IIB 
108TH CONGRESS 
1ST SESSION H. R. 1528
IN THE SENATE OF THE UNITED STATES 
JUNE 20, 2003
Received; read twice and referred to the Committee on Finance 
AN ACT 
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,
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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 
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.
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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. 
Sec. 311. Extension of joint review of strategic plans and budget for the Inter-
nal Revenue Service. 
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. 
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
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Sec. 701. Applicability of certain Federal-State agreements relating to unem-
ployment assistance.
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.
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‘‘(b) AMOUNT
OF
UNDERPAYMENT; INTEREST 
RATE.—For purposes of subsection (a)—
‘‘(1) AMOUNT.—The amount of the under-
payment on any day shall be the excess of—
‘‘(A) the sum of the required installments 
for the taxable year the due dates for which are 
on or before such day, over 
‘‘(B) the sum of the amounts (if any) of 
estimated tax payments made on or before such 
day on such required installments. 
‘‘(2) DETERMINATION OF INTEREST RATE.—
‘‘(A) IN
GENERAL.—The underpayment 
rate with respect to any day in an installment 
underpayment period shall be the under-
payment rate established under section 6621 
for the first day of the calendar quarter in 
which such installment underpayment period 
begins. 
‘‘(B) INSTALLMENT
UNDERPAYMENT
PE-
RIOD.—For purposes of subparagraph (A), the 
term ‘installment underpayment period’ means 
the period beginning on the day after the due 
date for a required installment and ending on 
the due date for the subsequent required in-
stallment (or in the case of the 4th required in-
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stallment, the 15th day of the 4th month fol-
lowing the close of a taxable year).
‘‘(C) DAILY RATE.—The rate determined 
under subparagraph (A) shall be applied on a 
daily basis and shall be based on the assump-
tion of 365 days in a calendar year. 
‘‘(3) TERMINATION OF ESTIMATED TAX INTER-
EST.—No day after the end of the installment un-
derpayment period for the 4th required installment 
specified in paragraph (2)(B) for a taxable year 
shall be treated as a day of underpayment with re-
spect to such taxable year.’’. 
(c) INCREASE
IN SAFE HARBOR WHERE TAX
IS 
SMALL.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section 
6641(d)(1)(B) (as so redesignated) is amended to 
read as follows: 
‘‘(i) the lesser of—
‘‘(I) 90 percent of the tax shown 
on the return for the taxable year (or, 
if no return is filed, 90 percent of the 
tax for such year), or 
‘‘(II) the tax shown on the return 
for the taxable year (or, if no return
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is filed, the tax for such year) reduced 
(but not below zero) by $1,600, or’’. 
(2) CONFORMING AMENDMENT.—Subsection (e) 
of section 6641 (as so redesignated) is amended by 
striking paragraph (1) and redesignating paragraphs 
(2) and (3) as paragraphs (1) and (2), respectively. 
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (1) and (2) of subsection (e) 
(as redesignated by subsection (c)(2)) and sub-
section (h) of section 6641 (as so designated) are 
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.
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SEC. 102. EXCLUSION FROM GROSS INCOME FOR INTEREST 
ON OVERPAYMENTS OF INCOME TAX BY INDI-
VIDUALS. 
(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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‘‘(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 84–58.—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 84–58, the date that 
the taxpayer identifies such amount as a deposit 
made pursuant to section 6603 of the Internal Rev-
enue Code (as added by this Act) shall be treated as
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the date such amount is deposited for purposes 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 105–206; 112 Stat. 720) 
is repealed. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act.
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SEC. 302. CONFIRMATION OF AUTHORITY OF TAX COURT 
TO 
APPLY 
DOCTRINE 
OF 
EQUITABLE 
RECOUPMENT. 
(a) CONFIRMATION OF AUTHORITY OF TAX COURT 
TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.—
Subsection (b) of section 6214 (relating to jurisdiction 
over other years and quarters) is amended by adding at 
the end the following new sentence: ‘‘Notwithstanding the 
preceding sentence, the Tax Court may apply the doctrine 
of equitable recoupment to the same extent that it is avail-
able in civil tax cases before the district courts of the 
United States and the United States Court of Federal 
Claims.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any action or proceeding in the 
Tax Court with respect to which a decision has not become 
final (as determined under section 7481 of the Internal 
Revenue Code of 1986) as of the date of the enactment 
of this Act. 
SEC. 303. JURISDICTION OF TAX COURT OVER COLLECTION 
DUE PROCESS CASES. 
(a) IN GENERAL.—Section 6330(d)(1) (relating to 
judicial review of determination) is amended to read as 
follows: 
‘‘(1) JUDICIAL REVIEW OF DETERMINATION.—
The person may, within 30 days of a determination
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under this section, appeal such determination to the 
Tax Court (and the Tax Court shall have jurisdic-
tion with respect to such matter).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to judicial appeals filed after 
the date of the enactment of this Act. 
SEC. 304. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS 
IN COMPROMISE. 
(a) IN GENERAL.—Section 7122(b) (relating to 
record) is amended by striking ‘‘Whenever a compromise’’ 
and all that follows through ‘‘his delegate’’ and inserting 
‘‘If the Secretary determines that an opinion of the Gen-
eral Counsel for the Department of the Treasury, or the 
Counsel’s delegate, is required with respect to a com-
promise, there shall be placed on file in the office of the 
Secretary such opinion’’. 
(b) CONFORMING AMENDMENTS.—Section 7122(b) is 
amended by striking the second and third sentences. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to offers-in-compromise submitted 
or pending on or after the date of the enactment of this 
Act.
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SEC. 305. 15-DAY DELAY IN DUE DATE FOR ELECTRONI-
CALLY FILED INDIVIDUAL INCOME TAX RE-
TURNS. 
(a) IN GENERAL.—Section 6072 (relating to time for 
filing income tax returns) is amended by adding at the 
end the following new subsection: 
‘‘(f) ELECTRONICALLY FILED RETURNS OF INDIVID-
UALS.—
‘‘(1) IN GENERAL.—Returns of an individual 
under section 6012 or 6013 (other than an indi-
vidual to whom subsection (c) applies) which are 
filed electronically—
‘‘(A) in the case of returns filed on the 
basis of a calendar year, shall be filed on or be-
fore the 30th day of April following the close of 
the calendar year, and 
‘‘(B) in the case of returns filed on the 
basis of a fiscal year, shall be filed on or before 
the last day of the 4th month following the 
close of the fiscal year. 
‘‘(2) 
ELECTRONIC
FILING.—Paragraph 
(1) 
shall not apply to any return unless—
‘‘(A) such return is accepted by the Sec-
retary, and
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‘‘(B) the balance due (if any) shown on 
such return is paid electronically in a manner 
prescribed by the Secretary. 
‘‘(3) SPECIAL RULES.—
‘‘(A) ESTIMATED TAX.—If—
‘‘(i) paragraph (1) applies to an indi-
vidual for any taxable year, and 
‘‘(ii) there is an overpayment of tax 
shown on the return for such year which 
the individual allows against the individ-
ual’s obligation under section 6641, 
then, with respect to the amount so allowed, 
any reference in section 6641 to the April 15 
following such taxable year shall be treated as 
a reference to April 30. 
‘‘(B) REFERENCES TO DUE DATE.—Para-
graph (1) shall apply solely for purposes of de-
termining the due date for the individual’s obli-
gation to file and pay tax and, except as other-
wise provided by the Secretary, shall be treated 
as an extension of the due date for any other 
purpose under this title. 
‘‘(4) TERMINATION.—This subsection shall not 
apply to any return filed with respect to a taxable 
year which begins after December 31, 2005.’’.
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to returns filed with respect to tax-
able years beginning after December 31, 2002. 
SEC. 306. ACCESS OF NATIONAL TAXPAYER ADVOCATE TO 
INDEPENDENT LEGAL COUNSEL. 
Clause (i) of section 7803(c)(2)(D) (relating to per-
sonnel actions) is amended by striking ‘‘and’’ at the end 
of subclause (I), by striking the period at the end of sub-
clause (II) and inserting ‘‘, and’’, and by adding at the 
end the following new subclause: 
‘‘(III) appoint a counsel in the 
Office of the Taxpayer Advocate to re-
port solely to the National Taxpayer 
Advocate.’’. 
SEC. 307. PAYMENT OF MOTOR FUEL EXCISE TAX REFUNDS 
BY DIRECT DEPOSIT. 
(a) IN GENERAL.—Subchapter II of chapter 33 of 
title 31, United States Code, is amended by adding at the 
end the following new section: 
‘‘§ 3337. Payment of motor fuel excise tax refunds by 
direct deposit 
‘‘The Secretary of the Treasury shall make payments 
under sections 6420, 6421, and 6427 of the Internal Rev-
enue Code of 1986 by electronic funds transfer (as defined
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in section 3332(j)(1)) if the person who is entitled to the 
payment—
‘‘(1) elects to receive the payment by electronic 
funds transfer; and 
‘‘(2) satisfies the requirements of section 
3332(g) with respect to such payment at such time 
and in such manner as the Secretary may require.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subchapter II of chapter 33 of title 31, United States 
Code, is amended by adding at the end the following new 
item:
‘‘3337. Payment of motor fuel excise tax refunds by direct deposit.’’.
SEC. 308. FAMILY BUSINESS TAX SIMPLIFICATION. 
(a) IN GENERAL.—Section 761 (defining terms for 
purposes of partnerships) is amended by redesignating 
subsection (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection: 
‘‘(f) QUALIFIED JOINT VENTURE.—
‘‘(1) IN GENERAL.—In the case of a qualified 
joint venture conducted by a husband and wife who 
file a joint return for the taxable year, for purposes 
of this title—
‘‘(A) such joint venture shall not be treat-
ed as a partnership, 
‘‘(B) all items of income, gain, loss, deduc-
tion, and credit shall be divided between the
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spouses in accordance with their respective in-
terests in the venture, and 
‘‘(C) each spouse shall take into account 
such spouse’s respective share of such items as 
if they were attributable to a trade or business 
conducted by such spouse as a sole proprietor. 
‘‘(2) QUALIFIED
JOINT
VENTURE.—For pur-
poses of paragraph (1), the term ‘qualified joint ven-
ture’ means any joint venture involving the conduct 
of a trade or business if—
‘‘(A) the only members of such joint ven-
ture are a husband and wife, 
‘‘(B) both spouses materially participate 
(within the meaning of section 469(h) without 
regard to paragraph (5) thereof) in such trade 
or business, and 
‘‘(C) both spouses elect the application of 
this subsection.’’. 
(b) NET EARNINGS FROM SELF-EMPLOYMENT.—
(1) Subsection (a) of section 1402 (defining net 
earnings from self-employment) is amended by strik-
ing ‘‘and’’ at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and insert-
ing ‘‘; and’’, and by inserting after paragraph (15) 
the following new paragraph:
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‘‘(16) notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) in deter-
mining net earnings from self-employment of such 
spouse.’’. 
(2) Subsection (a) of section 211 of the Social 
Security Act (defining net earnings from self-em-
ployment) is amended by striking ‘‘and’’ at the end 
of paragraph (14), by striking the period at the end 
of paragraph (15) and inserting ‘‘; and’’, and by in-
serting after paragraph (15) the following new para-
graph: 
‘‘(16) Notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) of the In-
ternal Revenue Code of 1986 in determining net 
earnings from self-employment of such spouse.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 309. HEALTH INSURANCE COSTS OF ELIGIBLE INDI-
VIDUALS. 
(a) CONSUMER OPTIONS.—
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(1) IN
GENERAL.—Paragraph (2) of section 
35(e) is amended by adding at the end the following 
new subparagraphs: 
‘‘(C) 
WAIVER
BY
ELIGIBLE
INDIVID-
UALS.—With respect to any month, clauses (i) 
and (ii) of subparagraph (A) shall not apply 
with respect to any eligible individual and such 
individual’s qualifying family members if such 
individual—
‘‘(i) does not reside in a State which 
the Secretary has identified by regulation, 
guidance, or otherwise as a State in which 
any coverage which—
‘‘(I) is described in any of sub-
paragraphs (C) through (H) of para-
graph (1), and 
‘‘(II) meets the requirements of 
subparagraphs (A) and (B) of this 
paragraph, 
is available to eligible individuals (and 
their qualifying family members) residing 
in the State, and 
‘‘(ii) elects to waive the application of 
clauses (i) and (ii) of subparagraph (A) of 
this paragraph.
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‘‘(D) 
ELECTION.—Any 
election 
made 
under subparagraph (C)(ii) shall be effective for 
the month for which such election is made and 
for all subsequent months. 
‘‘(E) TERMINATION.—Subparagraphs (C) 
and (D) shall not apply to any month beginning 
after December 31, 2004.’’. 
(2) NO IMPACT ON STATE CONSUMER PROTEC-
TIONS.—Nothing in the amendment made by para-
graph (1) supercedes or otherwise affects the appli-
cation of State law relating to consumer insurance 
protections (including State law implementing the 
requirements of part B of title XXVII of the Public 
Health Service Act). 
(b) STATE-BASED CONTINUATION COVERAGE NOT 
SUBJECT TO REQUIREMENTS.—Subparagraphs (A) and 
(B)(i) of section 35(e)(2) are each amended by striking 
‘‘subparagraphs (B) through (H)’’ and inserting ‘‘sub-
paragraphs (C) through (H)’’. 
(c) EFFECTIVE DATE.—
(1) CONSUMER
OPTIONS.—The amendment 
made by subsection (a) shall apply to months begin-
ning after the date of the enactment of this Act. 
(2) STATE-BASED CONTINUATION COVERAGE.—
The amendments made by subsection (b) shall take
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effect as if included in section 201(a) of the Trade 
Act of 2002. 
SEC. 310. SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS. 
(a) IN GENERAL.—Section 501 (relating to exemp-
tion from tax on corporations, certain trusts, etc.) is 
amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new 
subsection: 
‘‘(p) SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS.—
‘‘(1) IN
GENERAL.—The exemption from tax 
under subsection (a) with respect to any organiza-
tion described in paragraph (2), and the eligibility of 
any organization described in paragraph (2) to apply 
for recognition of exemption under subsection (a), 
shall be suspended during the period described in 
paragraph (3). 
‘‘(2) TERRORIST ORGANIZATIONS.—An organi-
zation is described in this paragraph if such organi-
zation is designated or otherwise individually identi-
fied— 
‘‘(A) under section 212(a)(3)(B)(vi)(II) or 
219 of the Immigration and Nationality Act as
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a terrorist organization or foreign terrorist or-
ganization, 
‘‘(B) in or pursuant to an Executive order 
which is related to terrorism and issued under 
the authority of the International Emergency 
Economic Powers Act or section 5 of the 
United Nations Participation Act of 1945 for 
the purpose of imposing on such organization 
an economic or other sanction, or 
‘‘(C) in or pursuant to an Executive order 
issued under the authority of any Federal law 
if—
‘‘(i) the organization is designated or 
otherwise individually identified in or pur-
suant to such Executive order as sup-
porting or engaging in terrorist activity (as 
defined in section 212(a)(3)(B) of the Im-
migration and Nationality Act) or sup-
porting terrorism (as defined in section 
140(d)(2) of the Foreign Relations Author-
ization Act, Fiscal Years 1988 and 1989); 
and 
‘‘(ii) such Executive order refers to 
this subsection.
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‘‘(3) PERIOD OF SUSPENSION.—With respect to 
any organization described in paragraph (2), the pe-
riod of suspension—
‘‘(A) begins on the later of—
‘‘(i) the date of the first publication of 
a designation or identification described in 
paragraph (2) with respect to such organi-
zation, or 
‘‘(ii) the date of the enactment of this 
subsection, and 
‘‘(B) ends on the first date that all des-
ignations and identifications described in para-
graph (2) with respect to such organization are 
rescinded pursuant to the law or Executive 
order under which such designation or identi-
fication was made. 
‘‘(4) DENIAL
OF
DEDUCTION.—No deduction 
shall be allowed under section 170, 545(b)(2), 
556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for 
any contribution to an organization described in 
paragraph (2) during the period described in para-
graph (3). 
‘‘(5) DENIAL OF ADMINISTRATIVE OR JUDICIAL 
CHALLENGE OF SUSPENSION OR DENIAL OF DEDUC-
TION.—Notwithstanding section 7428 or any other
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provision of law, no organization or other person 
may challenge a suspension under paragraph (1), a 
designation or identification described in paragraph 
(2), the period of suspension described in paragraph 
(3), or a denial of a deduction under paragraph (4) 
in any administrative or judicial proceeding relating 
to the Federal tax liability of such organization or 
other person. 
‘‘(6) ERRONEOUS DESIGNATION.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the tax exemption of any organi-
zation described in paragraph (2) is sus-
pended under paragraph (1), 
‘‘(ii) each designation and identifica-
tion described in paragraph (2) which has 
been made with respect to such organiza-
tion is determined to be erroneous pursu-
ant to the law or Executive order under 
which such designation or identification 
was made, and 
‘‘(iii) the erroneous designations and 
identifications result in an overpayment of 
income tax for any taxable year by such 
organization,
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credit or refund (with interest) with respect to 
such overpayment shall be made. 
‘‘(B) WAIVER
OF
LIMITATIONS.—If the 
credit or refund of any overpayment of tax de-
scribed in subparagraph (A)(iii) is prevented at 
any time by the operation of any law or rule of 
law (including res judicata), such credit or re-
fund may nevertheless be allowed or made if the 
claim therefor is filed before the close of the 1-
year period beginning on the date of the last 
determination 
described 
in 
subparagraph 
(A)(ii). 
‘‘(7) NOTICE OF SUSPENSIONS.—If the tax ex-
emption of any organization is suspended under this 
subsection, the Internal Revenue Service shall up-
date the listings of tax-exempt organizations and 
shall publish appropriate notice to taxpayers of such 
suspension and of the fact that contributions to such 
organization are not deductible during the period of 
such suspension.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to designations made before, on, 
or after the date of the enactment of this Act.
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SEC. 311. EXTENSION OF JOINT REVIEW OF STRATEGIC 
PLANS AND BUDGET FOR THE INTERNAL 
REVENUE SERVICE. 
(a) IN GENERAL.—Paragraph (2) of section 8021(f) 
(relating to joint reviews) is amended by striking ‘‘2004’’ 
and inserting ‘‘2009’’. 
(b) REPORT.—Subparagraph (C) of section 8022(3) 
(regarding reports) is amended—
(1) by striking ‘‘2004’’ and inserting ‘‘2009’’, 
and 
(2) by striking ‘‘with respect to—’’ and all that 
follows and inserting ‘‘with respect to the matters 
addressed in the joint review referred to in section 
8021(f)(2).’’. 
TITLE IV—CONFIDENTIALITY 
AND DISCLOSURE 
SEC. 401. 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.
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SEC. 402. TAXPAYER REPRESENTATIVES NOT SUBJECT TO 
EXAMINATION ON SOLE BASIS OF REPRESEN-
TATION OF TAXPAYERS. 
(a) IN GENERAL.—Paragraph (1) of section 6103(h) 
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amend-
ed—
(1) by striking ‘‘Returns’’ and inserting the fol-
lowing: 
‘‘(A) IN GENERAL.—Returns’’, and
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) TAXPAYER REPRESENTATIVES.—Not-
withstanding subparagraph (A), the return of 
the representative of a taxpayer whose return is 
being examined by an officer or employee of the 
Department of the Treasury shall not be open 
to inspection by such officer or employee on the 
sole basis of the representative’s relationship 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 which is 180 days 
after the date of the enactment of this Act.
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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 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 amend-
ed by adding at the end the following new subparagraph: 
‘‘(B) DISCLOSURE IN JUDICIAL OR ADMIN-
ISTRATIVE TAX PROCEEDINGS OF RETURN AND 
RETURN 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 
person and an opportunity for such person 
to request the deletion of matter from such 
return 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
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such return or return information is 
sought. In the case of S corporations, part-
nerships, 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 
return or return information that directly 
relates 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-
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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 by moving such clauses 2 ems to the 
right; 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.
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SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER 
IDENTIFICATION 
INFORMATION 
WITH 
RE-
SPECT TO DISCLOSURE OF ACCEPTED OF-
FERS-IN-COMPROMISE. 
(a) 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. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDEN-
TIALITY SAFEGUARDS. 
(a) IN GENERAL.—Section 6103(p) (relating to State 
law requirements) is amended by adding at the end the 
following new paragraph: 
‘‘(9) 
DISCLOSURE
TO
CONTRACTORS
AND 
OTHER AGENTS.—Notwithstanding any other provi-
sion of this section, no return or return information 
shall be disclosed to any contractor or other agent 
of a Federal, State, or local agency unless such 
agency, to the satisfaction of the Secretary—
‘‘(A) has requirements in effect which re-
quire each such contractor or other agent which 
would have access to returns or return informa-
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tion to provide safeguards (within the meaning 
of paragraph (4)) to protect the confidentiality 
of such returns or return information, 
‘‘(B) agrees to conduct an annual, on-site 
review (mid-point review in the case of con-
tracts of less than 1 year in duration) of each 
such contractor or other agent to determine 
compliance with such requirements, 
‘‘(C) submits the findings of the most re-
cent review conducted under subparagraph (B) 
to the Secretary as part of the report required 
by paragraph (4)(E), and
‘‘(D) certifies to the Secretary for the most 
recent annual period that each such contractor 
or other agent is in compliance with all such re-
quirements. 
The certification required by subparagraph (D) shall 
include the name and address of each contractor and 
other agent, a description of the contract of the con-
tractor or other agent with the agency, and the du-
ration of such contract.’’. 
(b) CONFORMING AMENDMENT.—Subparagraph (B) 
of section 6103(p)(8) is amended by inserting ‘‘or para-
graph (9)’’ after ‘‘subparagraph (A)’’. 
(c) EFFECTIVE DATE.—
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(1) IN GENERAL.—The amendments made by 
this section shall apply to disclosures made after De-
cember 31, 2003. 
(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 2004. 
SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND 
CONSENTS TO DISCLOSURE. 
(a) IN GENERAL.—Subsection (c) of section 6103 
(relating to disclosure of returns and return information 
to designee of taxpayer) is amended by adding at the end 
the following new paragraphs: 
‘‘(2) REQUIREMENTS
FOR
VALID
REQUESTS 
AND CONSENTS.—A request for or consent to disclo-
sure under paragraph (1) shall only be valid for pur-
poses of this section, sections 7213, 7213A, and 
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
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of perjury, that such request or consent com-
plied with subparagraph (A). 
‘‘(3) RESTRICTIONS
ON
PERSONS
OBTAINING 
INFORMATION.—Any person shall, as a condition for 
receiving return or return information under para-
graph (1)— 
‘‘(A) ensure that such return and return 
information is kept confidential, 
‘‘(B) use such return and return informa-
tion only for the purpose for which it was re-
quested, and 
‘‘(C) not disclose such return and return 
information except to accomplish the purpose 
for which it was requested, unless a separate 
consent from the taxpayer is obtained. 
‘‘(4) REQUIREMENTS
FOR
FORM
PRESCRIBED 
BY SECRETARY.—For purposes of this subsection, 
the Secretary shall prescribe a form for requests and 
consents which shall— 
‘‘(A) contain a warning, prominently dis-
played, informing the taxpayer that the form 
should not be signed unless it is completed, 
‘‘(B) state that if the taxpayer believes 
there is an attempt to coerce him to sign an in-
complete or blank form, the taxpayer should re-
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Treasury Inspector General for Tax Administration sub-
stantiates that such taxpayer’s return or return informa-
tion was inspected 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 sec-
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.
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(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. 408. 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. 
SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX 
REFUND PURPOSES. 
(a) IN GENERAL.—Paragraph (1) of section 6103(m) 
(relating to disclosure of taxpayer identity information) is 
amended by striking ‘‘and other media’’ and by inserting 
‘‘, other media, and through any other means of mass 
communication,’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act.
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SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED 
ACTIONS RELATED TO SECTION 501(c)(3) OR-
GANIZATIONS. 
(a) IN GENERAL.—Subsection (c) of section 6104 is 
amended by striking paragraph (2) and inserting the fol-
lowing new paragraphs: 
‘‘(2) DISCLOSURE OF PROPOSED ACTIONS.—
‘‘(A) SPECIFIC
NOTIFICATIONS.—In the 
case of an organization to which paragraph (1) 
applies, the Secretary may disclose to the ap-
propriate State officer—
‘‘(i) a notice of proposed refusal to 
recognize such organization as an organi-
zation described in section 501(c)(3) or a 
notice of proposed revocation of such orga-
nization’s recognition as an organization 
exempt from taxation, 
‘‘(ii) the issuance of a letter of pro-
posed deficiency of tax imposed under sec-
tion 507 or chapter 41 or 42, and 
‘‘(iii) the names, addresses, and tax-
payer identification numbers of organiza-
tions that have applied for recognition as 
organizations 
described 
in 
section 
501(c)(3).
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‘‘(B) ADDITIONAL DISCLOSURES.—Returns 
and return information of organizations with 
respect to which information is disclosed under 
subparagraph (A) may be made available for in-
spection by or disclosed to an appropriate State 
officer. 
‘‘(C) PROCEDURES FOR DISCLOSURE.—In-
formation may be inspected or disclosed under 
subparagraph (A) or (B) only—
‘‘(i) upon written request by an ap-
propriate State officer, and 
‘‘(ii) for the purpose of, and only to 
the extent necessary in, the administration 
of State laws regulating such organiza-
tions. 
Such information may only be inspected by or 
disclosed to a person other than the appropriate 
State officer if such person is an officer or em-
ployee of the State and is designated by the ap-
propriate State officer to receive the returns or 
return information under this paragraph on be-
half of the appropriate State officer. 
‘‘(D) DISCLOSURES OTHER THAN BY RE-
QUEST.—The Secretary may make available for 
inspection or disclose returns and return infor-
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mation of an organization to which paragraph 
(1) applies to an appropriate State officer of 
any State if the Secretary determines that such 
inspection or disclosure may facilitate the reso-
lution of State or Federal issues relating to the 
tax-exempt status of such organization. 
‘‘(3) USE IN ADMINISTRATIVE AND JUDICIAL 
CIVIL PROCEEDINGS.—Returns and return informa-
tion disclosed pursuant to this subsection may be 
disclosed in administrative and judicial civil pro-
ceedings pertaining to the enforcement of State laws 
regulating such organizations in a manner pre-
scribed by the Secretary similar to that for tax ad-
ministration proceedings under section 6103(h)(4). 
‘‘(4) NO
DISCLOSURE
IF
IMPAIRMENT.—Re-
turns and return information shall not be disclosed 
under this subsection, or in any proceeding described 
in paragraph (3), to the extent that the Secretary 
determines that such disclosure would seriously im-
pair Federal tax administration. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) RETURN
AND
RETURN
INFORMA-
TION.—The terms ‘return’ and ‘return informa-