II
Calendar No. 341
105TH CONGRESS
2D SESSION
H. R. 2676
[Report No. 105–174]
To amend the Internal Revenue Code of 1986 to restructure and reform
the Internal Revenue Service, and for other purposes.
IN THE SENATE OF THE UNITED STATES
NOVEMBER 5, 1997
Received; read twice and referred to the Committee on Finance
APRIL 22, 1998
Reported by Mr. ROTH, with an amendment
[Strike out all after the enacting clause and insert the part printed in italic]
AN ACT
To amend the Internal Revenue Code of 1986 to restructure
and reform the Internal Revenue Service, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Internal Revenue Service Restructuring and Reform Act
of 1997’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—EXECUTIVE BRANCH GOVERNANCE AND SENIOR
MANAGEMENT OF THE INTERNAL REVENUE SERVICE
Subtitle A—Executive Branch Governance and Senior Management
Sec. 101. Internal Revenue Service Oversight Board.
Sec. 102. Commissioner of Internal Revenue; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer audits and
other investigations.
Subtitle B—Personnel Flexibilities
Sec. 111. Personnel flexibilities.
TITLE II—ELECTRONIC FILING
Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Due date for certain information returns filed electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.
TITLE III—TAXPAYER PROTECTION AND RIGHTS
Sec. 300. Short title.
Subtitle A—Burden of Proof
Sec. 301. Burden of proof.
Subtitle B—Proceedings by Taxpayers
Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.
Subtitle C—Relief for Innocent Spouses and for Taxpayers Unable To
Manage Their Financial Affairs Due to Disabilities
Sec. 321. Spouse relieved in whole or in part of liability in certain cases.
Sec. 322. Suspension of statute of limitations on filing refund claims during pe-
riods of disability.
Subtitle D—Provisions Relating to Interest
Sec. 331. Elimination of interest rate differential on overlapping periods of in-
terest on income tax overpayments and underpayments.
Sec. 332. Increase in overpayment rate payable to taxpayers other than cor-
porations.
Subtitle E—Protections for Taxpayers Subject to Audit or Collection
Activities
Sec. 341. Privilege of confidentiality extended to taxpayer’s dealings with non-
attorneys authorized to practice before Internal Revenue Serv-
ice.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer source
code.
Sec. 345. Procedures relating to extensions of statute of limitations by agree-
ment.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting Alternative Com-
mitment Agreements.
Subtitle F—Disclosures to Taxpayers
Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers’ rights in interviews with the Internal Reve-
nue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Explanations of appeals and collection process.
Subtitle G—Low Income Taxpayer Clinics
Sec. 361. Low income taxpayer clinics.
Subtitle H—Other Matters
Sec. 371. Actions for refund with respect to certain estates which have elected
the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.
Sec. 375. Clarification of authority of Secretary relating to the making of elec-
tions.
Sec. 376. Limitation on penalty on individual’s failure to pay for months during
period of installment agreement.
Subtitle I—Studies
Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.
TITLE IV—CONGRESSIONAL ACCOUNTABILITY FOR THE
INTERNAL REVENUE SERVICE
Subtitle A—Oversight
Sec. 401. Expansion of duties of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.
Subtitle B—Budget
Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.
Subtitle C—Tax Law Complexity
Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.
TITLE V—CLARIFICATION OF DEDUCTION FOR DEFERRED
COMPENSATION
Sec. 501. Clarification of deduction for deferred compensation.
TITLE VI—CONGRESSIONAL ACCOUNTABILITY FOR THE
INTERNAL REVENUE SERVICE
Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Amendments related to title I of 1997 Act.
Sec. 604. Amendments related to title II of 1997 Act.
Sec. 605. Amendments related to title III of 1997 Act.
Sec. 606. Amendments related to title V of 1997 Act.
Sec. 607. Amendments related to title VII of 1997 Act.
Sec. 608. Amendments related to title IX of 1997 Act.
Sec. 609. Amendments related to title X of 1997 Act.
Sec. 610. Amendments related to title XI of 1997 Act.
Sec. 611. Amendments related to title XII of 1997 Act.
Sec. 612. Amendments related to title XIII of 1997 Act.
Sec. 613. Amendments related to title XIV of 1997 Act.
Sec. 614. Amendments related to title XV of 1997 Act.
Sec. 615. Amendments related to title XVI of 1997 Act.
Sec. 616. Amendments related to Omibus Budget Reconciliation Act of 1993.
Sec. 617. Amendments related to Tax Reform Act of 1984.
Sec. 618. Amendments related to Tax Reform Act of 1986.
Sec. 619. Miscellaneous clerical and deadwood changes.
Sec. 620. Effective date.
TITLE
I—EXECUTIVE
BRANCH
GOVERNANCE
AND
SENIOR
MANAGEMENT OF THE INTER-
NAL REVENUE SERVICE
Subtitle A—Executive Branch Gov-
ernance
and
Senior
Manage-
ment
SEC.
101.
INTERNAL
REVENUE
SERVICE
OVERSIGHT
BOARD.
(a) IN GENERAL.—Section 7802 (relating to the
Commissioner of Internal Revenue) is amended to read as
follows:
‘‘SEC.
7802.
INTERNAL
REVENUE
SERVICE
OVERSIGHT
BOARD.
‘‘(a) ESTABLISHMENT.—There is established within
the Department of the Treasury the Internal Revenue
Service Oversight Board (hereafter in this subchapter re-
ferred to as the ‘Oversight Board’).
‘‘(b) MEMBERSHIP.—
‘‘(1)
COMPOSITION.—The
Oversight
Board
shall be composed of 11 members, as follows:
‘‘(A) 8 members shall be individuals who
are not Federal officers or employees and who
are appointed by the President, by and with the
advice and consent of the Senate.
‘‘(B) 1 member shall be the Secretary of
the Treasury or, if the Secretary so designates,
the Deputy Secretary of the Treasury.
‘‘(C) 1 member shall be the Commissioner
of Internal Revenue.
‘‘(D) 1 member shall be an individual who
is a representative of an organization that rep-
resents a substantial number of Internal Reve-
nue Service employees and who is appointed by
the President, by and with the advice and con-
sent of the Senate.
‘‘(2) QUALIFICATIONS AND TERMS.—
‘‘(A) QUALIFICATIONS.—Members of the
Oversight Board described in paragraph (1)(A)
shall be appointed solely on the basis of their
professional experience and expertise in 1 or
more of the following areas:
‘‘(i) Management of large service or-
ganizations.
‘‘(ii) Customer service.
‘‘(iii) Federal tax laws, including tax
administration and compliance.
‘‘(iv) Information technology.
‘‘(v) Organization development.
‘‘(vi) The needs and concerns of tax-
payers.
In the aggregate, the members of the Oversight
Board described in paragraph (1)(A) should
collectively bring to bear expertise in all of the
areas described in the preceding sentence.
‘‘(B) TERMS.—Each member who is de-
scribed in paragraph (1)(A) or (D) shall be ap-
pointed for a term of 5 years, except that of the
members
first
appointed
under
paragraph
(1)(A)—
‘‘(i) 1 member shall be appointed for
a term of 1 year,
‘‘(ii) 1 member shall be appointed for
a term of 2 years,
‘‘(iii) 2 members shall be appointed
for a term of 3 years, and
‘‘(iv) 2 members shall be appointed
for a term of 4 years.
Such terms shall begin on the date of appoint-
ment.
‘‘(C)
REAPPOINTMENT.—An
individual
who is described in paragraph (1)(A) may be
appointed to no more than two 5-year terms on
the Oversight Board.
‘‘(D)
VACANCY.—Any
vacancy
on
the
Oversight Board shall be filled in the same
manner as the original appointment. Any mem-
ber appointed to fill a vacancy occurring before
the expiration of the term for which the mem-
ber’s predecessor was appointed shall be ap-
pointed for the remainder of that term.
‘‘(E)
SPECIAL
GOVERNMENT
EMPLOY-
EES.—During the entire period that an individ-
ual appointed under paragraph (1)(A) is a
member of the Oversight Board, such individual
shall be treated as—
‘‘(i) serving as a special government
employee (as defined in section 202 of title
18, United States Code) and as described
in section 207(c)(2) of such title 18, and
‘‘(ii) serving as an officer or employee
referred to in section 101(f) of the Ethics
in Government Act of 1978 for purposes of
title I of such Act.
‘‘(3) QUORUM.—6 members of the Oversight
Board shall constitute a quorum. A majority of
members present and voting shall be required for the
Oversight Board to take action.
‘‘(4) REMOVAL.—
‘‘(A) IN GENERAL.—Any member of the
Oversight Board may be removed at the will of
the President.
‘‘(B) SECRETARY
AND
COMMISSIONER.—
An individual described in subparagraph (B) or
(C) of paragraph (1) shall be removed upon ter-
mination of employment.
‘‘(C) REPRESENTATIVE OF INTERNAL REV-
ENUE SERVICE EMPLOYEES.—The member de-
scribed in paragraph (1)(D) shall be removed
upon termination of employment, membership,
or other affiliation with the organization de-
scribed in such paragraph.
‘‘(5) CLAIMS.—
‘‘(A) IN GENERAL.—Members of the Over-
sight Board who are described in paragraph
(1)(A) or (D) shall have no personal liability
under Federal law with respect to any claim
arising out of or resulting from an act or omis-
sion by such member within the scope of service
as a member. The preceding sentence shall not
be construed to limit personal liability for crimi-
nal acts or omissions, willful or malicious con-
duct, acts or omissions for private gain, or any
other act or omission outside the scope of the
service of such member on the Oversight Board.
‘‘(B) EFFECT ON OTHER LAW.—This para-
graph shall not be construed—
‘‘(i) to affect any other immunities
and protections that may be available to
such member under applicable law with re-
spect to such transactions,
‘‘(ii) to affect any other right or rem-
edy against the United States under appli-
cable law, or
‘‘(iii) to limit or alter in any way the
immunities that are available under appli-
cable law for Federal officers and employ-
ees.
‘‘(c) GENERAL RESPONSIBILITIES.—
‘‘(1) IN GENERAL.—The Oversight Board shall
oversee the Internal Revenue Service in its adminis-
tration, management, conduct, direction, and super-
vision of the execution and application of the inter-
nal revenue laws or related statutes and tax conven-
tions to which the United States is a party.
‘‘(2) EXCEPTIONS.—The Oversight Board shall
have no responsibilities or authority with respect
to—
‘‘(A) the development and formulation of
Federal tax policy relating to existing or pro-
posed internal revenue laws, related statutes,
and tax conventions,
‘‘(B) law enforcement activities of the In-
ternal Revenue Service, including compliance
activities such as criminal investigations, exami-
nations, and collection activities, or
‘‘(C) specific procurement activities of the
Internal Revenue Service.
‘‘(3) RESTRICTION ON DISCLOSURE OF RETURN
INFORMATION TO OVERSIGHT BOARD MEMBERS.—
No return, return information, or taxpayer return
information (as defined in section 6103(b)) may be
disclosed to any member of the Oversight Board de-
scribed in subsection (b)(1)(A) or (D). Any request
for information not permitted to be disclosed under
the preceding sentence, and any contact relating to
a specific taxpayer, made by a member of the Over-
sight Board so described to an officer or employee
of the Internal Revenue Service shall be reported by
such officer or employee to the Secretary and the
Joint Committee on Taxation.
‘‘(d) SPECIFIC RESPONSIBILITIES.—The Oversight
Board shall have the following specific responsibilities:
‘‘(1) STRATEGIC
PLANS.—To review and ap-
prove strategic plans of the Internal Revenue Serv-
ice, including the establishment of—
‘‘(A) mission and objectives, and standards
of performance relative to either, and
‘‘(B)
annual
and
long-range
strategic
plans.
‘‘(2)
OPERATIONAL
PLANS.—To
review
the
operational functions of the Internal Revenue Serv-
ice, including—
‘‘(A) plans for modernization of the tax
system,
‘‘(B) plans for outsourcing or managed
competition, and
‘‘(C) plans for training and education.
‘‘(3) MANAGEMENT.—To—
‘‘(A) recommend to the President can-
didates for appointment as the Commissioner of
Internal Revenue and recommend to the Presi-
dent the removal of the Commissioner,
‘‘(B) review the Commissioner’s selection,
evaluation, and compensation of senior man-
agers, and
‘‘(C) review and approve the Commis-
sioner’s plans for any major reorganization of
the Internal Revenue Service.
‘‘(4) BUDGET.—To—
‘‘(A) review and approve the budget re-
quest of the Internal Revenue Service prepared
by the Commissioner,
‘‘(B) submit such budget request to the
Secretary of the Treasury, and
‘‘(C) ensure that the budget request sup-
ports the annual and long-range strategic plans.
The Secretary shall submit the budget request referred to
in paragraph (4)(B) for any fiscal year to the President
who shall submit such request, without revision, to Con-
gress together with the President’s annual budget request
for the Internal Revenue Service for such fiscal year.
‘‘(e) BOARD PERSONNEL MATTERS.—
‘‘(1) COMPENSATION OF MEMBERS.—
‘‘(A) IN GENERAL.—Each member of the
Oversight Board who is described in subsection
(b)(1)(A) shall be compensated at a rate not to
exceed $30,000 per year. All other members of
the Oversight Board shall serve without com-
pensation for such service.
‘‘(B)
CHAIRPERSON.—In
lieu
of
the
amount
specified
in
subparagraph
(A),
the
Chairperson of the Oversight Board shall be
compensated at a rate not to exceed $50,000.
‘‘(2) TRAVEL EXPENSES.—The members of the
Oversight Board shall be allowed travel expenses, in-
cluding per diem in lieu of subsistence, at rates au-
thorized for employees of agencies under subchapter
I of chapter 57 of title 5, United States Code, while
away from their homes or regular places of business
for purposes of attending meetings of the Oversight
Board.
‘‘(3) STAFF.—At the request of the Chair-
person of the Oversight Board, the Commissioner
shall detail to the Oversight Board such personnel as
may be necessary to enable the Oversight Board to
perform its duties. Such detail shall be without
interruption or loss of civil service status or privi-
lege.
‘‘(4)
PROCUREMENT
OF
TEMPORARY
AND
INTERMITTENT SERVICES.—The Chairperson of the
Oversight Board may procure temporary and inter-
mittent services under section 3109(b) of title 5,
United States Code.
‘‘(f) ADMINISTRATIVE MATTERS.—
‘‘(1) CHAIR.—The members of the Oversight
Board shall elect for a 2-year term a chairperson
from among the members appointed under sub-
section (b)(1)(A).
‘‘(2) COMMITTEES.—The Oversight Board may
establish such committees as the Oversight Board
determines appropriate.
‘‘(3) MEETINGS.—The Oversight Board shall
meet at least once each month and at such other
times as the Oversight Board determines appro-
priate.
‘‘(4) REPORTS.—The Oversight Board shall
each year report to the President and the Congress
with respect to the conduct of its responsibilities
under this title.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 4946(c) (relating to definitions and
special rules for chapter 42) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (5),
(B) by striking the period at the end of
paragraph (6) and inserting ‘‘, or’’, and
(C) by adding at the end the following new
paragraph:
‘‘(7) a member of the Internal Revenue Service
Oversight Board.’’.
(2) The table of sections for subchapter A of
chapter 80 is amended by striking the item relating
to section 7802 and inserting the following new
item:
‘‘Sec. 7802. Internal Revenue Service Oversight Board.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on the date of the en-
actment of this Act.
(2)
NOMINATIONS
TO
INTERNAL
REVENUE
SERVICE OVERSIGHT BOARD.—The President shall
submit nominations under section 7802 of the Inter-
nal Revenue Code of 1986, as added by this section,
to the Senate not later than 6 months after the date
of the enactment of this Act.
SEC. 102. COMMISSIONER OF INTERNAL REVENUE; OTHER
OFFICIALS.
(a) IN GENERAL.—Section 7803 (relating to other
personnel) is amended to read as follows:
‘‘SEC.
7803.
COMMISSIONER
OF
INTERNAL
REVENUE;
OTHER OFFICIALS.
‘‘(a) COMMISSIONER OF INTERNAL REVENUE.—
‘‘(1) APPOINTMENT.—
‘‘(A) IN GENERAL.—There shall be in the
Department of the Treasury a Commissioner of
Internal Revenue who shall be appointed by the
President, by and with the advice and consent
of the Senate, to a 5-year term. The appoint-
ment shall be made without regard to political
affiliation or activity.
‘‘(B) VACANCY.—Any individual appointed
to fill a vacancy in the position of Commis-
sioner occurring before the expiration of the
term for which such individual’s predecessor
was appointed shall be appointed only for the
remainder of that term.
‘‘(C) REMOVAL.—The Commissioner may
be removed at the will of the President.
‘‘(2) DUTIES.—The Commissioner shall have
such duties and powers as the Secretary may pre-
scribe, including the power to—
‘‘(A) administer, manage, conduct, direct,
and supervise the execution and application of
the internal revenue laws or related statutes
and ax conventions to which the United States
is a party; and
‘‘(B) recommend to the President a can-
didate for appointment as Chief Counsel for the
Internal Revenue Service when a vacancy oc-
curs, and recommend to the President the re-
moval of such Chief Counsel.
If the Secretary determines not to delegate a power
specified in subparagraph (A) or (B), such deter-
mination may not take effect until 30 days after the
Secretary notifies the Committees on Ways and
Means, Government Reform and Oversight, and Ap-
propriations of the House of Representatives, the
Committees on Finance, Government Operations,
and Appropriations of the Senate, and the Joint
Committee on Taxation.
‘‘(3) CONSULTATION WITH BOARD.—The Com-
missioner shall consult with the Oversight Board on
all matters set forth in paragraphs (2) and (3)
(other than paragraph (3)(A)) of section 7802(d).
‘‘(b) ASSISTANT COMMISSIONER
FOR EMPLOYEE
PLANS AND EXEMPT ORGANIZATIONS.—There is estab-
lished within the Internal Revenue Service an office to be
known as the ‘Office of Employee Plans and Exempt Or-
ganizations’ to be under the supervision and direction of
an Assistant Commissioner of Internal Revenue. As head
of the Office, the Assistant Commissioner shall be respon-
sible for carrying out such functions as the Secretary may
prescribe with respect to organizations exempt from tax
employee of the Internal Revenue Service may
be appointed as Taxpayer Advocate only if such
individual agrees not to accept any employment
with the Internal Revenue Service for at least
5 years after ceasing to be the Taxpayer Advo-
cate.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the func-
tion of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems in dealings with the Internal
Revenue Service,
‘‘(iii) to the extent possible, propose
changes in the administrative practices of
the Internal Revenue Service to mitigate
problems identified under clause (ii), and
‘‘(iv)
identify
potential
legislative
changes which may be appropriate to miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i)
OBJECTIVES.—Not
later
than
June 30 of each calendar year, the Tax-
payer Advocate shall report to the Commit-
tee on Ways and Means of the House of
Representatives and the Committee on Fi-
nance of the Senate on the objectives of
the Taxpayer Advocate for the fiscal year
beginning in such calendar year. Any such
report shall contain full and substantive
analysis, in addition to statistical informa-
tion.
‘‘(ii) ACTIVITIES.—Not later than De-
cember 31 of each calendar year, the Tax-
payer Advocate shall report to the Commit-
tee on Ways and Means of the House of
Representatives and the Committee on Fi-
nance of the Senate on the activities of the
Taxpayer Advocate during the fiscal year
ending during such calendar year. Any
such report shall contain full and sub-
stantive analysis, in addition to statistical
information, and shall—
‘‘(I) identify the initiatives the
Taxpayer Advocate has taken on im-
proving taxpayer services and Internal
Revenue Service responsiveness,
‘‘(II)
contain
recommendations
received from individuals with the au-
thority to issue Taxpayer Assistance
Orders under section 7811,
‘‘(III) contain a summary of at
least 20 of the most serious problems
encountered by taxpayers, including a
description of the nature of such prob-
lems,
‘‘(IV) contain an inventory of the
items described in subclauses (I), (II),
and (III) for which action has been
taken and the result of such action,
‘‘(V) contain an inventory of the
items described in subclauses (I), (II),
and (III) for which action remains to
be completed and the period during
which each item has remained on such
inventory,
‘‘(VI) contain an inventory of the
items described in subclauses (I), (II),
and (III) for which no action has been
taken, the period during which each
item has remained on such inventory,
the reasons for the inaction, and iden-
tify any Internal Revenue Service offi-
cial who is responsible for such inac-
tion,
‘‘(VII) identify any Taxpayer As-
sistance Order which was not honored
by the Internal Revenue Service in a
timely manner, as specified under sec-
tion 7811(b),
‘‘(VIII) contain recommendations
for such administrative and legislative
action as may be appropriate to re-
solve problems encountered by tax-
payers,
‘‘(IX) identify areas of the tax
law that impose significant compliance
burdens on taxpayers or the Internal
Revenue
Service,
including
specific
recommendations for remedying these
problems,
‘‘(X) in conjunction with the Na-
tional Director of Appeals, identify
the 10 most litigated issues for each
category of taxpayers, including rec-
ommendations for mitigating such dis-
putes, and
mitted to the Commissioner by the Taxpayer Advo-
cate within 3 months after submission to the Com-
missioner.’’.
(b) CONFORMING AMENDMENTS.—
(1) The table of sections for subchapter A of
chapter 80 is amended by striking the item relating
to section 7803 and inserting the following new
item:
‘‘Sec. 7803. Commissioner of Internal Revenue; other officials.’’.
(2) Subsection (b) of section 5109 of title 5,
United
States
Code,
is
amended
by
striking
‘‘7802(b)’’ and inserting ‘‘7803(b)’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on the date of the en-
actment of this Act.
(2) CURRENT OFFICERS.—
(A) In the case of an individual serving as
Commissioner of Internal Revenue on the date
of the enactment of this Act who was appointed
to such position before such date, the 5-year
term required by section 7803(a)(1) of the In-
ternal Revenue Code of 1986, as added by this
section, shall begin as of the date of such ap-
pointment.
(B) Section 7803(c)(1)(B) of such Code,
as added by this section, shall not apply to the
individual serving as Taxpayer Advocate on the
date of the enactment of this Act.
SEC. 103. OTHER PERSONNEL.
(a) IN GENERAL.—Section 7804 (relating to the ef-
fect of reorganization plans) is amended to read as follows:
‘‘SEC. 7804. OTHER PERSONNEL.
‘‘(a) APPOINTMENT AND SUPERVISION.—Unless oth-
erwise prescribed by the Secretary, the Commissioner of
Internal Revenue is authorized to employ such number of
persons as the Commissioner deems proper for the admin-
istration and enforcement of the internal revenue laws,
and the Commissioner shall issue all necessary directions,
instructions, orders, and rules applicable to such persons.
‘‘(b) POSTS
OF DUTY
OF EMPLOYEES
IN FIELD
SERVICE OR TRAVELING.—Unless otherwise prescribed by
the Secretary—
‘‘(1) DESIGNATION
OF
POST
OF
DUTY.—The
Commissioner shall determine and designate the
posts of duty of all such persons engaged in field
work or traveling on official business outside of the
District of Columbia.
‘‘(2)
DETAIL
OF
PERSONNEL
FROM
FIELD
SERVICE.—The Commissioner may order any such
person engaged in field work to duty in the District
of Columbia, for such periods as the Commissioner
may prescribe, and to any designated post of duty
outside the District of Columbia upon the comple-
tion of such duty.
‘‘(c) DELINQUENT INTERNAL REVENUE OFFICERS
AND EMPLOYEES.—If any officer or employee of the
Treasury Department acting in connection with the inter-
nal revenue laws fails to account for and pay over any
amount of money or property collected or received by him
in connection with the internal revenue laws, the Secretary
shall issue notice and demand to such officer or employee
for payment of the amount which he failed to account for
and pay over, and, upon failure to pay the amount de-
manded within the time specified in such notice, the
amount so demanded shall be deemed imposed upon such
officer or employee and assessed upon the date of such
notice and demand, and the provisions of chapter 64 and
all other provisions of law relating to the collection of as-
sessed taxes shall be applicable in respect of such
amount.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 6344 is amended
by striking ‘‘section 7803(d)’’ and inserting ‘‘section
7804(c)’’.
(2) The table of sections for subchapter A of
chapter 80 is amended by striking the item relating
to section 7804 and inserting the following new
item:
‘‘Sec. 7804. Other personnel.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 104. PROHIBITION ON EXECUTIVE BRANCH INFLU-
ENCE OVER TAXPAYER AUDITS AND OTHER
INVESTIGATIONS.
(a) IN GENERAL.—Part I of subchapter A of chapter
75 (relating to crimes, other offenses, and forfeitures) is
amended by adding after section 7216 the following new
section:
‘‘SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLU-
ENCE OVER TAXPAYER AUDITS AND OTHER
INVESTIGATIONS.
‘‘(a) PROHIBITION.—It shall be unlawful for any ap-
plicable person to request any officer or employee of the
Internal Revenue Service to conduct or terminate an audit
or other investigation of any particular taxpayer with re-
spect to the tax liability of such taxpayer.
‘‘(b) REPORTING REQUIREMENT.—Any officer or em-
ployee of the Internal Revenue Service receiving any re-
quest prohibited by subsection (a) shall report the receipt
of such request to the Chief Inspector of the Internal Rev-
enue Service.
‘‘(c) EXCEPTIONS.—Subsection (a) shall not apply
to—
‘‘(1) any request made to an applicable person
by the taxpayer or a representative of the taxpayer
and forwarded by such applicable person to the In-
ternal Revenue Service,
‘‘(2) any request by an applicable person for
disclosure of return or return information under sec-
tion 6103 if such request is made in accordance with
the requirements of such section, or
‘‘(3) any request by the Secretary of the Treas-
ury as a consequence of the implementation of a
change in tax policy.
‘‘(d) PENALTY.—Any person who willfully violates
subsection (a) or fails to report under subsection (b) shall
be punished upon conviction by a fine in any amount not
exceeding $5,000, or imprisonment of not more than 5
years, or both, together with the costs of prosecution.
‘‘(e) APPLICABLE PERSON.—For purposes of this
section, the term ‘applicable person’ means—
‘‘(1) the President, the Vice President, any em-
ployee of the executive office of the President, and
any employee of the executive office of the Vice
President, and
‘‘(2) any individual (other than the Attorney
General of the United States) serving in a position
specified in section 5312 of title 5, United States
Code.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter A of chapter 75 is amended by
adding after the item relating to section 7216 the follow-
ing new item:
‘‘Sec. 7217. Prohibition on executive branch influence over tax-
payer audits and other investigations.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests made after the date
of the enactment of this Act.
Subtitle B—Personnel Flexibilities
SEC. 111. PERSONNEL FLEXIBILITIES.
(a) IN GENERAL.—Part III of title 5, United States
Code, is amended by adding at the end the following new
subpart:
‘‘Subpart I—Miscellaneous
‘‘CHAPTER
93—PERSONNEL
FLEXIBILI-
TIES
RELATING
TO
THE
INTERNAL
REVENUE SERVICE
‘‘Sec.
‘‘9301. General requirements.
‘‘9302. Flexibilities relating to performance management.
‘‘9303. Staffing flexibilities.
‘‘9304. Flexibilities relating to demonstration projects.
‘‘§ 9301. General requirements
‘‘(a) CONFORMANCE WITH MERIT SYSTEM PRIN-
CIPLES, ETC.—Any flexibilities under this chapter shall
be exercised in a manner consistent with—
‘‘(1) chapter 23, relating to merit system prin-
ciples and prohibited personnel practices; and
‘‘(2) provisions of this title (outside of this sub-
part) relating to preference eligibles.
‘‘(b)
REQUIREMENT
RELATING
TO
UNITS
REP-
RESENTED BY LABOR ORGANIZATIONS.—
‘‘(1) WRITTEN
AGREEMENT
REQUIRED.—Em-
ployees within a unit with respect to which a labor
organization is accorded exclusive recognition under
chapter 71 shall not be subject to the exercise of any
flexibility under section 9302, 9303, or 9304, unless
there is a written agreement between the Internal
Revenue Service and the organization permitting
such exercise.
‘‘(2)
DEFINITION
OF
A
WRITTEN
AGREE-
MENT.—In order to satisfy paragraph (1), a written
agreement—
‘‘(A) need not be a collective bargaining
agreement
within
the
meaning
of
section
7103(8); and
‘‘(B) may not be an agreement imposed by
the Federal Service Impasses Panel under sec-
tion 7119.
‘‘(3)
INCLUDIBLE
MATTERS.—The
written
agreement may address any flexibilities under sec-
tion 9302, 9303, or 9304, including any matter pro-
posed to be included in a demonstration project
under section 9304.
‘‘§ 9302. Flexibilities relating to performance manage-
ment
‘‘(a) IN GENERAL.—The Commissioner of Internal
Revenue shall, within a year after the date of the enact-
ment of this chapter, establish a performance management
system which—
‘‘(1) subject to section 9301(b), shall cover all
employees of the Internal Revenue Service other
than—
‘‘(A) the members of the Internal Revenue
Service Oversight Board;
‘‘(B) the Commissioner of Internal Reve-
nue; and
‘‘(C) the Chief Counsel for the Internal
Revenue Service;
‘‘(2) shall maintain individual accountability
by—
‘‘(A) establishing standards of performance
which—
‘‘(i) shall permit the accurate evalua-
tion of each employee’s performance on the
basis of the individual and organizational
performance requirements applicable with
respect to the evaluation period involved,
taking into account individual contribu-
tions toward the attainment of any goals
or objectives under paragraph (3);
‘‘(ii) shall be communicated to an em-
ployee before the start of any period with
respect to which the performance of such
employee is to be evaluated using such
standards; and
‘‘(iii) shall include at least 2 stand-
ards of performance, the lowest of which
shall denote the retention standard and
shall be equivalent to fully successful per-
formance;
‘‘(B) providing for periodic performance
evaluations to determine whether employees are
meeting all applicable retention standards; and
‘‘(C) using the results of such employee’s
performance evaluation as a basis for adjust-
ments in pay and other appropriate personnel
actions; and
‘‘(3) shall provide for (A) establishing goals or
objectives for individual, group, or organizational
performance (or any combination thereof), consistent
with Internal Revenue Service performance planning
procedures, including those established under the
Government Performance and Results Act of 1993,
the Information Technology Management Reform
Act of 1996, Revenue Procedure 64–22 (as in effect
on July 30, 1997), and taxpayer service surveys, (B)
communicating such goals or objectives to employ-
ees, and (C) using such goals or objectives to make
performance distinctions among employees or groups
of employees.
For purposes of this title, performance of an employee
during any period in which such employee is subject to
standards of performance under paragraph (2) shall be
considered to be ‘unacceptable’ if the performance of such
employee during such period fails to meet any retention
standard.
‘‘(b) AWARDS.—
‘‘(1) FOR
SUPERIOR
ACCOMPLISHMENTS.—In
the case of a proposed award based on the efforts
of an employee or former employee of the Internal
Revenue Service, any approval required under the
provisions of section 4502(b) shall be considered to
have been granted if the Office of Personnel Man-
agement does not disapprove the proposed award
within 60 days after receiving the appropriate cer-
tification described in such provisions.
‘‘(2) FOR EMPLOYEES WHO REPORT DIRECTLY
TO THE COMMISSIONER.—
‘‘(A) IN GENERAL.—In the case of an em-
ployee of the Internal Revenue Service who re-
ports directly to the Commissioner of Internal
Revenue, a cash award in an amount up to 50
percent of such employee’s annual rate of basic
pay may be made if the Commissioner finds
such an award to be warranted based on such
employee’s performance.
‘‘(B) NATURE
OF
AN
AWARD.—A cash
award under this paragraph shall not be consid-
ered to be part of basic pay.
‘‘(C)
TAX
ENFORCEMENT
RESULTS.—A
cash award under this paragraph may not be
based solely on tax enforcement results.
‘‘(D) ELIGIBLE EMPLOYEES.—Whether or
not an employee is an employee who reports di-
rectly to the Commissioner of Internal Revenue
shall, for purposes of this paragraph, be deter-
mined under regulations which the Commis-
sioner shall prescribe, except that in no event
shall more than 8 employees be eligible for a
cash award under this paragraph in any cal-
endar year.
‘‘(E) LIMITATION
ON
COMPENSATION.—
For purposes of applying section 5307 to an
employee in connection with any calendar year
to which an award made under this paragraph
to such employee is attributable, subsection
(a)(1) of such section shall be applied by sub-
stituting ‘to equal or exceed the annual rate of
compensation for the Vice President for such
calendar year’ for ‘to exceed the annual rate of
basic pay payable for level I of the Executive
Schedule, as of the end of such calendar year’.
‘‘(F)
APPROVAL
REQUIRED.—An
award
under this paragraph may not be made un-
less—
‘‘(i)
the
Commissioner
of
Internal
Revenue certifies to the Office of Personnel
Management
that
such
award
is
war-
ranted; and
‘‘(ii) the Office approves, or does not
disapprove, the proposed award within 60
days after the date on which it is so cer-
tified.
‘‘(3) BASED ON SAVINGS.—
‘‘(A) IN GENERAL.—The Commissioner of
Internal Revenue may authorize the payment of
cash awards to employees based on documented
financial savings achieved by a group or organi-
zation which such employees comprise, if such
payments are made pursuant to a plan which—
‘‘(i) specifies minimum levels of serv-
ice and quality to be maintained while
achieving such financial savings; and
‘‘(ii) is in conformance with criteria
prescribed by the Office of Personnel Man-
agement.
‘‘(B) FUNDING.—A cash award under this
paragraph may be paid from the fund or appro-
priation available to the activity primarily bene-
fiting or the various activities benefiting.
‘‘(C)
TAX
ENFORCEMENT
RESULTS.—A
cash award under this paragraph may not be
based solely on tax enforcement results.
‘‘(c) OTHER PROVISIONS.—
‘‘(1) NOTICE PROVISIONS.—In applying sections
4303(b)(1)(A) and 7513(b)(1) to employees of the
Internal Revenue Service, ‘15 days’ shall be sub-
stituted for ‘30 days’.
‘‘(2) APPEALS.—Notwithstanding the second
sentence of section 5335(c), an employee of the In-
ternal Revenue Service shall not have a right to ap-
peal the denial of a periodic step increase under sec-
tion 5335 to the Merit Systems Protection Board.
‘‘§ 9303. Staffing flexibilities
‘‘(a) ELIGIBILITY TO COMPETE FOR A PERMANENT
APPOINTMENT IN THE COMPETITIVE SERVICE.—
‘‘(1) ELIGIBILITY OF QUALIFIED VETERANS.—
‘‘(A) IN GENERAL.—No veteran described
in subparagraph (B) shall be denied the oppor-
tunity to compete for an announced vacant
competitive service position within the Internal
Revenue Service by reason of—
‘‘(i) not having acquired competitive
status; or
‘‘(ii) not being an employee of that
agency.
‘‘(B) DESCRIPTION.—An individual shall,
for purposes of a position for which such indi-
vidual is applying, be considered a veteran de-
scribed in this subparagraph if such individ-
ual—
‘‘(i) is either a preference eligible, or
an individual (other than a preference eli-
gible) who has been separated from the
armed forces under honorable conditions
after at least 3 years of active service; and
‘‘(ii) meets the minimum qualification
requirements for the position sought.
‘‘(2) ELIGIBILITY OF CERTAIN TEMPORARY EM-
PLOYEES.—
‘‘(A) IN
GENERAL.—No temporary em-
ployee described in subparagraph (B) shall be
denied the opportunity to compete for an an-
nounced
vacant
competitive
service
position
within the Internal Revenue Service by reason
of not having acquired competitive status.
‘‘(B) DESCRIPTION.—An individual shall,
for purposes of a position for which such indi-
vidual is applying, be considered a temporary
employee described in this subparagraph if—
‘‘(i) such individual is then currently
serving as a temporary employee in the In-
ternal Revenue Service;
‘‘(ii) such individual has completed at
least 2 years of current continuous service
in the competitive service under 1 or more
term appointments, each of which was
made under competitive procedures pre-
scribed for permanent appointments;
‘‘(iii) such individual’s performance
under each term appointment referred to
in clause (ii) met all applicable retention
standards; and
‘‘(iv) such individual meets the mini-
mum qualification requirements for the po-
sition sought.
‘‘(b) RATING SYSTEMS.—
‘‘(1)
IN
GENERAL.—Notwithstanding
sub-
chapter I of chapter 33, the Commissioner of Inter-
nal Revenue may establish category rating systems
for evaluating job applicants for positions in the
competitive service, under which qualified candidates
are divided into 2 or more quality categories on the
basis of relative degrees of merit, rather than as-
signed individual numerical ratings. Each applicant
who meets the minimum qualification requirements
for the position to be filled shall be assigned to an
appropriate category based on an evaluation of the
applicant’s knowledge, skills, and abilities relative to
those needed for successful performance in the job
to be filled.
‘‘(2)
TREATMENT
OF
PREFERENCE
ELIGI-
BLES.—Within
each
quality
category
established
under paragraph (1), preference eligibles shall be
listed ahead of individuals who are not preference
eligibles. For other than scientific and professional
positions at or higher than GS–9 (or equivalent),
preference eligibles who have a compensable service-
connected disability of 10 percent or more, and who
meet the minimum qualification standards, shall be
listed in the highest quality category.
‘‘(3) SELECTION PROCESS.—An appointing au-
thority may select any applicant from the highest
quality category or, if fewer than 3 candidates have
been assigned to the highest quality category, from
a merged category consisting of the highest and sec-
ond highest quality categories. Notwithstanding the
preceding sentence, the appointing authority may
not pass over a preference eligible in the same or a
higher category from which selection is made, unless
the requirements of section 3317(b) or 3318(b), as
applicable, are satisfied, except that in no event may
certification of a preference eligible under this sub-
section be discontinued by the Internal Revenue
Service under section 3317(b) before the end of the
6-month period beginning on the date of such em-
ployee’s first certification.
‘‘(c) INVOLUNTARY REASSIGNMENTS AND REMOVALS
OF CAREER APPOINTEES IN THE SENIOR EXECUTIVE
SERVICE.—Neither
section
3395(e)(1)
nor
section
3592(b)(1) shall apply with respect to the Internal Reve-
nue Service.
‘‘(d)
PROBATIONARY
PERIODS.—Notwithstanding
any other provision of law or regulation, the Commissioner
of Internal Revenue may establish a period of probation
under section 3321 of up to 3 years for any position if,
as determined by the Commissioner, a shorter period
would be insufficient for the incumbent to demonstrate
complete proficiency in such position.
‘‘(e) PROVISIONS THAT REMAIN APPLICABLE.—No
provision of this section exempts the Internal Revenue
Service from—
‘‘(1)
any
employment
priorities
established
under direction of the President for the placement of
surplus or displaced employees; or
‘‘(2) its obligations under any court order or
decree relating to the employment practices of the
Internal Revenue Service.
‘‘§ 9304.
Flexibilities
relating
to
demonstration
projects
‘‘(a) AUTHORITY TO CONDUCT.—The Commissioner
of Internal Revenue may, in accordance with this section,
conduct 1 or more demonstration projects to improve per-
sonnel management; provide increased individual account-
ability; eliminate obstacles to the removal of or imposing
any disciplinary action with respect to poor performers,
subject to the requirements of due process; expedite ap-
peals from adverse actions or performance-based actions;
and promote pay based on performance.
‘‘(b) GENERAL REQUIREMENTS.—Except as provided
in subsection (c), each demonstration project under this
section shall comply with the provisions of section 4703.
‘‘(c) SPECIAL RULES.—For purposes of any dem-
onstration project under this section—
‘‘(1)
AUTHORITY
OF
COMMISSIONER.—The
Commissioner of Internal Revenue shall exercise the
authority provided to the Office of Personnel Man-
agement under section 4703.
‘‘(2) PROVISIONS NOT APPLICABLE.—The fol-
lowing provisions of section 4703 shall not apply:
‘‘(A) Paragraphs (3) through (6) of sub-
section (b).
‘‘(B) Paragraphs (1), (2)(B)(ii), and (4) of
subsection (c).
‘‘(C) Subsections (d) through (g).
‘‘(d) NOTIFICATION REQUIRED TO BE GIVEN.—
‘‘(1) TO
EMPLOYEES.—The Commissioner of
Internal Revenue shall notify employees likely to be
affected by a project proposed under this section at
least 90 days in advance of the date such project is
to take effect.
‘‘(2) TO CONGRESS AND OPM.—The Commis-
sioner of Internal Revenue shall, with respect to
each demonstration project under this section, pro-
vide each House of Congress and the Office of Per-
sonnel Management with a report, at least 30 days
in advance of the date such project is to take effect,
setting forth the final version of the plan for such
project. Such report shall, with respect to the project
to which it relates, include the information specified
in section 4703(b)(1).
‘‘(e) LIMITATIONS.—No demonstration project under
this section may—
‘‘(1) provide for a waiver of any regulation pre-
scribed under any provision of law referred to in
paragraph (2)(B)(i) or (3) of section 4703(c);
‘‘(2) provide for a waiver of subchapter V of
chapter 63 or subpart G of part III (or any regula-
tions prescribed under such subchapter or subpart);
‘‘(3) provide for a waiver of any law or regula-
tion relating to preference eligibles as defined in sec-
tion 2108 or subchapter II or III of chapter 73 (or
any regulations prescribed thereunder);
‘‘(4) permit collective bargaining over pay or
benefits, or require collective bargaining over any
matter which would not be required under section
7106; or
‘‘(5) include a system for measuring perform-
ance that provides for only 1 level of performance at
or above the level of fully successful or better.
‘‘(f) PERMISSIBLE PROJECTS.—Notwithstanding any
other provision of law, a demonstration project under this
section—
‘‘(1) may establish alternative means of resolv-
ing any dispute within the jurisdiction of the Equal
Employment Opportunity Commission, the Merit
Systems Protection Board, the Federal Labor Rela-
tions Authority, or the Federal Service Impasses
Panel; and
‘‘(2) may permit the Internal Revenue Service
to adopt any alternative dispute resolution procedure
that a private entity may lawfully adopt.
‘‘(g)
CONSULTATION
AND
COORDINATION.—The
Commissioner of Internal Revenue shall consult with the
Director of the Office of Personnel Management in the
development and implementation of each demonstration
project under this section and shall submit such reports
to the Director as the Director may require. The Director
or the Commissioner of Internal Revenue may terminate
a demonstration project under this section if either of
them determines that the project creates a substantial
hardship on, or is not in the best interests of, the public,
the Federal Government, employees, or qualified appli-
cants for employment with the Internal Revenue Service.
‘‘(h) TERMINATION.—Each demonstration project
under this section shall terminate before the end of the
5-year period beginning on the date on which the project
takes effect, except that any such project may continue
beyond the end of such period, for not to exceed 2 years,
if the Commissioner of Internal Revenue, with the concur-
rence of the Director, determines such extension is nec-
essary to validate the results of the project. Not later than
6 months before the end of the 5-year period and any ex-
tension under the preceding sentence, the Commissioner
of Internal Revenue shall, with respect to the demonstra-
tion project involved, submit a legislative proposal to the
Congress if the Commissioner determines that such
project should be made permanent, in whole or in part.’’.
(b) CLERICAL AMENDMENT.—The analysis for part
III of title 5, United States Code, is amended by adding
at the end the following:
‘‘Subpart I—Miscellaneous
‘‘93.
Personnel
Flexibilities
Relating
to
the
Internal
Revenue
Service ..............................................................................................
9301’’.
(c) EFFECTIVE DATE.—This section shall take effect
on the date of enactment of this Act.
TITLE II—ELECTRONIC FILING
SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION
RETURNS.
(a) IN GENERAL.—It is the policy of the Congress
that paperless filing should be the preferred and most con-
venient means of filing tax and information returns, and
that by the year 2007, no more than 20 percent of all
such returns should be filed on paper.
(b) STRATEGIC PLAN.—
(1) IN
GENERAL.—Not later than 180 days
after the date of the enactment of this Act, the Sec-
retary of the Treasury or the Secretary’s delegate
(hereafter in this section referred to as the ‘‘Sec-
retary’’) shall establish a plan to eliminate barriers,
provide
incentives,
and
use
competitive
market
forces to increase electronic filing gradually over the
next 10 years while maintaining processing times for
paper returns at 40 days. To the extent practicable,
such plan shall provide that all returns prepared
electronically for taxable years beginning after 2001
shall be filed electronically.
(2)
ELECTRONIC
COMMERCE
ADVISORY
GROUP.—To ensure that the Secretary receives input
from the private sector in the development and im-
plementation of the plan required by paragraph (1),
the Secretary shall convene an electronic commerce
advisory group to include representatives from the
small business community and from the tax practi-
tioner, preparer, and computerized tax processor
communities and other representatives from the elec-
tronic filing industry.
(c) PROMOTION OF ELECTRONIC FILING AND INCEN-
TIVES.—Section 6011 is amended by redesignating sub-
section (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection:
‘‘(f) PROMOTION OF ELECTRONIC FILING.—
‘‘(1) IN GENERAL.—The Secretary is authorized
to promote the benefits of and encourage the use of
electronic tax administration programs, as they be-
come available, through the use of mass communica-
tions and other means.
‘‘(2) INCENTIVES.—The Secretary may imple-
ment procedures to provide for the payment of ap-
propriate incentives for electronically filed returns.’’.
(d) ANNUAL REPORTS.—Not later than June 30 of
each calendar year after 1997, the Chairperson of the In-
ternal Revenue Service Oversight Board, the Secretary,
and the Chairperson of the electronic commerce advisory
group established under subsection (b)(2) shall report to
the Committees on Ways and Means, Appropriations, and
Government Reform and Oversight of the House of Rep-
resentatives, the Committees on Finance, Appropriations,
and Government Affairs of the Senate, and the Joint Com-
mittee on Taxation, on—
(1) the progress of the Internal Revenue Serv-
ice in meeting the goal of receiving electronically 80
percent of tax and information returns by 2007;
(2) the status of the plan required by sub-
section (b); and
(3) the legislative changes necessary to assist
the Internal Revenue Service in meeting such goal.
SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS
FILED ELECTRONICALLY.
(a) IN GENERAL.—Section 6071 (relating to time for
filing returns and other documents) is amended by redes-
ignating subsection (b) as subsection (c) and by inserting
after subsection (a) the following new subsection:
‘‘(b) ELECTRONICALLY FILED INFORMATION RE-
TURNS.—Returns made under subparts B and C of part
III of this subchapter which are filed electronically shall
be filed on or before March 31 of the year following the
calendar year to which such returns relate.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to returns required to be filed after
December 31, 1999.
SEC. 203. PAPERLESS ELECTRONIC FILING.
(a) IN GENERAL.—Section 6061 (relating to signing
of returns and other documents) is amended—
(1) by striking ‘‘Except as otherwise provided
by’’ and inserting the following:
‘‘(a) GENERAL RULE.—Except as otherwise provided
by subsection (b) and’’, and
(2) by adding at the end the following new sub-
section:
‘‘(b) ELECTRONIC SIGNATURES.—
‘‘(1) IN GENERAL.—The Secretary shall develop
procedures for the acceptance of signatures in digital
or other electronic form. Until such time as such
procedures are in place, the Secretary may waive the
requirement of a signature for all returns or classes
of returns, or may provide for alternative methods of
subscribing all returns, declarations, statements, or
other documents required or permitted to be made
or written under internal revenue laws and regula-
tions.
‘‘(2)
TREATMENT
OF
ALTERNATIVE
METH-
ODS.—Notwithstanding any other provision of law,
any return, declaration, statement or other docu-
ment filed without signature under the authority of
this subsection or verified, signed or subscribed
under any method adopted under paragraph (1)
shall be treated for all purposes (both civil and
criminal, including penalties for perjury) in the same
manner as though signed and subscribed. Any such
return, declaration, statement or other document
shall be presumed to have been actually submitted
and subscribed by the person on whose behalf it was
submitted.
‘‘(3) PUBLISHED
GUIDANCE.—The Secretary
shall publish guidance as appropriate to define and
implement any waiver of the signature require-
ments.’’.
(b) ACKNOWLEDGMENT OF ELECTRONIC FILING.—
Section 7502(c) is amended to read as follows:
‘‘(c) REGISTERED AND CERTIFIED MAILING; ELEC-
TRONIC FILING.—
‘‘(1) REGISTERED MAIL.—For purposes of this
section, if any return, claim, statement, or other
document, or payment, is sent by United States reg-
istered mail—
‘‘(A) such registration shall be prima facie
evidence that the return, claim, statement, or
other document was delivered to the agency, of-
ficer, or office to which addressed, and
‘‘(B) the date of registration shall be
deemed the postmark date.
‘‘(2) CERTIFIED MAIL; ELECTRONIC FILING.—
The Secretary is authorized to provide by regula-
tions the extent to which the provisions of paragraph
(1) with respect to prima facie evidence of delivery
and the postmark date shall apply to certified mail
and electronic filing.’’.
(c) ESTABLISHMENT OF PROCEDURES FOR OTHER
INFORMATION.—In the case of taxable periods beginning
after December 31, 1998, the Secretary of the Treasury
or the Secretary’s delegate shall, to the extent practicable,
establish procedures to accept, in electronic form, any
other information, statements, elections, or schedules,
from taxpayers filing returns electronically, so that such
taxpayers will not be required to file any paper.
(d) PROCEDURES FOR COMMUNICATIONS BETWEEN
IRS AND PREPARER OF ELECTRONICALLY FILED RE-
TURNS.—The Secretary shall establish procedures for tax-
payers to authorize, on electronically filed returns, the pre-
parer of such returns to communicate with the Internal
Revenue Service on matters included on such returns.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 204. RETURN-FREE TAX SYSTEM.
(a) IN GENERAL.—The Secretary of the Treasury or
the Secretary’s delegate shall develop procedures for the
implementation of a return-free tax system under which
appropriate individuals would be permitted to comply with
the Internal Revenue Code of 1986 without making the
return required under section 6012 of such Code for tax-
able years beginning after 2007.
(b) REPORT.—Not later than June 30 of each cal-
endar year after 1999, such Secretary shall report to the
Committee on Ways and Means of the House of Rep-
resentatives, the Committee on Finance of the Senate, and
the Joint Committee on Taxation on—
(1) what additional resources the Internal Reve-
nue Service would need to implement such a system,
(2) the changes to the Internal Revenue Code
of 1986 that could enhance the use of such a sys-
tem,
(3) the procedures developed pursuant to sub-
section (a), and
(4) the number and classes of taxpayers that
would be permitted to use the procedures developed
pursuant to subsection (a).
SEC. 205. ACCESS TO ACCOUNT INFORMATION.
Not later than December 31, 2006, the Secretary of
the Treasury or the Secretary’s delegate shall develop pro-
cedures under which a taxpayer filing returns electroni-
cally would be able to review the taxpayer’s account elec-
tronically, but only if all necessary safeguards to ensure
the privacy of such account information are in place.
TITLE III—TAXPAYER
PROTECTION AND RIGHTS
SEC. 300. SHORT TITLE.
This title may be cited as the ‘‘Taxpayer Bill of
Rights 3’’.
Subtitle A—Burden of Proof
SEC. 301. BURDEN OF PROOF.
(a) IN GENERAL.—Chapter 76 (relating to judicial
proceedings) is amended by adding at the end the follow-
ing new subchapter:
‘‘Subchapter E—Burden of Proof
‘‘Sec. 7491. Burden of proof.
‘‘SEC. 7491. BURDEN OF PROOF.
‘‘(a) GENERAL RULE.—The Secretary shall have the
burden of proof in any court proceeding with respect to
any factual issue relevant to ascertaining the income tax
liability of a taxpayer.
‘‘(b) LIMITATIONS.—Subsection (a) shall only apply
with respect to an issue if—
‘‘(1) the taxpayer asserts a reasonable dispute
with respect to such issue,
‘‘(2) the taxpayer has fully cooperated with the
Secretary with respect to such issue, including pro-
viding, within a reasonable period of time, access to
and inspection of all witnesses, information, and
documents within the control of the taxpayer, as rea-
sonably requested by the Secretary, and
‘‘(3) in the case of a partnership, corporation,
or
trust,
the
taxpayer
is
described
in
section
7430(c)(4)(A)(ii).
‘‘(c) SUBSTANTIATION.—Nothing in this section shall
be construed to override any requirement of this title to
substantiate any item.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 6201 is amended by striking sub-
section (d) and redesignating subsection (e) as sub-
section (d).
(2) The table of subchapters for chapter 76 is
amended by adding at the end the following new
item:
‘‘Subchapter E. Burden of proof.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to court proceedings arising in con-
nection with examinations commencing after the date of
the enactment of this Act.
Subtitle B—Proceedings by
Taxpayers
SEC. 311. EXPANSION OF AUTHORITY TO AWARD COSTS
AND CERTAIN FEES.
(a) AWARD OF HIGHER ATTORNEY’S FEES BASED
ON COMPLEXITY
OF ISSUES.—Clause (iii) of section
7430(c)(1)(B) (relating to the award of costs and certain
fees) is amended by inserting ‘‘the difficulty of the issues
presented in the case, or the local availability of tax exper-
tise,’’ before ‘‘justifies a higher rate’’.
(b) AWARD OF ADMINISTRATIVE COSTS INCURRED
AFTER
30-DAY
LETTER.—Paragraph
(2)
of
section
7430(c) is amended by striking the last sentence and in-
serting the following:
‘‘Such term shall only include costs incurred on or
after whichever of the following is the earliest: (i)
the date of the receipt by the taxpayer of the notice
of the decision of the Internal Revenue Service Of-
fice of Appeals, (ii) the date of the notice of defi-
ciency, or (iii) the date on which the 1st letter of
proposed deficiency which allows the taxpayer an op-
portunity for administrative review in the Internal
Revenue Service Office of Appeals is sent.’’.
(c) AWARD
OF FEES
FOR CERTAIN ADDITIONAL
SERVICES.—Paragraph (3) of section 7430(c) is amended
to read as follows:
‘‘(3) ATTORNEY’S FEES.—
‘‘(A) IN GENERAL.—For purposes of para-
graphs (1) and (2), fees for the services of an
individual (whether or not an attorney) who is
authorized to practice before the Tax Court or
before the Internal Revenue Service shall be
treated as fees for the services of an attorney.
‘‘(B) PRO BONO SERVICES.—In any case in
which the court could have awarded attorney’s
fees under subsection (a) but for the fact that
an individual is representing the prevailing
party for no fee or for a fee which (taking into
account all the facts and circumstances) is no
more than a nominal fee, the court may also
award
a
judgment
or
settlement
for
such
amounts as the court determines to be appro-
priate (based on hours worked and costs ex-
pended) for services of such individual but only
if such award is paid to such individual or such
individual’s employer.’’.
(d) DETERMINATION
OF WHETHER POSITION
OF
UNITED STATES IS SUBSTANTIALLY JUSTIFIED.—Sub-
paragraph (B) of section 7430(c)(4) is amended by redes-
ignating clause (iii) as clause (iv) and by inserting after
clause (ii) the following new clause:
‘‘(iii) EFFECT
OF
LOSING
ON
SUB-
STANTIALLY
SIMILAR
ISSUES.—In deter-
mining for purposes of clause (i) whether
the position of the United States was sub-
stantially justified, the court shall take
into account whether the United States
has lost in courts of appeal for other cir-
cuits on substantially similar issues.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs incurred (and, in the case
of the amendment made by subsection (c), services per-
formed) more than 180 days after the date of the enact-
ment of this Act.
SEC. 312. CIVIL DAMAGES FOR NEGLIGENCE IN COLLEC-
TION ACTIONS.
(a) IN GENERAL.—Section 7433 (relating to civil
damages for certain unauthorized collection actions) is
amended—
(1) in subsection (a), by inserting ‘‘, or by rea-
son
of
negligence,’’
after
‘‘recklessly
or
inten-
tionally’’, and
(2) in subsection (b)—
(A) in the matter preceding paragraph (1),
by inserting ‘‘($100,000, in the case of neg-
ligence)’’ after ‘‘$1,000,000’’, and
(B) in paragraph (1), by inserting ‘‘or neg-
ligent’’ after ‘‘reckless or intentional’’.
(b) REQUIREMENT THAT ADMINISTRATIVE REM-
EDIES
BE
EXHAUSTED.—Paragraph
(1)
of
section
7433(d) is amended to read as follows:
‘‘(1)
REQUIREMENT
THAT
ADMINISTRATIVE
REMEDIES BE EXHAUSTED.—A judgment for dam-
ages shall not be awarded under subsection (b) un-
less the court determines that the plaintiff has ex-
hausted the administrative remedies available to
such plaintiff within the Internal Revenue Service.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to actions of officers or employees
of the Internal Revenue Service after the date of the en-
actment of this Act.
SEC. 313. INCREASE IN SIZE OF CASES PERMITTED ON
SMALL CASE CALENDAR.
(a) IN GENERAL.—Subsection (a) of section 7463
(relating to disputes involving $10,000 or less) is amended
by striking ‘‘$10,000’’ each place it appears and inserting
‘‘$25,000’’.
(b) CONFORMING AMENDMENTS.—
(1) The section heading for section 7463 is
amended
by
striking
‘‘$10,000’’
and
inserting
‘‘$25,000’’.
(2) The item relating to section 7463 in the
table of sections for part II of subchapter C of chap-
ter 76 is amended by striking ‘‘$10,000’’ and insert-
ing ‘‘$25,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to proceedings commencing after
the date of the enactment of this Act.
Subtitle
C—Relief
for
Innocent
Spouses and for Taxpayers Un-
able To Manage Their Financial
Affairs Due to Disabilities
SEC. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LI-
ABILITY IN CERTAIN CASES.
(a) IN GENERAL.—Subpart B of part II of sub-
chapter A of chapter 61 is amended by inserting after sec-
tion 6014 the following new section:
‘‘SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX
COURT.
‘‘(a) SPOUSE RELIEVED OF LIABILITY IN CERTAIN
CASES.—
‘‘(1)
IN
GENERAL.—Under
procedures
pre-
scribed by the Secretary, if—
‘‘(A) a joint return has been made under
section 6013 for a taxable year,
‘‘(B) on such return there is an under-
statement of tax attributable to erroneous items
of 1 spouse,
‘‘(C) the other spouse establishes that in
signing the return he or she did not know, and
had no reason to know, that there was such un-
derstatement,
‘‘(D) taking into account all the facts and
circumstances, it is inequitable to hold the other
spouse liable for the deficiency in tax for such
taxable year attributable to such understate-
ment, and
‘‘(E) the other spouse claims (in such form
as the Secretary may prescribe) the benefits of
this subsection not later than the date which is
2 years after the date of the assessment of such
deficiency,
then the other spouse shall be relieved of liability for
tax
(including
interest,
penalties,
and
other
amounts) for such taxable year to the extent such li-
ability is attributable to such understatement.
‘‘(2) APPORTIONMENT OF RELIEF.—If a spouse
who, but for paragraph (1)(C), would be relieved of
liability under paragraph (1), establishes that in
signing the return such spouse did not know, and
had no reason to know, the extent of such under-
statement, then such spouse shall be relieved of li-
ability for tax (including interest, penalties, and
other amounts) for such taxable year to the extent
that such liability is attributable to the portion of
such understatement of which such spouse did not
know and had no reason to know.
‘‘(3) UNDERSTATEMENT.—For purposes of this
subsection, the term ‘understatement’ has the mean-
ing given to such term by section 6662(d)(2)(A).
‘‘(4) SPECIAL
RULE
FOR
COMMUNITY
PROP-
ERTY INCOME.—For purposes of this subsection, the
determination of the spouse to whom items of gross
income (other than gross income from property) are
attributable shall be made without regard to commu-
nity property laws.
‘‘(b) PETITION FOR REVIEW BY TAX COURT.—In the
case of an individual who has filed a claim under sub-
section (a) within the period specified in subsection
(a)(1)(E)—
‘‘(1) IN GENERAL.—Such individual may peti-
tion the Tax Court (and the Tax Court shall have
jurisdiction) to determine such claim if such petition
is filed during the 90-day period beginning on the
earlier of—
‘‘(A) the date which is 6 months after the
date such claim is filed with the Secretary, or
‘‘(B) the date on which the Secretary mails
by certified or registered mail a notice to such
individual denying such claim.
Such 90-day period shall be determined by not
counting Saturday, Sunday, or a legal holiday in the
District of Columbia as the last day of such period.
‘‘(2) RESTRICTIONS
APPLICABLE
TO
COLLEC-
TION OF ASSESSMENT.—
‘‘(A) IN GENERAL.—Except as otherwise
provided in section 6851 or 6861, no levy or
proceeding in court for collection of any assess-
ment to which such claim relates shall be made,
begun, or prosecuted, until the expiration of the
90-day period described in paragraph (1), nor,
if a petition has been filed with the Tax Court,
until the decision of the Tax Court has become
final. Rules similar to the rules of section 7485
shall apply with respect to the collection of such
assessment.
‘‘(B) AUTHORITY TO ENJOIN COLLECTION
ACTIONS.—Notwithstanding the provisions of
section 7421(a), the beginning of such proceed-
ing or levy during the time the prohibition
under subparagraph (A) is in force may be en-
joined by a proceeding in the proper court, in-
cluding the Tax Court. The Tax Court shall
have no jurisdiction under this paragraph to en-
join any action or proceeding unless a timely
petition for a determination of such claim has
been filed and then only in respect of the
amount of the assessment to which such claim
relates.
‘‘(C) JEOPARDY COLLECTION.—If the Sec-
retary makes a finding that the collection of the
tax is in jeopardy, nothing in this subsection
shall prevent the immediate collection of such
tax.
‘‘(c) SUSPENSION OF RUNNING OF PERIOD OF LIMI-
TATIONS.—The running of the period of limitations in sec-
tion 6502 on the collection of the assessment to which the
petition under subsection (b) relates shall be suspended
for the period during which the Secretary is prohibited by
subsection (b) from collecting by levy or a proceeding in
court and for 60 days thereafter.
‘‘(d) APPLICABLE RULES.—
‘‘(1) ALLOWANCE OF APPLICATION.—Except as
provided in paragraph (2), notwithstanding any
other law or rule of law (other than section 6512(b),
7121, or 7122), credit or refund shall be allowed or
made to the extent attributable to the application of
this section.
‘‘(2) RES JUDICATA.—In the case of any claim
under subsection (a), the determination of the Tax
Court in any prior proceeding for the same taxable
periods in which the decision has become final, shall
be conclusive except with respect to the qualification
of the spouse for relief which was not an issue in
such proceeding. The preceding sentence shall not
apply if the Tax Court determines that the spouse
participated meaningfully in such prior proceeding.
‘‘(3) LIMITATION
ON
TAX
COURT
JURISDIC-
TION.—If a suit for refund is begun by either spouse
pursuant to section 6532, the Tax Court shall lose
jurisdiction of the spouse’s action under this section
to whatever extent jurisdiction is acquired by the
district court or the United States Court of Federal
Claims over the taxable years that are the subject of
the suit for refund.’’.
(b) SEPARATE FORM FOR APPLYING FOR SPOUSAL
RELIEF.—Not later than 180 days after the date of the
enactment of this Act, the Secretary of the Treasury shall
develop a separate form with instructions for use by tax-
payers in applying for relief under section 6015(a) of the
Internal Revenue Code of 1986, as added by this section.
(c) CONFORMING AMENDMENTS.—
(1) Section 6013 is amended by striking sub-
section (e).
(2) Subparagraph (A) of section 6230(c)(5) is
amended by striking ‘‘section 6013(e)’’ and inserting
‘‘section 6015’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart B of part II of subchapter A of chapter 61
is amended by inserting after the item relating to section
6014 the following new item:
‘‘Sec. 6015. Innocent spouse relief; petition to Tax Court.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to understatements for taxable
years beginning after the date of the enactment of this
Act.
SEC. 322. SUSPENSION OF STATUTE OF LIMITATIONS ON
FILING REFUND CLAIMS DURING PERIODS
OF DISABILITY.
(a) IN GENERAL.—Section 6511 (relating to limita-
tions on credit or refund) is amended by redesignating
subsection (h) as subsection (i) and by inserting after sub-
section (g) the following new subsection:
‘‘(h) RUNNING OF PERIODS OF LIMITATION SUS-
PENDED WHILE TAXPAYER IS UNABLE TO MANAGE FI-
NANCIAL AFFAIRS DUE TO DISABILITY.—
‘‘(1) IN GENERAL.—In the case of an individ-
ual, the running of the periods specified in sub-
sections (a), (b), and (c) shall be suspended during
any period of such individual’s life that such individ-
ual is financially disabled.
‘‘(2) FINANCIALLY DISABLED.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an individual is financially disabled
if such individual is unable to manage his fi-
nancial affairs by reason of his medically deter-
minable physical or mental impairment which
can be expected to result in death or which has
lasted or can be expected to last for a continu-
ous period of not less than 12 months. An indi-
vidual shall not be considered to have such an
impairment unless proof of the existence thereof
is furnished in such form and manner as the
Secretary may require.
‘‘(B) EXCEPTION WHERE INDIVIDUAL HAS
GUARDIAN,
ETC.—An individual shall not be
treated as financially disabled during any pe-
riod that such individual’s spouse or any other
person is authorized to act on behalf of such in-
dividual in financial matters.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to periods of disability before,
on, or after the date of the enactment of this Act but shall
not apply to any claim for credit or refund which (without
regard to such amendment) is barred by the operation of
any law or rule of law (including res judicata) as of Janu-
ary 1, 1998.
Subtitle D—Provisions Relating to
Interest
SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL
ON OVERLAPPING PERIODS OF INTEREST ON
INCOME TAX OVERPAYMENTS AND UNDER-
PAYMENTS.
(a) IN GENERAL.—Section 6621 (relating to deter-
mination of rate of interest) is amended by adding at the
end the following new subsection:
‘‘(d) ELIMINATION OF INTEREST ON OVERLAPPING
PERIODS OF INCOME TAX OVERPAYMENTS AND UNDER-
PAYMENTS.—To the extent that, for any period, interest
is payable under subchapter A and allowable under sub-
chapter B on equivalent underpayments and overpayments
by the same taxpayer of tax imposed by chapters 1 and
2, the net rate of interest under this section on such
amounts shall be zero for such period.’’.
(b) CONFORMING AMENDMENT.—Subsection (f) of
section 6601 (relating to satisfaction by credits) is amend-
ed by adding at the end the following new sentence: ‘‘The
preceding sentence shall not apply to the extent that sec-
tion 6621(d) applies.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest for calendar quarters
beginning after the date of the enactment of this Act.
SEC. 332. INCREASE IN OVERPAYMENT RATE PAYABLE TO
TAXPAYERS OTHER THAN CORPORATIONS.
(a) IN GENERAL.—Subparagraph (B) of section
6621(a)(1) (defining overpayment rate) is amended to
read as follows:
‘‘(B) 3 percentage points (2 percentage
points in the case of a corporation).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to interest for calendar quarters
beginning after the date of the enactment of this Act.
Subtitle
E—Protections
for
Tax-
payers Subject to Audit or Col-
lection Activities
SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO
TAXPAYER’S
DEALINGS
WITH
NON-ATTOR-
NEYS AUTHORIZED TO PRACTICE BEFORE IN-
TERNAL REVENUE SERVICE.
Section 7602 (relating to examination of books and
witnesses) is amended by adding at the end the following
new subsection:
‘‘(d) PRIVILEGE OF CONFIDENTIALITY EXTENDED
TO TAXPAYER’S DEALINGS WITH NON-ATTORNEYS AU-
THORIZED TO PRACTICE BEFORE INTERNAL REVENUE
SERVICE.—
‘‘(1) IN
GENERAL.—In any noncriminal pro-
ceeding before the Internal Revenue Service, the tax-
payer shall be entitled to the same common law pro-
tections of confidentiality with respect to tax advice
furnished by any qualified individual (in a manner
consistent with State law for such individual’s pro-
fession) as the taxpayer would have if such individ-
ual were an attorney.
‘‘(2) QUALIFIED INDIVIDUAL.—For purposes of
paragraph (1), the term ‘qualified individual’ means
any individual (other than an attorney) who is au-
thorized to practice before the Internal Revenue
Service.’’.
SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER
ASSISTANCE ORDERS.
Section 7811(a) (relating to taxpayer assistance or-
ders) is amended—
(1) by striking ‘‘Upon application’’ and insert-
ing the following:
‘‘(1) IN GENERAL.—Upon application’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new
paragraphs:
‘‘(2) ISSUANCE OF TAXPAYER ASSISTANCE OR-
DERS.—For purposes of determining whether to
issue a taxpayer assistance order, the Taxpayer Ad-
vocate shall consider the following factors, among
others:
‘‘(A) Whether there is an immediate threat
of adverse action.
‘‘(B) Whether there has been an unreason-
able delay in resolving taxpayer account prob-
lems.
‘‘(C) Whether the taxpayer will have to pay
significant costs (including fees for professional
representation) if relief is not granted.
‘‘(D) Whether the taxpayer will suffer ir-
reparable injury, or a long-term adverse impact,
if relief is not granted.
‘‘(3) STANDARD WHERE ADMINISTRATIVE GUID-
ANCE NOT FOLLOWED.—In cases where any Internal
Revenue Service employee is not following applicable
published administrative guidance (including the In-
ternal Revenue Manual), the Taxpayer Advocate
shall construe the factors taken into account in de-
termining whether to issue a taxpayer assistance
order in the manner most favorable to the tax-
payer.’’.
SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECH-
NIQUES.
Section 7602 is amended by adding at the end the
following new subsection:
‘‘(e) LIMITATION ON EXAMINATION ON UNREPORTED
INCOME.—The Secretary shall not use financial status or
economic reality examination techniques to determine the
existence of unreported income of any taxpayer unless the
Secretary has a reasonable indication that there is a likeli-
hood of such unreported income.’’.
SEC. 344. LIMITATION ON AUTHORITY TO REQUIRE PRO-
DUCTION OF COMPUTER SOURCE CODE.
(a) IN GENERAL.—Section 7602 is amended by add-
ing at the end the following new subsection:
‘‘(f) LIMITATION ON AUTHORITY TO REQUIRE PRO-
DUCTION OF COMPUTER SOURCE CODE.—
‘‘(1)
IN
GENERAL.—No
summons
may
be
issued under this title, and the Secretary may not
begin any action under section 7604 to enforce any
summons, to produce or examine any tax-related
computer source code.
‘‘(2) EXCEPTION
WHERE
INFORMATION
NOT
OTHERWISE
AVAILABLE
TO
VERIFY
CORRECTNESS
OF
ITEM
ON
RETURN.—Paragraph (1) shall not
apply to any portion of a tax-related computer
source code if—
‘‘(A) the Secretary is unable to otherwise
reasonably ascertain the correctness of any item
on a return from—
‘‘(i)
the
taxpayer’s
books,
papers,
records, or other data, or
‘‘(ii) the computer software program
and the associated data which, when exe-
cuted, produces the output to prepare the
return for the period involved, and
‘‘(B) the Secretary identifies with reason-
able specificity such portion as to be used to
verify the correctness of such item.
The Secretary shall be treated as meeting the re-
quirements of subparagraphs (A) and (B) after the
90th day after the Secretary makes a formal request
to the taxpayer and the owner or developer of the
computer software program for the material de-
scribed in subparagraph (A)(ii) if such material is
not provided before the close of such 90th day.
‘‘(3) OTHER EXCEPTIONS.—Paragraph (1) shall
not apply to—
‘‘(A) any inquiry into any offense con-
nected with the administration or enforcement
of the internal revenue laws, and
‘‘(B) any tax-related computer source code
developed by (or primarily for the benefit of)
the taxpayer or a related person (within the
meaning of section 267 or 707(b)) for internal
use by the taxpayer or such person and not for
commercial distribution.
‘‘(4)
TAX-RELATED
COMPUTER
SOURCE
CODE.—For purposes of this subsection, the term
‘tax-related computer source code’ means—
‘‘(A) the computer source code for any
computer software program for accounting, tax
return preparation or compliance, or tax plan-
ning, or
‘‘(B) design and development materials re-
lated to such a software program (including
program notes and memoranda).
‘‘(5) RIGHT TO CONTEST SUMMONS.—The de-
termination of whether the requirements of subpara-
graphs (A) and (B) of paragraph (2) are met or
whether any exception under paragraph (3) applies
may be contested in any proceeding under section
7604.
‘‘(6) PROTECTION
OF
TRADE
SECRETS
AND
OTHER CONFIDENTIAL INFORMATION.—In any court
proceeding to enforce a summons for any portion of
a tax-related computer source code, the court may
issue any order necessary to prevent the disclosure
of trade secrets or other confidential information
with respect to such source code, including providing
that any information be placed under seal to be
opened only as directed by the court.’’.
(b) APPLICATION
OF SPECIAL PROCEDURES
FOR
THIRD-PARTY SUMMONSES.—Paragraph (3) of section
7609(a) (defining third-party recordkeeper) is amended by
striking ‘‘and’’ at the end of subparagraph (H), by strik-
ing a period at the end of subparagraph (I) and inserting
‘‘, and’’, and by adding at the end the following:
‘‘(J) any owner or developer of a tax-relat-
ed computer source code (as defined in section
7602(f)(4)).
Subparagraph (J) shall apply only with respect to a
summons requiring the production of the source
code referred to in subparagraph (J) or the program
and data described in section 7602(f)(2)(A)(ii) to
which such source code relates.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to summonses issued more than
90 days after the date of the enactment of this Act.
SEC.
345.
PROCEDURES
RELATING
TO
EXTENSIONS
OF
STATUTE OF LIMITATIONS BY AGREEMENT.
(a) IN GENERAL.—Paragraph (4) of section 6501(c)
(relating to the period for limitations on assessment and
collection) is amended—
(1) by striking ‘‘Where’’ and inserting the fol-
lowing:
‘‘(A) IN GENERAL.—Where’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B) NOTICE TO TAXPAYER OF RIGHT TO
REFUSE OR LIMIT EXTENSION.—The Secretary
shall notify the taxpayer of the taxpayer’s right
to refuse to extend the period of limitations, or
to limit such extension to particular issues, on
each occasion when the taxpayer is requested to
provide such consent.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests to extend the period
of limitations made after the date of the enactment of this
Act.
SEC. 346. OFFERS-IN-COMPROMISE.
(a) ALLOWANCES FOR BASIC LIVING EXPENSES.—
Section 7122 (relating to offers-in-compromise) is amend-
ed by adding at the end the following new subsection:
‘‘(c) ALLOWANCES FOR BASIC LIVING EXPENSES.—
The Secretary shall develop and publish schedules of na-
tional and local allowances designed to provide that tax-
payers entering into a compromise have an adequate
means to provide for basic living expenses.’’.
(b) PREPARATION OF STATEMENT RELATING TO OF-
FERS-IN-COMPROMISE.—The Secretary of the Treasury
shall prepare a statement which sets forth in simple, non-
technical terms the rights of a taxpayer and the obliga-
tions of the Internal Revenue Service relating to offers-
in-compromise. Such statement shall—
(1) advise taxpayers who have entered into a
compromise agreement of the advantages of prompt-
ly notifying the Internal Revenue Service of any
change of address or marital status, and
(2) provide notice to taxpayers that in the case
of a compromise agreement terminated due to the
actions of 1 spouse or former spouse, the Internal
Revenue Service will, upon application, reinstate
such agreement with the spouse or former spouse
who remains in compliance with such agreement.
SEC. 347. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES
FOR FILING TAX COURT PETITION.
(a) IN GENERAL.—The Secretary of the Treasury or
the Secretary’s delegate shall include on each notice of de-
ficiency under section 6212 of the Internal Revenue Code
of 1986 the date determined by such Secretary (or dele-
gate) as the last day on which the taxpayer may file a
petition with the Tax Court.
(b) LATER FILING DEADLINES SPECIFIED ON NO-
TICE OF DEFICIENCY TO BE BINDING.—Subsection (a)
of section 6213 (relating to restrictions applicable to defi-
ciencies; petition to Tax Court) is amended by adding at
the end the following new sentence: ‘‘Any petition filed
with the Tax Court on or before the last date specified
for filing such petition by the Secretary in the notice of
deficiency shall be treated as timely filed.’’.
(c)
EFFECTIVE
DATE.—Subsection
(a)
and
the
amendment made by subsection (b) shall apply to notices
mailed after December 31, 1998.
SEC. 348. REFUND OR CREDIT OF OVERPAYMENTS BEFORE
FINAL DETERMINATION.
(a) TAX COURT PROCEEDINGS.—Subsection (a) of
section 6213 is amended—
(1) by striking ‘‘, including the Tax Court.’’
and inserting ‘‘, including the Tax Court, and a re-
fund may be ordered by such court of any amount
collected within the period during which the Sec-
retary is prohibited from collecting by levy or
through a proceeding in court under the provisions
of this subsection.’’, and
(2) by striking ‘‘to enjoin any action or pro-
ceeding’’ and inserting ‘‘to enjoin any action or pro-
ceeding or order any refund’’.
(b) OTHER PROCEEDINGS.—Subsection (a) of section
6512 is amended by striking the period at the end of para-
graph (4) and inserting ‘‘, and’’, and by inserting after
paragraph (4) the following new paragraphs:
‘‘(5) As to any amount collected within the pe-
riod during which the Secretary is prohibited from
making the assessment or from collecting by levy or
through a proceeding in court under the provisions
of section 6213(a), and
‘‘(6) As to overpayments the Secretary is au-
thorized to refund or credit pending appeal as pro-
vided in subsection (b).’’.
(c) REFUND OR CREDIT PENDING APPEAL.—Para-
graph (1) of section 6512(b) is amended by adding at the
end the following new sentence: ‘‘If a notice of appeal in
respect of the decision of the Tax Court is filed under sec-
tion 7483, the Secretary is authorized to refund or credit
the overpayment determined by the Tax Court to the ex-
tent the overpayment is not contested on appeal.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 349. THREAT OF AUDIT PROHIBITED TO COERCE TIP
REPORTING
ALTERNATIVE
COMMITMENT
AGREEMENTS.
The Secretary of the Treasury or the Secretary’s del-
egate shall instruct employees of the Internal Revenue
Service that they may not threaten to audit any taxpayer
in an attempt to coerce the taxpayer into entering into
a Tip Reporting Alternative Commitment Agreement.
Subtitle F—Disclosures to
Taxpayers
SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABIL-
ITY.
The Secretary of the Treasury or the Secretary’s del-
egate shall, as soon as practicable, but not later than 180
days after the date of the enactment of this Act, establish
procedures to clearly alert married taxpayers of their joint
and several liabilities on all appropriate publications and
instructions.
SEC. 352. EXPLANATION OF TAXPAYERS’ RIGHTS IN INTER-
VIEWS WITH THE INTERNAL REVENUE SERV-
ICE.
The Secretary of the Treasury or the Secretary’s del-
egate shall, as soon as practicable, but not later than 180
days after the date of the enactment of this Act, revise
the statement required by section 6227 of the Omnibus
Taxpayer Bill of Rights (Internal Revenue Service Publi-
cation No. 1) to more clearly inform taxpayers of their
rights—
(1) to be represented at interviews with the In-
ternal Revenue Service by any person authorized to
practice before the Internal Revenue Service, and
(2) to suspend an interview pursuant to section
7521(b)(2) of the Internal Revenue Code of 1986.
SEC. 353. DISCLOSURE OF CRITERIA FOR EXAMINATION SE-
LECTION.
(a) IN GENERAL.—The Secretary of the Treasury or
the Secretary’s delegate shall, as soon as practicable, but
not later than 180 days after the date of the enactment
of this Act, incorporate into the statement required by sec-
tion 6227 of the Omnibus Taxpayer Bill of Rights (Inter-
nal Revenue Service Publication No. 1) a statement which
sets forth in simple and nontechnical terms the criteria
and procedures for selecting taxpayers for examination.
Such statement shall not include any information the dis-
closure of which would be detrimental to law enforcement,
but shall specify the general procedures used by the Inter-
nal Revenue Service, including whether taxpayers are se-
lected for examination on the basis of information avail-
able in the media or on the basis of information provided
to the Internal Revenue Service by informants.
(b)
TRANSMISSION
TO
COMMITTEES
OF
CON-
GRESS.—The Secretary shall transmit drafts of the state-
ment required under subsection (a) (or proposed revisions
to any such statement) to the Committee on Ways and
Means of the House of Representatives, the Committee on
Finance of the Senate, and the Joint Committee on Tax-
ation on the same day.
SEC. 354. EXPLANATIONS OF APPEALS AND COLLECTION
PROCESS.
The Secretary of the Treasury or the Secretary’s del-
egate shall, as soon as practicable but not later than 180
days after the date of the enactment of this Act, include
with any 1st letter of proposed deficiency which allows the
taxpayer an opportunity for administrative review in the
Internal Revenue Service Office of Appeals an explanation
of the appeals process and the collection process with re-
spect to such proposed deficiency.
Subtitle G—Low Income Taxpayer
Clinics
SEC. 361. LOW INCOME TAXPAYER CLINICS.
(a) IN GENERAL.—Chapter 77 (relating to mis-
cellaneous provisions) is amended by adding at the end
the following new section:
‘‘SEC. 7525. LOW INCOME TAXPAYER CLINICS.
‘‘(a) IN GENERAL.—The Secretary may, subject to
the availability of appropriated funds, make grants to pro-
vide matching funds for the development, expansion, or
continuation of qualified low income taxpayer clinics.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED LOW INCOME TAXPAYER CLIN-
IC.—
‘‘(A) IN
GENERAL.—The term ‘qualified
low income taxpayer clinic’ means a clinic
that—
‘‘(i) does not charge more than a
nominal fee for its services (except for re-
imbursement of actual costs incurred), and
‘‘(ii)(I) represents low income tax-
payers in controversies with the Internal
Revenue Service, or
‘‘(II) operates programs to inform in-
dividuals for whom English is a second
language about their rights and respon-
sibilities under this title.
‘‘(B) REPRESENTATION OF LOW INCOME
TAXPAYERS.—A clinic meets the requirements
of subparagraph (A)(ii)(I) if—
‘‘(i) at least 90 percent of the tax-
payers represented by the clinic have in-
comes which do not exceed 250 percent of
the poverty level, as determined in accord-
ance with criteria established by the Direc-
tor of the Office of Management and
Budget, and
‘‘(ii) the amount in controversy for
any taxable year generally does not exceed
the amount specified in section 7463.
‘‘(2) CLINIC.—The term ‘clinic’ includes—
‘‘(A) a clinical program at an accredited
law school in which students represent low in-
come taxpayers in controversies arising under
this title, and
‘‘(B) an organization described in section
501(c) and exempt from tax under section
501(a) which satisfies the requirements of para-
graph (1) through representation of taxpayers
or referral of taxpayers to qualified representa-
tives.
‘‘(3) QUALIFIED REPRESENTATIVE.—The term
‘qualified
representative’
means
any
individual
(whether or not an attorney) who is authorized to
practice before the Internal Revenue Service or the
applicable court.
‘‘(c) SPECIAL RULES AND LIMITATIONS.—
‘‘(1) AGGREGATE
LIMITATION.—Unless other-
wise provided by specific appropriation, the Sec-
retary shall not allocate more than $3,000,000 per
year (exclusive of costs of administering the pro-
gram) to grants under this section.
‘‘(2) LIMITATION
ON
ANNUAL
GRANTS
TO
A
CLINIC.—The aggregate amount of grants which
may be made under this section to a clinic for a year
shall not exceed $100,000.
‘‘(3) MULTI-YEAR GRANTS.—Upon application
of a qualified low income taxpayer clinic, the Sec-
retary is authorized to award a multi-year grant not
to exceed 3 years.
‘‘(4) CRITERIA FOR AWARDS.—In determining
whether to make a grant under this section, the Sec-
retary shall consider—
‘‘(A) the numbers of taxpayers who will be
served by the clinic, including the number of
taxpayers in the geographical area for whom
English is a second language,
‘‘(B) the existence of other low income tax-
payer clinics serving the same population,
‘‘(C) the quality of the program offered by
the low income taxpayer clinic, including the
qualifications of its administrators and qualified
representatives, and its record, if any, in pro-
viding service to low income taxpayers, and
‘‘(D) alternative funding sources available
to the clinic, including amounts received from
other grants and contributions, and the endow-
ment and resources of the institution sponsor-
ing the clinic.
‘‘(5) REQUIREMENT OF MATCHING FUNDS.—A
low income taxpayer clinic must provide matching
funds on a dollar for dollar basis for all grants pro-
vided under this section. Matching funds may in-
clude—
‘‘(A) the salary (including fringe benefits)
of individuals performing services for the clinic,
and
‘‘(B) the cost of equipment used in the
clinic.
Indirect expenses, including general overhead of the
institution sponsoring the clinic, shall not be counted
as matching funds.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 is amended by adding at the end the follow-
ing new section:
‘‘Sec. 7525. Low income taxpayer clinics.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
Subtitle H—Other Matters
SEC. 371. ACTIONS FOR REFUND WITH RESPECT TO CER-
TAIN ESTATES WHICH HAVE ELECTED THE
INSTALLMENT METHOD OF PAYMENT.
(a) IN GENERAL.—Section 7422 is amended by re-
designating subsection (j) as subsection (k) and by insert-
ing after subsection (i) the following new subsection:
‘‘(j) SPECIAL RULE FOR ACTIONS WITH RESPECT TO
ESTATES FOR WHICH AN ELECTION UNDER SECTION
6166 IS MADE.—
‘‘(1) IN GENERAL.—The district courts of the
United States and the United States Court of Fed-
eral Claims shall have jurisdiction over any action
brought by the representative of an estate to which
this subsection applies to determine the correct
amount of the estate tax liability of such estate (or
for any refund with respect thereto) even if the full
amount of such liability has not been paid.
‘‘(2)
ESTATES
TO
WHICH
SUBSECTION
AP-
PLIES.—This subsection shall apply to any estate if,
as of the date the action is filed—
‘‘(A) an election under section 6166 is in
effect with respect to such estate,
‘‘(B) no portion of the installments payable
under such section have been accelerated, and
‘‘(C) all installments the due date for
which is on or before the date the action is filed
have been paid.
‘‘(3) PROHIBITION
ON
COLLECTION
OF
DIS-
ALLOWED
LIABILITY.—If
the
court
redetermines
under paragraph (1) the estate tax liability of an es-
tate, no part of such liability which is disallowed by
a decision of such court which has become final may
be collected by the Secretary, and amounts paid in
excess of the installments determined by the court as
currently due and payable shall be refunded.’’.
(b) EXTENSION OF TIME TO FILE REFUND SUIT.—
Section 7479 (relating to declaratory judgments relating
to eligibility of estate with respect to installment payments
under section 6166) is amended by adding at the end the
following new subsection:
‘‘(c) EXTENSION OF TIME TO FILE REFUND SUIT.—
The 2-year period in section 6532(a)(1) for filing suit for
refund after disallowance of a claim shall be suspended
during the 90-day period after the mailing of the notice
referred to in subsection (b)(3) and, if a pleading has been
filed with the Tax Court under this section, until the deci-
sion of the Tax Court has become final.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to any claim for refund filed after
the date of the enactment of this Act.
SEC. 372. CATALOGING COMPLAINTS.
In collecting data for the report required under sec-
tion 1211 of Taxpayer Bill of Rights 2 (Public Law 104–
168), the Secretary of the Treasury or the Secretary’s del-
egate shall maintain records of taxpayer complaints of
misconduct by Internal Revenue Service employees on an
individual employee basis.
SEC. 373. ARCHIVE OF RECORDS OF INTERNAL REVENUE
SERVICE.
(a) IN GENERAL.—Subsection (l) of section 6103 (re-
lating to confidentiality and disclosure of returns and re-
turn information) is amended by adding at the end the
following new paragraph:
‘‘(17) DISCLOSURE
TO
NATIONAL
ARCHIVES
AND
RECORDS
ADMINISTRATION.—The
Secretary
shall, upon written request from the Archivist of the
United States, disclose or authorize the disclosure of
returns and return information to officers and em-
ployees of the National Archives and Records Ad-
ministration for purposes of, and only to the extent
necessary in, the appraisal of records for destruction
or retention. No such officer or employee shall, ex-
cept to the extent authorized by subsections (f),
(i)(7), or (p), disclose any return or return informa-
tion disclosed under the preceding sentence to any
person other than to the Secretary, or to another of-
ficer or employee of the National Archives and
Records Administration whose official duties require
such disclosure for purposes of such appraisal.’’.
(b) CONFORMING AMENDMENTS.—Section 6103(p) is
amended—
(1) in paragraph (3)(A), by striking ‘‘or (16)’’
and inserting ‘‘(16), or (17)’’,
(2) in paragraph (4), by striking ‘‘or (14)’’ and
inserting ‘‘, (14), or (17)’’ in the matter preceding
subparagraph (A), and
(3) in paragraph (4)(F)(ii), by striking ‘‘or
(15)’’ and inserting ‘‘, (15), or (17)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests made by the Archivist
of the United States after the date of the enactment of
this Act.
SEC. 374. PAYMENT OF TAXES.
The Secretary of the Treasury or the Secretary’s del-
egate shall establish such rules, regulations, and proce-
dures as are necessary to allow payment of taxes by check
or money order made payable to the United States Treas-
ury.
SEC. 375. CLARIFICATION OF AUTHORITY OF SECRETARY
RELATING TO THE MAKING OF ELECTIONS.
Subsection (d) of section 7805 is amended by striking
‘‘by regulations or forms’’.
SEC. 376. LIMITATION ON PENALTY ON INDIVIDUAL’S FAIL-
URE TO PAY FOR MONTHS DURING PERIOD
OF INSTALLMENT AGREEMENT.
(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:
‘‘(h) LIMITATION
ON PENALTY
ON INDIVIDUAL’S
FAILURE TO PAY FOR MONTHS DURING PERIOD OF IN-
STALLMENT AGREEMENT.—No addition to the tax shall
be imposed under paragraph (2) or (3) of subsection (a)
with respect to the tax liability of an individual for any
month during which an installment agreement under sec-
tion 6159 is in effect for the payment of such tax to the
extent that imposing an addition to the tax under such
paragraph for such month would result in the aggregate
number of percentage points of such addition to the tax
exceeding 9.5.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply for purposes of determining addi-
tions to the tax for months beginning after the date of
the enactment of this Act.
Subtitle I—Studies
SEC. 381. PENALTY ADMINISTRATION.
The Joint Committee on Taxation shall conduct a
study—
(1) reviewing the administration and implemen-
tation by the Internal Revenue Service of the pen-
alty reform provisions of the Omnibus Budget Rec-
onciliation Act of 1989, and
(2) making any legislative and administrative
recommendations it deems appropriate to simplify
penalty administration and reduce taxpayer burden.
Such study shall be submitted to the Committee on Ways
and Means of the House of Representatives and the Com-
mittee on Finance of the Senate not later than 9 months
after the date of enactment of this Act.
SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMA-
TION.
The Joint Committee on Taxation shall conduct a
study of the scope and use of provisions regarding tax-
payer confidentiality, and shall report the findings of such
study, together with such recommendations as it deems
appropriate, to the Congress not later than one year after
the date of the enactment of this Act. Such study shall
examine the present protections for taxpayer privacy, the
need for third parties to use tax return information, and
the ability to achieve greater levels of voluntary compli-
ance by allowing the public to know who is legally required
to file tax returns, but does not file tax returns.
TITLE IV—CONGRESSIONAL AC-
COUNTABILITY FOR THE IN-
TERNAL REVENUE SERVICE
Subtitle A—Oversight
SEC. 401. EXPANSION OF DUTIES OF THE JOINT COMMIT-
TEE ON TAXATION.
(a) IN GENERAL.—Section 8021 (relating to the pow-
ers of the Joint Committee on Taxation) is amended by
adding at the end the following new subsections:
‘‘(e) INVESTIGATIONS.—The Joint Committee shall
review all requests (other than requests by the chairman
or ranking member of a Committee or Subcommittee) for
investigations of the Internal Revenue Service by the Gen-
eral Accounting Office, and approve such requests when
appropriate, with a view towards eliminating overlapping
investigations, ensuring that the General Accounting Of-
fice has the capacity to handle the investigation, and en-
suring that investigations focus on areas of primary im-
portance to tax administration.
‘‘(f) RELATING TO JOINT HEARINGS.—
‘‘(1) IN
GENERAL.—The Chief of Staff, and
such other staff as are appointed pursuant to section
8004, shall provide such assistance as is required for
joint hearings described in paragraph (2).
‘‘(2) JOINT HEARINGS.—On or before April 1
of each calendar year after 1997, there shall be a
joint hearing of two members of the majority and
one member of the minority from each of the Com-
mittees on Finance, Appropriations, and Govern-
ment Affairs of the Senate, and the Committees on
Ways and Means, Appropriations, and Government
Reform and Oversight of the House of Representa-
tives, to review the strategic plans and budget for
the Internal Revenue Service. After the conclusion of
the annual filing season, there shall be a second an-
nual joint hearing to review the other matters out-
lined in section 8022(3)(C).’’.
(b) EFFECTIVE DATES.—
(1) Subsection (e) of section 8021 of the Inter-
nal Revenue Code of 1986, as added by subsection
(a) of this section, shall apply to requests made after
the date of enactment of this Act.
(2) Subsection (f) of section 8021 of the Inter-
nal Revenue Code of 1986, as added by subsection
(a) of this section, shall take effect on the date of
the enactment of this Act.
SEC. 402. COORDINATED OVERSIGHT REPORTS.
(a) IN GENERAL.—Paragraph (3) of section 8022
(relating to the duties of the Joint Committee on Tax-
ation) is amended to read as follows:
‘‘(3) REPORTS.—
‘‘(A) To report, from time to time, to the
Committee on Finance and the Committee on
Ways and Means, and, in its discretion, to the
Senate or House of Representatives, or both,
the results of its investigations, together with
such recommendations as it may deem advis-
able.
‘‘(B) To report, annually, to the Commit-
tee on Finance and the Committee on Ways
and Means on the overall state of the Federal
tax
system,
together
with
recommendations
with respect to possible simplification proposals
and other matters relating to the administra-
tion of the Federal tax system as it may deem
advisable.
‘‘(C) To report, annually, to the Commit-
tees on Finance, Appropriations, and Govern-
ment Affairs of the Senate, and to the Commit-
tees on Ways and Means, Appropriations, and
Government
Reform
and
Oversight
of
the
House of Representatives, with respect to—
‘‘(i) strategic and business plans for
the Internal Revenue Service;
‘‘(ii) progress of the Internal Revenue
Service in meeting its objectives;
‘‘(iii) the budget for the Internal Rev-
enue Service and whether it supports its
objectives;
‘‘(iv) progress of the Internal Revenue
Service in improving taxpayer service and
compliance;
‘‘(v) progress of the Internal Revenue
Service on technology modernization; and
‘‘(vi) the annual filing season.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
Subtitle B—Budget
SEC. 411. FUNDING FOR CENTURY DATE CHANGE.
It is the sense of Congress that the Internal Revenue
Service efforts to resolve the century date change comput-
ing problems should be funded fully to provide for certain
resolution of such problems.
SEC. 412. FINANCIAL MANAGEMENT ADVISORY GROUP.
The Commissioner shall convene a financial manage-
ment advisory group consisting of individuals with exper-
tise in governmental accounting and auditing from both
the private sector and the Government to advise the Com-
missioner on financial management issues, including—
(1) the continued partnership between the In-
ternal Revenue Service and the General Accounting
Office;
(2) the financial accounting aspects of the In-
ternal Revenue Service’s system modernization;
(3) the necessity and utility of year-round au-
diting; and
(4) the Commissioner’s plans for improving its
financial management system.
Subtitle C—Tax Law Complexity
SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.
It is the sense of Congress that the Internal Revenue
Service should provide the Congress with an independent
view of tax administration, and that during the legislative
process, the tax writing committees of the Congress should
hear from front-line technical experts at the Internal Rev-
enue Service with respect to the administrability of pend-
ing amendments to the Internal Revenue Code of 1986.
SEC. 422. TAX COMPLEXITY ANALYSIS.
(a) REQUIRING ANALYSIS TO ACCOMPANY CERTAIN
LEGISLATION.—
(1) IN GENERAL.—Chapter 92 (relating to pow-
ers and duties of the Joint Committee on Taxation)
is amended by adding at the end the following new
section:
‘‘SEC. 8024. TAX COMPLEXITY ANALYSIS.
‘‘(a) IN GENERAL.—If—
‘‘(1) a bill or joint resolution is reported by the
Committee on Finance of the Senate, the Committee
on Ways and Means of the House of Representa-
tives, or any committee of conference, and
‘‘(2) such legislation includes any provision
amending the Internal Revenue Code of 1986,
the report for such legislation shall contain a Tax Com-
plexity Analysis unless the committee involved causes to
have the Tax Complexity Analysis printed in the Congres-
sional Record prior to the consideration of the legislation
100
in the House of Representatives or the Senate (as the case
may be).
‘‘(b) LEGISLATION SUBJECT TO POINT OF ORDER.—
It shall not be in order in the Senate to consider any bill
or joint resolution described in subsection (a) required to
be accompanied by a Tax Complexity Analysis that does
not contain a Tax Complexity Analysis.
‘‘(c) RESPONSIBILITIES OF THE COMMISSIONER.—
The Commissioner shall provide the Joint Committee on
Taxation with such information as is necessary to prepare
Tax Complexity Analyses.
‘‘(d) TAX COMPLEXITY ANALYSIS DEFINED.—For
purposes of this section, the term ‘Tax Complexity Analy-
sis’ means, with respect to a bill or joint resolution, a re-
port which is prepared by the Joint Committee on Tax-
ation and which identifies the provisions of the legislation
adding significant complexity or providing significant sim-
plification (as determined by the Joint Committee) and
includes the basis for such determination.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 92 is amended by adding at the
end the following new item:
‘‘Sec. 8024. Tax complexity analysis.’’.
(b) LEGISLATION SUBJECT TO POINT OF ORDER IN
HOUSE OF REPRESENTATIVES.—
101
(1) LEGISLATION
REPORTED
BY
COMMITTEE
ON WAYS AND MEANS.—Clause 2(l) of rule XI of the
Rules of the House of Representatives is amended
by adding at the end the following new subpara-
graph:
‘‘(8) The report of the Committee on Ways and
Means on any bill or joint resolution containing any provi-
sion amending the Internal Revenue Code of 1986 shall
include a Tax Complexity Analysis prepared by the Joint
Committee on Taxation in accordance with section 8024
of the Internal Revenue Code of 1986 unless the Commit-
tee on Ways and Means causes to have such Analysis
printed in the Congressional Record prior to the consider-
ation of the bill or joint resolution.’’.
(2) CONFERENCE REPORTS.—Rule XXVIII of
the Rules of the House of Representatives is amend-
ed by adding at the end the following new clause:
‘‘7. It shall not be in order to consider the report
of a committee of conference which contains any provision
amending the Internal Revenue Code of 1986 unless—
‘‘(a) the accompanying joint explanatory state-
ment contains a Tax Complexity Analysis prepared
by the Joint Committee on Taxation in accordance
with section 8024 of the Internal Revenue Code of
1986, or
102
‘‘(b) such Analysis is printed in the Congres-
sional Record prior to the consideration of the re-
port.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to legislation considered on or after
January 1, 1998.
TITLE V—CLARIFICATION OF DE-
DUCTION
FOR
DEFERRED
COMPENSATION
SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED
COMPENSATION.
(a) IN GENERAL.—Subsection (a) of section 404 is
amended by adding at the end the following new para-
graph:
‘‘(11)
DETERMINATIONS
RELATING
TO
DE-
FERRED COMPENSATION.—
‘‘(A) IN GENERAL.—For purposes of deter-
mining under this section—
‘‘(i) whether compensation of an em-
ployee is deferred compensation, and
‘‘(ii) when deferred compensation is
paid,
no amount shall be treated as received by the
employee, or paid, until it is actually received
by the employee.
103
‘‘(B)
EXCEPTION.—Subparagraph
(A)
shall not apply to severance pay.’’.
(b) SICK LEAVE PAY TREATED LIKE VACATION
PAY.—Paragraph (5) of section 404(a) is amended by in-
serting ‘‘or sick leave pay’’ after ‘‘vacation pay’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years ending after
October 8, 1997.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer required by this section to
change its method of accounting for its first taxable
year ending after October 8, 1997—
(A) such change shall be treated as initi-
ated by the taxpayer,
(B) such change shall be treated as made
with the consent of the Secretary of the Treas-
ury, and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481 of the Internal Revenue Code
of 1986 shall be taken into account in such first
taxable year.
104
TITLE VI—TAX TECHNICAL
CORRECTIONS ACT OF 1997
SEC. 601. SHORT TITLE.
This title may be cited as the ‘‘Tax Technical Correc-
tions Act of 1997’’.
SEC. 602. DEFINITIONS.
For purposes of this title—
(1)
1986
CODE.—The
term
‘‘1986
Code’’
means the Internal Revenue Code of 1986.
(2) 1997 ACT.—The term ‘‘1997 Act’’ means
the Taxpayer Relief Act of 1997.
SEC. 603. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 101(a) OF
1997 ACT.—
(1) Subsection (d) of section 24 of the 1986
Code is amended—
(A) by striking paragraphs (3) and (4),
(B) by redesignating paragraph (5) as
paragraph (3), and
(C) by striking paragraphs (1) and (2) and
inserting the following new paragraphs:
‘‘(1) IN GENERAL.—In the case of a taxpayer
with 3 or more qualifying children for any taxable
year, the aggregate credits allowed under subpart C
shall be increased by the lesser of—
105
‘‘(A) the credit which would be allowed
under this section without regard to this sub-
section and the limitation under section 26(a),
or
‘‘(B) the amount by which the aggregate
amount of credits allowed by this subpart (with-
out regard to this subsection) would increase if
the limitation imposed by section 26(a) were in-
creased by the excess (if any) of—
‘‘(i)
the
taxpayer’s
social
security
taxes for the taxable year, over
‘‘(ii) the credit allowed under section
32 (determined without regard to sub-
section (n)) for the taxable year.
The amount of the credit allowed under this
subsection shall not be treated as a credit al-
lowed under this subpart and shall reduce the
amount of credit otherwise allowable under sub-
section (a) without regard to section 26(a).
‘‘(2) REDUCTION
OF
CREDIT
TO
TAXPAYER
SUBJECT
TO
ALTERNATIVE
MINIMUM
TAX.—The
credit determined under this subsection for the tax-
able year shall be reduced by the excess (if any) of—
‘‘(A) the amount of tax imposed by section
55 (relating to alternative minimum tax) with
106
respect to such taxpayer for such taxable year,
over
‘‘(B) the amount of the reduction under
section 32(h) with respect to such taxpayer for
such taxable year.’’.
(2) Paragraph (3) of section 24(d) of the 1986
Code (as redesignated by paragraph (1)) is amended
by striking ‘‘paragraph (3)’’ and inserting ‘‘para-
graph (1)’’.
(b) AMENDMENTS RELATED TO SECTION 101(b) OF
1997 ACT.—
(1) The subsection (m) of section 32 of the
1986 Code added by section 101(b) of the 1997 Act
is amended to read as follows:
‘‘(n) SUPPLEMENTAL CHILD CREDIT.—
‘‘(1) IN GENERAL.—In the case of a taxpayer
with respect to whom a credit is allowed under sec-
tion 24 for the taxable year, the credit otherwise al-
lowable under this section shall be increased by the
lesser of—
‘‘(A) the credit which would be allowed
under section 24 without regard to this sub-
section and the limitation under section 26(a),
or
107
‘‘(B) the amount by which the aggregate
amount of credits allowed by subpart A (with-
out regard to this subsection) would be reduced
if the limitation imposed by section 26(a) were
reduced by the excess (if any) of—
‘‘(i) the credit allowed by this section
(without regard to this subsection) for the
taxable year, over
‘‘(ii)
the
taxpayer’s
social
security
taxes (as defined in section 24(d)) for the
taxable year.
The credit determined under this subsection shall be
allowed without regard to any other provision of this
section, including subsection (d).
‘‘(2) COORDINATION WITH OTHER CREDITS.—
‘‘(A) IN
GENERAL.—The amount of the
credit under this subsection shall reduce the
amount of the credit otherwise allowable under
section 24, but the amount of the credit under
this subsection (and such reduction) shall not
otherwise be taken into account in determining
the amount of any other credit allowable under
this part.
‘‘(B) TREATMENT OF CREDIT UNDER SEC-
TION 24(d).—For purposes of this subsection,
108
the credit determined under section 24(d) shall
be treated as not allowed under section 24.’’.
SEC. 604. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 201 OF
1997 ACT.—
(1) The item relating to section 25A in the
table of sections for subpart A of part IV of sub-
chapter A of chapter 1 of the 1986 Code is amended
to read as follows:
‘‘Sec. 25A. Hope and Lifetime Learning credits.’’.
(2) Subsection (a) of section 6050S of the 1986
Code is amended to read as follows:
‘‘(a) IN GENERAL.—Any person—
‘‘(1) which is an eligible educational institu-
tion—
‘‘(A) which receives payments for qualified
tuition and related expenses with respect to any
individual for any calendar year, or
‘‘(B) which makes reimbursements or re-
funds (or similar amounts) to any individual of
qualified tuition and related expenses,
‘‘(2) which is engaged in a trade or business of
making payments to any individual under an insur-
ance arrangement as reimbursements or refunds (or
similar amounts) of qualified tuition and related ex-
penses, or
109
‘‘(3) except as provided in regulations, any per-
son which is engaged in a trade or business and, in
the course of which, receives from any individual in-
terest aggregating $600 or more for any calendar
year on 1 or more qualified education loans,
shall make the return described in subsection (b) with re-
spect to the individual at such time as the Secretary may
by regulations prescribe.’’.
(3) Subparagraph (A) of section 201(c)(2) of
the 1997 Act is amended to read as follows:
‘‘(A)
Subparagraph
(B)
of
section
6724(d)(1) (relating to definitions) is amended
by redesignating clauses (x) through (xv) as
clauses (xi) through (xvi), respectively, and by
inserting after clause (ix) the following new
clause:
‘‘ ‘(x) section 6050S (relating to re-
turns relating to payments for qualified
tuition and related expenses),’ ’’.
(b) AMENDMENTS RELATED TO SECTION 211 OF
1997 ACT.—
(1) Paragraph (3) of section 135(c) of the 1986
Code is amended to read as follows:
110
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—
The term ‘eligible educational institution’ has the
meaning given such term by section 529(e)(5).’’.
(2) Subparagraph (A) of section 529(c)(3) of
the 1986 Code is amended by striking ‘‘section
72(b)’’ and inserting ‘‘section 72’’.
(c) AMENDMENTS RELATED TO SECTION 213 OF
1997 ACT.—
(1)(A) Section 530(b)(1)(E) of the 1986 Code
(defining education individual retirement account) is
amended to read as follows:
‘‘(E) Any balance to the credit of the des-
ignated beneficiary on the date on which the
beneficiary attains age 30 shall be distributed
within 30 days after such date to the bene-
ficiary or, if the beneficiary dies before attain-
ing age 30, shall be distributed within 30 days
after the date of death to the estate of such
beneficiary.’’.
(B) Subsection (d) of section 530 of the 1986
Code is amended by adding at the end the following
new paragraph:
‘‘(8)
DEEMED
DISTRIBUTION
ON
REQUIRED
DISTRIBUTION DATE.—In any case in which a dis-
tribution is required under subsection (b)(1)(E), any
111
balance to the credit of a designated beneficiary as
of the close of the 30-day period referred to in such
subsection for making such distribution shall be
deemed distributed at the close of such period.’’.
(2)(A) Paragraph (1) of section 530(d) of the
1986 Code is amended by striking ‘‘section 72(b)’’
and inserting ‘‘section 72’’.
(B) Subsection (e) of section 72 of the 1986
Code is amended by inserting after paragraph (8)
the following new paragraph:
‘‘(9)
EXTENSION
OF
PARAGRAPH
(2)(B)
TO
QUALIFIED
STATE
TUITION
PROGRAMS
AND
EDU-
CATIONAL
INDIVIDUAL
RETIREMENT
ACCOUNTS.—
Notwithstanding any other provision of this sub-
section, paragraph (2)(B) shall apply to amounts re-
ceived under a qualified State tuition program (as
defined in section 529(b)) or under an education in-
dividual retirement account (as defined in section
530(b)). The rule of paragraph (8)(B) shall apply
for purposes of this paragraph.’’.
(3) So much of section 530(d)(4)(C) of the
1986 Code as precedes clause (ii) thereof is amended
to read as follows:
‘‘(C) CONTRIBUTIONS RETURNED BEFORE
DUE
DATE
OF
RETURN.—Subparagraph (A)
112
shall not apply to the distribution of any con-
tribution made during a taxable year on behalf
of the designated beneficiary if—
‘‘(i) such distribution is made on or
before the day prescribed by law (including
extensions of time) for filing the bene-
ficiary’s return of tax for the taxable year
or, if the beneficiary is not required to file
such a return, the 15th day of the 4th
month of the taxable year following the
taxable year, and’’.
(4) Subparagraph (C) of section 135(c)(2) of
the 1986 Code is amended—
(A) by inserting ‘‘AND EDUCATION INDI-
VIDUAL RETIREMENT ACCOUNTS’’ in the head-
ing after ‘‘PROGRAM’’, and
(B) by striking ‘‘section 529(c)(3)(A)’’ and
inserting ‘‘section 72’’.
(5) Subparagraph (A) of section 4973(e)(1) of
the 1986 Code is amended by inserting before the
comma ‘‘(or, if less, the sum of the maximum
amounts permitted to be contributed under section
530(c) by the contributors to such accounts for such
year)’’.
113
(d) AMENDMENT RELATED
TO SECTION 224
OF
1997 ACT.—Section 170(e)(6)(F) of the 1986 Code (relat-
ing to termination) is amended by striking ‘‘1999’’ and
inserting ‘‘2000’’.
(e) AMENDMENTS RELATED TO SECTION 225 OF
1997 ACT.—
(1) The last sentence of section 108(f)(2) of the
1986 Code is amended to read as follows:
‘‘The term ‘student loan’ includes any loan made by
an educational organization described in section
170(b)(1)(A)(ii) or by an organization exempt from
tax under section 501(a) to refinance a loan to an
individual to assist the individual in attending any
such educational organization but only if the refi-
nancing loan is pursuant to a program of the refi-
nancing organization which is designed as described
in subparagraph (D)(ii).’’.
(2) Section 108(f)(3) of the 1986 Code is
amended by striking ‘‘(or by an organization de-
scribed in paragraph (2)(E) from funds provided by
an organization described in paragraph (2)(D))’’.
(f) AMENDMENTS RELATED TO SECTION 226 OF
1997 ACT.—
114
(1) Section 226(a) of the 1997 Act is amended
by striking ‘‘section 1397E’’ and inserting ‘‘section
1397D’’.
(2) Section 1397E(d)(4)(B) of the 1986 Code
is amended by striking ‘‘local education agency as
defined’’ and inserting ‘‘local educational agency as
defined’’.
SEC. 605. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 301 OF
1997 ACT.—Section 219(g) of the 1986 Code is amend-
ed—
(1) by inserting ‘‘or the individual’s spouse’’
after ‘‘individual’’ in paragraph (1), and
(2) by striking paragraph (7) and inserting:
‘‘(7) SPECIAL RULE FOR SPOUSES WHO ARE
NOT ACTIVE PARTICIPANTS.—If this subsection ap-
plies to an individual for any taxable year solely be-
cause their spouse is an active participant, then, in
applying this subsection to the individual (but not
their spouse)—
‘‘(A) the applicable dollar amount under
paragraph (3)(B)(i) shall be $150,000, and
‘‘(B) the amount applicable under para-
graph (2)(A)(ii) shall be $10,000.’’.
115
(b) AMENDMENTS RELATED TO SECTION 302 OF
1997 ACT.—
(1) Section 408A(c)(3)(A) of the 1986 Code is
amended by striking ‘‘shall be reduced’’ and insert-
ing ‘‘shall not exceed an amount equal to the
amount determined under paragraph (2)(A) for such
taxable year, reduced’’.
(2) Section 408A(c)(3) of the 1986 Code (relat-
ing to limits based on modified adjusted gross in-
come) is amended—
(A) by inserting ‘‘or a married individual
filing a separate return’’ after ‘‘joint return’’ in
subparagraph (A)(ii), and
(B) by striking ‘‘and the deduction under
section 219 shall be taken into account’’ in sub-
paragraph (C)(i).
(3) Section 408A(d)(2) of the 1986 Code (de-
fining qualified distribution) is amended by striking
subparagraph (B) and inserting the following:
‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU-
SION PERIOD.—A payment or distribution from
a Roth IRA shall not be treated as a qualified
distribution under subparagraph (A) if such
payment or distribution is made before the ex-
clusion date for the Roth IRA.
116
‘‘(C) EXCLUSION DATE.—For purposes of
this section, the exclusion date for any Roth
IRA is the first day of the taxable year imme-
diately following the 5-taxable year period be-
ginning with—
‘‘(i) the first taxable year for which a
contribution to any Roth IRA maintained
for the benefit of the individual was made,
or
‘‘(ii) in the case of a Roth IRA to
which 1 or more qualified rollover con-
tributions were made—
‘‘(I) from an individual retire-
ment plan other than a Roth IRA, or
‘‘(II) from another Roth IRA to
the
extent
such
contributions
are
properly allocable to contributions de-
scribed in subclause (I),
the most recent taxable year for which any
such qualified rollover contribution was
made.’’.
(4) Section 408A(d)(3) of the 1986 Code (relat-
ing to rollovers from IRAs other than Roth IRAs)
is amended by adding at the end the following:
117
‘‘(F) SPECIAL RULE FOR APPLYING SEC-
TION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) any distribution from a Roth
IRA is made before the exclusion
date, and
‘‘(II) any portion of such dis-
tribution is properly allocable to a
qualified
rollover
contribution
de-
scribed in paragraph (2)(C)(ii),
then section 72(t) shall be applied as if
such portion were includible in gross in-
come.
‘‘(ii)
LIMITATION.—Clause
(i)
shall
apply only to the extent of the amount in-
cludible in gross income under subpara-
graph (A)(i) by reason of the qualified roll-
over contribution.
‘‘(G) SPECIAL RULES FOR CONTRIBUTIONS
TO WHICH 4-YEAR AVERAGING APPLIES.—In the
case of a qualified rollover contribution to a
Roth IRA of a distribution to which subpara-
graph (A)(iii) applied, the following rules shall
apply:
‘‘(i) DEATH OF DISTRIBUTEE.—
118
‘‘(I) IN GENERAL.—If the indi-
vidual required to include amounts in
gross
income
under
such
subpara-
graph dies before all of such amounts
are included, all remaining amounts
shall be included in gross income for
the taxable year which includes the
date of death.
‘‘(II) SPECIAL RULE FOR SURVIV-
ING SPOUSE.—If the spouse of the in-
dividual described in subclause (I) ac-
quires the Roth IRA to which such
qualified rollover contribution is prop-
erly allocable, the spouse may elect to
include the remaining amounts de-
scribed
in
subclause
(I)
in
the
spouse’s gross income in the taxable
years of the spouse ending with or
within the taxable years of such indi-
vidual in which such amounts would
otherwise have been includible.
‘‘(ii) ADDITIONAL
TAX
FOR
EARLY
DISTRIBUTION.—
‘‘(I) IN
GENERAL.—If any dis-
tribution from a Roth IRA is made
119
before the exclusion date, and any
portion of such distribution is prop-
erly allocable to such qualified rollover
contribution,
the
distributee’s
tax
under this chapter for the taxable
year in which the amount is received
shall be increased by 10 percent of the
amount of such portion not in excess
of the amount includible in gross in-
come under subparagraph (A)(i) by
reason of such qualified rollover con-
tribution.
‘‘(II) TREATMENT OF TAX.—For
purposes of this title, any tax imposed
by subclause (I) shall be treated as a
tax imposed by section 72(t) and shall
be in addition to any other tax im-
posed by such section.’’.
(5)(A) Section 408A(d)(4) of the 1986 Code is
amended to read as follows:
‘‘(4) AGGREGATION AND ORDERING RULES.—
‘‘(A)
AGGREGATION
RULES.—Section
408(d)(2) shall be applied separately with re-
spect to—
120
‘‘(i) Roth IRAs and other individual
retirement plans,
‘‘(ii) Roth IRAs described in para-
graph (2)(C)(ii) and Roth IRAs not so de-
scribed, and
‘‘(iii) Roth IRAs described in para-
graph (2)(C)(ii) with different exclusion
dates.
‘‘(B) ORDERING RULES.—For purposes of
applying section 72 to any distribution from a
Roth IRA which is not a qualified distribution,
such distribution shall be treated as made—
‘‘(i) from contributions to the extent
that the amount of such distribution, when
added to all previous distributions from the
Roth IRA, does not exceed the aggregate
contributions to the Roth IRA, and
‘‘(ii) from such contributions in the
following order:
‘‘(I) Qualified rollover contribu-
tions to the extent includible in gross
income in the manner described in
paragraph (3)(A)(iii).
‘‘(II) Qualified rollover contribu-
tions not described in subclause (I) to
121
the extent includible in gross income
under paragraph (3)(A).
‘‘(III)
Contributions
not
de-
scribed in subclause (I) or (II).
Such rules shall also apply in determining the
character
of
qualified
rollover
contributions
from one Roth IRA to another Roth IRA.’’.
(B) Section 408A(d)(1) of the 1986 Code is
amended to read as follows:
‘‘(1) EXCLUSION.—Any qualified distribution
from a Roth IRA shall not be includible in gross in-
come.’’.
(6)(A) Section 408A(d) of the 1986 Code (re-
lating to distribution rules) is amended by adding at
the end the following:
‘‘(6) TAXPAYER MAY MAKE ADJUSTMENTS BE-
FORE DUE DATE.—
‘‘(A) IN GENERAL.—Except as provided by
the Secretary, if, on or before the due date for
any taxable year, a taxpayer transfers in a
trustee-to-trustee transfer any contribution to
an individual retirement plan made during such
taxable year from such plan to any other indi-
vidual retirement plan, then, for purposes of
this chapter, such contribution shall be treated
122
as having been made to the transferee plan
(and not the transferor plan).
‘‘(B) SPECIAL RULES.—
‘‘(i) TRANSFER OF EARNINGS.—Sub-
paragraph (A) shall not apply to the trans-
fer of any contribution unless such transfer
is accompanied by any net income allocable
to such contribution.
‘‘(ii) NO DEDUCTION.—Subparagraph
(A) shall apply to the transfer of any con-
tribution only to the extent no deduction
was allowed with respect to the contribu-
tion to the transferor plan.
‘‘(C) DUE
DATE.—For purposes of this
paragraph, the due date for any taxable year is
the last date for filing the return of tax for
such taxable year (including extensions).’’.
(B) Section 408A(d)(3) of the 1986 Code, as
amended by this subsection, is amended by striking
subparagraph (D) and by redesignating subpara-
graphs (E), (F), and (G) as subparagraphs (D), (E),
and (F), respectively.
(7) Section 302(b) of the 1997 Act is amended
by striking ‘‘Section 4973(b)’’ and inserting ‘‘Sec-
tion 4973’’.
123
(8) Section 408A of the 1986 Code is amended
by adding at the end the following new subsection:
‘‘(f) INDIVIDUAL RETIREMENT PLAN.—For purposes
of this section, except as provided by the Secretary, the
term ‘individual retirement plan’ shall not include a sim-
plified employee pension or a simple retirement account.’’.
(c) AMENDMENTS RELATED TO SECTION 303 OF
1997 ACT.—
(1) Section 72(t)(8)(E) of the 1986 Code is
amended—
(A) by striking ‘‘120 days’’ and inserting
‘‘120th day’’, and
(B) by striking ‘‘60 days’’ and inserting
‘‘60th day’’.
(2)(A) Section 402(c) of the 1986 Code is
amended by adding at the end the following:
‘‘(11) DENIAL OF ROLLOVER TREATMENT FOR
TRANSFERS OF HARDSHIP DISTRIBUTIONS TO INDI-
VIDUAL RETIREMENT PLANS.—This subsection shall
not apply to the transfer of any hardship distribu-
tion described in section 401(k)(2)(B)(i)(IV) from a
qualified cash or deferred arrangement to an eligible
retirement plan described in clause (i) or (ii) of
paragraph (8)(B).’’.
124
(B) The amendment made by this paragraph
shall apply to distributions made after December 31,
1997.
(d) AMENDMENTS RELATED TO SECTION 311 OF
1997 ACT.—
(1) Subsection (h) of section 1 of the 1986
Code (relating to maximum capital gains rate) is
amended to read as follows:
‘‘(h) MAXIMUM CAPITAL GAINS RATE.—
‘‘(1) IN GENERAL.—If a taxpayer has a net
capital gain for any taxable year, the tax imposed by
this section for such taxable year shall not exceed
the sum of—
‘‘(A) a tax computed at the rates and in
the same manner as if this subsection had not
been enacted on the greater of—
‘‘(i) taxable income reduced by the net
capital gain, or
‘‘(ii) the lesser of—
‘‘(I) the amount of taxable in-
come taxed at a rate below 28 per-
cent, or
‘‘(II) taxable income reduced by
the adjusted net capital gain,
125
‘‘(B) 10 percent of so much of the ad-
justed net capital gain (or, if less, taxable in-
come) as does not exceed the excess (if any)
of—
‘‘(i) the amount of taxable income
which would (without regard to this para-
graph) be taxed at a rate below 28 per-
cent, over
‘‘(ii) the taxable income reduced by
the adjusted net capital gain,
‘‘(C) 20 percent of the adjusted net capital
gain (or, if less, taxable income) in excess of the
amount on which a tax is determined under
subparagraph (B),
‘‘(D) 25 percent of the excess (if any) of—
‘‘(i) the unrecaptured section 1250
gain (or, if less, the net capital gain), over
‘‘(ii) the excess (if any) of—
‘‘(I) the sum of the amount on
which tax is determined under sub-
paragraph (A) plus the net capital
gain, over
‘‘(II) taxable income, and
‘‘(E) 28 percent of the amount of taxable
income in excess of the sum of the amounts on
126
which tax is determined under the preceding
subparagraphs of this paragraph.
‘‘(2)
REDUCED
CAPITAL
GAIN
RATES
FOR
QUALIFIED 5-YEAR GAIN.—
‘‘(A) REDUCTION IN 10-PERCENT RATE.—
In the case of any taxable year beginning after
December 31, 2000, the rate under paragraph
(1)(B) shall be 8 percent with respect to so
much of the amount to which the 10-percent
rate would otherwise apply as does not exceed
qualified 5-year gain, and 10 percent with re-
spect to the remainder of such amount.
‘‘(B) REDUCTION IN 20-PERCENT RATE.—
The rate under paragraph (1)(C) shall be 18
percent with respect to so much of the amount
to which the 20-percent rate would otherwise
apply as does not exceed the lesser of—
‘‘(i) the excess of qualified 5-year gain
over the amount of such gain taken into
account under subparagraph (A) of this
paragraph, or
‘‘(ii) the amount of qualified 5-year
gain (determined by taking into account
only property the holding period for which
begins after December 31, 2000),
127
and 20 percent with respect to the remainder of
such amount. For purposes of determining
under the preceding sentence whether the hold-
ing period of property begins after December
31, 2000, the holding period of property ac-
quired pursuant to the exercise of an option (or
other right or obligation to acquire property)
shall include the period such option (or other
right or obligation) was held.
‘‘(3) NET CAPITAL GAIN TAKEN INTO ACCOUNT
AS INVESTMENT INCOME.—For purposes of this sub-
section, the net capital gain for any taxable year
shall be reduced (but not below zero) by the amount
which the taxpayer takes into account as investment
income under section 163(d)(4)(B)(iii).
‘‘(4) ADJUSTED NET CAPITAL GAIN.—For pur-
poses of this subsection, the term ‘adjusted net cap-
ital gain’ means net capital gain reduced (but not
below zero) by the sum of—
‘‘(A) unrecaptured section 1250 gain, and
‘‘(B) 28 percent rate gain.
‘‘(5) 28 PERCENT RATE GAIN.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘28 percent
rate gain’ means the excess (if any) of—
128
‘‘(i) the sum of—
‘‘(I) the aggregate long-term cap-
ital gain from property held for more
than 1 year but not more than 18
months,
‘‘(II) collectibles gain, and
‘‘(III) section 1202 gain, over
‘‘(ii) the sum of—
‘‘(I) the aggregate long-term cap-
ital loss (not described in subclause
(IV)) from property referred to in
clause (i)(I),
‘‘(II) collectibles loss,
‘‘(III) the net short-term capital
loss, and
‘‘(IV) the amount of long-term
capital
loss
carried
under
section
1212(b)(1)(B) to the taxable year.
‘‘(B) SPECIAL RULES.—
‘‘(i) SHORT
SALES
AND
OPTIONS.—
Rules similar to the rules of subsections
(b) and (d) of section 1233 shall apply to
substantially identical property, and sec-
tion 1092(f) with respect to stock, held for
129
more than 1 year but not more than 18
months.
‘‘(ii)
SECTION
1256
CONTRACTS.—
Amounts treated as long-term capital gain
or loss under section 1256(a)(3) shall be
treated as attributable to property held for
more than 18 months.
‘‘(6) COLLECTIBLES GAIN AND LOSS.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—The terms ‘collectibles
gain’ and ‘collectibles loss’ mean gain or loss
(respectively) from the sale or exchange of a
collectible (as defined in section 408(m) without
regard to paragraph (3) thereof) which is a
capital asset held for more than 18 months but
only to the extent such gain is taken into ac-
count in computing gross income and such loss
is taken into account in computing taxable in-
come.
‘‘(B) PARTNERSHIPS, ETC.—For purposes
of subparagraph (A), any gain from the sale of
an interest in a partnership, S corporation, or
trust which is attributable to unrealized appre-
ciation in the value of collectibles shall be treat-
ed as gain from the sale or exchange of a col-
130
lectible. Rules similar to the rules of section
751 shall apply for purposes of the preceding
sentence.
‘‘(7) UNRECAPTURED SECTION 1250 GAIN.—For
purposes of this subsection—
‘‘(A)
IN
GENERAL.—The
term
‘unrecaptured section 1250 gain’ means the ex-
cess (if any) of—
‘‘(i) the amount of long-term capital
gain (not otherwise treated as ordinary in-
come) which would be treated as ordinary
income if—
‘‘(I) section 1250(b)(1) included
all depreciation and the applicable
percentage
under
section
1250(a)
were 100 percent, and
‘‘(II) only gain from property
held for more than 18 months were
taken into account, over
‘‘(ii) the excess (if any) of—
‘‘(I)
the
amount
described
in
paragraph (5)(A)(ii), over
‘‘(II) the amount described in
paragraph (5)(A)(i).
131
‘‘(B) LIMITATION WITH RESPECT TO SEC-
TION 1231 PROPERTY.—The amount described
in subparagraph (A)(i) from sales, exchanges,
and
conversions
described
in
section
1231(a)(3)(A) for any taxable year shall not ex-
ceed the net section 1231 gain (as defined in
section 1231(c)(3)) for such year.
‘‘(8) SECTION 1202 GAIN.—For purposes of this
subsection, the term ‘section 1202 gain’ means an
amount equal to the gain excluded from gross in-
come under section 1202(a).
‘‘(9) QUALIFIED 5-YEAR GAIN.—For purposes
of this subsection, the term ‘qualified 5-year gain’
means the amount of long-term capital gain which
would be computed for the taxable year if only gains
from the sale or exchange of property held by the
taxpayer for more than 5 years were taken into ac-
count. The determination under the preceding sen-
tence shall be made without regard to collectibles
gain, gain described in paragraph (7)(A)(i), and sec-
tion 1202 gain.
‘‘(10)
COORDINATION
WITH
RECAPTURE
OF
NET ORDINARY LOSSES UNDER SECTION 1231.—If
any amount is treated as ordinary income under sec-
tion 1231(c), such amount shall be allocated among
132
the separate categories of net section 1231 gain (as
defined in section 1231(c)(3)) in such manner as the
Secretary may by forms or regulations prescribe.
‘‘(11) REGULATIONS.—The Secretary may pre-
scribe such regulations as are appropriate (including
regulations requiring reporting) to apply this sub-
section in the case of sales and exchanges by pass-
thru entities and of interests in such entities.
‘‘(12) PASS-THRU ENTITY DEFINED.—For pur-
poses of this subsection, the term ‘pass-thru entity’
means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
‘‘(C) an S corporation,
‘‘(D) a partnership,
‘‘(E) an estate or trust,
‘‘(F) a common trust fund,
‘‘(G) a foreign investment company which
is described in section 1246(b)(1) and for which
an election is in effect under section 1247, and
‘‘(H) a qualified electing fund (as defined
in section 1295).
‘‘(13) SPECIAL
RULES
FOR
PERIODS
DURING
1997.—
133
‘‘(A)
DETERMINATION
OF
PERCENT
RATE GAIN.—In applying paragraph (5)—
‘‘(i) the amount determined under
subclause (I) of paragraph (5)(A)(i) shall
include long-term capital gain (not other-
wise
described
in
paragraph
(5)(A)(i))
which is properly taken into account for
the portion of the taxable year before May
7, 1997,
‘‘(ii) the amounts determined under
subclause (I) of paragraph (5)(A)(ii) shall
include long-term capital loss (not other-
wise
described
in
paragraph
(5)(A)(ii))
which is properly taken into account for
the portion of the taxable year before May
7, 1997, and
‘‘(iii) clauses (i)(I) and (ii)(I) of para-
graph (5)(A) shall be applied by not taking
into account any gain and loss on property
held for more than 1 year but not more
than 18 months which is properly taken
into account for the portion of the taxable
year after May 6, 1997, and before July
29, 1997.
‘‘(B) OTHER SPECIAL RULES.—
134
‘‘(i)
DETERMINATION
OF
UNRECAPTURED SECTION 1250 GAIN NOT
TO INCLUDE PRE-MAY 7, 1997 GAIN.—The
amount
determined
under
paragraph
(7)(A)(i) shall not include gain properly
taken into account for the portion of the
taxable year before May 7, 1997.
‘‘(ii)
OTHER
TRANSITIONAL
RULES
FOR 18-MONTH HOLDING PERIOD.—Para-
graphs (6)(A) and (7)(A)(i)(II) shall be
applied by substituting ‘1 year’ for ‘18
months’
with
respect
to
gain
properly
taken into account for the portion of the
taxable year after May 6, 1997, and before
July 29, 1997.
‘‘(C) SPECIAL RULES FOR PASS-THRU EN-
TITIES.—In applying this paragraph with re-
spect to any pass-thru entity, the determination
of when gains and loss are properly taken into
account shall be made at the entity level.’’.
(2) IN
GENERAL.—Paragraph (3) of section
55(b) of the 1986 Code is amended to read as fol-
lows:
‘‘(3) MAXIMUM RATE OF TAX ON NET CAPITAL
GAIN OF NONCORPORATE TAXPAYERS.—The amount
135
determined under the first sentence of paragraph
(1)(A)(i) shall not exceed the sum of—
‘‘(A) the amount determined under such
first sentence computed at the rates and in the
same manner as if this paragraph had not been
enacted on the taxable excess reduced by the
lesser of—
‘‘(i) the net capital gain, or
‘‘(ii) the sum of—
‘‘(I)
the
adjusted
net
capital
gain, plus
‘‘(II)
the
unrecaptured
section
1250 gain, plus
‘‘(B) 10 percent of so much of the ad-
justed net capital gain (or, if less, taxable ex-
cess) as does not exceed the amount on which
a tax is determined under section 1(h)(1)(B),
plus
‘‘(C) 20 percent of the adjusted net capital
gain (or, if less, taxable excess) in excess of the
amount on which tax is determined under sub-
paragraph (B), plus
‘‘(D) 25 percent of the amount of taxable
excess in excess of the sum of the amounts on
136
which tax is determined under the preceding
subparagraphs of this paragraph.
In the case of taxable years beginning after Decem-
ber 31, 2000, rules similar to the rules of section
1(h)(2) shall apply for purposes of subparagraphs
(B) and (C). Terms used in this paragraph which
are also used in section 1(h) shall have the respec-
tive meanings given such terms by section 1(h) but
computed with the adjustments under this part.’’.
(3) Section 57(a)(7) of the 1986 Code is
amended by adding at the end the following new
sentence: ‘‘In the case of stock the holding period of
which begins after December 31, 2000 (determined
with the application of the last sentence of section
1(h)(2)(B)), the preceding sentence shall be applied
by substituting ‘28 percent’ for ‘42 percent’.’’.
(4) Paragraphs (11) and (12) of section 1223,
and section 1235(a), of the 1986 Code are each
amended by striking ‘‘1 year’’ each place it appears
and inserting ‘‘18 months’’.
(e) AMENDMENTS RELATED TO SECTION 312 OF
1997 ACT.—
(1) Section 121(c)(1) of the 1986 Code is
amended to read as follows:
137
‘‘(1) IN GENERAL.—In the case of a sale or ex-
change to which this subsection applies, the owner-
ship and use requirements of subsection (a), and
subsection (b)(3), shall not apply; but the dollar lim-
itation under paragraph (1) or (2) of subsection (b),
whichever is applicable, shall be equal to—
‘‘(A) the amount which bears the same
ratio to such limitation (determined without re-
gard to this paragraph) as
‘‘(B)(i) the shorter of—
‘‘(I) the aggregate periods, during the
5-year period ending on the date of such
sale or exchange, such property has been
owned and used by the taxpayer as the
taxpayer’s principal residence, or
‘‘(II) the period after the date of the
most recent prior sale or exchange by the
taxpayer to which subsection (a) applied
and before the date of such sale or ex-
change, bears to
‘‘(ii) 2 years.’’.
(2) Section 312(d)(2) of the 1997 Act (relating
to sales before date of enactment) is amended by in-
serting ‘‘on or’’ before ‘‘before’’ each place it ap-
pears in the text and heading.
138
(f) AMENDMENT RELATED TO SECTION 313 OF 1997
ACT.—Section 1045 of the 1986 Code is amended by add-
ing at the end the following new subsection:
‘‘(c) LIMITATION
ON APPLICATION
TO PARTNER-
SHIPS AND S CORPORATIONS.—Subsection (a) shall apply
to a partnership or S corporation for a taxable year only
if at all times during such taxable year all of the partners
in the partnership, or all of the shareholders of the S cor-
poration, are natural persons or estates.’’.
SEC. 606. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 501 OF
1997 ACT.—
(1) Subsection (c) of section 2631 of the 1986
Code is amended by striking ‘‘an individual who
dies’’ and inserting ‘‘a generation-skipping trans-
fer’’.
(2) Subsection (f) of section 501 of the 1997
Act is amended by inserting ‘‘(other than the
amendment made by subsection (d))’’ after ‘‘this
section’’.
(b) AMENDMENTS RELATED TO SECTION 502 OF
1997 ACT.—
(1) Subsection (a) of section 2033A of the 1986
Code is amended to read as follows:
‘‘(a) EXCLUSION.—
139
‘‘(1) IN GENERAL.—In the case of an estate of
a decedent to which this section applies, the value of
the gross estate shall not include the lesser of—
‘‘(A) the adjusted value of the qualified
family-owned business interests of the decedent
otherwise includible in the estate, or
‘‘(B) the exclusion limitation with respect
to such estate.
‘‘(2) EXCLUSION LIMITATION.—
‘‘(A) IN GENERAL.—The exclusion limita-
tion with respect to any estate is the amount of
reduction in the tentative tax base with respect
to such estate which would be required in order
to reduce the tax imposed by section 2001(b)
(determined without regard to this section) by
an amount equal to the maximum credit equiva-
lent benefit.
‘‘(B) MAXIMUM CREDIT EQUIVALENT BEN-
EFIT.—For purposes of subparagraph (A), the
term ‘maximum credit equivalent benefit’ means
the excess of—
‘‘(i) the amount by which the ten-
tative tax imposed by section 2001(b) (de-
termined without regard to this section)
140
would be reduced if the tentative tax base
were reduced by $675,000, over
‘‘(ii) the amount by which the applica-
ble credit amount under section 2010(c)
with respect to such estate exceeds such
applicable
credit
amount
in
effect
for
1998.
‘‘(C) TENTATIVE
TAX
BASE.—For pur-
poses of this paragraph, the term ‘tentative tax
base’ means the amount with respect to which
the tax imposed by section 2001(b) would be
computed without regard to this section.’’.
(2) Section 2033A(b)(3) of the 1986 Code is
amended to read as follows:
‘‘(3) INCLUDIBLE GIFTS OF INTERESTS.—The
amount of the gifts of qualified family-owned busi-
ness interests determined under this paragraph is
the sum of—
‘‘(A) the amount of such gifts from the de-
cedent to members of the decedent’s family
taken
into
account
under
section
2001(b)(1)(B), plus
‘‘(B) the amount of such gifts otherwise
excluded under section 2503(b),
141
to the extent such interests are continuously held by
members of such family (other than the decedent’s
spouse) between the date of the gift and the date of
the decedent’s death.’’.
(c) AMENDMENTS RELATED TO SECTION 503 OF
THE 1997 ACT.—
(1) Clause (iii) of section 6166(b)(7)(A) of the
1986 Code is amended to read as follows:
‘‘(iii) for purposes of applying section
6601(j), the 2-percent portion (as defined
in such section) shall be treated as being
zero.’’.
(2) Clause (iii) of section 6166(b)(8)(A) of the
1986 Code is amended to read as follows:
‘‘(iii) 2-PERCENT INTEREST RATE NOT
TO APPLY.—For purposes of applying sec-
tion 6601(j), the 2-percent portion (as de-
fined in such section) shall be treated as
being zero.’’.
(d) AMENDMENT RELATED TO SECTION 505 OF THE
1997 ACT.—Paragraphs (1) and (2) of section 7479(a)
of the 1986 Code are each amended by striking ‘‘an es-
tate,’’ and inserting ‘‘an estate (or with respect to any
property included therein),’’.
142
(e) AMENDMENTS RELATED TO SECTION 506 OF
THE 1997 ACT.—
(1) Subsection (c) of section 2504 of the 1986
Code is amended by striking ‘‘was assessed or paid’’
and inserting ‘‘was finally determined for purposes
of this chapter’’.
(2) Paragraph (1) of section 506(e) of the 1997
Act is amended by striking ‘‘and (c)’’ and inserting
‘‘, (c), and (d)’’.
SEC. 607. AMENDMENTS RELATED TO TITLE VII OF 1997
ACT.
(a) AMENDMENT RELATED TO SECTION 1400 OF
1986 CODE.—Section 1400(b)(2)(B) of the 1986 Code is
amended by inserting ‘‘as determined on the basis of the
1990 census’’ after ‘‘percent’’.
(b) AMENDMENTS RELATED TO SECTION 1400B OF
1986 CODE.—
(1) Section 1400B(d)(2) of the 1986 Code is
amended by inserting ‘‘as determined on the basis of
the 1990 census’’ after ‘‘percent’’.
(2) Section 1400B(b) of the 1986 Code is
amended by redesignating paragraphs (6) and (7) as
paragraphs (5) and (6), respectively.
(c) AMENDMENTS RELATED TO SECTION 1400C OF
1986 CODE.—
143
(1) Paragraph (1) of section 1400C(c) of the
1986 Code is amended to read as follows:
‘‘(1) IN GENERAL.—The term ‘first-time home-
buyer’ means any individual if such individual (and
if married, such individual’s spouse) had no present
ownership interest in a principal residence in the
District of Columbia during the 1-year period ending
on the date of the purchase of the principal resi-
dence to which this section applies.’’.
(2) Subparagraph (B) of section 1400C(e)(2) of
the 1986 Code is amended by inserting before the
period ‘‘on the date the taxpayer first occupies such
residence’’.
(3) Paragraph (3) of section 1400C(e) of the
1986 Code is amended by striking all that follows
‘‘principal residence’’ and inserting ‘‘on the date
such residence is purchased.’’.
(4) Subsection (i) of section 1400C of the 1986
Code is amended to read as follows:
‘‘(i) APPLICATION OF SECTION.—This section shall
apply to property purchased after August 4, 1997, and
before January 1, 2001.’’.
(5) Subsection (c) of section 23 of the 1986
Code is amended by inserting ‘‘and section 1400C’’
after ‘‘other than this section’’.
144
(6) Subparagraph (C) of section 25(e)(1) of the
1986 Code is amended by striking ‘‘section 23’’ and
inserting ‘‘sections 23 and 1400C’’.
SEC. 608. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.
(a) AMENDMENT RELATED TO SECTION 901 OF 1997
ACT.—Section 9503(c)(7) of the 1986 Code is amended—
(1) by striking ‘‘resulting from the amendments
made by’’ and inserting ‘‘(and transfers to the Mass
Transit Account) resulting from the amendments
made by subsections (a) and (b) of section 901 of’’,
and
(2) by inserting before the period ‘‘and deposits
in the Highway Trust Fund (and transfers to the
Mass Transit Account) shall be treated as made
when they would have been required to be made
without regard to section 901(e) of the Taxpayer
Relief Act of 1997’’.
(b) AMENDMENT RELATED TO SECTION 907 OF 1997
ACT.—Paragraph (2) of section 9503(e) of the 1986 Code
is amended by striking the last sentence and inserting the
following new sentence: ‘‘For purposes of the preceding
sentence, the term ‘mass transit portion’ means, for any
fuel with respect to which tax was imposed under section
4041 or 4081 and otherwise deposited into the Highway
Trust Fund, the amount determined at the rate of—
145
‘‘(A) except as otherwise provided in this
sentence, 2.86 cents per gallon,
‘‘(B) 1.77 cents per gallon in the case of
any partially exempt methanol or ethanol fuel
(as defined in section 4041(m)) none of the al-
cohol in which consists of ethanol,
‘‘(C) 1.86 cents per gallon in the case of
liquefied natural gas,
‘‘(D) 2.13 cents per gallon in the case of
liquefied petroleum gas, and
‘‘(E) 9.71 cents per MCF (determined at
standard temperature and pressure) in the case
of compressed natural gas.’’.
(c) AMENDMENT RELATED TO SECTION 976 OF 1997
ACT.—Section 6103(d)(5) of the 1986 Code is amended
by striking ‘‘section 967 of the Taxpayer Relief Act of
1997.’’ and inserting ‘‘section 976 of the Taxpayer Relief
Act of 1997. Subsections (a)(2) and (p)(4) and sections
7213 and 7213A shall not apply with respect to disclo-
sures or inspections made pursuant to this paragraph.’’.
SEC. 609. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 1001 OF
1997 ACT.—
(1) Paragraph (2) of section 1259(b) of the
1986 Code is amended—
146
(A) by striking ‘‘debt’’ each place it ap-
pears in clauses (i) and (ii) of subparagraph
(A) and inserting ‘‘position’’,
(B) by striking ‘‘and’’ at the end of sub-
paragraph (A), and
(C) by redesignating subparagraph (B) as
subparagraph (C) and by inserting after sub-
paragraph (A) the following new subparagraph:
‘‘(B) any hedge with respect to a position
described in subparagraph (A), and’’.
(2) Section 1259(d)(1) of the 1986 Code is
amended
by
inserting
‘‘(including
cash)’’
after
‘‘property’’.
(3) Subparagraph (D) of section 475(f)(1) of
the 1986 Code is amended by adding at the end the
following new sentence: ‘‘Subsection (d)(3) shall not
apply under the preceding sentence for purposes of
applying sections 1402 and 7704.’’.
(4) Subparagraph (C) of section 1001(d)(3) of
the 1997 Act is amended by striking ‘‘within the 30-
day period beginning on’’ and inserting ‘‘before the
close of the 30th day after’’.
(b) AMENDMENTS RELATED TO SECTION 1012 OF
1997 Act.—
147
(1) Paragraph (1) of section 1012(d) of the
1997 Act is amended by striking ‘‘1997, pursuant’’
and inserting ‘‘1997; except that the amendment
made by subsection (a) shall apply to such distribu-
tions only if pursuant’’.
(2) Subparagraph (A) of section 355(e)(3) of
the 1986 Code is amended—
(A) by striking ‘‘shall not be treated as de-
scribed in’’ and inserting ‘‘shall not be taken
into account in applying’’, and
(B) by striking clause (iv) and inserting
the following new clause:
‘‘(iv) The acquisition of stock in the
distributing corporation or any controlled
corporation to the extent that the percent-
age of stock owned directly or indirectly in
such corporation by each person owning
stock in such corporation immediately be-
fore the acquisition does not decrease.’’.
(c) AMENDMENTS RELATED TO SECTION 1014 OF
1997 ACT.—
(1) Paragraph (1) of section 351(g) of the 1986
Code is amended by adding ‘‘and’’ at the end of sub-
paragraph (A) and by striking subparagraphs (B)
148
and (C) and inserting the following new subpara-
graph:
‘‘(B) if (and only if) the transferor receives
stock other than nonqualified preferred stock—
‘‘(i) subsection (b) shall apply to such
transferor, and
‘‘(ii) such nonqualified preferred stock
shall be treated as other property for pur-
poses of applying subsection (b).’’.
(2) Clause (ii) of section 354(a)(2)(C) of 1986
Code is amended by adding at the end the following
new subclause:
‘‘(III) EXTENSION
OF
STATUTE
OF LIMITATIONS.—The statutory pe-
riod for the assessment of any defi-
ciency attributable to a corporation
failing to be a family-owned corpora-
tion shall not expire before the expira-
tion of 3 years after the date the Sec-
retary is notified by the corporation
(in such manner as the Secretary may
prescribe) of such failure, and such
deficiency may be assessed before the
expiration of such 3-year period not-
withstanding the provisions of any
149
other law or rule of law which would
otherwise prevent such assessment.’’.
(d) AMENDMENT RELATED TO SECTION 1024 OF
1997 ACT.—Section 6331(h)(1) of the 1986 Code is
amended by striking ‘‘The effect of a levy’’ and inserting
‘‘If the Secretary approves a levy under this subsection,
the effect of such levy’’.
(e) AMENDMENTS RELATED TO SECTION 1031 OF
1997 ACT.—
(1) Subsection (l) of section 4041 of the 1986
Code is amended by striking ‘‘subsection (e) or (f)’’
and inserting ‘‘subsection (f) or (g)’’.
(2) Subsection (b) of section 9502 of the 1986
Code is amended by moving the sentence added at
the end of paragraph (1) to the end of such sub-
section.
(3) Subsection (c) of section 6421 of the 1986
Code is amended—
(A) by striking ‘‘(2)(A)’’ and inserting
‘‘(2)’’, and
(B) by adding at the end the following sen-
tence: ‘‘Subsection (a) shall not apply to gaso-
line to which this subsection applies.’’.
(f) AMENDMENTS RELATED TO SECTION 1032 OF
1997 ACT.—
150
(1) Section 1032(a) of the 1997 Act is amended
by striking ‘‘Subsection (a) of section 4083’’ and in-
serting ‘‘Paragraph (1) of section 4083(a)’’.
(2) Section 1032(e)(12)(A) of the 1997 Act
shall be applied as if ‘‘gasoline, diesel fuel,’’ were the
material proposed to be stricken.
(3) Paragraph (1) of section 4101(e) of the
1986 Code is amended by striking ‘‘dyed diesel fuel
and kerosene’’ and inserting ‘‘such fuel in a dyed
form’’.
(g) AMENDMENT RELATED TO SECTION 1055 OF
1997 ACT.—Section 6611(g)(1) of the 1986 Code is
amended by striking ‘‘(e), and (h)’’ and inserting ‘‘and
(e)’’.
(h) AMENDMENT RELATED TO SECTION 1083 OF
1997 ACT.—Section 1083(a)(2) of the 1997 Act is amend-
ed—
(1) by striking ‘‘21’’ and inserting ‘‘20’’, and
(2) by striking ‘‘22’’ and inserting ‘‘21’’.
(i) AMENDMENT RELATED
TO SECTION 1084
OF
1997 ACT.—
(1) Paragraph (3) of section 264(a) of the 1986
Code is amended by striking ‘‘subsection (c)’’ and
inserting ‘‘subsection (d)’’.
151
(2) Paragraph (4) of section 264(a) of the 1986
Code is amended by striking ‘‘subsection (d)’’ and
inserting ‘‘subsection (e)’’.
(3) Paragraph (4) of section 264(f) of the 1986
Code is amended by adding at the end the following
new subparagraph:
‘‘(E) MASTER
CONTRACTS.—If coverage
for each insured under a master contract is
treated as a separate contract for purposes of
sections 817(h), 7702, and 7702A, coverage for
each such insured shall be treated as a separate
contract for purposes of subparagraph (A). For
purposes of the preceding sentence, the term
‘master contract’ shall not include any group
life insurance contract (as defined in section
848(e)(2)).’’.
(4)(A) Clause (iv) of section 264(f)(5)(A) of the
1986 Code is amended by striking the second sen-
tence.
(B) Subparagraph (B) of section 6724(d)(1) of
the 1986 Code is amended by striking ‘‘or’’ at the
end of clause (xv), by striking the period at the end
of clause (xvi) and inserting ‘‘, or’’, and by adding
at the end the following new clause:
152
‘‘(xvii) section 264(f)(5)(A)(iv) (relat-
ing to reporting with respect to certain life
insurance and annuity contracts).’’.
(C) Paragraph (2) of section 6724(d) of the
1986 Code is amended by striking ‘‘or’’ at the end
of subparagraph (Y), by striking the period at the
end of subparagraph (Z) and inserting ‘‘or’’, and by
adding at the end the following new subparagraph:
‘‘(AA) section 264(f)(5)(A)(iv) (relating to
reporting with respect to certain life insurance
and annuity contracts).’’.
(j) AMENDMENT RELATED TO SECTION 1085 OF
1997 ACT.—Paragraph (5) of section 32(c) of the 1986
Code is amended—
(1) by inserting before the period at the end of
subparagraph (A) ‘‘and increased by the amounts
described in subparagraph (C)’’,
(2) by adding ‘‘or’’ at the end of clause (iii) of
subparagraph (B), and
(3) by striking all that follows subclause (II) of
subparagraph (B)(iv) and inserting the following:
‘‘(III) other trades or businesses.
For purposes of clause (iv), there shall not
be taken into account items which are at-
tributable to a trade or business which
153
consists of the performance of services by
the taxpayer as an employee.
‘‘(C) CERTAIN AMOUNTS INCLUDED.—An
amount is described in this subparagraph if it
is—
‘‘(i) interest received or accrued dur-
ing the taxable year which is exempt from
tax imposed by this chapter, or
‘‘(ii) amounts received as a pension or
annuity, and any distributions or payments
received
from
an
individual
retirement
plan, by the taxpayer during the taxable
year to the extent not included in gross in-
come.
Clause (ii) shall not include any amount which
is not includible in gross income by reason of
section 402(c), 403(a)(4), 403(b), 408(d) (3),
(4), or (5), or 457(e)(10).’’.
(k) AMENDMENT RELATED TO SECTION 1088 OF
1997 ACT.—Section 1088(b)(2)(C) of the 1997 Act is
amended by inserting ‘‘more than 1 year’’ before ‘‘after’’.
(l) AMENDMENT RELATED
TO SECTION 1089
OF
1997 ACT.—Paragraphs (1)(C) and (2)(C) of section
664(d) of the 1986 Code are each amended by adding ‘‘,
and’’ at the end.
154
SEC. 610. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.
(a) AMENDMENT RELATED TO SECTION 1103 OF
1997 ACT.—The paragraph (3) of section 59(a) added by
section 1103 of the 1997 Act is redesignated as paragraph
(4).
(b) AMENDMENT RELATED TO SECTION 1121 OF
1997 ACT.—Section 1298(a)(2)(B) of the 1986 Code is
amended by adding at the end the following new sentence:
‘‘Section 1297(e) shall not apply in determining whether
a corporation is a passive foreign investment company for
purposes of this subparagraph.’’.
(c) AMENDMENT RELATED TO SECTION 1122 OF
1997 ACT.—Section 672(f)(3)(B) of the 1986 Code is
amended by striking ‘‘section 1296’’ and inserting ‘‘sec-
tion 1297’’.
(d) AMENDMENT RELATED TO SECTION 1123 OF
1997 ACT.—The subsection (e) of section 1297 of the
1986 Code added by section 1123 of the 1997 Act is re-
designated as subsection (f).
(e) AMENDMENT RELATED TO SECTION 1144 OF
1997 ACT.—Paragraphs (1) and (2) of section 1144(c)
of the 1997 Act are each amended by striking ‘‘6038B(b)’’
and inserting ‘‘6038B(c) (as redesignated by subsection
(b))’’.
155
SEC. 611. AMENDMENTS RELATED TO TITLE XII OF 1997
ACT.
(a) AMENDMENT RELATED TO SECTION 1204 OF
1997 ACT.—The last sentence of section 162(a) of the
1986 Code is amended by striking ‘‘investigate’’ and all
that follows and inserting ‘‘investigate or prosecute, or
provide support services for the investigation or prosecu-
tion of, a Federal crime.’’.
(b) AMENDMENTS RELATED TO SECTION 1205 OF
1997 ACT.—
(1) Section 6311(e)(1) of the 1986 Code is
amended by striking ‘‘section 6103(k)(8)’’ and in-
serting ‘‘section 6103(k)(9)’’.
(2) Paragraph (8) of section 6103(k) of the
1986 Code (as added by section 1205(c)(1) of the
1997 Act) is redesignated as paragraph (9).
(3) The heading for section 7431(g) of the
1986 Code is amended by striking ‘‘(8)’’ and insert-
ing ‘‘(9)’’.
(4) Section 1205(c)(3) of the 1997 Act shall be
applied as if it read as follows:
‘‘(3) Section 6103(p)(3)(A), as amended by sec-
tion 1026(b)(1)(A), is amended by striking ‘‘or (8)’’
and inserting ‘‘(8), or (9)’’.
156
(5) Section 1213(b) of the 1997 Act is amended
by striking ‘‘section 6724(d)(1)(A)’’ and inserting
‘‘section 6724(d)(1)’’.
(c) AMENDMENT RELATED TO SECTION 1226 OF
1997 ACT.—Section 1226 of the 1997 Act is amended by
striking ‘‘ending on or’’ and inserting ‘‘beginning’’.
(d) AMENDMENT RELATED TO SECTION 1285 OF
1997 ACT.—Section 7430(b) of the 1986 Code is amended
by redesignating paragraph (5) as paragraph (4).
SEC. 612. AMENDMENTS RELATED TO TITLE XIII OF 1997
ACT.
(a) Section 646 of the 1986 Code is redesignated as
section 645.
(b) The item relating to section 646 in the table of
sections for subpart A of part I of subchapter J of chapter
1 of the 1986 Code is amended by striking ‘‘Sec. 646’’
and inserting ‘‘Sec. 645’’.
(c) Paragraph (1) of section 2652(b) of the 1986
Code is amended by striking ‘‘section 646’’ and inserting
‘‘section 645’’.
(d) Paragraph (3) of section 1(g) of the 1986 Code
is amended by striking subparagraph (C) and by redesig-
nating subparagraph (D) as subparagraph (C).
157
(e) Section 641 of the 1986 Code is amended by
striking subsection (c) and by redesignating subsection (d)
as subsection (c).
(f) Paragraph (4) of section 1361(e) of the 1986
Code is amended by striking ‘‘section 641(d)’’ and insert-
ing ‘‘section 641(c)’’.
(g) Subparagraph (A) of section 6103(e)(1) of the
1986 Code is amended by striking clause (ii) and by redes-
ignating clauses (iii) and (iv) as clauses (ii) and (iii), re-
spectively.
SEC. 613. AMENDMENTS RELATED TO TITLE XIV OF 1997
ACT.
(a) AMENDMENT RELATED TO SECTION 1434 OF
1997 ACT.—Paragraph (2) of section 4052(f) of the 1986
Code is amended by striking ‘‘this section’’ and inserting
‘‘such section’’.
(b) AMENDMENT RELATED TO SECTION 1436 OF
1997 ACT.—Paragraph (2) of section 4091(a) of the 1986
Code is amended by inserting ‘‘or on which tax has been
credited or refunded’’ after ‘‘such paragraph’’.
SEC. 614. AMENDMENTS RELATED TO TITLE XV OF 1997
ACT.
(a) AMENDMENT RELATED TO SECTION 1501 OF
1997 ACT.—The paragraph (8) of section 408(p) of the
158
1986 Code added by section 1501(b) of the 1997 Act is
redesignated as paragraph (9).
(b) AMENDMENT RELATED TO SECTION 1505 OF
1997 ACT.—Section 1505(d)(2) of the 1997 Act is amend-
ed by striking ‘‘(b)(12)’’ and inserting ‘‘(b)(12)(A)(i)’’.
(c) AMENDMENT RELATED TO SECTION 1531 OF
1997 ACT.—Subsection (f) of section 9811 of the 1986
Code (as added by section 1531 of the 1997 Act) is redes-
ignated as subsection (e).
SEC. 615. AMENDMENTS RELATED TO TITLE XVI.
(a) AMENDMENTS RELATED TO SECTION 1601(d) OF
1997 ACT.—
(1)
AMENDMENTS
RELATED
TO
SECTION
1601(d)(1)—
(A) Section 408(p)(2)(D)(i) of the 1986
Code is amended by striking ‘‘or (B)’’ in the
last sentence.
(B) Section 408(p) of the 1986 Code is
amended by adding at the end the following:
‘‘(10) SPECIAL RULES FOR ACQUISITIONS, DIS-
POSITIONS, AND SIMILAR TRANSACTIONS.—
‘‘(A) IN
GENERAL.—An employer which
fails to meet any applicable requirement by rea-
son of an acquisition, disposition, or similar
transaction shall not be treated as failing to
159
meet such requirement during the transition pe-
riod if—
‘‘(i) the employer satisfies require-
ments similar to the requirements of sec-
tion 410(b)(6)(C)(i)(II), and
‘‘(ii) the qualified salary reduction ar-
rangement maintained by the employer
would satisfy the requirements of this sub-
section after the transaction if the em-
ployer which maintained the arrangement
before the transaction had remained a sep-
arate employer.
‘‘(B)
APPLICABLE
REQUIREMENT.—For
purposes of this paragraph, the term ‘applicable
requirement’ means—
‘‘(i) the requirement under paragraph
(2)(A)(i) that an employer be an eligible
employer,
‘‘(ii) the requirement under paragraph
(2)(D) that an arrangement be the only
plan of an employer, and
‘‘(iii) the participation requirements
under paragraph (4).
‘‘(C) TRANSITION PERIOD.—For purposes
of this paragraph, the term ‘transition period’
160
means the period beginning on the date of any
transaction described in subparagraph (A) and
ending on the last day of the second calendar
year following the calendar year in which such
transaction occurs.’’.
(C) Section 408(p)(2) of the 1986 Code is
amended—
(i) by striking ‘‘the preceding sentence
shall apply only in accordance with rules
similar
to
the
rules
of
section
410(b)(6)(C)(i)’’ in the last sentence of
subparagraph (C)(i)(II) and inserting ‘‘the
preceding sentence shall not apply’’, and
(ii) by striking clause (iii) of subpara-
graph (D).
(2) AMENDMENT TO SECTION 1601(d)(4).—Sec-
tion 1601(d)(4)(A) of the 1997 Act is amended—
(A) by striking ‘‘Section 403(b)(11)’’ and
inserting ‘‘Paragraphs (7)(A)(ii) and (11) of
section 403(b)’’, and
(B) by striking ‘‘403(b)(1)’’ in clause (ii)
and inserting ‘‘403(b)(10)’’.
(b) AMENDMENT RELATED TO SECTION 1601(f)(4)
OF 1997 ACT.—Subsection (d) of section 6427 of the
1986 Code is amended—
161
(1) by striking ‘‘HELICOPTERS’’ in the heading
and inserting ‘‘OTHER AIRCRAFT USES’’, and
(2) by inserting ‘‘or a fixed-wing aircraft’’ after
‘‘helicopter’’.
SEC. 616. AMENDMENT RELATED TO OMNIBUS BUDGET
RECONCILIATION ACT OF 1993.
(a) IN GENERAL.—Section 196(c) of the 1986 Code
is amended by striking ‘‘and’’ at the end of paragraph (6),
by striking the period at the end of paragraph (7), and
insert ‘‘, and’’, and by adding at the end the following
new paragraph:
‘‘(8) the employer social security credit deter-
mined under section 45B(a).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect as if included in the amend-
ments made by section 13443 of the Revenue Reconcili-
ation Act of 1993.
SEC. 617. AMENDMENT RELATED TO TAX REFORM ACT OF
1984.
(a) IN GENERAL.—Paragraph (3) of section 136(c)
of the Tax Reform Act of 1984 is amended by adding at
the end the following flush sentence:
‘‘The treatment under the preceding sentence shall
apply to each period after June 30, 1983, during
which such members are stapled entities, whether or
162
not such members are stapled entities for all periods
after June 30, 1983.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the Tax
Reform Act of 1984 as of the date of the enactment of
such Act.
SEC. 618. AMENDMENT RELATED TO TAX REFORM ACT OF
1986.
(a) IN GENERAL.—Section 6401(b)(1) of the 1986
Code is amended by striking ‘‘and D’’ and inserting ‘‘D,
and G’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 701(b) of the Tax Reform
Act of 1986.
SEC.
619.
MISCELLANEOUS
CLERICAL
AND
DEADWOOD
CHANGES.
(a)(1) Section 6421 of the 1986 Code is amended by
redesignating subsections (j) and (k) as subsections (i)
and (j), respectively.
(2) Subsection (b) of section 34 of the 1986 Code
is amended by striking ‘‘section 6421(j)’’ and inserting
‘‘section 6421(i)’’.
163
(3) Subsections (a) and (b) of section 6421 of the
1986 Code are each amended by striking ‘‘subsection (j)’’
and inserting ‘‘subsection (i)’’.
(b) Sections 4092(b) and 6427(q)(2) of the 1986
Code are each amended by striking ‘‘section 4041(c)(4)’’
and inserting ‘‘section 4041(c)(2)’’.
(c) Sections 4221(c) and 4222(d) of the 1986 Code
are each amended by striking ‘‘4053(a)(6)’’ and inserting
‘‘4053(6)’’.
(d) Paragraph (5) of section 6416(b) of the 1986
Code is amended by striking ‘‘section 4216(e)(1)’’ each
place it appears and inserting ‘‘section 4216(d)(1)’’.
(e) Paragraph (3) of section 6427(f) of the 1986
Code is amended by striking ‘‘, (e),’’.
(f)(1) Section 6427 of the 1986 Code, as amended
by paragraph (2), is amended by redesignating subsections
(n), (p), (q), and (r) as subsections (m), (n), (o), and (p),
respectively.
(2) Paragraphs (1) and (2)(A) of section 6427(i) of
the 1986 Code are each amended by striking ‘‘(q)’’ and
inserting ‘‘(o)’’.
(g) Subsection (e) of section 9502 of the 1986 Code
is amended to read as follows:
‘‘(e) CERTAIN TAXES ON ALCOHOL MIXTURES TO
REMAIN IN GENERAL FUND.—For purposes of this sec-
164
tion, the amounts which would (but for this subsection)
be required to be appropriated under subparagraphs (A),
(C), and (D) of subsection (b)(1) shall be reduced by—
‘‘(1) 0.6 cent per gallon in the case of taxes im-
posed on any mixture at least 10 percent of which
is alcohol (as defined in section 4081(c)(3)) if any
portion of such alcohol is ethanol, and
‘‘(2) 0.67 cent per gallon in the case of fuel
used in producing a mixture described in paragraph
(1).’’.
(h)(1) Clause (i) of section 9503(c)(2)(A) of the 1986
Code is amended by adding ‘‘and’’ at the end of subclause
(II), by striking subclause (III), and by redesignating sub-
clause (IV) as subclause (III).
(2) Clause (ii) of such section is amended by striking
‘‘gasoline, special fuels, and lubricating oil’’ each place it
appears and inserting ‘‘fuel’’.
(i) The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 620. EFFECTIVE DATE.
Except as otherwise provided in this title, the amend-
ments made by this title shall take effect as if included
in the provisions of the Taxpayer Relief Act of 1997 to
which they relate.
165
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘In-
ternal Revenue Service Restructuring and Reform Act of
1998’’.
(b) AMENDMENT OF 1986 CODE.—Except as otherwise
expressly provided, whenever in this Act an amendment or
repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—REORGANIZATION OF STRUCTURE AND MANAGEMENT OF
THE INTERNAL REVENUE SERVICE
Subtitle A—Reorganization of the Internal Revenue Service
Sec. 1001. Reorganization of the Internal Revenue Service.
Sec. 1002. IRS mission to focus on taxpayers’ needs.
Subtitle B—Executive Branch Governance and Senior Management
Sec. 1101. Internal Revenue Service Oversight Board.
Sec. 1102. Commissioner of Internal Revenue; other officials.
Sec. 1103. Treasury Inspector General for Tax Administration.
Sec. 1104. Other personnel.
Sec. 1105. Prohibition on executive branch influence over taxpayer audits and
other investigations.
Subtitle C—Personnel Flexibilities
Sec. 1201. Improvements in personnel flexibilities.
Sec. 1202. Voluntary separation incentive payments.
Sec. 1203. Termination of employment for misconduct.
Sec. 1204. Basis for evaluation of Internal Revenue Service employees.
Sec. 1205. Employee training program.
166
TITLE II—ELECTRONIC FILING
Sec. 2001. Electronic filing of tax and information returns.
Sec. 2002. Due date for certain information returns.
Sec. 2003. Paperless electronic filing.
Sec. 2004. Return-free tax system.
Sec. 2005. Access to account information.
TITLE III—TAXPAYER PROTECTION AND RIGHTS
Sec. 3000. Short title.
Subtitle A—Burden of Proof
Sec. 3001. Burden of proof.
Subtitle B—Proceedings by Taxpayers
Sec. 3101. Expansion of authority to award costs and certain fees.
Sec. 3102. Civil damages for collection actions.
Sec. 3103. Increase in size of cases permitted on small case calendar.
Sec. 3104. Expansion of Tax Court jurisdiction to responsible person penalties.
Sec. 3105. Actions for refund with respect to certain estates which have elected
the installment method of payment.
Sec. 3106. Tax Court jurisdiction to review adverse IRS determination of tax-ex-
empt status of bond issue.
Sec. 3107. Civil action for release of erroneous lien.
Subtitle C—Relief for Innocent Spouses and for Taxpayers Unable To Manage
Their Financial Affairs Due to Disabilities
Sec. 3201. Spousal election to limit joint and several liability on joint return.
Sec. 3202. Suspension of statute of limitations on filing refund claims during pe-
riods of disability.
Subtitle D—Provisions Relating to Interest and Penalties
Sec. 3301. Elimination of interest rate differential on overlapping periods of in-
terest on income tax overpayments and underpayments.
Sec. 3302. Increase in overpayment rate payable to taxpayers other than corpora-
tions.
Sec. 3303. Elimination of penalty on individual’s failure to pay for months dur-
ing period of installment agreement.
Sec. 3304. Mitigation of failure to deposit penalty.
Sec. 3305. Suspension of interest and certain penalties where Secretary fails to
contact individual taxpayer.
Sec. 3306. Procedural requirements for imposition of penalties and additions to
tax.
Sec. 3307. Personal delivery of notice of penalty under section 6672.
Sec. 3308. Notice of interest charges.
Subtitle E—Protections for Taxpayers Subject to Audit or Collection Activities
PART I—DUE PROCESS
Sec. 3401. Due process in IRS collection actions.
167
PART II—EXAMINATION ACTIVITIES
Sec. 3411. Uniform application of confidentiality privilege to taxpayer commu-
nications with federally authorized practitioners.
Sec. 3412. Limitation on financial status audit techniques.
Sec. 3413. Software trade secrets protection.
Sec. 3414. Threat of audit prohibited to coerce tip reporting alternative commit-
ment agreements.
Sec. 3415. Taxpayers allowed motion to quash all third-party summonses.
Sec. 3416. Service of summonses to third-party recordkeepers permitted by mail.
Sec. 3417. Prohibition on IRS contact of third parties without prior notice.
PART III—COLLECTION ACTIVITIES
SUBPART A—APPROVAL PROCESS
Sec. 3421. Approval process for liens, levies, and seizures.
SUBPART B—LIENS AND LEVIES
Sec. 3431. Modifications to certain levy exemption amounts.
Sec. 3432. Release of levy upon agreement that amount is uncollectible.
Sec. 3433. Levy prohibited during pendency of refund proceedings.
Sec. 3434. Approval required for jeopardy and termination assessments and jeop-
ardy levies.
Sec. 3435. Increase in amount of certain property on which lien not valid.
Sec. 3436. Waiver of early withdrawal tax for IRS levies on employer-sponsored
retirement plans or IRAs.
SUBPART C—SEIZURES
Sec. 3441. Prohibition of sales of seized property at less than minimum bid.
Sec. 3442. Accounting of sales of seized property.
Sec. 3443. Uniform asset disposal mechanism.
Sec. 3444. Codification of IRS administrative procedures for seizure of taxpayer’s
property.
Sec. 3445. Procedures for seizure of residences and businesses.
PART IV—PROVISIONS RELATING TO EXAMINATION AND COLLECTION
ACTIVITIES
Sec. 3461. Procedures relating to extensions of statute of limitations by agree-
ment.
Sec. 3462. Offers-in-compromise.
Sec. 3463. Notice of deficiency to specify deadlines for filing Tax Court petition.
Sec. 3464. Refund or credit of overpayments before final determination.
Sec. 3465. IRS procedures relating to appeals of examinations and collections.
Sec. 3466. Application of certain fair debt collection procedures.
Sec. 3467. Guaranteed availability of installment agreements.
Subtitle F—Disclosures to Taxpayers
Sec. 3501. Explanation of joint and several liability.
Sec. 3502. Explanation of taxpayers’ rights in interviews with the Internal Reve-
nue Service.
Sec. 3503. Disclosure of criteria for examination selection.
Sec. 3504. Explanations of appeals and collection process.
Sec. 3505. Explanation of reason for refund denial.
168
Sec. 3506. Statements regarding installment agreements.
Sec. 3507. Notification of change in tax matters partner.
Subtitle G—Low Income Taxpayer Clinics
Sec. 3601. Low income taxpayer clinics.
Subtitle H—Other Matters
Sec. 3701. Cataloging complaints.
Sec. 3702. Archive of records of Internal Revenue Service.
Sec. 3703. Payment of taxes.
Sec. 3704. Clarification of authority of Secretary relating to the making of elec-
tions.
Sec. 3705. IRS employee contacts.
Sec. 3706. Use of pseudonyms by IRS employees.
Sec. 3707. Conferences of right in the National Office of IRS.
Sec. 3708. Illegal tax protester designation.
Sec. 3709. Provision of confidential information to Congress by whistleblowers.
Sec. 3710. Listing of local IRS telephone numbers and addresses.
Sec. 3711. Identification of return preparers.
Sec. 3712. Offset of past-due, legally enforceable State income tax obligations
against overpayments.
Sec. 3713. Treatment of IRS notices on foreign tax provisions.
Subtitle I—Studies
Sec. 3801. Administration of penalties and interest.
Sec. 3802. Confidentiality of tax return information.
TITLE IV—CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL
REVENUE SERVICE
Sec. 4001. Century date change.
Sec. 4002. Tax law complexity analysis.
TITLE V—REVENUE PROVISIONS
Sec. 5001. Clarification of deduction for deferred compensation.
Sec. 5002. Modification to foreign tax credit carryback and carryover periods.
Sec. 5003. Clarification and expansion of mathematical error assessment proce-
dures.
Sec. 5004. Termination of exception for certain real estate investment trusts from
the treatment of stapled entities.
Sec. 5005. Certain customer receivables ineligible for mark-to-market treatment.
Sec. 5006. Inclusion of rotavirus gastroenteritis to list of taxable vaccines.
TITLE VI—TECHNICAL CORRECTIONS
Sec. 6001. Short title.
Sec. 6002. Definitions.
Sec. 6003. Amendments related to title I of 1997 Act.
Sec. 6004. Amendments related to title II of 1997 Act.
Sec. 6005. Amendments related to title III of 1997 Act.
Sec. 6006. Amendment related to title IV of 1997 Act.
Sec. 6007. Amendments related to title V of 1997 Act.
Sec. 6008. Amendments related to title VII of 1997 Act.
Sec. 6009. Amendments related to title IX of 1997 Act.
169
Sec. 6010. Amendments related to title X of 1997 Act.
Sec. 6011. Amendments related to title XI of 1997 Act.
Sec. 6012. Amendments related to title XII of 1997 Act.
Sec. 6013. Amendments related to title XIII of 1997 Act.
Sec. 6014. Amendments related to title XIV of 1997 Act.
Sec. 6015. Amendments related to title XV of 1997 Act.
Sec. 6016. Amendments related to title XVI of 1997 Act.
Sec. 6017. Amendments related to Small Business Job Protection Act of 1996.
Sec. 6018. Amendments related to Taxpayer Bill of Rights 2.
Sec. 6019. Amendment related to Omnibus Budget Reconciliation Act of 1993.
Sec. 6020. Amendment related to Revenue Reconciliation Act of 1990.
Sec. 6021. Amendment related to Tax Reform Act of 1986.
Sec. 6022. Miscellaneous clerical and deadwood changes.
Sec. 6023. Effective date.
TITLE I—REORGANIZATION OF
STRUCTURE 
AND 
MANAGE-
MENT OF THE INTERNAL REV-
ENUE SERVICE
Subtitle A—Reorganization of the
Internal Revenue Service
SEC. 1001. REORGANIZATION OF THE INTERNAL REVENUE
SERVICE.
(a) IN GENERAL.—The Commissioner of Internal Rev-
enue shall develop and implement a plan to reorganize the
Internal Revenue Service. The plan shall—
(1) supersede any organization or reorganization
of the Internal Revenue Service based on any statute
or reorganization plan applicable on the effective date
of this section;
(2) eliminate or substantially modify the exist-
ing organization of the Internal Revenue Service
which is based on a national, regional, and district
structure;
170
(3) establish organizational units serving par-
ticular groups of taxpayers with similar needs; and
(4) ensure an independent appeals function
within the Internal Revenue Service, including the
prohibition in the plan of ex parte communications
between appeals officers and other Internal Revenue
Service employees to the extent that such communica-
tions appear to compromise the independence of the
appeals officers.
(b) SAVINGS PROVISIONS.—
(1) PRESERVATION
OF
SPECIFIC
TAX
RIGHTS
AND REMEDIES.—Nothing in the plan developed and
implemented under subsection (a) shall be considered
to impair any right or remedy, including trial by
jury, to recover any internal revenue tax alleged to
have been erroneously or illegally assessed or collected,
or any penalty claimed to have been collected without
authority, or any sum alleged to have been excessive
or in any manner wrongfully collected under the in-
ternal revenue laws. For the purpose of any action to
recover any such tax, penalty, or sum, all statutes,
rules, and regulations referring to the collector of in-
ternal revenue, the principal officer for the internal
revenue district, or the Secretary, shall be deemed to
refer to the officer whose act or acts referred to in the
171
preceding sentence gave rise to such action. The venue
of any such action shall be the same as under existing
law.
(2) CONTINUING
EFFECT
OF
LEGAL
DOCU-
MENTS.—All orders, determinations, rules, regula-
tions, permits, agreements, grants, contracts, certifi-
cates, licenses, registrations, privileges, and other ad-
ministrative actions—
(A) which have been issued, made, granted,
or allowed to become effective by the President,
any Federal agency or official thereof, or by a
court of competent jurisdiction, in the perform-
ance of any function transferred or affected by
the reorganization of the Internal Revenue Serv-
ice or any other administrative unit of the De-
partment of the Treasury under this section, and
(B) which are in effect at the time this sec-
tion takes effect, or were final before the effective
date of this section and are to become effective on
or after the effective date of this section,
shall continue in effect according to their terms until
modified, terminated, superseded, set aside, or revoked
in accordance with law by the President, the Sec-
retary of the Treasury, the Commissioner of Internal
172
Revenue, or other authorized official, a court of com-
petent jurisdiction, or by operation of law.
(3) PROCEEDINGS NOT AFFECTED.—The provi-
sions of this section shall not affect any proceedings,
including notices of proposed rulemaking, or any ap-
plication for any license, permit, certificate, or finan-
cial assistance pending before the Department of the
Treasury (or any administrative unit of the Depart-
ment, including the Internal Revenue Service) at the
time this section takes effect, with respect to functions
transferred or affected by the reorganization under
this section but such proceedings and applications
shall continue. Orders shall be issued in such proceed-
ings, appeals shall be taken therefrom, and payments
shall be made pursuant to such orders, as if this sec-
tion had not been enacted, and orders issued in any
such proceedings shall continue in effect until modi-
fied, terminated, superseded, or revoked by a duly au-
thorized official, by a court of competent jurisdiction,
or by operation of law. Nothing in this paragraph
shall be deemed to prohibit the discontinuance or
modification of any such proceeding under the same
terms and conditions and to the same extent that such
proceeding could have been discontinued or modified
if this section had not been enacted.
173
(4) SUITS
NOT
AFFECTED.—The provisions of
this section shall not affect suits commenced before the
effective date of this section, and in all such suits,
proceedings shall be had, appeals taken, and judg-
ments rendered in the same manner and with the
same effect as if this section had not been enacted.
(5) NONABATEMENT OF ACTIONS.—No suit, ac-
tion, or other proceeding commenced by or against the
Department of the Treasury (or any administrative
unit of the Department, including the Internal Reve-
nue Service), or by or against any individual in the
official capacity of such individual as an officer of
the Department of the Treasury, shall abate by reason
of the enactment of this section.
(6) ADMINISTRATIVE ACTIONS RELATING TO PRO-
MULGATION
OF
REGULATIONS.—Any administrative
action relating to the preparation or promulgation of
a regulation by the Department of the Treasury (or
any administrative unit of the Department, including
the Internal Revenue Service) relating to a function
transferred or affected by the reorganization under
this section may be continued by the Department of
the Treasury through any appropriate administrative
unit of the Department, including the Internal Reve-
174
nue Service with the same effect as if this section had
not been enacted.
SEC. 1002. IRS MISSION TO FOCUS ON TAXPAYERS’ NEEDS.
The Internal Revenue Service shall review and restate
its mission to place a greater emphasis on serving the public
and meeting taxpayers’ needs.
Subtitle B—Executive Branch Gov-
ernance and Senior Manage-
ment
SEC. 
1101. 
INTERNAL 
REVENUE 
SERVICE 
OVERSIGHT
BOARD.
(a) IN GENERAL.—Section 7802 (relating to the Com-
missioner of Internal Revenue) is amended to read as fol-
lows:
‘‘SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT
BOARD.
‘‘(a) ESTABLISHMENT.—There is established within
the Department of the Treasury the Internal Revenue Serv-
ice Oversight Board (hereafter in this subchapter referred
to as the ‘Oversight Board’).
‘‘(b) MEMBERSHIP.—
‘‘(1) COMPOSITION.—The Oversight Board shall
be composed of 9 members, as follows:
‘‘(A) 6 members shall be individuals who
are not otherwise Federal officers or employees
175
and who are appointed by the President, by and
with the advice and consent of the Senate.
‘‘(B) 1 member shall be the Secretary of the
Treasury or, if the Secretary so designates, the
Deputy Secretary of the Treasury.
‘‘(C) 1 member shall be the Commissioner of
Internal Revenue.
‘‘(D) 1 member shall be an individual who
is a representative of an organization that rep-
resents a substantial number of Internal Revenue
Service employees and who is appointed by the
President, by and with the advice and consent of
the Senate.
‘‘(2) QUALIFICATIONS AND TERMS.—
‘‘(A) QUALIFICATIONS.—Members of the
Oversight Board described in paragraph (1)(A)
shall be appointed without regard to political af-
filiation and solely on the basis of their profes-
sional experience and expertise in 1 or more of
the following areas:
‘‘(i) Management of large service orga-
nizations.
‘‘(ii) Customer service.
‘‘(iii) Federal tax laws, including tax
administration and compliance.
176
‘‘(iv) Information technology.
‘‘(v) Organization development.
‘‘(vi) The needs and concerns of tax-
payers.
In the aggregate, the members of the Oversight
Board described in paragraph (1)(A) should col-
lectively bring to bear expertise in all of the
areas described in the preceding sentence.
‘‘(B) TERMS.—Each member who is de-
scribed in subparagraph (A) or (D) of paragraph
(1) shall be appointed for a term of 5 years, ex-
cept that of the members first appointed under
paragraph (1)(A)—
‘‘(i) 2 members shall be appointed for
a term of 2 years,
‘‘(ii) 2 members shall be appointed for
a term of 4 years, and
‘‘(iii) 2 members shall be appointed for
a term of 5 years.
‘‘(C) REAPPOINTMENT.—An individual who
is described in paragraph (1)(A) may be ap-
pointed to no more than two 5-year terms on the
Oversight Board.
‘‘(D) VACANCY.—Any vacancy on the Over-
sight Board shall be filled in the same manner
177
as the original appointment. Any member ap-
pointed to fill a vacancy occurring before the ex-
piration of the term for which the member’s
predecessor was appointed shall be appointed for
the remainder of that term.
‘‘(3) ETHICAL CONSIDERATIONS.—
‘‘(A) FINANCIAL DISCLOSURE.—
‘‘(i) IN GENERAL.—During the entire
period that an individual appointed under
subparagraph (A) or (D) of paragraph (1)
is a member of the Oversight Board, such
individual shall be treated as serving as an
officer or employee referred to in section
101(f) of the Ethics in Government Act of
1978 for purposes of title I of such Act, ex-
cept that section 101(d) of such Act shall
apply without regard to the number of days
of service in the position.
‘‘(ii) REPRESENTED ORGANIZATION.—
The organization represented by the indi-
vidual appointed under paragraph (1)(D)
shall file an annual financial report with
the Committee on Finance in the Senate
and the Committee on Ways and Means in
the House of Representatives. Such report
178
shall include information regarding com-
pensation paid to the individual so ap-
pointed, other individuals employed by the
organization, and membership dues collected
by the organization.
‘‘(B) 
RESTRICTIONS
ON
POST-EMPLOY-
MENT.—For purposes of section 207(c) of title
18, United States Code, except as provided in
subparagraph (D)(i)(II), an individual ap-
pointed under subparagraph (A) or (D) of para-
graph (1) shall be treated as an employee re-
ferred to in section 207(c)(2)(A)(i) of such title
during the entire period the individual is a
member of the Board, except that subsections
(c)(2)(B) and (f) of section 207 of such title shall
not apply.
‘‘(C) PRIVATE MEMBERS WHO ARE SPECIAL
GOVERNMENT EMPLOYEES.—If an individual ap-
pointed under paragraph (1)(A) is a special
Government employee, the following additional
rules apply for purposes of chapter 11 of title 18,
United States Code:
‘‘(i) RESTRICTION
ON
REPRESENTA-
TION.—In addition to any restriction under
section 205(c) of title 18, United States
179
Code, except as provided in subsections (d)
through (i) of section 205 of such title, such
individual (except in the proper discharge
of official duties) shall not, with or without
compensation, represent anyone to or before
any officer or employee of—
‘‘(I) the Oversight Board or the
Internal Revenue Service on any mat-
ter,
‘‘(II) the Department of the Treas-
ury on any matter involving the inter-
nal revenue laws or involving the man-
agement or operations of the Internal
Revenue Service, or
‘‘(III) the Department of Justice
with respect to litigation involving a
matter described in subclause (I) or
(II).
‘‘(ii) COMPENSATION
FOR
SERVICES
PROVIDED BY ANOTHER.—For purposes of
section 203 of such title—
‘‘(I) such individual shall not be
subject to the restrictions of subsection
(a)(1) thereof for sharing in compensa-
tion earned by another for representa-
181
resented while a member of the Board,
or
‘‘(III) section 208 of such title for
personal and substantial participation
in a particular matter in which all fi-
nancial interests which would other-
wise prohibit the individual’s partici-
pation are interests of such organiza-
tion.
‘‘(ii) COMPENSATION.—Nothing in sec-
tion 203 of title 18, United States Code,
shall prohibit an organization represented
by the individual appointed under para-
graph (1)(D) from giving, promising, or of-
fering compensation to the individual for
acting as its agent or attorney or for other-
wise representing such organization.
‘‘(4) QUORUM.—5 members of the Oversight
Board shall constitute a quorum. A majority of mem-
bers present and voting shall be required for the Over-
sight Board to take action.
‘‘(5) REMOVAL.—
‘‘(A) IN
GENERAL.—Any member of the
Oversight Board appointed under paragraph (1)
182
(A) or (D) may be removed at the will of the
President.
‘‘(B) SECRETARY AND COMMISSIONER.—An
individual described in subparagraph (B) or (C)
of paragraph (1) shall be removed upon termi-
nation of service in the office described in such
subparagraph.
‘‘(6) CLAIMS.—
‘‘(A) IN GENERAL.—Members of the Over-
sight Board who are described in paragraph (1)
(A) or (D) shall have no personal liability under
Federal law with respect to any claim arising
out of or resulting from an act or omission by
such member within the scope of service as a
member.
‘‘(B) EFFECT ON OTHER LAW.—This para-
graph shall not be construed—
‘‘(i) to affect any other immunities and
protections that may be available to such
member under applicable law with respect
to such transactions,
‘‘(ii) to affect any other right or rem-
edy against the United States under appli-
cable law, or
183
‘‘(iii) to limit or alter in any way the
immunities that are available under appli-
cable law for Federal officers and employees.
‘‘(c) GENERAL RESPONSIBILITIES.—
‘‘(1) OVERSIGHT.—
‘‘(A) IN
GENERAL.—The Oversight Board
shall oversee the Internal Revenue Service in its
administration, management, conduct, direction,
and supervision of the execution and application
of the internal revenue laws or related statutes
and tax conventions to which the United States
is a party.
‘‘(B) MISSION OF IRS.—As part of its over-
sight functions described in subparagraph (A),
the Oversight Board shall ensure that the organi-
zation and operation of the Internal Revenue
Service allows it to carry out its mission.
‘‘(C) 
CONFIDENTIALITY.—The 
Oversight
Board shall ensure that appropriate confiden-
tiality is maintained in the exercise of its duties.
‘‘(2) EXCEPTIONS.—The Oversight Board shall
have no responsibilities or authority with respect to—
‘‘(A) the development and formulation of
Federal tax policy relating to existing or pro-
184
posed internal revenue laws, related statutes, and
tax conventions,
‘‘(B) specific law enforcement activities of
the Internal Revenue Service, including specific
compliance activities such as examinations, col-
lection activities, and criminal investigations,
‘‘(C) specific procurement activities of the
Internal Revenue Service, or
‘‘(D) except as provided in subsection
(d)(3), specific personnel actions.
‘‘(d) SPECIFIC
RESPONSIBILITIES.—The Oversight
Board shall have the following specific responsibilities:
‘‘(1) STRATEGIC PLANS.—To review and approve
strategic plans of the Internal Revenue Service, in-
cluding the establishment of—
‘‘(A) mission and objectives, and standards
of performance relative to either, and
‘‘(B) annual and long-range strategic plans.
‘‘(2) OPERATIONAL PLANS.—To review the oper-
ational functions of the Internal Revenue Service, in-
cluding—
‘‘(A) plans for modernization of the tax sys-
tem,
‘‘(B) plans for outsourcing or managed
competition, and
185
‘‘(C) plans for training and education.
‘‘(3) MANAGEMENT.—To—
‘‘(A) recommend to the President candidates
for appointment as the Commissioner of Internal
Revenue and recommend to the President the re-
moval of the Commissioner,
‘‘(B) recommend to the Secretary of the
Treasury, after taking into consideration any
recommendations of the Commissioner, 3 can-
didates for appointment as the National Tax-
payer Advocate from individuals who have—
‘‘(i) a background in customer service
as well as tax law, and
‘‘(ii) experience in representing indi-
vidual taxpayers,
‘‘(C) recommend to the Secretary of the
Treasury the removal of the National Taxpayer
Advocate,
‘‘(D) review the Commissioner’s selection,
evaluation, and compensation of Internal Reve-
nue Service senior executives who have program
management responsibility over significant func-
tions of the Internal Revenue Service,
186
‘‘(E) review and approve the Commis-
sioner’s plans for any major reorganization of
the Internal Revenue Service, and
‘‘(F) review procedures of the Internal Reve-
nue Service relating to financial audits required
by law.
‘‘(4) BUDGET.—To—
‘‘(A) review and approve the budget request
of the Internal Revenue Service prepared by the
Commissioner,
‘‘(B) submit such budget request to the Sec-
retary of the Treasury, and
‘‘(C) ensure that the budget request supports
the annual and long-range strategic plans.
‘‘(5) TAXPAYER
PROTECTION.—To ensure the
proper treatment of taxpayers by the employees of the
Internal Revenue Service.
The Secretary shall submit the budget request referred to
in paragraph (4)(B) for any fiscal year to the President
who shall submit such request, without revision, to Congress
together with the President’s annual budget request for the
Internal Revenue Service for such fiscal year.
‘‘(e) BOARD PERSONNEL MATTERS.—
‘‘(1) COMPENSATION OF MEMBERS.—
187
‘‘(A) IN
GENERAL.—Each member of the
Oversight Board who is described in subsection
(b)(1)(A) shall be compensated at a rate of
$30,000 per year. All other members shall serve
without compensation for such service.
‘‘(B) CHAIRPERSON.—In lieu of the amount
specified in subparagraph (A), the Chairperson
of the Oversight Board shall be compensated at
a rate of $50,000 per year.
‘‘(2) TRAVEL EXPENSES.—The members of the
Oversight Board shall be allowed travel expenses, in-
cluding per diem in lieu of subsistence, at rates au-
thorized for employees of agencies under subchapter I
of chapter 57 of title 5, United States Code, while
away from their homes or regular places of business
for purposes of duties as a member of the Oversight
Board.
‘‘(3) STAFF.—
‘‘(A) IN GENERAL.—The Chairperson of the
Oversight Board may appoint and terminate
any personnel that may be necessary to enable
the Board to perform its duties.
‘‘(B) DETAIL
OF
GOVERNMENT
EMPLOY-
EES.—Upon request of the Chairperson of the
Oversight Board, a Federal agency shall detail a
188
Federal Government employee to the Oversight
Board without reimbursement. Such detail shall
be without interruption or loss of civil service
status or privilege.
‘‘(4) PROCUREMENT OF TEMPORARY AND INTER-
MITTENT SERVICES.—The Chairperson of the Over-
sight Board may procure temporary and intermittent
services under section 3109(b) of title 5, United States
Code.
‘‘(f) ADMINISTRATIVE MATTERS.—
‘‘(1) CHAIR.—
‘‘(A) TERM.—The members of the Oversight
Board shall elect for a 2-year term a chairperson
from among the members appointed under sub-
section (b)(1)(A).
‘‘(B) POWERS.—Except as otherwise pro-
vided by a majority vote of the Oversight Board,
the powers of the Chairperson shall include—
‘‘(i) establishing committees,
‘‘(ii) setting meeting places and times,
‘‘(iii) establishing meeting agendas,
and
‘‘(iv) developing rules for the conduct
of business.
189
‘‘(2) MEETINGS.—The Oversight Board shall
meet at least quarterly and at such other times as the
Chairperson determines appropriate.
‘‘(3) REPORTS.—
‘‘(A) ANNUAL.—The Oversight Board shall
each year report with respect to the conduct of
its responsibilities under this title to the Presi-
dent, the Committees on Ways and Means, Gov-
ernment Reform and Oversight, and Appropria-
tions of the House of Representatives and the
Committees on Finance, Governmental Affairs,
and Appropriations of the Senate.
‘‘(B) ADDITIONAL REPORT.—Upon a deter-
mination by the Oversight Board under sub-
section (c)(1)(B) that the organization and oper-
ation of the Internal Revenue Service are not al-
lowing it to carry out its mission, the Oversight
Board shall report such determination to the
Committee on Ways and Means of the House of
Representatives, and the Committee on Finance
of the Senate.
‘‘(g) TERMINATION OF BOARD.—The Internal Revenue
Service Oversight Board established under subsection (a)
shall terminate on September 30, 2008.’’
190
(b) RESTRICTION ON DISCLOSURE OF RETURN INFOR-
MATION
TO
OVERSIGHT
BOARD
MEMBERS.—Section
6103(h) (relating to disclosure to certain Federal officers
and employees for purposes of tax administration, etc.) is
amended by adding at the end the following new paragraph:
‘‘(5) INTERNAL
REVENUE
SERVICE
OVERSIGHT
BOARD.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), and except as provided in subpara-
graph (B), no return or return information may
be disclosed to any member of the Oversight
Board described in subparagraph (A) or (D) of
section 7802(b)(1) or to any employee or detailee
of such Board by reason of their service with the
Board. Any request for information not per-
mitted to be disclosed under the preceding sen-
tence, and any contact relating to a specific tax-
payer, made by any such individual to an officer
or employee of the Internal Revenue Service shall
be reported by such officer or employee to the
Secretary, the Treasury Inspector General for
Tax Administration, and the Joint Committee
on Taxation.
‘‘(B) EXCEPTION
FOR
REPORTS
TO
THE
BOARD.—If—
191
‘‘(i) the Commissioner or the Treasury
Inspector General for Tax Administration
prepares any report or other matter for the
Oversight Board in order to assist the
Board in carrying out its duties, and
‘‘(ii) the Commissioner or such Inspec-
tor General determines it is necessary to in-
clude any return or return information in
such report or other matter to enable the
Board to carry out such duties,
such return or return information (other than
information regarding taxpayer identity) may
be disclosed to members, employees, or detailees
of the Board solely for the purpose of carrying
out such duties.’’
(c) CONFORMING AMENDMENTS.—
(1) Section 4946(c) (relating to definitions and
special rules for chapter 42) is amended by striking
‘‘or’’ at the end of paragraph (5), by striking the pe-
riod at the end of paragraph (6) and inserting ‘‘, or’’,
and by adding at the end the following new para-
graph:
‘‘(7) a member of the Internal Revenue Service
Oversight Board.’’