‘‘(C) the penalty would be grossly dis-
proportionate to the action or expense that would
have been needed to avoid the error, and impos-
ing 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 sig-
nature.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on January 1, 2003.
SEC. 217. 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-assessment
may be judged, or
‘‘(B) contains information that on its face
indicates that the self-assessment is substantially
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 SUB-
MISSIONS.—
‘‘(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 SUBMISSION.—
The term ‘specified frivolous submission’ means
a specified submission if any portion of such
submission—
‘‘(i) is based on a position which the
Secretary has identified as frivolous under
subsection (c), or
‘‘(ii) reflects a desire to delay or im-
pede the administration of Federal tax
laws.
‘‘(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 no-
tice and opportunity for hearing before
levy), and
‘‘(ii) an application under—
‘‘(I) section 7811 (relating to tax-
payer assistance orders),
‘‘(II) section 6159 (relating to
agreements for payment of tax liability
in installments), or
‘‘(III) section 7122 (relating to
compromises).
‘‘(3) OPPORTUNITY
TO
WITHDRAW
SUBMIS-
SION.—If the Secretary provides a person with notice
that a submission is a specified frivolous submission
and such person withdraws such submission promptly
after such notice, the penalty imposed under para-
graph (1) shall not apply with respect to such submis-
sion.
‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec-
retary shall prescribe (and periodically revise) a list of posi-
tions which the Secretary has identified as being frivolous
for purposes of this subsection. The Secretary shall not in-
clude in such list any position that the Secretary deter-
mines 
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 Federal
tax laws.
‘‘(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) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS BEFORE LEVY.—
(1) FRIVOLOUS REQUESTS DISREGARDED.—Sec-
tion 6330 (relating to notice and opportunity for
hearing before levy) is amended by adding at the end
the following new subsection:
‘‘(g) FRIVOLOUS REQUESTS FOR HEARING, ETC.—
Notwithstanding any other provision of this section, if the
Secretary determines that any portion of a request for a
hearing under this section or section 6320 meets the require-
ment of clause (i) or (ii) of section 6702(b)(2)(A), then the
Secretary may treat such portion as if it were never sub-
mitted and such portion shall not be subject to any further
administrative or judicial review.’’.
(2) PRECLUSION
FROM
RAISING
FRIVOLOUS
ISSUES
AT
HEARING.—Section 
6330(c)(4) 
is
amended—
(A) by striking ‘‘(A)’’ and inserting
‘‘(A)(i)’’;
(B) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’;
(C) by striking the period at the end of the
first sentence and inserting ‘‘; or’’; and
(D) by inserting after subparagraph (A)(ii)
(as so redesignated) the following:
‘‘(B) the issue meets the requirement of
clause (i) or (ii) of section 6702(b)(2)(A).’’.
(3) 
STATEMENT
OF
GROUNDS.—Section
6330(b)(1) is amended by striking ‘‘under subsection
(a)(3)(B)’’ and inserting ‘‘in writing under subsection
(a)(3)(B) and states the grounds for the requested
hearing’’.
(c) TREATMENT OF FRIVOLOUS REQUESTS FOR HEAR-
INGS UPON FILING OF NOTICE OF LIEN.—Section 6320 is
amended—
(1) in subsection (b)(1), by striking ‘‘under sub-
section (a)(3)(B)’’ and inserting ‘‘in writing under
subsection (a)(3)(B) and states the grounds for the re-
quested hearing’’, and
(2) in subsection (c), by striking ‘‘and (e)’’ and
inserting ‘‘(e), and (g)’’.
(d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR
OFFERS-IN-COMPROMISE
AND
INSTALLMENT
AGREE-
MENTS.—Section 7122 is amended by adding at the end
the following new subsection:
‘‘(e) 
FRIVOLOUS
SUBMISSIONS, 
ETC.—Notwith-
standing any other provision of this section, if the Secretary
determines that any portion of an application for an offer-
in-compromise or installment agreement submitted under
this section or section 6159 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative
or judicial review.’’.
(e) 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.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to submissions made and issues raised
after the date on which the Secretary first prescribes a list
under section 6702(c) of the Internal Revenue Code of 1986,
as amended by subsection (a).
SEC. 218. 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.
Subtitle B—Fairness of Collection
Procedures
SEC. 221. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALL-
MENT 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 certain
cases) is amended in the matter preceding paragraph
(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. 222. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) EXTENSION OF TIME FOR RETURN OF PROPERTY
SUBJECT TO LEVY.—Subsection (b) of section 6343 (relat-
ing 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 tax-
payers) 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 regard
to this section) as of such date.
SEC. 223. INDIVIDUALS HELD HARMLESS ON WRONGFUL
LEVY, ETC. ON INDIVIDUAL RETIREMENT
PLAN.
(a) IN GENERAL.—Section 6343 (relating to authority
to release levy and return property) is amended by adding
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 distribu-
tion and deposit were part of a rollover described 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 section
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 para-
graph (1) from the Secretary, and
‘‘(C) such deposit shall not be taken into ac-
count under section 408(d)(3)(B).
‘‘(3) REFUND, ETC., OF INCOME TAX ON LEVY.—
If any amount is includible in gross income for a tax-
able 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 collected shall be
credited or refunded as an overpayment 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 Revenue
Code of 1986 after December 31, 2002.
SEC. 224. SEVEN-DAY THRESHOLD ON TOLLING OF STAT-
UTE OF LIMITATIONS DURING TAX REVIEW.
(a) IN GENERAL.—Section 7811(d)(1) (relating to sus-
pension 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. 225. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary’s dele-
gate, shall conduct a study of the practices of the Internal
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 Com-
mittee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate.
Subtitle C—Efficiency of Tax
Administration
SEC. 231. REVISIONS RELATING TO TERMINATION OF EM-
PLOYMENT OF INTERNAL REVENUE SERVICE
EMPLOYEES FOR MISCONDUCT.
(a) IN GENERAL.—Subchapter A of chapter 80 (relat-
ing 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 Service
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 Rehabili-
tation Act of 1973; or
‘‘(vi) title I of the Americans with Dis-
abilities Act of 1990; or
‘‘(C) the Internal Revenue Service policy on
unauthorized inspection of returns or return in-
formation;
‘‘(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 Internal
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 prescribed
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 liabil-
ity, unless such understatement is due to reasonable
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 ex-
tracting personal gain or benefit.
‘‘(c) DETERMINATIONS OF COMMISSIONER.—
‘‘(1) IN GENERAL.—The Commissioner may take
a personnel action other than a disciplinary action
provided for in the guidelines under subsection (a)(2)
for an act or omission described under subsection (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 discretion,
may establish a procedure to determine if an indi-
vidual 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 provisions
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 Revenue
Service for a taxpayer.
‘‘(e) ANNUAL REPORT.—The Commissioner shall sub-
mit to Congress annually a report on disciplinary actions
under this section.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 80 is amended by inserting after the item relating
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 re-
pealed.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 232. 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.—Sub-
section (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 available 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. 233. JURISDICTION OF TAX COURT OVER COLLECTION
DUE PROCESS CASES.
(a) IN GENERAL.—Section 6330(d)(1) (relating to ju-
dicial review of determination) is amended to read as fol-
lows:
‘‘(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 jurisdiction
with respect to such matter).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to judicial appeals filed after the
date of the enactment of this Act.
SEC. 234. 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 General Coun-
sel for the Department of the Treasury, or the Counsel’s del-
egate, is required with respect to a compromise, 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. 235. 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 individual
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 before the
30th day of April following the close of the cal-
endar 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 individual’s
obligation under section 6641,
then, with respect to the amount so allowed, any
reference in section 6641 to the April 15 fol-
lowing 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 Decem-
ber 31, 2001.
Subtitle D—Confidentiality and
Disclosure
SEC. 241. 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. 242. TAXPAYER REPRESENTATIVES NOT SUBJECT TO
EXAMINATION ON SOLE BASIS OF REPRESEN-
TATION OF TAXPAYERS.
(a) IN GENERAL.—Subsection (h) of section 6103 (re-
lating to disclosure to certain Federal officers and employ-
ees for purposes of tax administration, etc.) is amended by
adding at the end the following new paragraph:
‘‘(7) TAXPAYER
REPRESENTATIVES.—Notwith-
standing paragraph (1), the return of the representa-
tive of a taxpayer whose return is being examined by
an officer or employee of the Department of the Treas-
ury shall not be open to inspection by such officer or
employee on the sole basis of the representative’s rela-
tionship to the taxpayer unless a supervisor 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. 243. DISCLOSURE IN JUDICIAL OR ADMINISTRATIVE
TAX PROCEEDINGS OF RETURN AND RETURN
INFORMATION OF PERSONS WHO ARE NOT
PARTY TO SUCH PROCEEDINGS.
(a) IN GENERAL.—Paragraph (4) of section 6103(h)
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amended
by adding at the end the following new subparagraph:
‘‘(B) DISCLOSURE IN JUDICIAL OR ADMINIS-
TRATIVE TAX PROCEEDINGS OF RETURN AND RE-
TURN INFORMATION OF PERSONS NOT PARTY TO
SUCH PROCEEDINGS.—
‘‘(i) NOTICE.—Return or return infor-
mation of any person who is not a party to
a judicial or administrative proceeding de-
scribed in this paragraph shall not be dis-
closed under clause (ii) or (iii) of subpara-
graph (A) until after the Secretary makes a
reasonable effort to give notice to such per-
son and an opportunity for such person to
request the deletion of matter from such re-
turn or return information, including any
of the items referred to in paragraphs (1)
through (7) of section 6110(c). Such notice
shall include a statement of the issue or
issues the resolution of which is the reason
such return or return information is sought.
In the case of S corporations, partnerships,
estates, and trusts, such notice shall be
made at the entity level.
‘‘(ii) DISCLOSURE LIMITED TO PERTI-
NENT PORTION.—The only portion of a re-
turn or return information described in
clause (i) which may be disclosed under
subparagraph (A) is that portion of such re-
turn or return information that directly re-
lates to the resolution of an issue in such
proceeding.
‘‘(iii) EXCEPTIONS.—Clause (i) shall
not apply—
‘‘(I) to any civil action under sec-
tion 7407, 7408, or 7409,
‘‘(II) to any ex parte proceeding
for obtaining a search warrant, order
for entry on premises or safe deposit
boxes, or similar ex parte proceeding,
‘‘(III) to disclosure of third party
return information by indictment or
criminal information, or
‘‘(IV) if the Attorney General or
the Attorney General’s delegate deter-
mines that the application of such
clause would seriously impair a crimi-
nal tax investigation or proceeding.’’.
(b) CONFORMING AMENDMENTS.—Paragraph (4) of
section 6103(h) is amended by—
(1) by striking ‘‘PROCEEDINGS.—A return’’ and
inserting ‘‘PROCEEDINGS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a return’’;
(2) by redesignating subparagraphs (A), (B),
(C), and (D) as clauses (i), (ii), (iii), and (iv), re-
spectively; and
(3) in the matter following clause (iv) (as so re-
designated), by striking ‘‘subparagraph (A), (B), or
(C)’’ and inserting ‘‘clause (i), (ii), or (iii)’’ and by
moving such matter 2 ems to the right.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to proceedings commenced after the date
of the enactment of this Act.
SEC. 244. PROHIBITION OF DISCLOSURE OF TAXPAYER
IDENTIFICATION 
INFORMATION 
WITH 
RE-
SPECT TO DISCLOSURE OF ACCEPTED OF-
FERS-IN-COMPROMISE.
(a) IN GENERAL.—Paragraph (1) of section 6103(k)
(relating to disclosure of certain returns and return infor-
mation for tax administrative purposes) is amended by in-
serting ‘‘(other than the taxpayer’s address and TIN)’’ after
‘‘Return information’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to disclosures made after the date of the
enactment of this Act.
SEC. 245. 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 fol-
lowing 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 in-
formation 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 contracts
of less than 1 year in duration) of each con-
tractor to determine compliance with such re-
quirements,
‘‘(C) submits the findings of the most recent
review conducted under subparagraph (B) to the
Secretary as part of the report required by para-
graph (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 paragraph
(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. 246. HIGHER STANDARDS FOR REQUESTS FOR AND
CONSENTS TO DISCLOSURE.
(a) IN GENERAL.—Subsection (c) of section 6103 (re-
lating 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 disclosure
under paragraph (1) shall only be valid for purposes
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 per-
jury, that such request or consent complied with
subparagraph (A).
‘‘(3) RESTRICTIONS ON PERSONS OBTAINING IN-
FORMATION.—Any person shall, as a condition for re-
ceiving return or return information under para-
graph (1)—
‘‘(A) ensure that such return and return in-
formation 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 in-
formation 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 Sec-
retary 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 incom-
plete or blank form, the taxpayer should report
the matter to the Treasury Inspector General 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 Con-
gress on compliance with the designation and certification
requirements applicable to requests for or consent to disclo-
sure 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 in-
serting ‘‘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. 247. NOTICE TO TAXPAYER CONCERNING ADMINISTRA-
TIVE 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 Treas-
ury Inspector General for Tax Administration determines
that such taxpayer’s return or return information was in-
spected or disclosed in violation of any of the provisions
specified in paragraph (1), (2), or (3).’’.
(b) REPORTS.—Subsection (p) of section 6103 (relat-
ing to procedure and recordkeeping), as amended by section
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 law-
suits were settled and the amounts of damages
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. 248. 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.