational series.
‘‘(b)(1)(A) The Secretary of the Treasury may, subject
to criteria to be prescribed by the Office of Personnel Man-
agement, establish 1 or more broad-banded systems covering
all or any portion of the Internal Revenue Service work-
force.
‘‘(B) With the approval of the Office of Personnel Man-
agement, a broad-banded system established under this sec-
tion may either include or consist of positions that other-
wise would be subject to subchapter IV of chapter 53 or sec-
tion 5376.
‘‘(2) The Office of Personnel Management may require
the Secretary of the Treasury to submit information relat-
ing to broad-banded systems at the Internal Revenue Serv-
ice.
‘‘(3) Except as otherwise provided under this section,
employees under a broad-banded system shall continue to
243
be subject to the laws and regulations covering employees
under the pay system that otherwise would apply to such
employees.
‘‘(4) The criteria to be prescribed by the Office of Per-
sonnel Management shall, at a minimum—
‘‘(A) ensure that the structure of any broad-
banded system maintains the principle of equal pay
for substantially equal work;
‘‘(B) establish the minimum and maximum
number of grades that may be combined into pay
bands;
‘‘(C) establish requirements for setting minimum
and maximum rates of pay in a pay band;
‘‘(D) establish requirements for adjusting the pay
of an employee within a pay band;
‘‘(E) establish requirements for setting the pay of
a supervisory employee whose position is in a pay
band or who supervises employees whose positions are
in pay bands; and
‘‘(F) establish requirements and methodologies
for setting the pay of an employee upon conversion to
a broad-banded system, initial appointment, change
of position or type of appointment (including pro-
motion, demotion, transfer, reassignment, reinstate-
ment, placement in another pay band, or movement
244
to a different geographic location), and movement be-
tween a broad-banded system and another pay sys-
tem.
‘‘(c) With the approval of the Office of Personnel Man-
agement and in accordance with a plan for implementation
submitted by the Secretary of the Treasury, the Secretary
may, with respect to Internal Revenue Service employees
who are covered by a broad-banded system established under
this section, provide for variations from the provisions of
subchapter VI of chapter 53.
‘‘§ 9510. General workforce staffing
‘‘(a)(1) Except as otherwise provided by this section,
an employee of the Internal Revenue Service may be selected
for a permanent appointment in the competitive service in
the Internal Revenue Service through internal competitive
promotion procedures if—
‘‘(A) the employee has completed, in the competi-
tive service, 2 years of current continuous service
under a term appointment or any combination of
term appointments;
‘‘(B) such term appointment or appointments
were made under competitive procedures prescribed
for permanent appointments;
‘‘(C) the employee’s performance under such term
appointment or appointments met established reten-
245
tion standards, or, if not covered by a performance
management system established under section 9508,
was rated at the fully successful level or higher (or
equivalent thereof); and
‘‘(D) the vacancy announcement for the term ap-
pointment from which the conversion is made stated
that there was a potential for subsequent conversion
to a permanent appointment.
‘‘(2) An appointment under this section may be made
only to a position in the same line of work as a position
to which the employee received a term appointment under
competitive procedures.
‘‘(b)(1) Notwithstanding subchapter I of chapter 33,
the Secretary of the Treasury may establish category rating
systems for evaluating applicants for Internal Revenue
Service positions in the competitive service under which
qualified candidates are divided into 2 or more quality cat-
egories on the basis of relative degrees of merit, rather than
assigned individual numerical ratings.
‘‘(2) Each applicant who meets the minimum quali-
fication requirements for the position to be filled shall be
assigned to an appropriate category based on an evaluation
of the applicant’s knowledge, skills, and abilities relative
to those needed for successful performance in the position
to be filled.
246
‘‘(3) Within each quality category established under
paragraph (1), preference eligibles shall be listed ahead of
individuals who are not preference eligibles. For other than
scientific and professional positions at or higher than GS–
9 (or equivalent), preference eligibles who have a compen-
sable service-connected disability of 10 percent or more, and
who meet the minimum qualification standards, shall be
listed in the highest quality category.
‘‘(4) An appointing authority may select any appli-
cant from the highest quality category or, if fewer than 3
candidates have been assigned to the highest quality cat-
egory, from a merged category consisting of the highest and
second highest quality categories.
‘‘(5) Notwithstanding paragraph (4), the appointing
authority may not pass over a preference eligible in the
same or higher category from which selection is made unless
the requirements of section 3317(b) or 3318(b), as applica-
ble, are satisfied.
‘‘(c) The Secretary of the Treasury may detail employ-
ees among the offices of the Internal Revenue Service with-
out regard to the 120-day limitation in section 3341(b).
‘‘(d) Notwithstanding any other provision of law, the
Secretary of the Treasury may establish a probationary pe-
riod under section 3321 of up to 3 years for Internal Reve-
nue Service positions if the Secretary of the Treasury deter-
247
mines that the nature of the work is such that a shorter
period is insufficient to demonstrate complete proficiency
in the position.
‘‘(e) Nothing in this section exempts the Secretary of
the Treasury from—
‘‘(1) any employment priority established under
direction of the President for the placement of surplus
or displaced employees; or
‘‘(2) any obligation under a court order or decree
relating to the employment practices of the Internal
Revenue Service or the Department of the Treasury.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of title 5, United States Code, is amended by add-
ing at the end the following:
‘‘Subpart I—Miscellaneous
‘‘95. Personnel flexibilities relating to the Internal Reve-
nue Service .................................................................... 9501’’.
SEC. 
1202. 
VOLUNTARY 
SEPARATION 
INCENTIVE 
PAY-
MENTS.
(a) DEFINITION.—In this section, the term ‘‘employee’’
means an employee (as defined by section 2105 of title 5,
United States Code) who is employed by the Internal Reve-
nue Service serving under an appointment without time
limitation, and has been currently employed for a continu-
ous period of at least 3 years, but does not include—
248
(1) a reemployed annuitant under subchapter
III of chapter 83 or chapter 84 of title 5, United
States Code, or another retirement system;
(2) an employee having a disability on the basis
of which such employee is or would be eligible for dis-
ability retirement under the applicable retirement
system referred to in paragraph (1);
(3) an employee who is in receipt of a specific
notice of involuntary separation for misconduct or
unacceptable performance;
(4) an employee who, upon completing an addi-
tional period of service as referred to in section
3(b)(2)(B)(ii) of the Federal Workforce Restructuring
Act of 1994 (5 U.S.C. 5597 note), would qualify for
a voluntary separation incentive payment under sec-
tion 3 of such Act;
(5) an employee who has previously received any
voluntary separation incentive payment by the Fed-
eral Government under this section or any other au-
thority and has not repaid such payment;
(6) an employee covered by statutory reemploy-
ment rights who is on transfer to another organiza-
tion; or
(7) any employee who, during the 24-month pe-
riod preceding the date of separation, has received a
249
recruitment or relocation bonus under section 5753 of
title 5, United States Code, or who, within the 12-
month period preceding the date of separation, re-
ceived a retention allowance under section 5754 of
title 5, United States Code.
(b) AUTHORITY TO PROVIDE VOLUNTARY SEPARATION
INCENTIVE PAYMENTS.—
(1) IN GENERAL.—The Commissioner of Internal
Revenue may pay voluntary separation incentive
payments under this section to any employee to the
extent necessary to carry out the plan to reorganize
the Internal Revenue Service under section 1001.
(2) AMOUNT AND TREATMENT OF PAYMENTS.—A
voluntary separation incentive payment—
(A) shall be paid in a lump sum after the
employee’s separation;
(B) shall be paid from appropriations or
funds available for the payment of the basic pay
of the employees;
(C) shall be equal to the lesser of—
(i) an amount equal to the amount the
employee would be entitled to receive under
section 5595(c) of title 5, United States
Code; or
250
(ii) an amount determined by an agen-
cy head not to exceed $25,000;
(D) may not be made except in the case of
any qualifying employee who voluntarily sepa-
rates (whether by retirement or resignation) be-
fore January 1, 2003;
(E) shall not be a basis for payment, and
shall not be included in the computation, of any
other type of Government benefit; and
(F) shall not be taken into account in deter-
mining the amount of any severance pay to
which the employee may be entitled under section
5595 of title 5, United States Code, based on any
other separation.
(c) ADDITIONAL INTERNAL REVENUE SERVICE CON-
TRIBUTIONS TO THE RETIREMENT FUND.—
(1) IN GENERAL.—In addition to any other pay-
ments which it is required to make under subchapter
III of chapter 83 of title 5, United States Code, the
Internal Revenue Service shall remit to the Office of
Personnel Management for deposit in the Treasury of
the United States to the credit of the Civil Service Re-
tirement and Disability Fund an amount equal to 15
percent of the final basic pay of each employee who
is covered under subchapter III of chapter 83 or chap-
251
ter 84 of title 5, United States Code, to whom a vol-
untary separation incentive has been paid under this
section.
(2) DEFINITION.—In paragraph (1), the term
‘‘final basic pay’’, with respect to an employee, means
the total amount of basic pay which would be payable
for a year of service by such employee, computed
using the employee’s final rate of basic pay, and, if
last serving on other than a full-time basis, with ap-
propriate adjustment therefor.
(d) EFFECT OF SUBSEQUENT EMPLOYMENT WITH THE
GOVERNMENT.—An individual who has received a vol-
untary separation incentive payment under this section
and accepts any employment for compensation with the
Government of the United States, or who works for any
agency of the United States Government through a personal
services contract, within 5 years after the date of the separa-
tion on which the payment is based shall be required to
pay, prior to the individual’s first day of employment, the
entire amount of the incentive payment to the Internal Rev-
enue Service.
(e) EFFECT ON INTERNAL REVENUE SERVICE EM-
PLOYMENT LEVELS.—
(1) INTENDED EFFECT.—Voluntary separations
under this section are not intended to necessarily re-
252
duce the total number of full-time equivalent positions
in the Internal Revenue Service.
(2) USE OF VOLUNTARY SEPARATIONS.—The In-
ternal Revenue Service may redeploy or use the full-
time equivalent positions vacated by voluntary sepa-
rations under this section to make other positions
available to more critical locations or more critical
occupations.
SEC. 1203. TERMINATION OF EMPLOYMENT FOR MIS-
CONDUCT.
(a) IN GENERAL.—Subject to subsection (c), the Com-
missioner of Internal Revenue shall terminate the employ-
ment of any employee of the Internal Revenue Service if
there is a final administrative or judicial determination
that such employee committed any act or omission described
under subsection (b) in the performance of the employee’s
official duties. Such termination shall be a removal for
cause on charges of misconduct.
(b) ACTS OR OMISSIONS.—The acts or omissions re-
ferred to under subsection (a) are—
(1) failure to obtain the required approval signa-
tures on documents authorizing the seizure of a tax-
payer’s home, personal belongings, or business assets;
(2) providing a false statement under oath with
respect to a material matter involving a taxpayer;
253
(3) violation of the civil rights of a taxpayer or
other employee of the Internal Revenue Service;
(4) falsifying or destroying documents to conceal
mistakes made by the employee with respect to a mat-
ter involving a taxpayer;
(5) assault or battery on a taxpayer or other em-
ployee of the Internal Revenue Service;
(6) violations of the Internal Revenue Code of
1986, Department of Treasury regulations, or policies
of the Internal Revenue Service (including the Inter-
nal Revenue Manual) for the purpose of retaliating
against, or harassing, a taxpayer or other employee
of the Internal Revenue Service; and
(7) willful misuse of the provisions of section
6103 of the Internal Revenue Code of 1986 for the
purpose of concealing information from a congres-
sional inquiry.
(c) DETERMINATION OF COMMISSIONER.—
(1) IN GENERAL.—The Commissioner of Internal
Revenue may take a personnel action other than ter-
mination for an act or omission under subsection (a).
(2) DISCRETION.—The exercise of authority
under paragraph (1) shall be at the sole discretion of
the Commissioner of Internal Revenue and may not
be delegated to any other officer. The Commissioner of
254
Internal Revenue, in his sole discretion, may establish
a procedure which will be used to determine whether
an individual should be referred to the Commissioner
of Internal Revenue for a determination by the Com-
missioner under paragraph (1).
(3) NO APPEAL.—Any determination of the Com-
missioner of Internal Revenue under this subsection
may not be appealed in any administrative or judi-
cial proceeding.
SEC. 1204. BASIS FOR EVALUATION OF INTERNAL REVENUE
SERVICE EMPLOYEES.
(a) IN GENERAL.—The Internal Revenue Service shall
not use records of tax enforcement results—
(1) to evaluate employees and their immediate
supervisors; or
(2) to impose or suggest production quotas or
goals with respect to individuals described in para-
graph (1).
(b) TAXPAYER SERVICE.—The Internal Revenue Serv-
ice shall use the fair and equitable treatment of taxpayers
by employees as one of the standards for evaluating em-
ployee performance.
(c) CERTIFICATION.—Each appropriate supervisor
shall certify quarterly by letter to the Commissioner of In-
255
ternal Revenue that tax enforcement results are not used
in a manner prohibited by subsection (a).
(d) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 6231 of the Technical and Miscellaneous Revenue Act
of 1988 (Public Law 100–647; 102 Stat. 3734) is repealed.
(e) EFFECTIVE DATE.—This section shall apply to
evaluations conducted on or after the date of the enactment
of this Act.
SEC. 1205. EMPLOYEE TRAINING PROGRAM.
(a) IN GENERAL.—Not later than 90 days after the
date of the enactment of this Act, the Commissioner of Inter-
nal Revenue shall implement an employee training pro-
gram and shall submit an employee training plan to the
Committee on Finance of the Senate and the Committee on
Ways and Means of the House of Representatives.
(b) CONTENTS.—The plan submitted under subsection
(a) shall—
(1) detail a comprehensive employee training
program to ensure adequate customer service train-
ing;
(2) detail a schedule for training and the fiscal
years during which the training will occur;
(3) detail the funding of the program and rel-
evant information to demonstrate the priority and
commitment of resources to the plan;
256
(4) review the organizational design of customer
service;
(5) provide for the implementation of a perform-
ance development system; and
(6) provide for at least 16 hours of conflict man-
agement training during fiscal year 1999 for employ-
ees conducting collection activities.
TITLE II—ELECTRONIC FILING
SEC. 2001. ELECTRONIC FILING OF TAX AND INFORMATION
RETURNS.
(a) IN GENERAL.—It is the policy of the Congress
that—
(1) paperless filing should be the preferred and
most convenient means of filing tax and information
returns, and
(2) it should be the goal of the Internal Revenue
Service to have at least 80 percent of all such returns
filed electronically by the year 2007.
(b) STRATEGIC PLAN.—
(1) IN GENERAL.—Not later than 180 days after
the date of the enactment of this Act, the Secretary of
the Treasury or the Secretary’s delegate (hereafter in
this section referred to as the ‘‘Secretary’’) shall estab-
lish a plan to eliminate barriers, provide incentives,
and use competitive market forces to increase elec-
257
tronic filing gradually over the next 10 years while
maintaining processing times for paper returns at 40
days. To the extent practicable, such plan shall pro-
vide that all returns prepared electronically for tax-
able years beginning after 2001 shall be filed elec-
tronically.
(2) ELECTRONIC COMMERCE ADVISORY GROUP.—
To ensure that the Secretary receives input from the
private sector in the development and implementation
of the plan required by paragraph (1), the Secretary
shall convene an electronic commerce advisory group
to include representatives from the small business
community and from the tax practitioner, preparer,
and computerized tax processor communities and
other representatives from the electronic filing indus-
try.
(c) PROMOTION OF ELECTRONIC FILING AND INCEN-
TIVES.—Section 6011 is amended by redesignating sub-
section (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection:
‘‘(f) PROMOTION OF ELECTRONIC FILING.—
‘‘(1) IN GENERAL.—The Secretary is authorized
to promote the benefits of and encourage the use of
electronic tax administration programs, as they be-
258
come available, through the use of mass communica-
tions and other means.
‘‘(2) INCENTIVES.—The Secretary may imple-
ment procedures to provide for the payment of appro-
priate incentives for electronically filed returns.’’
(d) ANNUAL REPORTS.—Not later than June 30 of
each calendar year after 1998, the Chairperson of the Inter-
nal Revenue Service Oversight Board, the Secretary of the
Treasury, and the Chairperson of the electronic commerce
advisory group established under subsection (b)(2) shall re-
port to the Committees on Ways and Means, Appropria-
tions, and Government Reform and Oversight of the House
of Representatives and the Committees on Finance, Appro-
priations, and Governmental Affairs of the Senate on—
(1) the progress of the Internal Revenue Service
in meeting the goal of receiving electronically 80 per-
cent of tax and information returns by 2007;
(2) the status of the plan required by subsection
(b); and
(3) the legislative changes necessary to assist the
Internal Revenue Service in meeting such goal.
SEC. 2002. DUE DATE FOR CERTAIN INFORMATION RE-
TURNS.
(a) INFORMATION
RETURNS
FILED
ELECTRONI-
CALLY.—Section 6071 (relating to time for filing returns
259
and other documents) is amended by redesignating sub-
section (b) as subsection (c) and by inserting after sub-
section (a) the following new subsection:
‘‘(b) ELECTRONICALLY
FILED
INFORMATION
RE-
TURNS.—Returns made under subparts B and C of part
III of this subchapter which are filed electronically shall
be filed on or before March 31 of the year following the cal-
endar year to which such returns relate.’’
(b) STUDY RELATING TO TIME FOR PROVIDING NO-
TICE TO RECIPIENTS.—
(1) IN GENERAL.—The Secretary of the Treasury
shall conduct a study evaluating the effect of extend-
ing the deadline for providing statements to persons
with respect to whom information is required to be
furnished under subparts B and C of part III of sub-
chapter A of chapter 61 of the Internal Revenue Code
of 1986 (other than section 6051 of such Code) from
January 31 to February 15 of the year in which the
return to which the statement relates is required to be
filed.
(2) REPORT.—Not later than December 31, 1998,
the Secretary of the Treasury shall submit a report on
the study under paragraph (1) to the Committee on
Ways and Means of the House of Representatives and
the Committee on Finance of the Senate.
260
(c) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to returns required to be filed after
December 31, 1999.
SEC. 2003. PAPERLESS ELECTRONIC FILING.
(a) IN GENERAL.—Section 6061 (relating to signing
of returns and other documents) is amended—
(1) by striking ‘‘Except as otherwise provided
by’’ and inserting the following:
‘‘(a) GENERAL RULE.—Except as otherwise provided
by subsection (b) and’’, and
(2) by adding at the end the following new sub-
section:
‘‘(b) ELECTRONIC SIGNATURES.—
‘‘(1) IN GENERAL.—The Secretary shall develop
procedures for the acceptance of signatures in digital
or other electronic form. Until such time as such pro-
cedures are in place, the Secretary may provide for
alternative methods of subscribing all returns, dec-
larations, statements, or other documents required or
permitted to be made or written under internal reve-
nue laws and regulations.
‘‘(2) TREATMENT OF ALTERNATIVE METHODS.—
Notwithstanding any other provision of law, any re-
turn, declaration, statement, or other document filed
and verified, signed, or subscribed under any method
261
adopted under paragraph (1) shall be treated for all
purposes (both civil and criminal, including penalties
for perjury) in the same manner as though signed
and subscribed. Any such return, declaration, state-
ment, or other document shall be presumed to have
been actually submitted and subscribed by the person
on whose behalf it was submitted.
‘‘(3) PUBLISHED
GUIDANCE.—The Secretary
shall publish guidance as appropriate to define and
implement any method adopted under paragraph
(1).’’
(b) ACKNOWLEDGMENT OF ELECTRONIC FILING.—Sec-
tion 7502(c) is amended to read as follows:
‘‘(c) REGISTERED AND CERTIFIED MAILING; ELEC-
TRONIC FILING.—
‘‘(1) REGISTERED MAIL.—For purposes of this
section, if any return, claim, statement, or other doc-
ument, or payment, is sent by United States reg-
istered mail—
‘‘(A) such registration shall be prima facie
evidence that the return, claim, statement, or
other document was delivered to the agency, offi-
cer, or office to which addressed, and
‘‘(B) the date of registration shall be deemed
the postmark date.
262
‘‘(2) CERTIFIED MAIL; ELECTRONIC FILING.—The
Secretary is authorized to provide by regulations the
extent to which the provisions of paragraph (1) with
respect to prima facie evidence of delivery and the
postmark date shall apply to certified mail and elec-
tronic filing.’’
(c) ESTABLISHMENT OF PROCEDURES FOR OTHER IN-
FORMATION.—In the case of taxable periods beginning after
December 31, 1998, the Secretary of the Treasury or the
Secretary’s delegate shall, to the extent practicable, establish
procedures to accept, in electronic form, any other informa-
tion, statements, elections, or schedules, from taxpayers fil-
ing returns electronically, so that such taxpayers will not
be required to file any paper.
(d) PROCEDURES
FOR AUTHORIZING DISCLOSURE
ELECTRONICALLY.—The Secretary shall establish proce-
dures for taxpayers to designate, on electronically filed re-
turns, persons to whom information may be disclosed under
section 6103(c) of the Internal Revenue Code of 1986.
(e) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 2004. RETURN-FREE TAX SYSTEM.
(a) IN GENERAL.—The Secretary of the Treasury or
the Secretary’s delegate shall develop procedures for the im-
263
plementation of a return-free tax system under which ap-
propriate individuals would be permitted to comply with
the Internal Revenue Code of 1986 without making the re-
turn required under section 6012 of such Code for taxable
years beginning after 2007.
(b) REPORT.—Not later than June 30 of each calendar
year after 1999, such Secretary shall report to the Commit-
tee on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate on—
(1) what additional resources the Internal Reve-
nue Service would need to implement such a system,
(2) the changes to the Internal Revenue Code of
1986 that could enhance the use of such a system,
(3) the procedures developed pursuant to sub-
section (a), and
(4) the number and classes of taxpayers that
would be permitted to use the procedures developed
pursuant to subsection (a).
SEC. 2005. ACCESS TO ACCOUNT INFORMATION.
(a) IN GENERAL.—Not later than December 31, 2006,
the Secretary of the Treasury or the Secretary’s delegate
shall develop procedures under which a taxpayer filing re-
turns electronically (and their designees under section
6103(c) of the Internal Revenue Code of 1986) would be able
to review the taxpayer’s account electronically, but only if
264
all necessary safeguards to ensure the privacy of such ac-
count information are in place.
(b) REPORT.—Not later than December 31, 2003, the
Secretary of the Treasury shall report on the progress the
Secretary is making on the development of procedures under
subsection (a) to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate.
TITLE III—TAXPAYER
PROTECTION AND RIGHTS
SEC. 3000. SHORT TITLE.
This title may be cited as the ‘‘Taxpayer Bill of Rights
3’’.
Subtitle A—Burden of Proof
SEC. 3001. BURDEN OF PROOF.
(a) IN GENERAL.—Chapter 76 (relating to judicial
proceedings) is amended by adding at the end the following
new subchapter:
‘‘Subchapter E—Burden of Proof
‘‘Sec. 7491. Burden of proof.
‘‘SEC. 7491. BURDEN OF PROOF.
‘‘(a) BURDEN SHIFTS WHERE TAXPAYER PRODUCES
CREDIBLE EVIDENCE.—
‘‘(1) GENERAL RULE.—If, in any court proceed-
ing, a taxpayer introduces credible evidence with re-
265
spect to any factual issue relevant to ascertaining the
income tax liability of the taxpayer, the Secretary
shall have the burden of proof with respect to such
issue.
‘‘(2) LIMITATIONS.—Paragraph (1) shall apply
with respect to an issue only if—
‘‘(A) the taxpayer has complied with the re-
quirements under this title to substantiate any
item,
‘‘(B) the taxpayer has maintained all
records required under this title and has cooper-
ated with reasonable requests by the Secretary
for witnesses, information, documents, meetings,
and interviews, and
‘‘(C) in the case of a partnership, corpora-
tion, or trust, the taxpayer is described in sec-
tion 7430(c)(4)(A)(ii).
‘‘(3) COORDINATION.—Paragraph (1) shall not
apply to any issue if any other provision of this title
provides for a specific burden of proof with respect to
such issue.
‘‘(b) USE OF STATISTICAL INFORMATION ON UNRE-
LATED TAXPAYERS.—In the case of an individual taxpayer,
the Secretary shall have the burden of proof in any court
proceeding with respect to any item of income which was
266
reconstructed by the Secretary solely through the use of sta-
tistical information on unrelated taxpayers.
‘‘(c) PENALTIES.—Notwithstanding any other provi-
sion of this title, the Secretary shall have the burden of pro-
duction in any court proceeding with respect to the liability
of any individual for any penalty, addition to tax, or addi-
tional amount imposed by this title.’’
(b) CONFORMING AMENDMENT.—The table of sub-
chapters for chapter 76 is amended by adding at the end
the following new item:
‘‘SUBCHAPTER E. Burden of proof.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to court proceedings arising in connec-
tion with examinations commencing after the date of the
enactment of this Act.
Subtitle B—Proceedings by
Taxpayers
SEC. 3101. EXPANSION OF AUTHORITY TO AWARD COSTS
AND CERTAIN FEES.
(a) AWARD OF ALL REASONABLE ATTORNEYS FEES.—
(1) IN GENERAL.—Section 7430(c)(1) (relating
to reasonable litigation costs) is amended—
(A) by striking clause (iii) of subparagraph
(B) and inserting:
267
‘‘(iii) reasonable fees paid or incurred
for the services of attorneys in connection
with the court proceeding.’’, and
(B) by striking the last 2 sentences.
(2) 
CONFORMING
AMENDMENT.—Section
7430(c)(2)(B) is amended by striking ‘‘or (iii)’’.
(b) AWARD
OF ADMINISTRATIVE COSTS INCURRED
AFTER 30-DAY LETTER.—Paragraph (2) of section 7430(c)
is amended by striking the last sentence and inserting the
following new flush sentence:
‘‘Such term shall only include costs incurred on or
after whichever of the following is the earliest: (i) the
date of the receipt by the taxpayer of the notice of the
decision of the Internal Revenue Service Office of Ap-
peals, (ii) the date of the notice of deficiency, or (iii)
the date on which the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for admin-
istrative review in the Internal Revenue Service Of-
fice of Appeals is sent.’’
(c) AWARD OF FEES FOR CERTAIN ADDITIONAL SERV-
ICES.—Paragraph (3) of section 7430(c) is amended to read
as follows:
‘‘(3) ATTORNEYS FEES.—
‘‘(A) IN GENERAL.—For purposes of para-
graphs (1) and (2), fees for the services of an in-
268
dividual (whether or not an attorney) who is au-
thorized to practice before the Tax Court or be-
fore the Internal Revenue Service shall be treated
as fees for the services of an attorney.
‘‘(B) PRO BONO SERVICES.—The court may
award reasonable attorneys fees under subsection
(a) in excess of the attorneys fees paid or in-
curred if such fees are less than the reasonable
attorneys fees because an individual is represent-
ing the prevailing party for no fee or for a fee
which (taking into account all the facts and cir-
cumstances) is no more than a nominal fee. This
subparagraph shall apply only if such award is
paid to such individual or such individual’s em-
ployer.’’
(d) DETERMINATION
OF WHETHER POSITION
OF
UNITED STATES IS SUBSTANTIALLY JUSTIFIED.—Sub-
paragraph (B) of section 7430(c)(4) is amended by redesig-
nating clause (iii) as clause (iv) and by inserting after
clause (ii) the following new clause:
‘‘(iii) EFFECT OF LOSING ON SUBSTAN-
TIALLY
SIMILAR
ISSUES.—In determining
for purposes of clause (i) whether the posi-
tion of the United States was substantially
justified, the court shall take into account
269
whether the United States has lost in courts
of appeal for other circuits on substantially
similar issues.’’
(e) TAXPAYER TREATED AS PREVAILING IF JUDGMENT
IS LESS THAN TAXPAYER’S OFFER.—
(1) IN GENERAL.—Section 7430(c)(4) (defining
prevailing party) is amended by adding at the end
the following new subparagraph:
‘‘(E) SPECIAL
RULES
WHERE
JUDGMENT
LESS THAN TAXPAYER’S OFFER.—
‘‘(i) IN GENERAL.—A party to a court
proceeding meeting the requirements of sub-
paragraph (A)(ii) shall be treated as the
prevailing party if the liability of the tax-
payer pursuant to the judgment in the pro-
ceeding (determined without regard to inter-
est) is equal to or less than the liability of
the taxpayer which would have been so de-
termined if the United States had accepted
a qualified offer of the party under sub-
section (g).
‘‘(ii) 
EXCEPTIONS.—This 
subpara-
graph shall not apply to—
‘‘(I) any judgment issued pursu-
ant to a settlement, or
270
‘‘(II) any proceeding in which the
amount of tax liability is not in issue,
including any declaratory judgment
proceeding, any proceeding to enforce
or quash any summons issued pursu-
ant to this title, and any action to re-
strain disclosure under section 6110(f).
‘‘(iii) SPECIAL
RULES.—If this sub-
paragraph applies to any court proceed-
ing—
‘‘(I) 
the 
determination 
under
clause (i) shall be made by reference to
the last qualified offer made with re-
spect to the tax liability at issue in the
proceeding, and
‘‘(II) reasonable administrative
and litigation costs shall only include
costs incurred on and after the date of
such offer.
‘‘(iv) COORDINATION.—This subpara-
graph shall not apply to a party which is
a prevailing party under any other provi-
sion of this paragraph.’’
(2) QUALIFIED OFFER.—Section 7430 is amend-
ed by adding at the end the following new subsection:
271
‘‘(g) QUALIFIED OFFER.—For purposes of subsection
(c)(4)—
‘‘(1) IN
GENERAL.—The term ‘qualified offer’
means a written offer which—
‘‘(A) is made by the taxpayer to the United
States during the qualified offer period,
‘‘(B) specifies the amount of the taxpayer’s
liability (determined without regard to interest),
‘‘(C) is designated at the time it is made as
a qualified offer for purposes of this section, and
‘‘(D) remains open during the period begin-
ning on the date it is made and ending on the
earliest of the date the offer is rejected, the date
the trial begins, or the 90th day after the date
the offer is made.
‘‘(2) QUALIFIED OFFER PERIOD.—For purposes
of this subsection, the term ‘qualified offer period’
means the period—
‘‘(A) beginning on the date on which the 1st
letter of proposed deficiency which allows the
taxpayer an opportunity for administrative re-
view in the Internal Revenue Service Office of
Appeals is sent, and
‘‘(B) ending on the date which is 30 days
before the date the case is first set for trial.’’
272
(f) AWARD OF ATTORNEYS FEES IN UNAUTHORIZED
INSPECTION
AND DISCLOSURE CASES.—Section 7431(c)
(relating to damages) is amended by striking the period at
the end of paragraph (2) and inserting ‘‘, plus’’, and by
adding at the end the following new paragraph:
‘‘(3) in the case of a plaintiff which is described
in section 7430(c)(4)(A)(ii), reasonable attorneys fees,
except that if the defendant is the United States, rea-
sonable attorneys fees may be awarded only if the
plaintiff is the prevailing party (as determined under
section 7430(c)(4)).’’
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to costs incurred (and, in the case of
the amendment made by subsection (c), services performed)
more than 180 days after the date of the enactment of this
Act.
SEC. 3102. CIVIL DAMAGES FOR COLLECTION ACTIONS.
(a) EXTENSION TO NEGLIGENCE ACTIONS.—
(1) IN GENERAL.—Section 7433 (relating to civil
damages for certain unauthorized collection actions)
is amended—
(A) in subsection (a), by inserting ‘‘, or by
reason of negligence,’’ after ‘‘recklessly or inten-
tionally’’, and
(B) in subsection (b)—
273
(i) in the matter preceding paragraph
(1), by inserting ‘‘($100,000, in the case of
negligence)’’ after ‘‘$1,000,000’’, and
(ii) in paragraph (1), by inserting ‘‘or
negligent’’ after ‘‘reckless or intentional’’.
(2) REQUIREMENT THAT ADMINISTRATIVE REM-
EDIES
BE
EXHAUSTED.—Paragraph (1) of section
7433(d) is amended to read as follows:
‘‘(1) REQUIREMENT THAT ADMINISTRATIVE REM-
EDIES
BE
EXHAUSTED.—A judgment for damages
shall not be awarded under subsection (b) unless the
court determines that the plaintiff has exhausted the
administrative remedies available to such plaintiff
within the Internal Revenue Service.’’
(b) DAMAGES ALLOWED IN CIVIL ACTIONS BY PER-
SONS OTHER THAN TAXPAYERS.—Section 7426 is amended
by redesignating subsection (h) as subsection (i) and by
adding after subsection (g) the following new subsection:
‘‘(h) RECOVERY OF DAMAGES PERMITTED IN CERTAIN
CASES.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b), if, in any action brought under this section, there
is a finding that any officer or employee of the Inter-
nal Revenue Service recklessly or intentionally, or by
reason of negligence, disregarded any provision of this
274
title the defendant shall be liable to the plaintiff in
an amount equal to the lesser of $1,000,000 ($100,000
in the case of negligence) or the sum of—
‘‘(A) actual, direct economic damages sus-
tained by the plaintiff as a proximate result of
the reckless or intentional or negligent actions of
the officer or employee (reduced by any amount
of such damages awarded under subsection (b)),
and
‘‘(B) the costs of the action.
‘‘(2) REQUIREMENT THAT ADMINISTRATIVE REM-
EDIES
BE
EXHAUSTED.—A judgment for damages
shall not be awarded under this section unless the
court determines that the plaintiff has exhausted the
administrative remedies available to such plaintiff
within the Internal Revenue Service.’’
(c) CIVIL DAMAGES FOR IRS VIOLATIONS OF BANK-
RUPTCY PROCEDURES.—
(1) IN GENERAL.—Section 7433 (relating to civil
damages for certain unauthorized collection actions)
is amended by adding at the end the following new
subsection:
‘‘(e) ACTIONS FOR VIOLATIONS OF CERTAIN BANK-
RUPTCY PROCEDURES.—
275
‘‘(1) IN GENERAL.—If, in connection with any
collection of Federal tax with respect to a taxpayer,
any officer or employee of the Internal Revenue Serv-
ice willfully violates any provision of section 362 (re-
lating to automatic stay) or 524 (relating to effect of
discharge) of title 11, United States Code, or any reg-
ulation promulgated under such section, such tax-
payer may petition the bankruptcy court to recover
damages against the United States.
‘‘(2) REMEDY TO BE EXCLUSIVE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), notwithstanding section 105
of such title 11, such petition shall be the exclu-
sive remedy for recovering damages resulting
from such actions.
‘‘(B) 
CERTAIN
OTHER
ACTIONS
PER-
MITTED.—Subparagraph (A) shall not apply to
an action under section 362(h) of such title 11
for a violation of a stay provided by section 362
of such title; except that—
‘‘(i) administrative and litigation costs
in connection with such an action may only
be awarded under section 7430, and
276
‘‘(ii) administrative costs may be
awarded only if incurred on or after the
date that the bankruptcy petition is filed.’’
(2) CONFORMING
AMENDMENT.—Subsection (b)
of section 7433 is amended by inserting ‘‘or petition
filed under subsection (e)’’ after ‘‘subsection (a)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to actions of officers or employees of the
Internal Revenue Service after the date of the enactment
of this Act.
SEC. 3103. INCREASE IN SIZE OF CASES PERMITTED ON
SMALL CASE CALENDAR.
(a) IN GENERAL.—Section 7463 (relating to disputes
involving $10,000 or less) is amended by striking ‘‘$10,000’’
each place it appears (including the section heading) and
inserting ‘‘$50,000’’.
(b) CONFORMING AMENDMENTS.—
(1) Sections 7436(c)(1) and 7443A(b)(3) are each
amended by striking ‘‘$10,000’’ and inserting
‘‘$50,000’’.
(2) The table of sections for part II of subchapter
C of chapter 76 is amended by striking ‘‘$10,000’’ in
the item relating to section 7463 and inserting
‘‘$50,000’’.
277
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to proceedings commencing after the
date of the enactment of this Act.
SEC. 3104. EXPANSION OF TAX COURT JURISDICTION TO
RESPONSIBLE PERSON PENALTIES.
(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 subsections (c), (d), and (e)
as subsections (d), (e), and (f), respectively, and by insert-
ing after subsection (b) the following new subsection:
‘‘(c) PETITION FOR REVIEW BY TAX COURT.—
‘‘(1) IN GENERAL.—A person may petition the
Tax Court (and the Tax Court shall have jurisdic-
tion) to determine the person’s liability under sub-
section (a) if such petition is filed during the 90-day
period beginning on the day on which notice and de-
mand of the penalty under subsection (a) is made on
such person.
‘‘(2) RESTRICTIONS APPLICABLE TO COLLECTION
OF ASSESSMENT.—
‘‘(A) IN
GENERAL.—Except as otherwise
provided in section 6851 or 6861, no levy or pro-
ceeding in court for collection of any assessment
of any penalty under subsection (a) shall be
made, begun, or prosecuted until the expiration
278
of the 90-day period described in paragraph (1),
or, if a petition has been filed with the Tax
Court, until the decision of the Tax Court has be-
come final. Rules similar to the rules of section
7485 shall apply with respect to the collection of
such assessment.
‘‘(B) AUTHORITY
TO
ENJOIN
COLLECTION
ACTIONS.—Notwithstanding the provisions of sec-
tion 7421(a), the beginning of any levy or pro-
ceeding in court for collection of any assessment
of any penalty under subsection (a) during the
time the prohibition under subparagraph (A) is
in force may be enjoined by a proceeding in the
proper court, including the Tax Court. The Tax
Court shall have no jurisdiction under this sub-
paragraph to enjoin any action or proceeding
unless a timely petition has been filed under
paragraph (1) and then only in respect of the
amount of the assessment to which such petition
relates.
‘‘(3) SUSPENSION OF RUNNING OF PERIOD OF
LIMITATIONS.—The running of the period of limita-
tions in section 6502 on the collection of the assess-
ment to which the petition under paragraph (1) re-
lates shall be suspended for the period during which
279
the Secretary is prohibited by paragraph (2)(A) from
collecting by levy or a proceeding in court and for 60
days thereafter.
‘‘(4) APPLICABLE RULES.—
‘‘(A) CREDIT OR REFUND ALLOWED.—Not-
withstanding any other law or rule of law (other
than section 6512(b), 7121, or 7122), credit or
refund shall be allowed or made to the extent at-
tributable to the application of this subsection.
‘‘(B) LIMITATION ON TAX COURT JURISDIC-
TION.—If a suit for refund is begun, the Tax
Court shall lose jurisdiction of the action under
this subsection to whatever extent jurisdiction is
acquired by the district court or the United
States Court of Federal Claims over the taxable
periods that are the subject of the suit for re-
fund.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 7103(a)(4) is amended by striking
‘‘6672(b)’’ and inserting ‘‘6672(d)’’.
(2) Section 7421(a) is amended by striking
‘‘6672(b)’’ and inserting ‘‘6672 (c) and (d)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to penalties imposed after the date of
the enactment of this Act.
280
SEC. 3105. ACTIONS FOR REFUND WITH RESPECT TO CER-
TAIN ESTATES WHICH HAVE ELECTED THE IN-
STALLMENT METHOD OF PAYMENT.
(a) IN GENERAL.—Section 7422 is amended by redes-
ignating subsection (j) as subsection (k) and by inserting
after subsection (i) the following new subsection:
‘‘(j) SPECIAL RULE FOR ACTIONS WITH RESPECT TO
ESTATES FOR WHICH AN ELECTION UNDER SECTION 6166
IS MADE.—
‘‘(1) IN
GENERAL.—The district courts of the
United States and the United States Court of Federal
Claims shall not fail to have jurisdiction over any ac-
tion brought by the representative of an estate to
which this subsection applies to determine the correct
amount of the estate tax liability of such estate (or for
any refund with respect thereto) solely because the full
amount of such liability has not been paid by reason
of an election under section 6166 with respect to such
estate.
‘‘(2) ESTATES
TO
WHICH
SUBSECTION
AP-
PLIES.—This subsection shall apply to any estate if,
as of the date the action is filed—
‘‘(A) no portion of the installments payable
under section 6166 have been accelerated,
281
‘‘(B) all such installments the due date for
which is on or before the date the action is filed
have been paid,
‘‘(C) there is no case pending in the Tax
Court with respect to the tax imposed by section
2001 on the estate and, if a notice of deficiency
under section 6212 with respect to such tax has
been issued, the time for filing a petition with
the Tax Court with respect to such notice has ex-
pired, and
‘‘(D) no proceeding for declaratory judg-
ment under section 7479 is pending.
‘‘(3) PROHIBITION
ON
COLLECTION
OF
DIS-
ALLOWED LIABILITY.—If the court redetermines under
paragraph (1) the estate tax liability of an estate, no
part of such liability which is disallowed by a deci-
sion of such court which has become final may be col-
lected by the Secretary, and amounts paid in excess
of the installments determined by the court as cur-
rently due and payable shall be refunded.’’
(b) EXTENSION OF TIME TO FILE REFUND SUIT.—
Section 7479 (relating to declaratory judgments relating to
eligibility of estate with respect to installment payments
under section 6166) is amended by adding at the end the
following new subsection:
282
‘‘(c) EXTENSION OF TIME TO FILE REFUND SUIT.—
The 2-year period in section 6532(a)(1) for filing suit for
refund after disallowance of a claim shall be suspended dur-
ing the 90-day period after the mailing of the notice referred
to in subsection (b)(3) and, if a pleading has been filed with
the Tax Court under this section, until the decision of the
Tax Court has become final.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any claim for refund filed after the
date of the enactment of this Act.
SEC. 3106. TAX COURT JURISDICTION TO REVIEW ADVERSE
IRS DETERMINATION OF TAX-EXEMPT STATUS
OF BOND ISSUE.
(a) IN GENERAL.—Section 7478 (relating to declara-
tory judgments relating to status of certain governmental
obligations) is amended—
(1) by striking ‘‘prospective obligations will be’’
both places it appears in subsection (a) and inserting
‘‘previously issued or prospective obligations is or will
be’’, and
(2) by striking subsection (b)(1) and inserting
the following:
‘‘(1) PETITIONER.—Except as provided in sub-
section (c), a pleading may be filed under this section
only by the issuer or prospective issuer.’’
283
(b) NOTICE
REQUIREMENT.—Section 7478(b) is
amended by adding at the end the following:
‘‘(4) NOTICE
TO
HOLDERS
OF
PREVIOUSLY
ISSUED OBLIGATIONS.—
‘‘(A) IN
GENERAL.—If an issuer of pre-
viously issued obligations files a pleading under
this section, the court shall not issue a declara-
tory judgment or decree under this section unless
it determines that the petitioner has provided
adequate notice to holders of such obligations
within 10 days of the filing of the pleading.
‘‘(B) DELIVERY
OF
NOTICE.—The notice
under subparagraph (A) shall be given using the
most practicable of the following methods:
‘‘(i) In person.
‘‘(ii) By certified or registered mail
sent to the holder’s last known address.
‘‘(iii) By printing in appropriate pub-
lications.
‘‘(C) CONTENTS OF THE NOTICE.—The no-
tice under subparagraph (A) shall include a
statement of the holder’s right to intervene in,
and participate in, any proceeding under this
section with respect to obligations held or for-
merly held by the holder.’’
284
(c) INTERVENTION; OTHER RULES.—Section 7478 is
amended by adding at the end the following:
‘‘(c) BONDHOLDER INTERVENTION.—If an issuer of
previously issued obligations files a pleading under this sec-
tion, then the Tax Court shall permit any person who dem-
onstrates to the satisfaction of the court that such person
was or is a holder of any of such previously issued obliga-
tions to intervene in, and participate in, the proceedings
before the court with respect to such pleading, on such terms
and conditions as shall be established by the court.
‘‘(d) PERIOD OF LIMITATIONS, COLLECTION, AND IM-
POSITION OF INTEREST AND PENALTIES STAYED PENDING
CONCLUSION OF PROCEEDINGS.—
‘‘(1) IN GENERAL.—If an issuer of previously
issued obligations files a pleading under this sec-
tion—
‘‘(A) the running of the period of limita-
tions in sections 6501 and 6502 on the assess-
ment and the collection of any tax due by a per-
son (whether or not a party to a proceeding
under this section) on the interest paid on such
previously issued obligations,
‘‘(B) the collection of such tax due, and
285
‘‘(C) the imposition of any interest, pen-
alties, additions to tax, or additional amounts in
respect to any such unpaid tax,
shall be suspended from the date of such filing until
the date on which the decision of the Tax Court be-
comes final.
‘‘(2) CROSS REFERENCE.—
‘‘For additional suspension of running of period of
limitation, see section 6503.’’
(d) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), the amendments made by this section
shall apply to determinations made after the date of
the enactment of this Act.
(2) SPECIAL
RULE.—Notwithstanding section
7478(b)(3) of the Internal Revenue Code of 1986, in
the case of a technical advice memorandum which—
(A) provides that any interest on any obli-
gation which is part of an issue (or portion
thereof) is not exempt from taxation under the
Internal Revenue Code of 1986, and
(B) was publicly released within 1 year of
the date of the enactment of this Act,
a pleading may be filed under section 7478 of such
Code with respect to such memorandum not later
than the 90th day after such date.
286
SEC. 3107. CIVIL ACTION FOR RELEASE OF ERRONEOUS
LIEN.
(a) RIGHT OF SUBSTITUTION OF VALUE.—Subsection
(b) of section 6325 (relating to release of lien or discharge
of property) is amended by adding at the end the following
new paragraph:
‘‘(4) RIGHT OF SUBSTITUTION OF VALUE.—
‘‘(A) IN GENERAL.—At the request of the
owner of any property subject to any lien im-
posed by this chapter, the Secretary shall issue
a certificate of discharge of such property if such
owner—
‘‘(i) deposits with the Secretary an
amount of money equal to the value of the
interest of the United States (as determined
by the Secretary) in the property, or
‘‘(ii) furnishes a bond acceptable to the
Secretary in a like amount.
‘‘(B) REFUND OF DEPOSIT WITH INTEREST
AND RELEASE OF BOND.—The Secretary shall re-
fund the amount so deposited (and shall pay in-
terest at the overpayment rate under section
6621), and shall release such bond, to the extent
that the Secretary determines that—
287
‘‘(i) the unsatisfied liability giving rise
to the lien can be satisfied from a source
other than such property, or
‘‘(ii) the value of the interest of the
United States in the property is less than
the Secretary’s prior determination of such
value.
‘‘(C) USE OF DEPOSIT, ETC., IF ACTION TO
CONTEST LIEN NOT FILED.—If no action is filed
under section 7426(a)(4) within the period pre-
scribed therefor, the Secretary shall, within 60
days after the expiration of such period—
‘‘(i) apply the amount deposited, or
collect on such bond, to the extent necessary
to satisfy the unsatisfied liability secured by
the lien, and
‘‘(ii) refund (with interest as described
in subparagraph (B)) any portion of the
amount deposited which is not used to sat-
isfy such liability.
‘‘(D) EXCEPTION.—Subparagraph (A) shall
not apply if the owner of the property is the per-
son whose unsatisfied liability gave rise to the
lien.’’
(b) CIVIL ACTION TO RELEASE ERRONEOUS LIEN.—
288
(1) IN GENERAL.—Subsection (a) of section 7426
(relating to civil actions by persons other than tax-
payers) is amended by adding at the end the follow-
ing new paragraph:
‘‘(4) SUBSTITUTION OF VALUE.—If a certificate
of discharge is issued to any person under section
6325(b)(4) with respect to any property, such person
may, within 120 days after the day on which such
certificate is issued, bring a civil action against the
United States in a district court of the United States
for a determination of whether the value of the inter-
est of the United States (if any) in such property is
less than the value determined by the Secretary. No
other action may be brought by such person for such
a determination.’’
(2) FORM OF RELIEF.—
(A) IN GENERAL.—Subsection (b) of section
7426 is amended by adding at the end the fol-
lowing new paragraph:
‘‘(5) SUBSTITUTION OF VALUE.—If the court de-
termines that the Secretary’s determination of the
value of the interest of the United States in the prop-
erty for purposes of section 6325(b)(4) exceeds the ac-
tual value of such interest, the court shall grant a
judgment ordering a refund of the amount deposited,
289
and a release of the bond, to the extent that the aggre-
gate of the amounts thereof exceeds such value deter-
mined by the court.’’
(B) INTEREST ALLOWED ON REFUND OF DE-
POSIT.—Subsection (g) of section 7426 is amend-
ed by striking ‘‘and’’ at the end of paragraph
(1), by striking the period at the end of para-
graph (2) and inserting ‘‘; and’’, and by adding
at the end the following new paragraph:
‘‘(3) in the case of a judgment pursuant to sub-
section (b)(5) which orders a refund of any amount,
from the date the Secretary received such amount to
the date of payment of such judgment.’’
(3) SUSPENSION OF RUNNING OF STATUTE OF
LIMITATION.—Subsection (f) of section 6503 is
amended to read as follows:
‘‘(f) WRONGFUL SEIZURE OF OR LIEN ON PROPERTY
OF THIRD PARTY.—
‘‘(1) WRONGFUL SEIZURE.—The running of the
period under section 6502 shall be suspended for a pe-
riod equal to the period from the date property (in-
cluding money) of a third party is wrongfully seized
or received by the Secretary to the date the Secretary
returns property pursuant to section 6343(b) or the
date on which a judgment secured pursuant to section
290
7426 with respect to such property becomes final, and
for 30 days thereafter. The running of such period
shall be suspended under this paragraph only with re-
spect to the amount of such assessment equal to the
amount of money or the value of specific property re-
turned.
‘‘(2) WRONGFUL LIEN.—In the case of any as-
sessment for which a lien was made on any property,
the running of the period under section 6502 shall be
suspended for a period equal to the period beginning
on the date any person becomes entitled to a certifi-
cate under section 6325(b)(4) with respect to such
property and ending on the date which is 30 days
after the earlier of—
‘‘(A) the earliest date on which the Sec-
retary no longer holds any amount as a deposit
or bond provided under section 6325(b)(4) by
reason of such deposit or bond being used to sat-
isfy the unpaid tax or being refunded or released,
or
‘‘(B) the date that the judgment secured
under section 7426(b)(5) becomes final.
The running of such period shall be suspended under
this paragraph only with respect to the amount of
such assessment equal to the value of the interest of
291
the United States in the property plus interest, pen-
alties, additions to the tax, and additional amounts
attributable thereto.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
Subtitle 
C—Relief 
for 
Innocent
Spouses and for Taxpayers Un-
able To Manage Their Financial
Affairs Due to Disabilities
SEC. 3201. SPOUSAL ELECTION TO LIMIT JOINT AND SEV-
ERAL LIABILITY ON JOINT RETURN.
(a) IN GENERAL.—Subpart B of part II of subchapter
A of chapter 61 is amended by inserting after section 6014
the following new section:
‘‘SEC. 6015. ELECTION TO LIMIT JOINT AND SEVERAL LI-
ABILITY ON JOINT RETURN.
‘‘(a) ELECTION TO LIMIT LIABILITY.—
‘‘(1) IN
GENERAL.—Notwithstanding section
6013(d)(3), and except as provided in paragraphs (2)
and (3), if an individual who has made a joint re-
turn for any taxable year elects the application of this
section—
‘‘(A) the individual’s liability for any tax
shown on the return which remains unpaid as of
292
the payment due date shall not exceed the indi-
vidual’s separate return amount determined
under subsection (b), and
‘‘(B) the individual’s liability for any defi-
ciency which is assessed shall not exceed the por-
tion of such deficiency properly allocable to the
individual under subsection (c).
‘‘(2) BURDEN OF PROOF.—Except as provided in
paragraph (3) (B) or (C), each individual who elects
the application of this section shall have the burden
of proof with respect to establishing the individual’s
separate return amount and the portion of any defi-
ciency allocable to such individual.
‘‘(3) ELECTION.—
‘‘(A) IN GENERAL.—An election under this
subsection for any taxable year shall be made not
later than 2 years after the date on which the
Secretary has begun collection activities with re-
spect to the individual making the election.
‘‘(B) CERTAIN TAXPAYERS INELIGIBLE TO
ELECT.—If the Secretary demonstrates that as-
sets were transferred between individuals filing a
joint return as part of a fraudulent scheme by
such individuals, an election under this section
293
by either individual shall be invalid (and section
6013(d)(3) shall apply to the joint return).
‘‘(C) ELECTION NOT VALID WITH RESPECT
TO
CERTAIN
DEFICIENCIES.—If the Secretary
demonstrates that an individual making an elec-
tion under this section had actual knowledge of
any item giving rise to a deficiency (or portion
thereof) which is not allocable to such individual
under subsection (c), such election shall not
apply to such deficiency (or portion).
‘‘(b) SEPARATE RETURN AMOUNT.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘separate return
amount’ means, with respect to an individual, an
amount equal to the excess (if any) of—
‘‘(A) the tax liability of the individual
which would have been determined (on the basis
of the items shown on the joint return) for the
taxable year if the individual had filed a sepa-
rate return, over
‘‘(B) the aggregate payments of such tax
properly allocable to such individual.
‘‘(2) SPECIAL RULES FOR COMPUTING TAX LI-
ABILITIES AND PAYMENT.—
294
‘‘(A) TREATMENT OF CERTAIN CREDITS.—
The credits allowed by sections 31, 33, and 34
for any taxable year—
‘‘(i) shall not be taken into account in
determining the amount of tax shown on a
return or the tax liability of an individual
filing a separate return, but
‘‘(ii) shall be taken into account in de-
termining the aggregate payments of tax of
the individual to whom such credits are
properly allocable.
‘‘(B) MATHEMATICAL
AND
CLERICAL
ER-
RORS.—Tax shown on a return shall include any
tax assessed on account of a mathematical or
clerical error (within the meaning of section
6213(g)(2)) appearing on the return.
‘‘(3) PAYMENT DUE DATE.—The term ‘payment
due date’ means the date prescribed for payment of
the tax (determined with regard to any extension of
time for payment).
‘‘(c) ALLOCATION OF DEFICIENCY.—For purposes of
subsection (a)(1)(B)—
‘‘(1) IN
GENERAL.—The portion of any defi-
ciency on a joint return allocated to an individual
shall be the amount which bears the same ratio to
295
such deficiency as the net amount of items taken into
account in computing the deficiency and allocable to
the individual under paragraph (3) bears to the net
amount of all items taken into account in computing
the deficiency.
‘‘(2) 
SEPARATE
TREATMENT
OF
CERTAIN
ITEMS.—If a deficiency (or portion thereof) is attrib-
utable to—
‘‘(A) the disallowance of a credit, or
‘‘(B) any tax (other than tax imposed by
section 1 or 55) required to be included with the
joint return,
and such item is allocated to 1 individual under
paragraph (3), such deficiency (or portion) shall be
allocated to such individual. Any such item shall not
be taken into account under paragraph (1).
‘‘(3) ALLOCATION OF ITEMS GIVING RISE TO THE
DEFICIENCY.—For purposes of this subsection—
‘‘(A) IN GENERAL.—Any item giving rise to
a deficiency on a joint return shall be allocated
to individuals filing the return in the same man-
ner as it would have been allocated if the indi-
viduals had filed separate returns for the taxable
year.
296
‘‘(B) EXCEPTION
WHERE
OTHER
SPOUSE
BENEFITS.—Under rules prescribed by the Sec-
retary, an item otherwise allocable to an individ-
ual under subparagraph (A) shall be allocated to
the other individual filing the joint return to the
extent the item gave rise to a tax benefit on the
joint return to the other individual.
‘‘(C) EXCEPTION
FOR
FRAUD.—The Sec-
retary may provide for an allocation of any item
in a manner not prescribed by subparagraph (A)
if the Secretary establishes that such allocation is
appropriate due to fraud of 1 or both individ-
uals.
‘‘(d) PETITION FOR REVIEW BY TAX COURT.—
‘‘(1) IN GENERAL.—In the case of an individual
who elects to have this section apply—
‘‘(A) IN GENERAL.—The individual may pe-
tition the Tax Court (and the Tax Court shall
have jurisdiction) to determine the appropriate
relief available to the individual under this sec-
tion if such petition is filed during the 90-day
period beginning on the date on which the Sec-
retary mails by certified or registered mail a no-
tice to such individual of the Secretary’s deter-
mination of relief available to the spouse. Not-
297
withstanding the preceding sentence, an individ-
ual may file such petition at any time after the
date which is 6 months after the date such elec-
tion is filed with the Secretary and before the
close of such 90-day period.
‘‘(B) RESTRICTIONS
APPLICABLE
TO
COL-
LECTION OF ASSESSMENT.—
‘‘(i) IN GENERAL.—Except as otherwise
provided in section 6851 or 6861, no levy or
proceeding in court shall be made, begun, or
prosecuted against the spouse making an
election under subsection (a) for collection of
any assessment to which such election re-
lates until the expiration of the 90-day pe-
riod described in subparagraph (A), or, if a
petition has been filed with the Tax Court,
until the decision of the Tax Court has be-
come final. Rules similar to the rules of sec-
tion 7485 shall apply with respect to the
collection of such assessment.
‘‘(ii) AUTHORITY TO ENJOIN COLLEC-
TION ACTIONS.—Notwithstanding the provi-
sions of section 7421(a), the beginning of
such levy or proceeding during the time the
prohibition under clause (i) is in force may
298
be enjoined by a proceeding in the proper
court, including the Tax Court. The Tax
Court shall have no jurisdiction under this
subparagraph to enjoin any action or pro-
ceeding unless a timely petition has been
filed under subparagraph (A) and then only
in respect of the amount of the assessment
to which the election under subsection (a)
relates.
‘‘(2) SUSPENSION OF RUNNING OF PERIOD OF
LIMITATIONS.—The running of the period of limita-
tions in section 6502 on the collection of the assess-
ment to which the petition under paragraph (1)(A)
relates shall be suspended for the period during which
the Secretary is prohibited by paragraph (1)(B) from
collecting by levy or a proceeding in court and for 60
days thereafter.
‘‘(3) APPLICABLE RULES.—
‘‘(A) ALLOWANCE OF CREDIT OR REFUND.—
Except as provided in subparagraph (B), not-
withstanding any other law or rule of law (other
than section 6512(b), 7121, or 7122), credit or
refund shall be allowed or made to the extent at-
tributable to the application of this section.
299
‘‘(B) RES JUDICATA.—In the case of any
election under subsection (a), if a decision of the
Tax Court in any prior proceeding for the same
taxable year has become final, such decision shall
be conclusive except with respect to the qualifica-
tion of the individual for relief which was not an
issue in such proceeding. The exception con-
tained in the preceding sentence shall not apply
if the Tax Court determines that the individual
participated meaningfully in such prior proceed-
ing.
‘‘(C) LIMITATION ON TAX COURT JURISDIC-
TION.—If a suit for refund is begun by either in-
dividual filing the joint return pursuant to sec-
tion 6532—
‘‘(i) the Tax Court shall lose jurisdic-
tion of the individual’s action under this
section to whatever extent jurisdiction is ac-
quired by the district court or the United
States Court of Federal Claims over the tax-
able years that are the subject of the suit for
refund, and
‘‘(ii) the court acquiring jurisdiction
shall have jurisdiction over the petition filed
under this subsection.
300
‘‘(4) NOTICE
TO
OTHER
SPOUSE.—The Tax
Court shall establish rules which provide the individ-
ual filing a joint return but not making the election
under subsection (a) with adequate notice and an op-
portunity to become a party to a proceeding under
this subsection.
‘‘(e) EQUITABLE RELIEF.—Under procedures pre-
scribed by the Secretary, if—
‘‘(1) a separate return amount determined under
subsection (b) or an allocation of deficiency under
subsection (c) is attributable to an item being allo-
cated to an individual,
‘‘(2) the individual establishes that he or she did
not know, and had no reason to know, of such item,
and
‘‘(3) taking into account all the facts and cir-
cumstances, it is inequitable to hold the individual
liable for any unpaid tax or any deficiency (or any
portion of either) attributable to such item,
the Secretary may provide that, for purposes of this section,
such item shall not be allocated to such individual but shall
be allocated to the other individual filing the joint return.
‘‘(f) OTHER RULES.—For purposes of this section—
‘‘(1) 
COMMUNITY
PROPERTY
LAWS
DIS-
REGARDED.—Any determination under this section
301
shall be made without regard to community property
laws.
‘‘(2) LIMITATIONS ON SEPARATE RETURNS DIS-
REGARDED.—If an item of deduction or credit is dis-
allowed in its entirety solely because a separate re-
turn is filed, such disallowance shall be disregarded
and the item shall be computed as if a joint return
had been filed and then allocated between the spouses
appropriately. A similar rule shall apply for purposes
of section 86.
‘‘(3) CHILD’S LIABILITY.—If the liability of a
child of a taxpayer is included on a joint return, such
liability shall be disregarded in computing the sepa-
rate liability of either spouse and such liability shall
be allocated appropriately between the spouses.
‘‘(g) LIABILITY INCREASED BY REASON OF TRANSFERS
OF PROPERTY TO AVOID TAX.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this section, any limitation on the tax li-
ability of an individual electing the application of
this section shall be increased by the value of any dis-
qualified asset transferred to the individual.
‘‘(2) DISQUALIFIED ASSET.—For purposes of this
subsection—
302
‘‘(A) IN GENERAL.—The term ‘disqualified
asset’ means any property or right to property
transferred to an individual making the election
under this section with respect to a joint return
by the other individual filing such joint return
if the principal purpose of the transfer was the
avoidance of tax or payment of tax.
‘‘(B) PRESUMPTION.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), except as provided in
clause (ii), any transfer which is made after
the date which is 1 year before—
‘‘(I) in the case of any unpaid tax
to which subsection (a)(1)(A) applies,
the payment due date of such unpaid
tax, and
‘‘(II) in the case of any deficiency
to which subsection (a)(1)(B) applies,
the date on which the 1st letter of pro-
posed deficiency which allows the tax-
payer an opportunity for administra-
tive review in the Internal Revenue
Service Office of Appeals is sent,
303
shall be presumed to have as its principal
purpose the avoidance of tax or payment of
tax.
‘‘(ii) EXCEPTIONS.—Clause (i) shall
not apply to any transfer—
‘‘(I) pursuant to a decree of di-
vorce or separate maintenance or a
written instrument incident to such a
decree, or
‘‘(II) which an individual estab-
lishes did not have as its principal
purpose the avoidance of tax or pay-
ment of tax.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as are necessary to carry out the provisions
of this section, including—
‘‘(1) regulations providing methods for allocation
of items other than the methods under subsection
(c)(3), and
‘‘(2) regulations providing the opportunity for
an individual to have notice of, and an opportunity
to participate in, any administrative proceeding with
respect to an election made under subsection (a) by
the other individual filing the joint return.’’
304
(b) SEPARATE FORM FOR APPLYING FOR SPOUSAL RE-
LIEF.—Not later than 180 days after the date of the enact-
ment of this Act, the Secretary of the Treasury shall develop
a separate form with instructions for use by taxpayers in
applying for relief under section 6015(a) of the Internal
Revenue Code of 1986, as added by this section.
(c) SEPARATE NOTICE TO EACH FILER.—The Sec-
retary of the Treasury shall, wherever practicable, send any
notice relating to a joint return under section 6013 of the
Internal Revenue Code of 1986 separately to each individ-
ual filing the joint return.
(d) CONFORMING AMENDMENTS.—
(1) Section 6013 is amended by striking sub-
section (e).
(2) Subparagraph (A) of section 6230(c)(5) is
amended by striking ‘‘section 6013(e)’’ and inserting
‘‘section 6015’’.
(3) Section 7421(a) is amended by inserting
‘‘6015(d),’’ after ‘‘sections’’.
(e) CLERICAL AMENDMENT.—The table of sections for
subpart B of part II of subchapter A of chapter 61 is
amended by inserting after the item relating to section 6014
the following new item:
‘‘Sec. 6015. Election to limit joint and several liability on joint re-
turn.’’
(f) EFFECTIVE DATES.—
305
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to any liability for tax arising after the date
of the enactment of this Act and any liability for tax
arising on or before such date but remaining unpaid
as of such date.
(2) 2-YEAR PERIOD.—The 2-year period under
section 6015(a)(3)(A) of the Internal Revenue Code of
1986 shall not expire before the date which is 2 years
after the date of the first collection activity after the
date of the enactment of this Act.
SEC. 3202. SUSPENSION OF STATUTE OF LIMITATIONS ON
FILING REFUND CLAIMS DURING PERIODS OF
DISABILITY.
(a) IN GENERAL.—Section 6511 (relating to limita-
tions on credit or refund) is amended by redesignating sub-
section (h) as subsection (i) and by inserting after sub-
section (g) the following new subsection:
‘‘(h) RUNNING
OF PERIODS
OF LIMITATION SUS-
PENDED WHILE TAXPAYER IS UNABLE TO MANAGE FINAN-
CIAL AFFAIRS DUE TO DISABILITY.—
‘‘(1) IN GENERAL.—In the case of an individual,
the running of the periods specified in subsections (a),
(b), and (c) shall be suspended during any period of
306
such individual’s life that such individual is finan-
cially disabled.
‘‘(2) FINANCIALLY DISABLED.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an individual is financially disabled
if such individual is unable to manage his finan-
cial affairs by reason of a medically determina-
ble physical or mental impairment of the indi-
vidual which can be expected to result in death
or which has lasted or can be expected to last for
a continuous period of not less than 12 months.
An individual shall not be considered to have
such an impairment unless proof of the existence
thereof is furnished in such form and manner as
the Secretary may require.
‘‘(B) EXCEPTION WHERE INDIVIDUAL HAS
GUARDIAN, ETC.—An individual shall not be
treated as financially disabled during any pe-
riod that such individual’s spouse or any other
person is authorized to act on behalf of such in-
dividual in financial matters.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to periods of disability before, on,
or after the date of the enactment of this Act but shall not
apply to any claim for credit or refund which (without re-
307
gard to such amendment) is barred by the operation of any
law or rule of law (including res judicata) as of January
1, 1998.
Subtitle D—Provisions Relating to
Interest and Penalties
SEC. 3301. ELIMINATION OF INTEREST RATE DIFFERENTIAL
ON OVERLAPPING PERIODS OF INTEREST ON
INCOME TAX OVERPAYMENTS AND UNDER-
PAYMENTS.
(a) IN GENERAL.—Section 6621 (relating to deter-
mination of rate of interest) is amended by adding at the
end the following new subsection:
‘‘(d) ELIMINATION OF INTEREST ON OVERLAPPING PE-
RIODS OF INCOME TAX OVERPAYMENTS AND UNDERPAY-
MENTS.—To the extent that, for any period, interest is pay-
able under subchapter A and allowable under subchapter
B on equivalent underpayments and overpayments by the
same taxpayer of tax imposed by chapters 1 and 2, the net
rate of interest under this section on such amounts shall
be zero for such period.’’
(b) CONFORMING AMENDMENT.—Subsection (f) of sec-
tion 6601 (relating to satisfaction by credits) is amended
by adding at the end the following new sentence: ‘‘The pre-
ceding sentence shall not apply to the extent that section
6621(d) applies.’’
308
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to interest for calendar quarters begin-
ning after the date of the enactment of this Act.
SEC. 3302. INCREASE IN OVERPAYMENT RATE PAYABLE TO
TAXPAYERS OTHER THAN CORPORATIONS.
(a) IN
GENERAL.—Subparagraph (B) of section
6621(a)(1) (defining overpayment rate) is amended to read
as follows:
‘‘(B) 3 percentage points (2 percentage
points in the case of a corporation).’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to interest for calendar quarters begin-
ning after the date of the enactment of this Act.
SEC. 3303. ELIMINATION OF PENALTY ON INDIVIDUAL’S
FAILURE TO PAY FOR MONTHS DURING PE-
RIOD OF INSTALLMENT AGREEMENT.
(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:
‘‘(h) LIMITATION ON PENALTY ON INDIVIDUAL’S FAIL-
URE TO PAY FOR MONTHS DURING PERIOD OF INSTALL-
MENT AGREEMENT.—In the case of an individual who files
a return of tax on or before the due date for the return
(including extensions), no addition to the tax shall be im-
posed under paragraph (2) or (3) of subsection (a) with
309
respect to the individual’s liability for tax relating to the
return for any month during which an installment agree-
ment under section 6159 is in effect for the payment of such
tax.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply for purposes of determining additions
to the tax for months beginning after the date of the enact-
ment of this Act.
SEC. 3304. MITIGATION OF FAILURE TO DEPOSIT PENALTY.
(a) TAXPAYER MAY DESIGNATE PERIODS TO WHICH
DEPOSITS
APPLY.—Section 6656 (relating to under-
payment of deposits) is amended by adding at the end the
following new subsection:
‘‘(e) DESIGNATION OF PERIODS TO WHICH DEPOSITS
APPLY.—
‘‘(1) IN GENERAL.—A person may designate the
period or periods to which a deposit is to be applied
for purposes of this section.
‘‘(2) TIME FOR MAKING DESIGNATION.—A person
shall make any designation under paragraph (1) on
or before the later of—
‘‘(A) the date the deposit is made, or
‘‘(B) the 90th day after the earlier of the
dates determined under subsection (b)(1)(B) with
respect to a notice covering the period to which
310
the deposit would be applied but for a designa-
tion under this subsection.’’
(b) EXPANSION OF EXEMPTION FOR FIRST-TIME DE-
POSITS.—
(1) IN
GENERAL.—Paragraph (2) of section
6656(c) (relating to exemption for first-time deposi-
tors of employment taxes) is amended to read as fol-
lows:
‘‘(2) such failure—
‘‘(A) occurs during the 1st quarter that such
person was required to deposit any employment
tax, or
‘‘(B) if such person is required to change
the frequency of deposits of any employment tax,
relates to the first deposit to which such change
applies, and’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to deposits required to be made after
the 180th day after the date of the enactment of this Act.
SEC. 3305. SUSPENSION OF INTEREST AND CERTAIN PEN-
ALTIES WHERE SECRETARY FAILS TO CON-
TACT INDIVIDUAL TAXPAYER.
(a) IN GENERAL.—Section 6404 (relating to abate-
ments) is amended by redesignating subsection (g) as sub-
311
section (h) and by inserting after subsection (f) the follow-
ing new subsection:
‘‘(g) SUSPENSION OF INTEREST AND CERTAIN PEN-
ALTIES WHERE SECRETARY FAILS TO CONTACT TAX-
PAYER.—
‘‘(1) IN GENERAL.—In the case of an individual
who files a return of tax imposed by subtitle A for a
taxable year on or before the due date for the return
(including extensions), if the Secretary does not pro-
vide a notice of deficiency to the taxpayer before the
close of the 1-year period beginning on the later of—
‘‘(A) the date on which the return is filed,
or
‘‘(B) the due date of the return without re-
gard to extensions,
the Secretary shall suspend the imposition of any in-
terest, penalty, addition to tax, or additional amount
with respect to any failure relating to the return
which is computed by reference to the period of time
the failure continues to exist and which is properly
allocable to the suspension period.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to—
‘‘(A) any penalty imposed by section 6651,
312
‘‘(B) any interest, penalty, addition to tax,
or additional amount in a case involving fraud,
or
‘‘(C) any criminal penalty.
‘‘(3) SUSPENSION PERIOD.—For purposes of this
subsection, the term ‘suspension period’ means the pe-
riod—
‘‘(A) beginning on the day after the close of
the 1-year period under paragraph (1), and
‘‘(B) ending on the date which is 21 days
after the date on which notice and demand for
payment of tax relating to such return is made
by the Secretary.’’
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years ending after the date
of the enactment of this Act.
SEC. 3306. PROCEDURAL REQUIREMENTS FOR IMPOSITION
OF PENALTIES AND ADDITIONS TO TAX.
(a) IN GENERAL.—Chapter 68 (relating to additions
to the tax, additional amounts, and assessable penalties) is
amended by adding at the end the following new subchapter:
‘‘Subchapter C—Procedural Requirements
‘‘Sec. 6751. Procedural requirements.
313
‘‘SEC. 6751. PROCEDURAL REQUIREMENTS.
‘‘(a) COMPUTATION OF PENALTY INCLUDED IN NO-
TICE.—The Secretary shall include with each notice of pen-
alty under this title information with respect to the name
of the penalty, the section of this title under which the pen-
alty is imposed, and a computation of the penalty.
‘‘(b) APPROVAL OF ASSESSMENT.—
‘‘(1) IN GENERAL.—No penalty under this title
shall be assessed unless the initial determination of
such assessment is personally approved (in writing)
by the immediate supervisor of the individual making
such determination or such higher level official as the
Secretary may designate.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to—
‘‘(A) any addition to tax under section
6651, 6654, or 6655, or
‘‘(B) any other penalty automatically cal-
culated through electronic means.
‘‘(c) PENALTIES.—For purposes of this section, the
term ‘penalty’ includes any addition to tax or any addi-
tional amount.’’
(b) CONFORMING AMENDMENT.—The table of sub-
chapters for chapter 68 is amended by adding at the end
the following new item:
‘‘SUBCHAPTER C. Procedural requirements.’’
314
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to notices issued, and penalties assessed,
after the 180th day after the date of the enactment of this
Act.
SEC. 3307. PERSONAL DELIVERY OF NOTICE OF PENALTY
UNDER SECTION 6672.
(a) IN GENERAL.—Paragraph (1) of section 6672(b)
(relating to failure to collect and pay over tax, or attempt
to evade or defeat tax) is amended by inserting ‘‘or in per-
son’’ after ‘‘section 6212(b)’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 6672(b) is amended
by inserting ‘‘(or, in the case of such a notice deliv-
ered in person, such delivery)’’ after ‘‘paragraph (1)’’.
(2) Paragraph (3) of section 6672(b) is amended
by inserting ‘‘or delivered in person’’ after ‘‘mailed’’
each place it appears.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 3308. NOTICE OF INTEREST CHARGES.
(a) IN GENERAL.—Chapter 67 (relating to interest) is
amended by adding at the end the following new subchapter:
‘‘Subchapter D—Notice requirements
‘‘Sec. 6631. Notice requirements.
315
‘‘SEC. 6631. NOTICE REQUIREMENTS.
‘‘The Secretary shall include with each notice to an
individual taxpayer which includes an amount of interest
required to be paid by such taxpayer under this title infor-
mation with respect to the section of this title under which
the interest is imposed and a computation of the interest.’’
(b) CONFORMING AMENDMENT.—The table of sub-
chapters for chapter 67 is amended by adding at the end
the following new item:
‘‘SUBCHAPTER D. Notice requirements.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to notices issued after June 30, 2000.
Subtitle E—Protections for Tax-
payers Subject to Audit or Col-
lection Activities
PART I—DUE PROCESS
SEC. 3401. DUE PROCESS IN IRS COLLECTION ACTIONS.
(a) NOTICE AND OPPORTUNITY FOR HEARING BEFORE
FILING OF NOTICE OF LIEN.—Subchapter C of chapter 64
(relating to lien for taxes) is amended by inserting before
the table of sections the following:
‘‘Part I.
Due process for liens.
‘‘Part II.
Liens.
‘‘PART I—DUE PROCESS FOR LIENS
‘‘Sec. 6320. Notice and opportunity for hearing before filing of no-
tice of lien.
316
‘‘SEC. 6320. NOTICE AND OPPORTUNITY FOR HEARING BE-
FORE FILING OF NOTICE OF LIEN.
‘‘(a) REQUIREMENT OF NOTICE.—
‘‘(1) IN GENERAL.—No notice of lien may be
filed under section 6323 unless the Secretary has noti-
fied in writing the person described in section 6321
of the Secretary’s intention to file such a notice of
lien.
‘‘(2) TIME AND METHOD FOR NOTICE.—The no-
tice required under paragraph (1) shall be—
‘‘(A) given in person,
‘‘(B) left at the dwelling or usual place of
business of such person, or
‘‘(C) sent by certified or registered mail to
such person’s last known address,
not less than 30 days before the day of the filing of
the notice of lien.
‘‘(3) INFORMATION INCLUDED WITH NOTICE.—
The notice required under paragraph (1) shall include
in simple and nontechnical terms—
‘‘(A) the amount of unpaid tax,
‘‘(B) the right of the person to request a
hearing during the 30-day period described in
paragraph (2),
317
‘‘(C) the administrative appeals available to
the taxpayer with respect to such lien and the
procedures relating to such appeals, and
‘‘(D) the provisions of this title and proce-
dures relating to the release of liens on property.
‘‘(b) RIGHT TO FAIR HEARING.—
‘‘(1) IN GENERAL.—If the person requests a hear-
ing under subsection (a)(3)(B), such hearing shall be
held by the Internal Revenue Service Office of Ap-
peals.
‘‘(2) IMPARTIAL OFFICER.—The hearing under
this subsection shall be conducted by an officer or em-
ployee who has had no involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the
first hearing under this section. A taxpayer may
waive the requirement of this paragraph.
‘‘(c) CONDUCT
OF
HEARING; REVIEW; SUSPEN-
SIONS.—For purposes of this section, subsections (c), (d)
(other than paragraph (2)(B) thereof), and (e) of section
6330 shall apply.
‘‘PART II—LIENS’’.
(b) NOTICE AND OPPORTUNITY FOR HEARING BEFORE
LEVY.—Subchapter D of chapter 64 (relating to seizure of
property for collection of taxes) is amended by inserting be-
fore the table of sections the following:
318
‘‘Part I.
Due process for collections.
‘‘Part II.
Levy.
‘‘PART I—DUE PROCESS FOR COLLECTIONS
‘‘Sec. 6330. Notice and opportunity for hearing before levy.
‘‘SEC. 6330. NOTICE AND OPPORTUNITY FOR HEARING BE-
FORE LEVY.
‘‘(a) REQUIREMENT OF NOTICE BEFORE LEVY.—
‘‘(1) IN GENERAL.—No levy may be made on
any property or right to property of any person un-
less the Secretary has notified such person in writing
of the Secretary’s intention to make such a levy.
‘‘(2) TIME AND METHOD FOR NOTICE.—
‘‘(A) IN
GENERAL.—The notice required
under paragraph (1) shall be—
‘‘(i) given in person,
‘‘(ii) left at the dwelling or usual place
of business of such person, or
‘‘(iii) sent by certified or registered
mail to such person’s last known address,
not less than 30 days before the day of the levy.
‘‘(B) LONGER PERIOD FOR LIFE INSURANCE
AND ENDOWMENT CONTRACTS.—In the case of a
levy on an organization with respect to a life in-
surance or endowment contract issued by such
organization, subparagraph (A) shall be applied
by substituting ‘90 days’ for ‘30 days’.
335
‘‘(J) any owner or developer of a computer
software source code (as defined in section
7612(d)(2)).
Subparagraph (J) shall apply only with respect to a
summons requiring the production of the source code
referred to in subparagraph (J) or the program and
data described in section 7612(b)(1)(A)(ii) to which
such source code relates.’’
(d) CONFORMING AMENDMENT.—The table of sections
for subchapter A of chapter 78 is amended by striking the
item relating to section 7612 and by inserting the following:
‘‘Sec. 7612. Special procedures for summonses for computer soft-
ware.
‘‘Sec. 7613. Cross references.’’
(e) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to summonses issued, and
software acquired, after the date of the enactment of
this Act.
(2) SOFTWARE PROTECTION.—In the case of any
software acquired on or before such date of enactment,
the requirements of section 7612(a)(2) of the Internal
Revenue Code of 1986 (as added by such amend-
ments) shall apply after the 90th day after such date.
The preceding sentence shall not apply to the require-
ment under section 7612(c)(2)(G)(ii) of such Code (as
so added).
362
(3) provide notice to the taxpayer that the tax-
payer may appeal the rejection of an offer-in-com-
promise to the Internal Revenue Service Office of Ap-
peals.
(e) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to proposed offers-in-com-
promise and installment agreements submitted after
the date of the enactment of this Act.
(2) SUSPENSION OF COLLECTION BY LEVY.—The
amendment made by subsection (b) shall apply to of-
fers-in-compromise pending on or made after the 60th
day after the date of the enactment of this Act.
SEC. 3463. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES
FOR FILING TAX COURT PETITION.
(a) IN GENERAL.—The Secretary of the Treasury or
the Secretary’s delegate shall include on each notice of defi-
ciency under section 6212 of the Internal Revenue Code of
1986 the date determined by such Secretary (or delegate)
as the last day on which the taxpayer may file a petition
with the Tax Court.
(b) LATER FILING DEADLINES SPECIFIED ON NOTICE
OF DEFICIENCY TO BE BINDING.—Subsection (a) of section
6213 (relating to restrictions applicable to deficiencies; peti-
tion to Tax Court) is amended by adding at the end the
469
posed by section 2001, the deduction under section
2055(f) with respect to such easement shall be allowed
to the estate but only if no charitable deduction is al-
lowed under chapter 1 to any person with respect to
the grant of such easement.’’
(2) The first sentence of paragraph (6) of section
2031(c) of the 1986 Code is amended by striking all
that follows ‘‘shall be made’’ and inserting ‘‘on or be-
fore the due date (including extensions) for filing the
return of tax imposed by section 2001 and shall be
made on such return.’’
SEC. 6008. AMENDMENTS RELATED TO TITLE VII OF 1997
ACT.
(a) AMENDMENT RELATED TO SECTION 1400 OF 1986
CODE.—Section 1400(b)(2)(B) of the 1986 Code is amended
by inserting ‘‘as determined on the basis of the 1990 census’’
after ‘‘percent’’.
(b) AMENDMENT RELATED
TO SECTION 1400A OF
1986 CODE.—Subsection (a) of section 1400A of the 1986
Code is amended by inserting before the period ‘‘and section
1394(b)(3)(B)(iii) shall be applied without regard to the
employee residency requirement’’.
(c) AMENDMENTS RELATED TO SECTION 1400B OF
1986 CODE.—