107TH CONGRESS
2D SESSION
H. R. 5728
AN ACT
To amend the Internal Revenue Code of 1986 to provide
fairness in tax collection procedures and improved admin-
istrative efficiency and confidentiality and to reform its
penalty and interest provisions.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tax Administration Reform Act of 2002’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—FAIRNESS IN TAX COLLECTION PROCEDURES
Sec. 101. Partial payment of tax liability in installment agreements.
Sec. 102. Extension of time for return of property.
Sec. 103. Individuals held harmless on wrongful levy, etc. on individual retire-
ment plan.
Sec. 104. Seven-day threshold on tolling of statute of limitations during tax re-
view.
Sec. 105. Study of liens and levies.
Sec. 106. Low-income taxpayer clinics.
TITLE II—IMPROVED ADMINISTRATIVE EFFICIENCY AND
CONFIDENTIALITY
SUBTITLE A—EFFICIENCY OF TAX ADMINISTRATION
Sec. 201. Revisions relating to termination of employment of Internal Revenue
Service employees for misconduct.
Sec. 202. Confirmation of authority of Tax Court to apply doctrine of equitable
recoupment.
Sec. 203. Jurisdiction of Tax Court over collection due process cases.
Sec. 204. Office of Chief Counsel review of offers in compromise.
Sec. 205. 15-day delay in due date for electronically filed individual income tax
returns.
SUBTITLE B—CONFIDENTIALITY AND DISCLOSURE
Sec. 211. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 212. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
Sec. 213. Compliance by contractors with confidentiality safeguards.
Sec. 214. Higher standards for requests for and consents to disclosure.
Sec. 215. Notice to taxpayer concerning administrative determination of brows-
ing; annual report.
Sec. 216. Expanded disclosure in emergency circumstances.
SUBTITLE C—OTHER PROVISIONS
Sec. 221. Better means of communicating with taxpayers.
Sec. 222. Enrolled agents.
Sec. 223. Financial management service fees.
Sec. 224. Amendment to Treasury auction reforms.
TITLE III—REFORM OF PENALTY AND INTEREST PROVISIONS
Sec. 301. ailure to pay estimated tax penalty converted to interest charge on
accumulated unpaid balance.
Sec. 302. Exclusion from gross income for interest on overpayments of income
tax by individuals.
Sec. 303. Abatement of interest.
Sec. 304. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 305. Expansion of interest netting for individuals.
Sec. 306. Waiver of certain penalties for first-time unintentional minor errors.
Sec. 307. Frivolous tax submissions.
Sec. 308. Clarification of application of Federal tax deposit penalty.
TITLE I—FAIRNESS IN TAX
COLLECTION PROCEDURES
SEC. 101. PARTIAL PAYMENT OF TAX LIABILITY IN IN-
STALLMENT AGREEMENTS.
(a) IN GENERAL.—
(1) Section 6159(a) (relating to authorization
of agreements) is amended—
(A) by striking ‘‘satisfy liability for pay-
ment of’’ and inserting ‘‘make payment on’’,
and
(B) by inserting ‘‘full or partial’’ after ‘‘fa-
cilitate’’.
(2) Section 6159(c) (relating to Secretary re-
quired to enter into installment agreements in cer-
tain cases) is amended in the matter preceding para-
graph (1) by inserting ‘‘full’’ before ‘‘payment’’.
(b) REQUIREMENT TO REVIEW PARTIAL PAYMENT
AGREEMENTS EVERY TWO YEARS.—Section 6159 is
amended by redesignating subsections (d) and (e) as sub-
sections (e) and (f), respectively, and inserting after sub-
section (c) the following new subsection:
‘‘(d) SECRETARY REQUIRED TO REVIEW INSTALL-
MENT AGREEMENTS FOR PARTIAL COLLECTION EVERY
TWO YEARS.—In the case of an agreement entered into
by the Secretary under subsection (a) for partial collection
of a tax liability, the Secretary shall review the agreement
at least once every 2 years.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to agreements entered into on or
after the date of the enactment of this Act.
SEC. 102. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) EXTENSION OF TIME FOR RETURN OF PROPERTY
SUBJECT TO LEVY.—Subsection (b) of section 6343 (re-
lating to return of property) is amended by striking ‘‘9
months’’ and inserting ‘‘2 years’’.
(b) PERIOD OF LIMITATION ON SUITS.—Subsection
(c) of section 6532 (relating to suits by persons other than
taxpayers) is amended—
(1) in paragraph (1) by striking ‘‘9 months’’
and inserting ‘‘2 years’’, and
(2) in paragraph (2) by striking ‘‘9-month’’ and
inserting ‘‘2-year’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to—
(1) levies made after the date of the enactment
of this Act, and
(2) levies made on or before such date if the 9-
month period has not expired under section 6343(b)
of the Internal Revenue Code of 1986 (without re-
gard to this section) as of such date.
SEC. 103. INDIVIDUALS HELD HARMLESS ON WRONGFUL
LEVY, ETC., ON INDIVIDUAL RETIREMENT
PLAN.
(a) IN GENERAL.—Section 6343 (relating to author-
ity to release levy and return property) is amended by add-
ing at the end the following new subsection:
‘‘(f) INDIVIDUALS HELD HARMLESS ON WRONGFUL
LEVY, ETC., ON INDIVIDUAL RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—If the Secretary determines
that an individual retirement plan has been levied
upon in a case to which subsection (b) or (d)(2)(A)
applies, an amount equal to the sum of—
‘‘(A) the amount of money returned by the
Secretary on account of such levy, and
‘‘(B) interest paid under subsection (c) on
such amount of money,
may be deposited into an individual retirement plan
(other than an endowment contract) to which a roll-
over from the plan levied upon is permitted.
‘‘(2) TREATMENT AS ROLLOVER.—The distribu-
tion on account of the levy and any deposit under
paragraph (1) with respect to such distribution shall
be treated for purposes of this title as if such dis-
tribution and deposit were part of a rollover de-
scribed in section 408(d)(3)(A)(i); except that—
‘‘(A) interest paid under subsection (c)
shall be treated as part of such distribution and
as not includible in gross income,
‘‘(B) the 60-day requirement in such sec-
tion shall be treated as met if the deposit is
made not later than the 60th day after the day
on which the individual receives an amount
under paragraph (1) from the Secretary, and
‘‘(C) such deposit shall not be taken into
account under section 408(d)(3)(B).
‘‘(3) REFUND, ETC., OF
INCOME
TAX
ON
LEVY.—If any amount is includible in gross income
for a taxable year by reason of a levy referred to in
paragraph (1) and any portion of such amount is
treated as a rollover under paragraph (2), any tax
imposed by chapter 1 on such portion shall not be
assessed, and if assessed shall be abated, and if col-
lected shall be credited or refunded as an overpay-
ment made on the due date for filing the return of
tax for such taxable year.
‘‘(4) INTEREST.—Notwithstanding subsection
(d), interest shall be allowed under subsection (c) in
a case in which the Secretary makes a determination
described in subsection (d)(2)(A) with respect to a
levy upon an individual retirement plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to amounts paid under subsections
(b), (c), and (d)(2)(A) of section 6343 of the Internal Rev-
enue Code of 1986 after December 31, 2002.
SEC. 104. SEVEN-DAY THRESHOLD ON TOLLING OF STAT-
UTE OF LIMITATIONS DURING TAX REVIEW.
(a) IN GENERAL.—Section 7811(d)(1) (relating to
suspension of running of period of limitation) is amended
by inserting after ‘‘application,’’ the following: ‘‘but only
if the date of such decision is at least 7 days after the
date of the taxpayer’s application’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to applications filed after the date
of the enactment of this Act.
SEC. 105. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary’s del-
egate, shall conduct a study of the practices of the Inter-
nal Revenue Service concerning liens and levies. The study
shall examine—
(1) the declining use of liens and levies by the
Internal Revenue Service, and
(2) the practicality of recording liens and lev-
ying against property in cases in which the cost of
such actions exceeds the amount to be realized from
such property.
Not later than 1 year after the date of the enactment of
this Act, the Secretary shall submit such study to the
Committee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the Senate.
SEC. 106. LOW-INCOME TAXPAYER CLINICS.
(a) LIMITATION ON AMOUNT OF GRANTS.—Para-
graph (1) of section 7526(c) (relating to special rules and
limitations) is amended by striking ‘‘$6,000,000 per year’’
and inserting ‘‘$9,000,000 for 2002, $12,000,000 for
2003, and $15,000,000 for each year thereafter’’.
(b) LIMITATION ON USE OF CLINICS FOR TAX RE-
TURN
PREPARATION.—Subparagraph (A) of section
7526(b)(1) is amended by adding at the end the following
flush language:
‘‘The term does not include a clinic that pro-
vides routine tax return preparation. The pre-
ceding sentence shall not apply to return prepa-
ration in connection with a controversy with the
Internal Revenue Service.’’.
(c) PROMOTION
OF CLINICS.—Section 7526(c) is
amended by adding at the end the following new para-
graph:
‘‘(7) PROMOTION OF CLINICS.—The Secretary
is authorized to promote the benefits of and encour-
age the use of low-income taxpayer clinics through
the use of mass communications, referrals, and other
means.’’.
TITLE II—IMPROVED ADMINIS-
TRATIVE 
EFFICIENCY 
AND
CONFIDENTIALITY
Subtitle A—Efficiency of Tax
Administration
SEC. 201. REVISIONS RELATING TO TERMINATION OF EM-
PLOYMENT OF INTERNAL REVENUE SERVICE
EMPLOYEES FOR MISCONDUCT.
(a) IN GENERAL.—Subchapter A of chapter 80 (re-
lating to application of internal revenue laws) is amended
by inserting after section 7804 the following new section:
‘‘SEC. 7804A. DISCIPLINARY ACTIONS FOR MISCONDUCT.
‘‘(a) DISCIPLINARY ACTIONS.—
‘‘(1) IN GENERAL.—Subject to subsection (c),
the Commissioner shall take an action in accordance
with the guidelines established under paragraph (2)
against any employee of the Internal Revenue Serv-
ice if there is a final administrative or judicial deter-
mination that such employee committed any act or
omission described under subsection (b) in the per-
formance of the employee’s official duties or where
a nexus to the employee’s position exists.
‘‘(2) GUIDELINES.—The Commissioner shall
issue guidelines for determining the appropriate level
of discipline, up to and including termination of em-
ployment, for committing any act or omission de-
scribed under subsection (b).
‘‘(b) ACTS OR OMISSIONS.—The acts or omissions de-
scribed under this subsection are—
‘‘(1) willful failure to obtain the required ap-
proval signatures on documents authorizing the sei-
zure of a taxpayer’s home, personal belongings, or
business assets;
‘‘(2) willfully providing a false statement under
oath with respect to a material matter involving a
taxpayer or taxpayer representative;
‘‘(3) with respect to a taxpayer or taxpayer rep-
resentative, the willful violation of—
‘‘(A) any right under the Constitution of
the United States;
‘‘(B) any civil right established under—
‘‘(i) title VI or VII of the Civil Rights
Act of 1964;
‘‘(ii) title IX of the Education Amend-
ments of 1972;
‘‘(iii) the Age Discrimination in Em-
ployment Act of 1967;
‘‘(iv) the Age Discrimination Act of
1975;
‘‘(v) section 501 or 504 of the Reha-
bilitation Act of 1973; or
‘‘(vi) title I of the Americans with
Disabilities Act of 1990; or
‘‘(C) the Internal Revenue Service policy
on unauthorized inspection of returns or return
information;
‘‘(4) willfully falsifying or destroying documents
to conceal mistakes made by any employee with re-
spect to a matter involving a taxpayer or taxpayer
representative;
‘‘(5) assault or battery on a taxpayer or tax-
payer representative, but only if there is a criminal
conviction, or a final adverse judgment by a court in
a civil case, with respect to the assault or battery;
‘‘(6) willful violations of this title, Department
of the Treasury regulations, or policies of the Inter-
nal Revenue Service (including the Internal Revenue
Manual) for the purpose of retaliating against, or
harassing, a taxpayer or taxpayer representative;
‘‘(7) willful misuse of the provisions of section
6103 for the purpose of concealing information from
a congressional inquiry;
‘‘(8) willful failure to file any return of tax re-
quired under this title on or before the date pre-
scribed therefor (including any extensions) when a
tax is due and owing, unless such failure is due to
reasonable cause and not due to willful neglect;
‘‘(9) willful understatement of Federal tax li-
ability, unless such understatement is due to reason-
able cause and not due to willful neglect; and
‘‘(10) threatening to audit a taxpayer, or to
take other action under this title, for the purpose of
extracting personal gain or benefit.
‘‘(c) DETERMINATIONS OF COMMISSIONER.—
‘‘(1) IN
GENERAL.—The Commissioner may
take a personnel action other than a disciplinary ac-
tion provided for in the guidelines under subsection
(a)(2) for an act or omission described under sub-
section (b).
‘‘(2) DISCRETION.—The exercise of authority
under paragraph (1) shall be at the sole discretion
of the Commissioner and may not be delegated to
any other officer. The Commissioner, in his sole dis-
cretion, may establish a procedure to determine if an
individual should be referred to the Commissioner
for a determination by the Commissioner under
paragraph (1).
‘‘(3) NO APPEAL.—Notwithstanding any other
provision of law, any determination of the Commis-
sioner under this subsection may not be reviewed in
any administrative or judicial proceeding. A finding
that an act or omission described under subsection
(b) occurred may be reviewed.
‘‘(d) DEFINITION.—For the purposes of the provi-
sions described in clauses (i), (ii), and (iv) of subsection
(b)(3)(B), references to a program or activity regarding
Federal financial assistance or an education program or
activity receiving Federal financial assistance shall include
any program or activity conducted by the Internal Rev-
enue Service for a taxpayer.
‘‘(e) ANNUAL REPORT.—The Commissioner shall
submit to Congress annually a report on disciplinary ac-
tions under this section.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 80 is amended by inserting after the item re-
lating to section 7804 the following new item:
‘‘Sec. 7804A. Disciplinary actions for misconduct.’’.
(c) REPEAL
OF SUPERSEDED SECTION.—Section
1203 of the Internal Revenue Service Restructuring and
Reform Act of 1998 (Public Law 105–206; 112 Stat. 720)
is repealed.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 202. CONFIRMATION OF AUTHORITY OF TAX COURT
TO 
APPLY 
DOCTRINE 
OF 
EQUITABLE
RECOUPMENT.
(a) CONFIRMATION OF AUTHORITY OF TAX COURT
TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.—
Subsection (b) of section 6214 (relating to jurisdiction
over other years and quarters) is amended by adding at
the end the following new sentence: ‘‘Notwithstanding the
preceding sentence, the Tax Court may apply the doctrine
of equitable recoupment to the same extent that it is avail-
able in civil tax cases before the district courts of the
United States and the United States Court of Federal
Claims.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to any action or proceeding in the
Tax Court with respect to which a decision has not become
final (as determined under section 7481 of the Internal
Revenue Code of 1986) as of the date of the enactment
of this Act.
SEC. 203. JURISDICTION OF TAX COURT OVER COLLECTION
DUE PROCESS CASES.
(a) IN GENERAL.—Section 6330(d)(1) (relating to
judicial review of determination) is amended to read as
follows:
‘‘(1) JUDICIAL REVIEW OF DETERMINATION.—
The person may, within 30 days of a determination
under this section, appeal such determination to the
Tax Court (and the Tax Court shall have jurisdic-
tion with respect to such matter).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to judicial appeals filed after
the date of the enactment of this Act.
SEC. 204. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS
IN COMPROMISE.
(a) IN GENERAL.—Section 7122(b) (relating to
record) is amended by striking ‘‘Whenever a compromise’’
and all that follows through ‘‘his delegate’’ and inserting
‘‘If the Secretary determines that an opinion of the Gen-
eral Counsel for the Department of the Treasury, or the
Counsel’s delegate, is required with respect to a com-
promise, there shall be placed on file in the office of the
Secretary such opinion’’.
(b) CONFORMING AMENDMENTS.—Section 7122(b) is
amended by striking the second and third sentences.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to offers-in-compromise submitted
or pending on or after the date of the enactment of this
Act.
SEC. 205. 15-DAY DELAY IN DUE DATE FOR ELECTRONI-
CALLY FILED INDIVIDUAL INCOME TAX RE-
TURNS.
(a) IN GENERAL.—Section 6072 (relating to time for
filing income tax returns) is amended by adding at the
end the following new subsection:
‘‘(f) ELECTRONICALLY FILED RETURNS OF INDIVID-
UALS.—
‘‘(1) IN GENERAL.—Returns of an individual
under section 6012 or 6013 (other than an indi-
vidual to whom subsection (c) applies) which are
filed electronically—
‘‘(A) in the case of returns filed on the
basis of a calendar year, shall be filed on or be-
fore the 30th day of April following the close of
the calendar year, and
‘‘(B) in the case of returns filed on the
basis of a fiscal year, shall be filed on or before
the last day of the 4th month following the
close of the fiscal year.
‘‘(2) 
ELECTRONIC
FILING.—Paragraph 
(1)
shall not apply to any return unless—
‘‘(A) such return is accepted by the Sec-
retary, and
‘‘(B) the balance due (if any) shown on
such return is paid electronically in a manner
prescribed by the Secretary.
‘‘(3) SPECIAL RULES.—
‘‘(A) ESTIMATED TAX.—If—
‘‘(i) paragraph (1) applies to an indi-
vidual for any taxable year, and
‘‘(ii) there is an overpayment of tax
shown on the return for such year which
the individual allows against the individ-
ual’s obligation under section 6641,
then, with respect to the amount so allowed,
any reference in section 6641 to the April 15
following such taxable year shall be treated as
a reference to April 30.
‘‘(B) REFERENCES TO DUE DATE.—Para-
graph (1) shall apply solely for purposes of de-
termining the due date for the individual’s obli-
gation to file and pay tax and, except as other-
wise provided by the Secretary, shall be treated
as an extension of the due date for any other
purpose under this title.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
Subtitle B—Confidentiality and
Disclosure
SEC. 211. COLLECTION ACTIVITIES WITH RESPECT TO
JOINT RETURN DISCLOSABLE TO EITHER
SPOUSE BASED ON ORAL REQUEST.
(a) IN GENERAL.—Paragraph (8) of section 6103(e)
(relating to disclosure of collection activities with respect
to joint return) is amended by striking ‘‘in writing’’ the
first place it appears.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to requests made after the date
of the enactment of this Act.
SEC. 212. TAXPAYER REPRESENTATIVES NOT SUBJECT TO
EXAMINATION ON SOLE BASIS OF REPRESEN-
TATION OF TAXPAYERS.
(a) IN GENERAL.—Subsection (h) of section 6103
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amend-
ed by adding at the end the following new paragraph:
‘‘(7) TAXPAYER REPRESENTATIVES.—Notwith-
standing paragraph (1), the return of the represent-
ative of a taxpayer whose return is being examined
by an officer or employee of the Department of the
Treasury shall not be open to inspection by such of-
ficer or employee on the sole basis of the representa-
tive’s relationship to the taxpayer unless a super-
visor of such officer or employee has approved the
inspection of the return of such representative on a
basis other than by reason of such relationship.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 213. COMPLIANCE BY CONTRACTORS WITH CONFIDEN-
TIALITY SAFEGUARDS.
(a) IN GENERAL.—Section 6103(p) (relating to State
law requirements) is amended by adding at the end the
following new paragraph:
‘‘(9) DISCLOSURE TO CONTRACTORS.—Notwith-
standing any other provision of this section, no re-
turn or return information shall be disclosed by any
officer or employee of any Federal agency or State
to any contractor of such agency or State unless
such agency or State—
‘‘(A) has requirements in effect which re-
quire each contractor of such agency or State
which would have access to returns or return
information to provide safeguards (within the
meaning of paragraph (4)) to protect the con-
fidentiality of such returns or return informa-
tion,
‘‘(B) agrees to conduct an annual, on-site
review (mid-point review in the case of con-
tracts of less than 1 year in duration) of each
contractor to determine compliance with such
requirements,
‘‘(C) submits the findings of the most re-
cent review conducted under subparagraph (B)
to the Secretary as part of the report required
by paragraph (4)(E), and
‘‘(D) certifies to the Secretary for the most
recent annual period that all contractors are in
compliance with all such requirements.
The certification required by subparagraph (D) shall
include the name and address of each contractor, a
description of the contract of the contractor with the
Federal agency or State, and the duration of such
contract.’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B)
of section 6103(p)(8) is amended by inserting ‘‘or para-
graph (9)’’ after ‘‘subparagraph (A)’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to disclosures made after De-
cember 31, 2002.
(2) CERTIFICATIONS.—The first certification
under section 6103(p)(9)(D) of the Internal Revenue
Code of 1986, as added by subsection (a), shall be
made with respect to calendar year 2003.
SEC. 214. HIGHER STANDARDS FOR REQUESTS FOR AND
CONSENTS TO DISCLOSURE.
(a) IN GENERAL.—Subsection (c) of section 6103
(relating to disclosure of returns and return information
to designee of taxpayer) is amended by adding at the end
the following new paragraphs:
‘‘(2) REQUIREMENTS
FOR
VALID
REQUESTS
AND CONSENTS.—A request for or consent to disclo-
sure under paragraph (1) shall only be valid for pur-
poses of this section or sections 7213, 7213A, or
7431 if—
‘‘(A) at the time of execution, such request
or consent designates a recipient of such disclo-
sure and is dated, and
‘‘(B) at the time such request or consent
is submitted to the Secretary, the submitter of
such request or consent certifies, under penalty
of perjury, that such request or consent com-
plied with subparagraph (A).
‘‘(3) RESTRICTIONS
ON
PERSONS
OBTAINING
INFORMATION.—Any person shall, as a condition for
receiving return or return information under para-
graph (1)—
‘‘(A) ensure that such return and return
information is kept confidential,
‘‘(B) use such return and return informa-
tion only for the purpose for which it was re-
quested, and
‘‘(C) not disclose such return and return
information except to accomplish the purpose
for which it was requested, unless a separate
consent from the taxpayer is obtained.
‘‘(4) REQUIREMENTS
FOR
FORM
PRESCRIBED
BY SECRETARY.—For purposes of this subsection,
the Secretary shall prescribe a form for requests and
consents which shall—
‘‘(A) contain a warning, prominently dis-
played, informing the taxpayer that the form
should not be signed unless it is completed,
‘‘(B) state that if the taxpayer believes
there is an attempt to coerce him to sign an in-
complete or blank form, the taxpayer should re-
port the matter to the Treasury Inspector Gen-
eral for Tax Administration, and
‘‘(C) contain the address and telephone
number of the Treasury Inspector General for
Tax Administration.’’.
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Treasury Inspector
General for Tax Administration shall submit a report to
the Congress on compliance with the designation and cer-
tification requirements applicable to requests for or con-
sent to disclosure of returns and return information under
section 6103(c) of the Internal Revenue Code of 1986, as
amended by subsection (a). Such report shall—
(1) evaluate (on the basis of random sampling)
whether—
(A) the amendment made by subsection (a)
is achieving the purposes of this section;
(B) requesters and submitters for such dis-
closure are continuing to evade the purposes of
this section and, if so, how; and
(C) the sanctions for violations of such re-
quirements are adequate; and
(2) include such recommendations that the
Treasury Inspector General for Tax Administration
considers necessary or appropriate to better achieve
the purposes of this section.
(c) CONFORMING AMENDMENT.—Section 6103(c) is
amended by striking ‘‘TAXPAYER.—The Secretary’’ and
inserting ‘‘TAXPAYER.—
‘‘(1) IN GENERAL.—The Secretary’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests and consents made
after 3 months after the date of the enactment of this
Act.
SEC. 215. NOTICE TO TAXPAYER CONCERNING ADMINIS-
TRATIVE DETERMINATION OF BROWSING; AN-
NUAL REPORT.
(a) NOTICE TO TAXPAYER.—Subsection (e) of section
7431 (relating to notification of unlawful inspection and
disclosure) is amended by adding at the end the following:
‘‘The Secretary shall also notify such taxpayer if the
Treasury Inspector General for Tax Administration deter-
mines that such taxpayer’s return or return information
was inspected or disclosed in violation of any of the provi-
sions specified in paragraph (1), (2), or (3).’’.
(b) REPORTS.—Subsection (p) of section 6103 (relat-
ing to procedure and recordkeeping), as amended by sec-
tion 245, is further amended by adding at the end the
following new paragraph:
‘‘(10) REPORT ON UNAUTHORIZED DISCLOSURE
AND INSPECTION.—As part of the report required by
paragraph (3)(C) for each calendar year, the Sec-
retary shall furnish information regarding the unau-
thorized disclosure and inspection of returns and re-
turn information, including the number, status, and
results of—
‘‘(A) administrative investigations,
‘‘(B) civil lawsuits brought under section
7431 (including the amounts for which such
lawsuits were settled and the amounts of dam-
ages awarded), and
‘‘(C) criminal prosecutions.’’.
(c) EFFECTIVE DATE.—
(1) NOTICE.—The amendment made by sub-
section (a) shall apply to determinations made after
the date of the enactment of this Act.
(2) REPORTS.—The amendment made by sub-
section (b) shall apply to calendar years ending after
the date of the enactment of this Act.
SEC. 216. EXPANDED DISCLOSURE IN EMERGENCY CIR-
CUMSTANCES.
(a) IN GENERAL.—Section 6103(i)(3)(B) (relating to
danger of death or physical injury) is amended by striking
‘‘or State’’ and inserting ‘‘, State, or local’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
Subtitle C—Other Provisions
SEC. 221. BETTER MEANS OF COMMUNICATING WITH TAX-
PAYERS.
Not later than 18 months after the date of the enact-
ment of this Act, the Treasury Inspector General for Tax
Administration shall submit a report to Congress evalu-
ating whether technological advances, such as e-mail and
facsimile transmission, permit the use of alternative
means for the Internal Revenue Service to communicate
with taxpayers.
SEC. 222. ENROLLED AGENTS.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the
following new section:
‘‘SEC. 7527. ENROLLED AGENTS.
‘‘(a) IN GENERAL.—The Secretary may prescribe
such regulations as may be necessary to regulate the con-
duct of enrolled agents in regards to their practice before
the Internal Revenue Service.
‘‘(b) USE OF CREDENTIALS.—Any enrolled agents
properly licensed to practice as required under rules pro-
mulgated under section (a) herein shall be allowed to use
the credentials or designation as ‘enrolled agent’, ‘EA’, or
‘E.A.’.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 7525. Enrolled agents.’’.
(c) PRIOR REGULATIONS.—Nothing in the amend-
ments made by this section shall be construed to have any
effect on part 10 of title 31, Code of Federal Regulations,
or any other Federal rule or regulation issued before the
date of the enactment of this Act.
SEC. 223. FINANCIAL MANAGEMENT SERVICE FEES.
Notwithstanding any other provision of law, the Fi-
nancial Management Service may charge the Internal Rev-
enue Service, and the Internal Revenue Service may pay
the Financial Management Service, a fee sufficient to
cover the full cost of implementing a continuous levy pro-
gram under subsection (h) of section 6331 of the Internal
Revenue Code of 1986. Any such fee shall be based on
actual levies made and shall be collected by the Financial
Management Service by the retention of a portion of
amounts collected by levy pursuant to that subsection.
Amounts received by the Financial Management Service
as fees under that subsection shall be deposited into the
account of the Department of the Treasury under section
3711(g)(7) of title 31, United States Code, and shall be
collected and accounted for in accordance with the provi-
sions of that section. The amount credited against the tax-
payer’s liability on account of the continuous levy shall
be the amount levied, without reduction for the amount
paid to the Financial Management Service as a fee.
SEC. 224. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) IN GENERAL.—Clause (i) of section 202(c)(4)(B)
of the Government Securities Act Amendments of 1993
(31 U.S.C. 3121 note) is amended by inserting before the
semicolon ‘‘(or, if earlier, at the time the Secretary re-
leases the minutes of the meeting in accordance with para-
graph (2))’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to meetings held after the date
of the enactment of this Act.
TITLE III—REFORM OF PENALTY
AND INTEREST PROVISIONS
SEC. 301. FAILURE TO PAY ESTIMATED TAX PENALTY CON-
VERTED TO INTEREST CHARGE ON ACCUMU-
LATED UNPAID BALANCE.
(a) PENALTY MOVED TO INTEREST CHAPTER OF
CODE.—The Internal Revenue Code of 1986 is amended
by redesignating section 6654 as section 6641 and by
moving section 6641 (as so redesignated) from part I of
subchapter A of chapter 68 to the end of subchapter E
of chapter 67 (as added by subsection (e)(1) of this sec-
tion).
(b) PENALTY CONVERTED TO INTEREST CHARGE.—
The heading and subsections (a) and (b) of section 6641
(as so redesignated) are amended to read as follows:
‘‘SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY
ESTIMATED INCOME TAX.
‘‘(a) IN GENERAL.—Interest shall be paid on any un-
derpayment of estimated tax by an individual for a taxable
year for each day of such underpayment. The amount of
such interest for any day shall be the product of the un-
derpayment rate established under subsection (b)(2) mul-
tiplied by the amount of the underpayment.
‘‘(b) AMOUNT
OF
UNDERPAYMENT; INTEREST
RATE.—For purposes of subsection (a)—
‘‘(1) AMOUNT.—The amount of the under-
payment on any day shall be the excess of—
‘‘(A) the sum of the required installments
for the taxable year the due dates for which are
on or before such day, over
‘‘(B) the sum of the amounts (if any) of
estimated tax payments made on or before such
day on such required installments.
‘‘(2) DETERMINATION OF INTEREST RATE.—
‘‘(A) IN
GENERAL.—The underpayment
rate with respect to any day in an installment
underpayment period shall be the under-
payment rate established under section 6621
for the first day of the calendar quarter in
which such installment underpayment period
begins.
‘‘(B) INSTALLMENT
UNDERPAYMENT
PE-
RIOD.—For purposes of subparagraph (A), the
term ‘installment underpayment period’ means
the period beginning on the day after the due
date for a required installment and ending on
the due date for the subsequent required in-
stallment (or in the case of the 4th required in-
stallment, the 15th day of the 4th month fol-
lowing the close of a taxable year).
‘‘(C) DAILY RATE.—The rate determined
under subparagraph (A) shall be applied on a
daily basis and shall be based on the assump-
tion of 365 days in a calendar year.
‘‘(3) TERMINATION OF ESTIMATED TAX INTER-
EST.—No day after the end of the installment un-
derpayment period for the 4th required installment
specified in paragraph (2)(B) for a taxable year
shall be treated as a day of underpayment with re-
spect to such taxable year.’’.
(c) INCREASE
IN SAFE HARBOR WHERE TAX
IS
SMALL.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
6641(d)(1)(B) (as so redesignated) is amended to
read as follows:
‘‘(i) the lesser of—
‘‘(I) 90 percent of the tax shown
on the return for the taxable year (or,
if no return is filed, 90 percent of the
tax for such year), or
‘‘(II) the tax shown on the return
for the taxable year (or, if no return
is filed, the tax for such year) reduced
(but not below zero) by $2,000, or’’.
(2) CONFORMING AMENDMENT.—Subsection (e)
of section 6641 (as so redesignated) is amended by
striking paragraph (1) and redesignating paragraphs
(2) and (3) as paragraphs (1) and (2), respectively.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (1) and (2) of subsection (e)
(as redesignated by subsection (c)(2)) and sub-
section (h) of section 6641 (as so designated) are