(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76 is amended by striking
the item relating to section 7434 and inserting the
following:
‘‘Sec. 7434. Civil damages for fraudulent filing of information re-
turns.
‘‘Sec. 7435. Cross references.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to false or fraudulent information
returns filed after the date of the enactment of this Act.
SEC. 603. REQUIREMENT TO CONDUCT REASONABLE IN-
VESTIGATIONS OF INFORMATION RETURNS.
(a) GENERAL RULE.—Section 6201 (relating to as-
sessment authority) is amended by redesignating sub-
section (d) as subsection (e) and by inserting after sub-
section (c) the following new subsection:
‘‘(d) REQUIRED REASONABLE INVESTIGATION OF IN-
FORMATION RETURNS.—If a taxpayer asserts a reason-
able dispute with respect to any item of income reported
on an information return filed with the Secretary under
chapter 61 by a third party, the Secretary, when making
a determination of a deficiency based on such information
return, shall have the burden of proof with respect to such
determination unless the Secretary has conducted a rea-
sonable investigation to corroborate the accuracy of such
information return.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
TITLE VII—MODIFICATIONS TO
PENALTY FOR FAILURE TO
COLLECT AND PAY OVER TAX
SEC. 701. PRELIMINARY NOTICE REQUIREMENT.
(a) IN GENERAL.—Section 6672 (relating to failure
to collect and pay over tax, or attempt to evade or defeat
tax) is amended by redesignating subsection (b) as sub-
section (c) and by inserting after subsection (a) the follow-
ing new subsection:
‘‘(b) PRELIMINARY NOTICE REQUIREMENT.—
‘‘(1) IN
GENERAL.—No penalty shall be im-
posed under subsection (a) unless the Secretary noti-
fies the taxpayer in writing by mail to an address as
determined under section 6212(b) that the taxpayer
shall be subject to an assessment of such penalty.
‘‘(2) TIMING OF NOTICE.—The mailing of the
notice described in paragraph (1) shall precede any
notice and demand of any penalty under subsection
(a) by at least 60 days.
‘‘(3) STATUTE
OF
LIMITATIONS.—If a notice
described in paragraph (1) with respect to any pen-
alty is mailed before the expiration of the period
provided by section 6501 for the assessment of such
penalty (determined without regard to this para-
graph), the period provided by such section for the
assessment of such penalty shall not expire before
the date 90 days after the date on which such notice
was mailed.
‘‘(4) EXCEPTION
FOR
JEOPARDY.—This sub-
section shall not apply if the Secretary finds that the
collection of the penalty is in jeopardy.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to assessments made after June
30, 1994.
SEC. 702. DISCLOSURE OF CERTAIN INFORMATION WHERE
MORE THAN 1 PERSON SUBJECT TO PEN-
ALTY.
(a) IN GENERAL.—Subsection (e) of section 6103
(relating to disclosure to persons having material interest),
as amended by section 401(a), is amended by adding at
the end the following new paragraph:
‘‘(9) DISCLOSURE
OF
CERTAIN
INFORMATION
WHERE MORE THAN 1 PERSON SUBJECT TO PEN-
ALTY UNDER SECTION 6672.—If the Secretary deter-
mines that a person is liable for a penalty under sec-
tion 6672(a) with respect to any failure, upon re-
quest in writing of such person, the Secretary shall
disclose in writing to such person—
‘‘(A) the name of any other person whom
the Secretary has determined to be liable for
such penalty with respect to such failure, and
‘‘(B) whether the Secretary has attempted
to collect such penalty from such other person,
the general nature of such collection activities,
and the amount collected.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 703. PENALTIES UNDER SECTION 6672.
(a) PUBLIC INFORMATION REQUIREMENTS.—The
Secretary of the Treasury or the Secretary’s delegate
(hereafter in this section referred to as the ‘‘Secretary’’)
shall take such actions as may be appropriate to ensure
that employees are aware of their responsibilities under
the Federal tax depository system, the circumstances
under which employees may be liable for the penalty im-
posed by section 6672 of the Internal Revenue Code of
1986, and the responsibility to promptly report to the In-
ternal Revenue Service any failure referred to in sub-
section (a) of such section 6672. Such actions shall in-
clude—
(1) printing of a warning on deposit coupon
booklets and the appropriate tax returns that certain
employees may be liable for the penalty imposed by
such section 6672, and
(2) the development of a special information
packet.
(b) BOARD MEMBERS OF TAX-EXEMPT ORGANIZA-
TIONS.—
(1) VOLUNTARY BOARD MEMBERS.—
(A) IN GENERAL.—The penalty under sec-
tion 6672 of the Internal Revenue Code of 1986
shall not be imposed on unpaid, volunteer mem-
bers of any board of trustees or directors of an
organization referred to in section 501 of such
Code to the extent such members are solely
serving in an honorary capacity, do not partici-
pate in the day-to-day or financial operations of
the organization, and do not have actual knowl-
edge of the failure on which such penalty is im-
posed.
(B) APPLICATION
OF
PARAGRAPH.—This
paragraph shall not apply if it results in no per-
son being held liable for the penalty described
in section 6672(a) of the Internal Revenue
Code of 1986.
(2) DEVELOPMENT
OF
EXPLANATORY
MATE-
RIALS.—The Secretary shall develop materials ex-
plaining the circumstances under which board mem-
bers of tax-exempt organizations (including vol-
untary and honorary members) may be subject to
penalty under section 6672 of such Code. Such ma-
terials shall be made available to tax-exempt organi-
zations.
(3) IRS INSTRUCTIONS.—The Secretary shall
clarify the instructions to Internal Revenue Service
employees on the application of the penalty under
section 6672 of such Code with regard to voluntary
members of boards of trustees or directors of tax-
exempt organizations.
(c) PROMPT NOTIFICATION.—To the maximum ex-
tent practicable, the Secretary shall notify all persons who
have failed to make timely and complete deposit of any
taxes described in section 6672 of the Internal Revenue
Code of 1986 of such failure within 30 days after the re-
turn was filed reflecting such failure or after the date on
which the Secretary is first aware of such failure. If the
person failing to make the deposit is not an individual,
the Secretary shall notify the entity subject to such deposit
requirement and that entity shall notify, within 15 days
of the notification by the Secretary, all officers, general
partners, trustees, or other managers of the failure.
TITLE VIII—AWARDING OF
COSTS AND CERTAIN FEES
SEC. 801. MOTION FOR DISCLOSURE OF INFORMATION.
Paragraph (4) of section 7430(c) (defining prevailing
party) is amended by adding at the end the following new
subparagraph:
‘‘(C) MOTION FOR DISCLOSURE OF INFOR-
MATION.—Once a taxpayer substantially pre-
vails as described in subparagraph (A)(ii), the
taxpayer may file a motion for an order requir-
ing the disclosure (within a reasonable period of
time specified by the court) of all information
and copies of relevant records in the possession
of the Internal Revenue Service with respect to
such taxpayer’s case and the substantial jus-
tification for the position taken by the Internal
Revenue Service.’’
SEC. 802. INCREASED LIMIT ON ATTORNEY FEES.
Paragraph (1) of section 7430(c) (defining reason-
able litigation costs) is amended—
(1) by striking ‘‘$75’’ in clause (iii) of subpara-
graph (B) and inserting ‘‘$110’’,
SEC. 804. AUTHORITY FOR COURT TO AWARD REASONABLE
ADMINISTRATIVE COSTS.
Section 7430(c)(7)(B) is amended to read as follows:
‘‘(B) the position taken in an administra-
tive proceeding to which subsection (a) applies.’’
SEC. 805. EFFECTIVE DATE.
The amendments made by this title shall apply in the
case of proceedings commenced after the date of the enact-
ment of this Act.
TITLE IX—OTHER PROVISIONS
SEC. 901. REQUIRED CONTENT OF CERTAIN NOTICES.
(a) GENERAL RULE.—Subsection (a) of section 7522
(relating to content of tax due, deficiency, and other no-
tices) is amended by striking ‘‘shall describe the basis for,
and identify’’ and inserting ‘‘shall set forth the adjust-
ments which are the basis for, and shall identify’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to notices sent after the date
6 months after the date of the enactment of this Act.
SEC. 902. TREATMENT OF SUBSTITUTE RETURNS UNDER
SECTION 6651.
(a) GENERAL RULE.—Section 6651 (relating to fail-
ure to file tax return or to pay tax), as amended by section
202(a), is amended by adding at the end the following new
subsection:
‘‘(h) TREATMENT OF RETURNS PREPARED BY SEC-
RETARY UNDER SECTION 6020(b).—In the case of any
return made by the Secretary under section 6020(b)—
‘‘(1) such return shall be disregarded for pur-
poses of determining the amount of the addition
under paragraph (1) of subsection (a), but
‘‘(2) such return shall be treated as the return
filed by the taxpayer for purposes of determining the
amount of the addition under paragraphs (2) and
(3) of subsection (a).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in the case of any return the
due date for which (determined without regard to exten-
sions) is after the date of the enactment of this Act.
SEC. 903. RELIEF FROM RETROACTIVE APPLICATION OF
TREASURY DEPARTMENT REGULATIONS.
(a) IN GENERAL.—Subsection (b) of section 7805
(relating to rules and regulations) is amended to read as
follows:
‘‘(b) RETROACTIVITY OF REGULATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, no temporary, proposed, or
final regulation relating to the internal revenue laws
shall apply to any taxable period ending before the
earliest of the following dates:
‘‘(A) The date on which such regulation is
filed with the Federal Register.
‘‘(B) In the case of any final regulation,
the date on which any proposed or temporary
regulation to which such final regulation relates
was filed with the Federal Register.
‘‘(C) The date on which any notice sub-
stantially describing the expected contents of
any temporary, proposed, or final regulation is
issued to the public.
‘‘(2) PREVENTION OF ABUSE.—The Secretary
may provide that any regulation may take effect or
apply retroactively to prevent abuse of a statute to
which the regulation relates.
‘‘(3) 
CORRECTION
OF
PROCEDURAL
DE-
FECTS.—The Secretary may provide that any regu-
lation may apply retroactively to correct a proce-
dural defect in the issuance of any prior regulation.
‘‘(4) INTERNAL REGULATIONS.—The limitation
of paragraph (1) shall not apply to any regulation
relating to internal Treasury Department policies,
practices, or procedures.
‘‘(5) CONGRESSIONAL
AUTHORIZATION.—The
limitation of paragraph (1) may be superseded by a
legislative grant from Congress authorizing the Sec-
retary to prescribe the effective date with respect to
any regulation.
‘‘(6) ELECTION TO APPLY RETROACTIVELY.—
The Secretary may provide for any taxpayer to elect
to apply any regulation before the dates specified in
paragraph (1).
‘‘(7) APPLICATION
TO
RULINGS.—The Sec-
retary may prescribe the extent, if any, to which any
ruling (including any judicial decision or any admin-
istrative determination other than by regulation) re-
lating to the internal revenue laws shall be applied
without retroactive effect.’’
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendment made by subsection (a)
shall apply with respect to—
(A) any temporary or proposed regulation
filed on or after January 5, 1993, and
(B) any temporary or proposed regulation
filed before January 5, 1993, and filed as a
final regulation after such date.
(2) SPECIAL RULE.—Section 7805(b)(2) of the
Internal Revenue Code of 1986 (as added by sub-
section (a)) shall apply only to statutes enacted on
or after the date of the enactment of this Act.
SEC. 904. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the
Treasury or the Secretary’s delegate (hereafter in this sec-
tion referred to as the ‘‘Secretary’’) from any taxpayer
and the Secretary cannot associate such payment with any
outstanding tax liability of such taxpayer, the Secretary
shall make reasonable efforts to notify the taxpayer of
such inability within 60 days after the receipt of such
payment.
SEC. 905. UNAUTHORIZED ENTICEMENT OF INFORMATION
DISCLOSURE.
(a) IN GENERAL.—Subchapter B of chapter 76 (re-
lating to proceedings by taxpayers and third parties), as
amended by section 602(a), is amended by redesignating
section 7435 as section 7436 and by inserting after sec-
tion 7434 the following new section:
‘‘SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICE-
MENT OF INFORMATION DISCLOSURE.
‘‘(a) IN GENERAL.—If any officer or employee of the
United States intentionally compromises the determina-
tion or collection of any tax due from an attorney, certified
public accountant, or enrolled agent representing a tax-
payer in exchange for information conveyed by the tax-
payer to the attorney, certified public accountant, or en-
rolled agent for purposes of obtaining advice concerning
the taxpayer’s tax liability, such taxpayer may bring a civil
action for damages against the United States in a district
court of the United States. Such civil action shall be the
exclusive remedy for recovering damages resulting from
such actions.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
defendant, the defendant shall be liable to the plaintiff in
an amount equal to the lesser of $500,000 or the sum
of—
‘‘(1) actual, direct economic damages sustained
by the plaintiff as a proximate result of the informa-
tion disclosure, and
‘‘(2) the costs of the action.
Damages shall not include the taxpayer’s liability for any
civil or criminal penalties, or other losses attributable to
incarceration or the imposition of other criminal sanctions.
‘‘(c) PAYMENT AUTHORITY.—Claims pursuant to
this section shall be payable out of funds appropriated
under section 1304 of title 31, United States Code.
‘‘(d) PERIOD
FOR BRINGING ACTION.—Notwith-
standing any other provision of law, an action to enforce
liability created under this section may be brought without
regard to the amount in controversy and may be brought
only within 2 years after the date the actions creating such
liability would have been discovered by exercise of reason-
able care.
‘‘(e) MANDATORY STAY.—Upon a certification by the
Commissioner or the Commissioner’s delegate that there
is an ongoing investigation or prosecution of the taxpayer,
the district court before which an action under this section
is pending, shall stay all proceedings with respect to such
action pending the conclusion of the investigation or
prosecution.
‘‘(f) CRIME-FRAUD
EXCEPTION.—Subsection (a)
shall not apply to information conveyed to an attorney,
certified public accountant, or enrolled agent for the pur-
pose of perpetrating a fraud or crime.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 76, as amended by section
602(b), is amended by striking the item relating to section
7435 and by adding at the end the following new items:
‘‘Sec. 7435. Civil damages for unauthorized enticement of infor-
mation disclosure.
‘‘Sec. 7436. Cross references.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to actions after the date of the
enactment of this Act.
TITLE X—FORM
MODIFICATIONS; STUDIES
SEC. 1000. DEFINITIONS.
For purposes of this title:
(1) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of the Treasury or his delegate.
(2) 1986 
CODE.—The term ‘‘1986 Code’’
means the Internal Revenue Code of 1986.
(3) TAX-WRITING
COMMITTEES.—The term
‘‘tax-writing Committees’’ means the Committee on
Ways and Means of the House of Representatives
and the Committee on Finance of the Senate.
Subtitle A—Form Modifications
SEC. 1001. EXPLANATION OF CERTAIN PROVISIONS.
(a) GENERAL RULE.—The Secretary shall take such
actions as may be appropriate to ensure that taxpayers
are aware of the provisions of the 1986 Code permitting
payment of tax in installments, extensions of time for pay-
ment of tax, and compromises of tax liability. Such actions
shall include revising the instructions for filing income tax
returns so that such instructions include an explanation
of—
(1) the procedures for requesting the benefits of
such provisions, and
(2) the terms and conditions under which the
benefits of such provisions are available.
(b) COLLECTION NOTICES.—In any notice of an
underpayment of tax or proposed underpayment of tax
sent by the Secretary to any taxpayer, the Secretary shall
include a notification of the availability of the provisions
of sections 6159, 6161, and 7122 of the 1986 Code.
SEC. 1002. IMPROVED PROCEDURES FOR NOTIFYING SERV-
ICE OF CHANGE OF ADDRESS OR NAME.
The Secretary shall provide improved procedures for
taxpayers to notify the Secretary of changes in names and
addresses. Not later than June 30, 1996, the Secretary
shall institute procedures for timely updating all Internal
Revenue Service records with change-of-address informa-
tion provided to the Secretary by taxpayers.
SEC. 1003. RIGHTS AND RESPONSIBILITIES OF DIVORCED
INDIVIDUALS.
The Secretary shall include in the Internal Revenue
Service publication entitled ‘‘Your Rights As A Taxpayer’’
a section on the rights and responsibilities of divorced
individuals.
Subtitle B—Studies
SEC. 1011. PILOT PROGRAM FOR APPEAL OF ENFORCE-
MENT ACTIONS.
(a) GENERAL RULE.—The Secretary shall establish
a 1-year pilot program for appeals of enforcement actions
(including lien, levy, and seizure actions) to the Appeals
Division of the Internal Revenue Service—
(1) where the deficiency was assessed without
actual knowledge of the taxpayer,
(2) where the deficiency was assessed without
an opportunity for administrative appeal, and
(3) in other appropriate circumstances.
(b) REPORT.—Not later than June 30, 1996, the
Secretary shall submit to the tax-writing Committees a re-
port on the pilot program established under subsection (a),
together with such recommendations as he may deem
advisable.
SEC. 1012. STUDY ON TAXPAYERS WITH SPECIAL NEEDS.
(a) GENERAL RULE.—The Secretary shall conduct a
study on ways to assist the elderly, physically impaired,
foreign-language speaking, and other taxpayers with spe-
cial needs to comply with the internal revenue laws.
(b) REPORT.—Not later than June 30, 1996, the
Secretary shall submit to the tax-writing Committees a re-
port on the study conducted under subsection (a), together
with such recommendations as he may deem advisable.
SEC. 1013. REPORTS ON TAXPAYER-RIGHTS EDUCATION
PROGRAM.
Not later than April 1, 1996, the Secretary shall sub-
mit a report to the tax-writing Committees on the scope
and content of the Internal Revenue Service’s taxpayer-
rights education program for its officers and employees.
Not later than June 30, 1996, the Secretary shall submit
a report to the tax-writing Committees on the effectiveness
of the program referred to in the preceding sentence.
SEC. 1014. BIENNIAL REPORTS ON MISCONDUCT BY INTER-
NAL REVENUE SERVICE EMPLOYEES.
Not later than June 30, 1996, and during June of
each second calendar year thereafter, the Secretary shall
report to the tax-writing Committees on all cases involving
complaints about misconduct of Internal Revenue Service
employees and the disposition of such complaints.
SEC. 1015. STUDY OF NOTICES OF DEFICIENCY.
(a) GENERAL RULE.—The Comptroller General shall
conduct a study on—
(1) the effectiveness of current Internal Reve-
nue Service efforts to notify taxpayers with regard
to tax deficiencies under section 6212 of the 1986
Code,
(2) the number of registered or certified letters
and other notices returned to the Internal Revenue
Service as undeliverable,
(3) any followup action taken by the Internal
Revenue Service to locate taxpayers who did not re-
ceive actual notice,
(4) the effect that failures to receive notice of
such deficiencies have on taxpayers, and
(5) recommendations to improve Internal Reve-
nue Service notification of taxpayers.
(b) REPORT.—Not later than June 30, 1996, the
Comptroller General shall submit to the tax-writing Com-
mittees a report on the study conducted under subsection
(a), together with such recommendations as he may deem
advisable.
SEC. 1016. NOTICE AND FORM ACCURACY STUDY.
(a) GENERAL RULE.—The Comptroller General shall
conduct annual studies of the accuracy of 25 of the most
commonly used Internal Revenue Service forms, notices,
and publications. In conducting any such study, the Comp-
troller General shall examine the suitability and usefulness
of Internal Revenue Service telephone numbers on Inter-
nal Revenue Service notices and shall solicit and consider
the comments of organizations representing taxpayers,
employers, and tax professionals.
(b) REPORTS.—The Comptroller General shall sub-
mit to the tax-writing Committees a report on each study
conducted under subsection (a), together with such rec-
ommendations as he may deem advisable. The first such
report shall be submitted not later than June 30, 1996.
Æ
HR 661 IH——2
HR 661 IH——3