I
108TH CONGRESS
1ST SESSION
H. R. 1528
To amend the Internal Revenue Code of 1986 to protect taxpayers and
ensure accountability of the Internal Revenue Service.
IN THE HOUSE OF REPRESENTATIVES
APRIL 1, 2003
Mr. PORTMAN introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to protect
taxpayers and ensure accountability of the Internal Rev-
enue Service.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Taxpayer Protection and IRS Accountability Act of
2003’’.
(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
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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—PENALTY AND INTEREST REFORMS
Sec. 101. Failure to pay estimated tax penalty converted to interest charge on
accumulated unpaid balance.
Sec. 102. Exclusion from gross income for interest on overpayments of income
tax by individuals.
Sec. 103. Abatement of interest.
Sec. 104. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 105. Expansion of interest netting for individuals.
Sec. 106. Waiver of certain penalties for first-time unintentional minor errors.
Sec. 107. Frivolous tax submissions.
Sec. 108. Clarification of application of Federal tax deposit penalty.
TITLE II—FAIRNESS OF COLLECTION PROCEDURES
Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Extension of time for return of property.
Sec. 203. Individuals held harmless on wrongful levy, etc., on individual retire-
ment plan.
Sec. 204. Seven-day threshold on tolling of statute of limitations during tax re-
view.
Sec. 205. Study of liens and levies.
TITLE III—TAX ADMINISTRATION REFORMS
Sec. 301. Revisions relating to termination of employment of Internal Revenue
Service employees for misconduct.
Sec. 302. Confirmation of authority of tax court to apply doctrine of equitable
recoupment.
Sec. 303. Jurisdiction of tax court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. 15-day delay in due date for electronically filed individual income tax
returns.
Sec. 306. Access of National Taxpayer Advocate to independent legal counsel.
Sec. 307. Payment of motor fuel excise tax refunds by direct deposit.
Sec. 308. Family business tax simplification.
Sec. 309. Health insurance costs of eligible individuals.
Sec. 310. Suspension of tax-exempt status of terrorist organizations.
TITLE IV—CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 402. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
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Sec. 403. Disclosure in judicial or administrative tax proceedings of return and
return information of persons who are not party to such pro-
ceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification information with
respect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of brows-
ing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to section
501(c)(3) organizations.
Sec. 411. Confidentiality of taxpayer communications with the Office of the
Taxpayer Advocate.
TITLE V—MISCELLANEOUS
Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt organiza-
tions.
Sec. 503. Employee misconduct report to include summary of complaints by
category.
Sec. 504. Annual report on awards of costs and certain fees in administrative
and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of failure to
file.
Sec. 508. Amendment to treasury auction reforms.
Sec. 509. Enrolled agents.
Sec. 510. Financial management service fees.
Sec. 511. Extension of Internal Revenue Service user fees.
TITLE VI—LOW-INCOME TAXPAYER CLINICS
Sec. 601. Low-income taxpayer clinics.
TITLE VII—FEDERAL-STATE UNEMPLOYMENT ASSISTANCE
AGREEMENTS.
Sec. 701. Applicability of certain Federal-State agreements relating to unem-
ployment assistance.
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TITLE I—PENALTY AND
INTEREST REFORMS
SEC. 101. FAILURE TO PAY ESTIMATED TAX PENALTY CON-
VERTED TO INTEREST CHARGE ON ACCUMU-
LATED UNPAID BALANCE.
(a) PENALTY MOVED TO INTEREST CHAPTER OF
CODE.—The Internal Revenue Code of 1986 is amended
by redesignating section 6654 as section 6641 and by
moving section 6641 (as so redesignated) from part I of
subchapter A of chapter 68 to the end of subchapter E
of chapter 67 (as added by subsection (e)(1) of this 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)—
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‘‘(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).
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‘‘(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 $1,600, or’’.
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(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
each amended by striking ‘‘addition to tax’’ each
place it occurs and inserting ‘‘interest’’.
(2) Section 167(g)(5)(D) is amended by strik-
ing ‘‘6654’’ and inserting ‘‘6641’’.
(3) Section 460(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(4) Section 3510(b) is amended—
(A) by striking ‘‘section 6654’’ in para-
graph (1) and inserting ‘‘section 6641’’;
(B) by amending paragraph (2)(B) to read
as follows:
‘‘(B) no interest would be required to be
paid (but for this section) under 6641 for such
taxable year by reason of the $1,600 amount
specified in section 6641(d)(1)(B)(i)(II).’’;
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(C) by striking ‘‘section 6654(d)(2)’’ in
paragraph 
(3) 
and 
inserting 
‘‘section
6641(d)(2)’’; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(6) Section 6601(h) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(7) Section 6621(b)(2)(B) is amended by strik-
ing ‘‘addition to tax under section 6654’’ and insert-
ing ‘‘interest required to be paid under section
6641’’.
(8) Section 6622(b) is amended—
(A) by striking ‘‘PENALTY
FOR’’ in the
heading; and
(B) by striking ‘‘addition to tax under sec-
tion 6654 or 6655’’ and inserting ‘‘interest re-
quired to be paid under section 6641 or addi-
tion to tax under section 6655’’.
(9) Section 6658(a) is amended—
(A) by striking ‘‘6654, or 6655’’ and in-
serting ‘‘or 6655, and no interest shall be re-
quired to be paid under section 6641,’’; and
(B) by inserting ‘‘or paying interest’’ after
‘‘the tax’’ in paragraph (2)(B)(ii).
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(10) Section 6665(b) is amended—
(A) in the matter preceding paragraph (1)
by striking ‘‘, 6654,’’; and
(B) in paragraph (2) by striking ‘‘6654
or’’.
(11) Section 7203 is amended by striking ‘‘sec-
tion 6654 or 6655’’ and inserting ‘‘section 6655 or
interest required to be paid under section 6641’’.
(e) CLERICAL AMENDMENTS.—
(1) Chapter 67 is amended by inserting after
subchapter D the following:
‘‘Subchapter E—Interest on Failure by
Individual to Pay Estimated Income Tax
‘‘Sec. 6641. Interest on failure by individual to pay estimated in-
come tax.’’.
(2) The table of subchapters for chapter 67 is
amended by adding at the end the following new
items:
‘‘Subchapter D. Notice requirements.
‘‘Subchapter E. Interest on failure by individual to pay estimated
income tax.’’.
(3) The table of sections for part I of sub-
chapter A of chapter 68 is amended by striking the
item relating to section 6654.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to installment payments for taxable
years beginning after December 31, 2003.
SEC.
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102. EXCLUSION FROM GROSS INCOME FOR IN-
TEREST ON OVERPAYMENTS OF INCOME TAX
BY INDIVIDUALS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to items specifically excluded from gross
income) is amended by inserting after section 139 the fol-
lowing new section:
‘‘SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTER-
EST ON OVERPAYMENTS OF INCOME TAX BY
INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual,
gross income shall not include interest paid under section
6611 on any overpayment of tax imposed by this subtitle.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply in
the case of a failure to claim items resulting in the over-
payment on the original return if the Secretary determines
that the principal purpose of such failure is to take advan-
tage of subsection (a).
‘‘(c) SPECIAL RULE FOR DETERMINING MODIFIED
ADJUSTED GROSS INCOME.—For purposes of this title,
interest not included in gross income under subsection (a)
shall not be treated as interest which is exempt from tax
for purposes of sections 32(i)(2)(B) and 6012(d) or any
computation in which interest exempt from tax under this
title is added to adjusted gross income.’’.
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(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 is amended by
inserting after the item relating to section 139 the fol-
lowing new item:
‘‘Sec. 139A. Exclusion from gross income for interest on over-
payments of income tax by individuals.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest received in calendar
years beginning after the date of the enactment of this
Act.
SEC. 103. ABATEMENT OF INTEREST.
(a) ABATEMENT OF INTEREST WITH RESPECT TO
ERRONEOUS REFUND CHECK WITHOUT REGARD TO SIZE
OF REFUND.—Paragraph (2) of section 6404(e) is amend-
ed by striking ‘‘unless—’’ and all that follows and insert-
ing ‘‘unless the taxpayer (or a related party) has in any
way caused such erroneous refund.’’.
(b) ABATEMENT OF INTEREST TO EXTENT INTER-
EST
IS ATTRIBUTABLE
TO TAXPAYER RELIANCE
ON
WRITTEN STATEMENTS OF THE IRS.—Subsection (f) of
section 6404 is amended—
(1) in the subsection heading, by striking
‘‘PENALTY OR ADDITION’’ and inserting ‘‘INTEREST,
PENALTY, OR ADDITION’’; and
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(2) in paragraph (1) and in subparagraph (B)
of paragraph (2), by striking ‘‘penalty or addition’’
and inserting ‘‘interest, penalty, or addition’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to interest accruing
on or after the date of the enactment of this Act.
SEC. 104. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS.
(a) IN GENERAL.—Subchapter A of chapter 67 (re-
lating to interest on underpayments) is amended by add-
ing at the end the following new section:
‘‘SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS,
ETC.
‘‘(a) AUTHORITY TO MAKE DEPOSITS OTHER THAN
AS PAYMENT OF TAX.—A taxpayer may make a cash de-
posit with the Secretary which may be used by the Sec-
retary to pay any tax imposed under subtitle A or B or
chapter 41, 42, 43, or 44 which has not been assessed
at the time of the deposit. Such a deposit shall be made
in such manner as the Secretary shall prescribe.
‘‘(b) NO INTEREST IMPOSED.—To the extent that
such deposit is used by the Secretary to pay tax, for pur-
poses of section 6601 (relating to interest on underpay-
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ments), the tax shall be treated as paid when the deposit
is made.
‘‘(c) RETURN OF DEPOSIT.—Except in a case where
the Secretary determines that collection of tax is in jeop-
ardy, the Secretary shall return to the taxpayer any
amount of the deposit (to the extent not used for a pay-
ment of tax) which the taxpayer requests in writing.
‘‘(d) PAYMENT OF INTEREST.—
‘‘(1) IN
GENERAL.—For purposes of section
6611 (relating to interest on overpayments), a de-
posit which is returned to a taxpayer shall be treated
as a payment of tax for any period to the extent
(and only to the extent) attributable to a disputable
tax for such period. Under regulations prescribed by
the Secretary, rules similar to the rules of section
6611(b)(2) shall apply.
‘‘(2) DISPUTABLE TAX.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘disputable tax’ means the
amount of tax specified at the time of the de-
posit as the taxpayer’s reasonable estimate of
the maximum amount of any tax attributable to
disputable items.
‘‘(B) SAFE
HARBOR
BASED
ON
30-DAY
LETTER.—In the case of a taxpayer who has
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been issued a 30-day letter, the maximum
amount of tax under subparagraph (A) shall
not be less than the amount of the proposed de-
ficiency specified in such letter.
‘‘(3) OTHER
DEFINITIONS.—For purposes of
paragraph (2)—
‘‘(A) DISPUTABLE ITEM.—The term ‘dis-
putable item’ means any item of income, gain,
loss, deduction, or credit if the taxpayer—
‘‘(i) has a reasonable basis for its
treatment of such item, and
‘‘(ii) reasonably believes that the Sec-
retary also has a reasonable basis for dis-
allowing the taxpayer’s treatment of such
item.
‘‘(B) 30-DAY LETTER.—The term ‘30-day
letter’ means the first letter of proposed defi-
ciency which allows the taxpayer an opportunity
for administrative review in the Internal Rev-
enue Service Office of Appeals.
‘‘(4) RATE OF INTEREST.—The rate of interest
allowable under this subsection shall be the Federal
short-term rate determined under section 6621(b),
compounded daily.
‘‘(e) USE OF DEPOSITS.—
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‘‘(1) PAYMENT OF TAX.—Except as otherwise
provided by the taxpayer, deposits shall be treated
as used for the payment of tax in the order depos-
ited.
‘‘(2) RETURNS
OF
DEPOSITS.—Deposits shall
be treated as returned to the taxpayer on a last-in,
first-out basis.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter A of chapter 67 is amended by adding at
the end the following new item:
‘‘Sec. 6603. Deposits made to suspend running of interest on po-
tential underpayments, etc.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to deposits made after the
date of the enactment of this Act.
(2) COORDINATION
WITH
DEPOSITS
MADE
UNDER REVENUE PROCEDURE 84 0958.—In the case
of an amount held by the Secretary of the Treasury
or his delegate on the date of the enactment of this
Act as a deposit in the nature of a cash bond deposit
pursuant to Revenue Procedure 84 0958, the date
that the taxpayer identifies such amount as a de-
posit made pursuant to section 6603 of the Internal
Revenue Code (as added by this Act) shall be treat-
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ed as the date such amount is deposited for pur-
poses of such section 6603.
SEC. 105. EXPANSION OF INTEREST NETTING FOR INDIVID-
UALS.
(a) IN GENERAL.—Subsection (d) of section 6621
(relating to elimination of interest on overlapping periods
of tax overpayments and underpayments) is amended by
adding at the end the following: ‘‘Solely for purposes of
the preceding sentence, section 6611(e) shall not apply in
the case of an individual.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to interest accrued after Decem-
ber 31, 2003.
SEC. 106. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME
UNINTENTIONAL MINOR ERRORS.
(a) IN GENERAL.—Section 6651 (relating to failure
to file tax return or to pay tax) is amended by adding
at the end the following new subsection:
‘‘(i) TREATMENT OF FIRST-TIME UNINTENTIONAL
MINOR ERRORS.—
‘‘(1) IN GENERAL.—In the case of a return of
tax imposed by subtitle A filed by an individual, the
Secretary may waive an addition to tax under sub-
section (a) if—
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‘‘(A) the individual has a history of compli-
ance with the requirements of this title,
‘‘(B) it is shown that the failure is due to
an unintentional minor error,
‘‘(C) the penalty would be grossly dis-
proportionate to the action or expense that
would have been needed to avoid the error, and
imposing the penalty would be against equity
and good conscience,
‘‘(D) waiving the penalty would promote
compliance with the requirements of this title
and effective tax administration, and
‘‘(E) the taxpayer took all reasonable steps
to remedy the error promptly after discovering
it.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply if—
‘‘(A) the Secretary has waived any addition
to tax under this subsection with respect to any
prior failure by such individual,
‘‘(B) the failure is a mathematical or cler-
ical error (as defined in section 6213(g)(2)), or
‘‘(C) the failure is the lack of a required
signature.’’.
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(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on January 1, 2004.
SEC. 107. FRIVOLOUS TAX SUBMISSIONS.
(a) CIVIL PENALTIES.—Section 6702 is amended to
read as follows:
‘‘SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
‘‘(a) CIVIL PENALTY
FOR FRIVOLOUS TAX RE-
TURNS.—A person shall pay a penalty of $5,000 if—
‘‘(1) such person files what purports to be a re-
turn of a tax imposed by this title but which—
‘‘(A) does not contain information on
which the substantial correctness of the self-as-
sessment may be judged, or
‘‘(B) contains information that on its face
indicates that the self-assessment is substan-
tially incorrect; and
‘‘(2) the conduct referred to in paragraph (1)—
‘‘(A) is based on a position which the Sec-
retary has identified as frivolous under sub-
section (c), or
‘‘(B) reflects a desire to delay or impede
the administration of Federal tax laws.
‘‘(b) CIVIL PENALTY
FOR SPECIFIED FRIVOLOUS
SUBMISSIONS.—
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‘‘(1) IMPOSITION OF PENALTY.—Except as pro-
vided in paragraph (3), any person who submits a
specified frivolous submission shall pay a penalty of
$5,000.
‘‘(2) SPECIFIED FRIVOLOUS SUBMISSION.—For
purposes of this section—
‘‘(A) 
SPECIFIED
FRIVOLOUS
SUBMIS-
SION.—The term ‘specified frivolous submis-
sion’ means a specified submission if any por-
tion of such submission is based on a position
which the Secretary has identified as frivolous
under subsection (c).
‘‘(B) SPECIFIED SUBMISSION.—The term
‘specified submission’ means—
‘‘(i) a request for a hearing under—
‘‘(I) section 6320 (relating to no-
tice and opportunity for hearing upon
filing of notice of lien), or
‘‘(II) section 6330 (relating to
notice and opportunity for hearing be-
fore levy), and
‘‘(ii) an application under—
‘‘(I) section 7811 (relating to
taxpayer assistance orders),
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‘‘(II) section 6159 (relating to
agreements for payment of tax liabil-
ity in installments), or
‘‘(III) section 7122 (relating to
compromises).
‘‘(3) OPPORTUNITY
TO
WITHDRAW
SUBMIS-
SION.—If the Secretary provides a person with no-
tice that a submission is a specified frivolous sub-
mission and such person withdraws such submission
within 30 days after such notice, the penalty im-
posed under paragraph (1) shall not apply with re-
spect to such submission.
‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec-
retary shall prescribe (and periodically revise) a list of po-
sitions which the Secretary has identified as being frivo-
lous for purposes of this subsection. The Secretary shall
not include in such list any position that the Secretary
determines 
meets 
the 
requirement 
of 
section
6662(d)(2)(B)(ii)(II).
‘‘(d) REDUCTION OF PENALTY.—The Secretary may
reduce the amount of any penalty imposed under this sec-
tion if the Secretary determines that such reduction would
promote compliance with and administration of the Fed-
eral tax laws.
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‘‘(e) PENALTIES
IN ADDITION
TO OTHER PEN-
ALTIES.—The penalties imposed by this section shall be
in addition to any other penalty provided by law.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter B of chapter 68 is amended by
striking the item relating to section 6702 and inserting
the following new item:
‘‘Sec. 6702. Frivolous tax submissions.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to submissions made and issues
raised after the date on which the Secretary first pre-
scribes a list under section 6702(c) of the Internal Rev-
enue Code of 1986, as amended by subsection (a).
SEC. 108. CLARIFICATION OF APPLICATION OF FEDERAL
TAX DEPOSIT PENALTY.
Nothing in section 6656 of the Internal Revenue
Code of 1986 shall be construed to permit the percentage
specified in subsection (b)(1)(A)(iii) thereof to apply other
than in a case where the failure is for more than 15 days.
TITLE II—FAIRNESS OF
COLLECTION PROCEDURES
SEC. 201. PARTIAL PAYMENT OF TAX LIABILITY IN IN-
STALLMENT AGREEMENTS.
(a) IN GENERAL.—
(1) Section 6159(a) (relating to authorization
of agreements) is amended—
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(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.
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SEC. 202. 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. 203. 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:
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‘‘(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
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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, 2003.
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SEC. 204. 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. 205. 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.
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TITLE III—TAX ADMINISTRATION
REFORMS
SEC. 301. 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).
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‘‘(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
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‘‘(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
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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
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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 09206; 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.
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tion 405, 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.