II
Calendar No. 374
104TH CONGRESS
2D SESSION
H. R. 2337
IN THE SENATE OF THE UNITED STATES
APRIL 17, 1996
Received; read twice and placed on the calendar
AN ACT
To amend the Internal Revenue Code of 1986 to provide
for increased taxpayer protections.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Taxpayer Bill of Rights 2’’.
(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; amendment of 1986 Code; table of contents.
TITLE I—TAXPAYER ADVOCATE
Sec. 101. Establishment of position of Taxpayer Advocate within Internal Reve-
nue Service.
Sec. 102. Expansion of authority to issue Taxpayer Assistance Orders.
TITLE II—MODIFICATIONS TO INSTALLMENT AGREEMENT
PROVISIONS
Sec. 201. Notification of reasons for termination of installment agreements.
Sec. 202. Administrative review of termination of installment agreement.
TITLE III—ABATEMENT OF INTEREST AND PENALTIES
Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after notice and
demand.
Sec. 304. Abatement of penalty for failure to make required deposits of payroll
taxes in certain cases.
TITLE IV—JOINT RETURNS
Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full pay-
ment of tax.
Sec. 403. Disclosure of collection activities.
TITLE V—COLLECTION ACTIVITIES
Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
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Sec. 503. Offers-in-compromise.
TITLE VI—INFORMATION RETURNS
Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of information re-
turns.
TITLE VII—AWARDING OF COSTS AND CERTAIN FEES
Sec. 701. United States must establish that its position in proceeding was sub-
stantially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment proceed-
ings.
TITLE VIII—MODIFICATION TO RECOVERY OF CIVIL DAMAGES
FOR UNAUTHORIZED COLLECTION ACTIONS
Sec. 801. Increase in limit on recovery of civil damages for unauthorized collec-
tion actions.
Sec. 802. Court discretion to reduce award for litigation costs for failure to ex-
haust administrative remedies.
TITLE IX—MODIFICATIONS TO PENALTY FOR FAILURE TO
COLLECT AND PAY OVER TAX
Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person liable for
penalty for failure to collect and pay over tax.
Sec. 903. Right of contribution where more than 1 person liable for penalty for
failure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt from
penalty for failure to collect and pay over tax.
TITLE X—MODIFICATIONS OF RULES RELATING TO SUMMONSES
Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.
TITLE XI—RELIEF FROM RETROACTIVE APPLICATION OF
TREASURY DEPARTMENT REGULATIONS
Sec. 1101. Relief from retroactive application of Treasury Department regula-
tions.
TITLE XII—MISCELLANEOUS PROVISIONS
Sec. 1201. Phone number of person providing payee statements required to be
shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent ac-
counts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
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Sec. 1207. Disclosure of returns and return information to designee of tax-
payer.
Sec. 1208. Study of netting of interest on overpayments and liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-timely-filing
rule.
Sec. 1211. Reports on misconduct of IRS employees.
TITLE XIII—REVENUE OFFSETS
Subtitle A—Application of Failure-to-Pay Penalty to Substitute Returns
Sec. 1301. Application of failure-to-pay penalty to substitute returns.
Subtitle B—Excise Taxes on Amounts of Private Excess Benefits
Sec. 1311. Excise taxes for failure by certain charitable organizations to meet
certain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to file com-
plete and timely annual returns.
TITLE I—TAXPAYER ADVOCATE
SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER AD-
VOCATE WITHIN INTERNAL REVENUE SERV-
ICE.
(a) GENERAL RULE.—Section 7802 (relating to
Commissioner of Internal Revenue; Assistant Commis-
sioner (Employee Plans and Exempt Organizations)) is
amended by adding at the end the following new sub-
section:
‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—
‘‘(1) IN GENERAL.—There is established in the
Internal Revenue Service an office to be known as
the ‘Office of the Taxpayer Advocate’. Such office
shall be under the supervision and direction of an of-
ficial to be known as the ‘Taxpayer Advocate’ who
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shall be appointed by and report directly to the
Commissioner of Internal Revenue. The Taxpayer
Advocate shall be entitled to compensation at the
same rate as the highest level official reporting di-
rectly to the Deputy Commissioner of the Internal
Revenue Service.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the func-
tion of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems in dealings with the Internal
Revenue Service,
‘‘(iii) to the extent possible, propose
changes in the administrative practices of
the Internal Revenue Service to mitigate
problems identified under clause (ii), and
‘‘(iv) 
identify 
potential 
legislative
changes which may be appropriate to miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) OBJECTIVES.—Not later than
June 30 of each calendar year after 1995,
the Taxpayer Advocate shall report to the