I
105TH CONGRESS
1ST SESSION
H. R. 2292
To restructure the Internal Revenue Service, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 30, 1997
Mr. PORTMAN (for himself and Mr. CARDIN) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committees on Government Reform and Oversight, the Budg-
et, and Rules, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To restructure 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.
Sec. 2. Congressional findings and declaration of purposes.
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; Chief Counsel; other officials.
Sec. 103. Other personnel.
Subtitle B—Personnel Flexibilities
Sec. 111. Personnel flexibilities.
TITLE II—ELECTRONIC FILING
Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Extension of time to file for electronic filers.
Sec. 203. Paperless electronic filing.
Sec. 204. Regulation of preparers.
Sec. 205. Paperless payment.
Sec. 206. Return-free tax system.
Sec. 207. Access to account information.
TITLE III—TAXPAYER PROTECTION AND RIGHTS
Sec. 301. Expansion of authority to issue taxpayer assistance orders.
Sec. 302. Expansion of authority to award costs and certain fees.
Sec. 303. Civil damages for negligence in collection actions.
Sec. 304. Disclosure of criteria for examination selection.
Sec. 305. Archival of records of Internal Revenue Service.
Sec. 306. Tax return information.
Sec. 307. Freedom of information.
Sec. 308. Offers-in-compromise.
Sec. 309. Elimination of interest differential on overpayments and underpay-
ments.
Sec. 310. Elimination of application of failure to pay penalty during period of
installment agreement.
Sec. 311. Safe harbor for qualification for installment agreements.
Sec. 312. Payment of taxes.
Sec. 313. Low income taxpayer clinics.
Sec. 314. Jurisdiction of the Tax Court.
Sec. 315. Cataloging complaints.
Sec. 316. Procedures involving taxpayer interviews.
Sec. 317. Explanation of joint and several liability.
Sec. 318. Procedures relating to extensions of statute of limitations by agree-
ment.
Sec. 319. Review of penalty administration.
Sec. 320. Study of treatment of all taxpayers as separate filing units.
Sec. 321. Study of burden of proof.
TITLE IV—CONGRESSIONAL ACCOUNTABILITY FOR THE
INTERNAL REVENUE SERVICE
Subtitle A—Oversight
Sec. 401. Expansion of powers of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.
Subtitle B—Budget
Sec. 411. Budget discretion.
Sec. 412. Funding for century date change.
Sec. 413. Financial management advisory group.
Subtitle C—Tax Law Complexity
Sec. 421. Role of Internal Revenue Service.
Sec. 422. Tax complexity analysis.
Sec. 423. Simplified tax and wage reporting system.
Sec. 424. Compliance burden estimates.
SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF
PURPOSES.
(a) The Congress finds the following:
(1) The structure of the Internal Revenue Serv-
ice should be strengthened to ensure focus and bet-
ter target its budgeting, staffing, and technology to
serve the American taxpayer and collect the Federal
revenue.
(2) The American public expects timely, accu-
rate, and respectful service from the Internal Reve-
nue Service.
(3) The job of the Internal Revenue Service is
to operate as an efficient financial management or-
ganization.
(4) The bulk of the Federal revenue is gen-
erated through voluntary compliance. Taxpayer serv-
ice and education, as well as targeted compliance
and enforcement initiatives, increase voluntary com-
pliance.
(5) While the Internal Revenue Service must
maintain a strong enforcement presence, its core and
the core of the Federal revenue stream lie in a re-
vamped, modern, technologically advanced organiza-
tion that can track finances, send out clear notices,
and assist taxpayers promptly and efficiently.
(6) The Internal Revenue Service governance,
management, and oversight structures must: develop
and maintain a shared vision with continuity; set
and maintain priorities and strategic direction; im-
pose accountability on senior management; provide
oversight through a credible board, including mem-
bers who bring private sector expertise to the Inter-
nal Revenue Service; develop appropriate measures
of success; align budget and technology with prior-
ities and strategic direction; and coordinate over-
sight and identify problems at an early stage.
(7) The Internal Revenue Service must use in-
formation technology as an enabler of its strategic
objectives.
(8) Electronic filing can increase cost savings
and compliance.
(9) In order to ensure that fewer taxpayers are
subject to improper treatment by the Internal Reve-
nue Service, Congress and the agency need to focus
on preventing problems before they occur.
(10) There currently is no mechanism in place
to ensure that Members of Congress have a complete
understanding of how tax legislation will affect tax-
payers and the Internal Revenue Service and to cre-
ate incentives to simplify the tax law, and to ensure
that Congress hears directly from the Internal Reve-
nue Service during the legislative process.
(b) The purposes of this Act are as follows:
(1) To restructure the Internal Revenue Serv-
ice, transforming it into a world class service organi-
zation.
(2) To establish taxpayer satisfaction as the
goal of the Internal Revenue Service, such that the
Internal Revenue Service should only initiate contact
with a taxpayer if the agency is prepared to devote
the resources necessary for a proper and timely reso-
lution of the matter.
(3) To provide for direct accountability to the
President for tax administration, an Internal Reve-
nue Service Oversight Board, a strengthened Com-
missioner of Internal Revenue, and coordinated con-
gressional oversight to ensure that there are clear
lines of accountability and that the leadership of the
Internal Revenue Service has the continuity and ex-
pertise to guide the agency.
(4) To enable the Internal Revenue Service to
recruit and train a first-class workforce that will be
rewarded for performance and held accountable for
working with taxpayers to solve problems.
(5) To establish paperless filing as the pre-
ferred and most convenient means of filing tax re-
turns for the vast majority of taxpayers within 10
years of enactment of this Act.
(6) To provide additional taxpayer protections
and rights and to ensure that taxpayers receive fair,
impartial, timely, and courteous treatment from the
Internal Revenue Service.
(7) To establish the resolution of the century
date change problem as the highest technology prior-
ity of the Internal Revenue Service.
(8) To establish procedures to minimize com-
plexity in the tax law and simplify tax administra-
tion, and provide Congress with an independent view
of tax administration from the Internal Revenue
Service.
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 (in this subchapter referred to
as the ‘Board’).
‘‘(b) MEMBERSHIP.—
‘‘(1) COMPOSITION.—The Board shall be com-
posed of 9 members, of whom—
‘‘(A) 7 shall be individuals who are not
full-time Federal officers or employees, who are
appointed by the President, by and with the ad-
vice and consent of the Senate, and who shall
be considered special government employees
pursuant to paragraph (2),
‘‘(B) 1 shall be the Secretary of the Treas-
ury or, if the Secretary so designates, the Dep-
uty Secretary of the Treasury, and
‘‘(C) 1 shall be a representative of an orga-
nization that represents a substantial number
of Internal Revenue Service employees who is
appointed by the President, by and with the ad-
vice and consent of the Senate.
‘‘(2) SPECIAL GOVERNMENT EMPLOYEES.—
‘‘(A) QUALIFICATIONS.—Members of the
Board described in paragraph (1)(A) shall be
appointed solely on the basis of their profes-
sional experience and expertise in the following
areas:
‘‘(i) Management of large service or-
ganizations.
‘‘(ii) Customer service.
‘‘(iii) Compliance.
‘‘(iv) Information technology.
‘‘(v) Organization development.
‘‘(vi) The needs and concerns of tax-
payers.
In the aggregate, the members of the Board de-
scribed in paragraph (1)(A) should collectively
bring to bear expertise in these enumerated
areas.
‘‘(B) TERMS.—Each member who is de-
scribed in paragraph (1)(A) shall be appointed
for a term of 5 years, except that of the mem-
bers first appointed—
‘‘(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) 1 member shall be appointed for
a term of 4 years.
‘‘(C) 
REAPPOINTMENT.—An 
individual
who is described in paragraph (1)(A) may be
appointed to no more than two 5-year terms on
the Board.
‘‘(D) SPECIAL
GOVERNMENT
EMPLOY-
EES.—During such periods as they are per-
forming services for the Board, members who
are not Federal officers or employees shall be
treated as special government employees (as de-
fined in section 202 of title 18, United States
Code).
‘‘(E) CLAIMS.—
‘‘(i) IN
GENERAL.—Members of the
Board who are described in paragraph
(1)(A) 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. The preced-
ing sentence shall not be construed to limit
personal liability for criminal acts or omis-
sions, willful or malicious conduct, acts or
omissions for private gain, or any other act
or omission outside the scope of the service
of such member on the Board.
‘‘(ii) EFFECT ON OTHER LAW.—This
subparagraph shall not be construed—
‘‘(I) to affect any other immuni-
ties and protections that may be avail-
able to such member under applicable
law with respect to such transactions,
‘‘(II) to affect any other right or
remedy against the United States
under applicable law, or
‘‘(III) to limit or alter in any way
the immunities that are available
under applicable law for Federal offi-
cers and employees not described in
this subparagraph.
‘‘(3) VACANCY.—Any vacancy on the Board—
‘‘(A) shall not affect the powers of the
Board, and
‘‘(B) shall be filled in the same manner as
the original appointment.
‘‘(4) REMOVAL.—
‘‘(A) IN
GENERAL.—A member of the
Board may be removed at the will of the Presi-
dent.
‘‘(B) SECRETARY OR DELEGATE.—An indi-
vidual described in subsection (b)(1)(B) shall be
removed upon termination of employment.
‘‘(C) REPRESENTATIVE OF INTERNAL REV-
ENUE SERVICE EMPLOYEES.—A member who is
from an organization that represents a substan-
tial number of Internal Revenue Service em-
ployees shall be removed upon termination of
employment, membership, or other affiliation
with such organization.
‘‘(c) GENERAL RESPONSIBILITIES.—
‘‘(1) IN
GENERAL.—The Board shall oversee
the Internal Revenue Service in the 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.
‘‘(2) EXCEPTIONS.—The 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) specific law enforcement activities of
the Internal Revenue Service, including compli-
ance activities such as criminal investigations,
examinations, and collection activities, or
‘‘(C) specific activities of the Internal Rev-
enue Service delegated to employees of the In-
ternal Revenue Service pursuant to delegation
orders in effect as of the date of the enactment
of this subsection, including delegation order
106 relating to procurement authority, except
to the extent that such delegation orders are
modified subsequently by the Secretary.
‘‘(3) RESTRICTION ON DISCLOSURE OF RETURN
INFORMATION TO BOARD MEMBERS.—No return, re-
turn information, or taxpayer return information (as
defined in section 6103(b)) may be disclosed to any
member of the Board described in subsection (b)(1)
(A) or (C). Any request for information not per-
mitted to be disclosed under the preceding sentence,
and any contact relating to a specific taxpayer, made
by a member of the Board 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 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 provide for—
‘‘(A) the selection and appointment, eval-
uation, and removal of the Commissioner of In-
ternal Revenue,
‘‘(B) the review of the Commissioner’s se-
lection, evaluation, and compensation of senior
managers, and
‘‘(C) the review of the Commissioner’s
plans for reorganization of the Internal Reve-
nue 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,
‘‘(C) ensure that the budget request sup-
ports the annual and long-range strategic plans,
and
‘‘(D) ensure appropriate financial audits of
the Internal Revenue Service.
The Secretary shall submit the budget request referred to
in subparagraph (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
Board who is described in subsection (b)(1)(A)
shall be compensated at a rate of $30,000 per
year. All other members of the Board shall
serve without compensation for such service.
‘‘(B) 
CHAIRPERSON.—In 
lieu 
of 
the
amount specified in subparagraph (A), the
Chairperson of the Board shall be compensated
at a rate of $50,000 per year if such Chair-
person is described in subsection (b)(1)(A).
‘‘(2) TRAVEL EXPENSES.—The members of the
Board shall be allowed travel expenses, including per
diem in lieu of subsistence, at rates authorized 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 in the per-
formance of services for the Board.
‘‘(3) STAFF.—On the request of the Chair-
person of the Board, the Commissioner shall detail
to the Board such personnel as may be necessary to
enable the Board to perform its duties. Such detail
shall be without interruption or loss of civil service
status or privilege.
‘‘(4) PROCUREMENT
OF
TEMPORARY
AND
INTERMITTENT SERVICES.—The Chairperson of the
Board may procure temporary and intermittent serv-
ices under section 3109(b) of title 5, United States
Code.
‘‘(f) ADMINISTRATIVE MATTERS.—
‘‘(1) CHAIR.—The members of the Board shall
elect a chairperson for a 2-year term.
‘‘(2) COMMITTEES.—The Board may establish
such committees as the Board determines appro-
priate.
‘‘(3) MEETINGS.—The Board shall meet at
least once each month and at such other times as
the Board determines appropriate.
‘‘(4) REPORTS.—The Board shall each year re-
port 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.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 102. COMMISSIONER OF INTERNAL REVENUE; CHIEF
COUNSEL; OTHER OFFICIALS.
(a) IN GENERAL.—Section 7803 (relating to other
personnel) is amended to read as follows:
‘‘SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; CHIEF
COUNSEL; OTHER OFFICIALS.
‘‘(a) COMMISSIONER OF INTERNAL REVENUE.—
‘‘(1) APPOINTMENT.—There shall be in the De-
partment of the Treasury a Commissioner of Inter-
nal Revenue who shall be appointed by the Internal
Revenue Service Oversight Board to a 5-year term
and compensated without regard to chapters 33, 51,
and 53 of title 5, United States Code. The appoint-
ment shall be made on the basis of demonstrated
ability in management and without regard to politi-
cal affiliation or activity. The Board may reappoint
the Commissioner to subsequent terms so long as
performance is satisfactory or better.
‘‘(2) DUTIES.—The Commissioner shall—
‘‘(A) administer, manage, conduct, direct,
and supervise the execution and application of
the internal revenue laws or related statutes
and tax conventions to which the United States
is a party; and
‘‘(B) when a vacancy occurs, recommend a
candidate for appointment as Chief Counsel for
the Internal Revenue Service to the President,
and may recommend the removal of such Chief
Counsel to the President.
‘‘(3) CONSULTATION WITH BOARD.—The Com-
missioner shall consult with the Board on all mat-
ters set forth in paragraphs (2) and (3) (other than
subparagraph (A)) of section 7802(d)(2).
‘‘(4) PAY.—The Commissioner is authorized to
be paid at an annual rate of basic pay not to exceed
the maximum rate of basic pay of level II of the Ex-
ecutive Schedule under section 5311 of title 5, Unit-
ed States Code, including any applicable locality-
based comparability payment that may be authorized
under section 5304 of such title 5.
‘‘(b) CHIEF COUNSEL FOR THE INTERNAL REVENUE
SERVICE.—
‘‘(1) APPOINTMENT.—There shall be in the De-
partment of the Treasury a Chief Counsel for the
Internal Revenue Service who shall be appointed by
the President, by and with the advice and consent
of the Senate.
‘‘(2) DUTIES.—The Chief Counsel shall be the
chief law officer for the Internal Revenue Service
and shall perform such duties as may be prescribed
by the Secretary of the Treasury. To the extent that
the Chief Counsel performs duties relating to the de-
velopment of rules and regulations promulgated
under this title, final decisionmaking authority shall
remain with the Secretary.
‘‘(3) PAY.—The Chief Counsel is authorized to
be paid at an annual rate of basic pay not to exceed
the maximum rate of basic pay of level III of the
Executive Schedule under section 5311 of title 5,
United States Code, including any applicable local-
ity-based comparability payment that may be au-
thorized under section 5304 of such title 5.
‘‘(c) ASSISTANT
COMMISSIONER
FOR
EMPLOYEE
PLANS AND EXEMPT ORGANIZATIONS.—
‘‘(1) ESTABLISHMENT
OF
OFFICE.—There is
established within the Internal Revenue Service an
office to be known as the ‘Office of Employee Plans
and Exempt Organizations’ to be under the super-
vision and direction of an Assistant Commissioner of
Internal Revenue. As head of the Office, the Assist-
ant Commissioner shall be responsible for carrying
out such functions as the Secretary may prescribe
with respect to organizations exempt from tax under
section 501(a) and with respect to plans to which
part I of subchapter D of chapter 1 applies (and
with respect to organizations designed to be exempt
under such section and plans designed to be plans
to which such part applies) and other nonqualified
deferred compensation arrangements. The Assistant
Commissioner shall report annually to the Commis-
sioner with respect to the Assistant Commissioner’s
responsibilities under this section.
‘‘(2) AUTHORIZATION
OF
APPROPRIATIONS.—
There is authorized to be appropriated to the Inter-
nal Revenue Service solely to carry out the functions
of the Office an amount equal to the sum of—
‘‘(A) so much of the collection from taxes
under section 4940 (relating to excise tax based
on investment income) as would have been col-
lected if the rate of tax under such section was
2 percent during the second preceding fiscal
year, and
‘‘(B) the greater of—
‘‘(i) an amount equal to the amount
described in subparagraph (A), or
‘‘(ii) $30,000,000.
‘‘(3) USER FEES.—All user fees collected by the
Office shall be dedicated to carry out the functions
of the Office.
‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—
‘‘(1) IN GENERAL.—
‘‘(A) There is established in the Internal
Revenue Service an office to be known as the
‘Office of the Taxpayer Advocate’. Such office
shall be under the supervision and direction of
an official to be known as the ‘Taxpayer Advo-
cate’ who shall be appointed by and report di-
rectly to the Commissioner of Internal Revenue,
with the approval of the Internal Revenue Serv-
ice Oversight Board. The Taxpayer Advocate
shall be entitled to compensation at the same
rate as the highest level official reporting di-
rectly to the Commissioner of Internal Revenue.
‘‘(B) As a qualification for appointment as
the Taxpayer Advocate, an individual must have
substantial experience representing taxpayers
before the Internal Revenue Service or with tax-
payer rights issues.
‘‘(C) An individual who, before being ap-
pointed as the Taxpayer Advocate, was an offi-
cer or employee of the Internal Revenue Service
may be so appointed 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 Advocate.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the func-
tion of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems in dealings with the Internal
Revenue Service,
‘‘(iii) to the extent possible, propose
changes in the administrative practices of
the Internal Revenue Service to mitigate
problems identified under clause (ii), and
‘‘(iv) 
identify 
potential 
legislative
changes which may be appropriate to miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) OBJECTIVES.—Not later than
June 30 of each calendar year after 1995,
the Taxpayer Advocate shall report to the
Committee on Ways and Means of the
House of Representatives and the Commit-
tee on Finance of the Senate on the objec-
tives of the Taxpayer Advocate for the fis-
cal year beginning in such calendar year.
Any such report shall contain full and sub-
stantive analysis, in addition to statistical
information.
‘‘(ii) ACTIVITIES.—Not later than De-
cember 31 of each calendar year after
1995, the Taxpayer Advocate shall report
to the Committee on Ways and Means of
the House of Representatives and the
Committee on Finance of the Senate on
the activities of the Taxpayer Advocate
during the fiscal year ending during such
calendar year. Any such report shall con-
tain full and substantive analysis, in addi-
tion 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) describe the extent to
which regional problem resolution offi-
cers participate in the selection and
evaluation of local problem resolution
officers,
‘‘(X) 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,
‘‘(XI) in conjunction with the
National Director of Appeals, identify
the 10 most litigated issues for each
category of taxpayers (e.g., individ-
uals, self-employed individuals, and
small 
businesses), 
including 
rec-
ommendations for mitigating such dis-
putes, and
‘‘(XII) include such other infor-
mation as the Taxpayer Advocate may
deem advisable.
‘‘(iii) REPORT TO BE SUBMITTED DI-
RECTLY.—Each report required under this
subparagraph shall be provided directly to
the Committees described in clauses (i)
and (ii) without any prior review or com-
ment from the Commissioner, the Internal
Revenue Service Oversight Board, the Sec-
retary of the Treasury, any other officer or
employee of the Department of the Treas-
ury, or the Office of Management and
Budget.
‘‘(C) 
OTHER
RESPONSIBILITIES.—The
Taxpayer Advocate shall—
‘‘(i) monitor the coverage and geo-
graphic allocation of problem resolution of-
ficers,
‘‘(ii) develop guidance to be distrib-
uted to all Internal Revenue Service offi-
cers and employees outlining the criteria
for referral of taxpayer inquiries to prob-
lem resolution officers,
‘‘(iii) ensure that the local telephone
numbers for the problem resolution officer
in each internal revenue district is pub-
lished and available to taxpayers, and
‘‘(iv) in conjunction with the Commis-
sioner, develop career paths for problem
resolution officers choosing to make a ca-
reer in the Office of the Taxpayer Advo-
cate.
‘‘(3) RESPONSIBILITIES
OF
COMMISSIONER.—
The Commissioner shall establish procedures requir-
ing a formal response to all recommendations sub-
mitted to the Commissioner by the Taxpayer Advo-
cate within 3 months after submission to the Com-
missioner.’’.
(b) AMENDMENT OF PRESIDENT’S AUTHORITY TO
APPOINT CHIEF COUNSEL
FOR INTERNAL REVENUE
SERVICE.—
(1) Paragraph (2) of section 7801(b) (relating
to the office of General Counsel for the Department)
is amended to read as follows:
‘‘(2) ASSISTANT
GENERAL
COUNSELS.—The
Secretary of the Treasury may appoint, without re-
gard to the provisions of the civil service laws, and
fix the duties of not to exceed five assistant General
Counsels.’’.
(2)(A) Subsection (f)(2) of section 301 of title
31, United States Code, is amended by striking ‘‘an
Assistant General Counsel who shall be the’’ and in-
serting ‘‘a’’.
(B) Section 301 of such title 31 is amended by
adding at the end the following new subsection:
‘‘(h) CROSS REFERENCE.—For provisions relating to
the appointment of officers and employees of the Internal
Revenue Service, see subchapter A of chapter 80 of the
Internal Revenue Code of 1986.’’.
(c) 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; Chief Counsel;
other officials.’’
(2) Subsection (b) of section 5109 of title 5,
United States Code, is amended by striking
‘‘7802(b)’’ and inserting ‘‘7803(c)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect 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.—The Com-
missioner of Internal Revenue is authorized to employ
such number of persons as the Commissioner deems prop-
er for the administration and enforcement of the internal
revenue laws, and the Commissioner shall issue all nec-
essary directions, instructions, orders, and rules applicable
to such persons.
‘‘(b) POSTS
OF DUTY
OF EMPLOYEES
IN FIELD
SERVICE OR TRAVELING.—
‘‘(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.
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. Classification and pay flexibilities.
‘‘9304. Staffing flexibilities.
‘‘9305. 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, 9304, or 9305,
unless there is a written agreement between the In-
ternal Revenue Service and the organization permit-
ting 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.
‘‘(c) FLEXIBILITIES FOR WHICH OPM APPROVAL IS
REQUIRED.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), flexibilities under this chapter may be ex-
ercised by the Internal Revenue Service without
prior approval of the Office of Personnel Manage-
ment.
‘‘(2) EXCEPTIONS.—The flexibilities under sub-
sections (c) through (e) of section 9303 may be exer-
cised by the Internal Revenue Service only after a
specific plan describing how those flexibilities are to
be exercised has been submitted to and approved, in
writing, by the Director of the Office of Personnel
Management.
‘‘§ 9302. Flexibilities relating to performance manage-
ment
‘‘(a) IN GENERAL.—The Commissioner of Internal
Revenue shall, within 180 days 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 
retention 
standards
which—
‘‘(i) shall permit the accurate evalua-
tion of each employee’s performance on the
basis of criteria relating to the duties and
responsibilities of the position held by such
employee; and
‘‘(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;
‘‘(B) providing for periodic performance
evaluations to determine whether retention
standards are being met; and
‘‘(C) with respect to any employee whose
performance does not meet retention standards,
using the results of such employee’s perform-
ance evaluation as a basis for—
‘‘(i) denying increases in basic pay,
promotions, and credit for performance
under section 3502; and
‘‘(ii) the taking of other appropriate
action, such as a reassignment or an action
under chapter 43; and
‘‘(3) shall provide for—
‘‘(A) establishing goals or objectives for in-
dividual, 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 Manage-
ment Reform Act of 1996, Revenue Procedure
64–22 (as in effect on July 30, 1997), and tax-
payer service surveys, and communicating such
goals or objectives to employees;
‘‘(B) using such goals and objectives to
make performance distinctions among employ-
ees or groups of employees; and
‘‘(C) using assessments under this para-
graph, in combination with performance evalua-
tions under paragraph (2), as a basis for grant-
ing employee awards, adjusting an employee’s
rate of basic pay, and taking such other person-
nel action as may be appropriate.
For purposes of this title, performance of an employee
during any period in which such employee is subject to
retention standards under paragraph (2) shall be consid-
ered to be ‘unacceptable’ if the performance of such em-
ployee during such period fails to meet any of those stand-
ards.
‘‘(b) AWARDS.—
‘‘(1) FOR
SUPERIOR
ACCOMPLISHMENTS.—In
the case of an employee of the Internal Revenue
Service, section 4502(b) shall be applied by sub-
stituting ‘with the approval of the Commissioner of
Internal Revenue’ for ‘with the approval of the Of-
fice’.
‘‘(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.
‘‘(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 President for such cal-
endar 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’.
‘‘(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. Classification and pay flexibilities
‘‘(a) BROAD-BANDED SYSTEMS.—
‘‘(1) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) the term ‘broad-banded system’
means a system under which positions are clas-
sified and pay for service in any such position
is fixed through the use of pay bands, rather
than under—
‘‘(i) chapter 51 and subchapter III of
chapter 53; or
‘‘(ii) subchapter IV of chapter 53; and
‘‘(B) the term ‘pay band’ means, with re-
spect to positions in 1 or more occupational se-
ries, a pay range—
‘‘(i) consisting of—
‘‘(I) 2 or more consecutive grades
of the General Schedule; or
‘‘(II) 2 or more consecutive pay
ranges of such other pay or wage
schedule as would otherwise apply
(but for this section); and
‘‘(ii) the minimum rate for which is
the minimum rate for the lower (or lowest)
grade or range in the pay band and the
maximum rate for which is the maximum
rate for the higher (or highest) grade or
range in the pay band, including any local-
ity-based and other similar comparability
payments.
‘‘(2) AUTHORITY.—The Commissioner of Inter-
nal Revenue may, subject to criteria to be prescribed
by the Office of Personnel Management, establish
one or more broad-banded systems covering all or
any portion of its workforce which would otherwise
be subject to the provisions of law cited in clause (i)
or (ii) of subsection (a)(1)(A), except for any posi-
tion classified by statute.
‘‘(3) CRITERIA.—The criteria to be prescribed
by the Office shall, at a minimum—
‘‘(A) ensure that the structure of any
broad-banded system maintains the principle of
equal pay for substantially equal work;
‘‘(B) establish the minimum (but not less
than 2) and maximum number of grades or pay
ranges that may be combined into pay bands;
‘‘(C) establish requirements for adjusting
the pay of an employee within a pay band;
‘‘(D) establish requirements for setting the
pay of a supervisory employee whose position is
in a pay band or who supervises employees
whose positions are in pay bands; and
‘‘(E) establish requirements and meth-
odologies for setting the pay of an employee
upon conversion to a broad-banded system, ini-
tial appointment, change of position or type of
appointment (including promotion, demotion,
transfer, reassignment, reinstatement, place-
ment in another pay band, or movement to a
different geographic location), and movement
between a broad-banded system and another
pay system.
‘‘(4) INFORMATION.—The Commissioner of In-
ternal Revenue shall submit to the Office such infor-
mation relating to its broad-banded systems as the
Office may require.
‘‘(5) REVIEW AND REVOCATION AUTHORITY.—
The Office may, with respect to any broad-banded
system under this subsection, and in accordance
with regulations which it shall prescribe, exercise
with respect to any broad-banded system under this
subsection authorities similar to those available to it
under sections 5110 and 5111 with respect to classi-
fications under chapter 51.
‘‘(b) SINGLE PAY-BAND SYSTEM.—
‘‘(1) IN GENERAL.—The Commissioner of In-
ternal Revenue may, with respect to employees who
remain subject to chapter 51 and subchapter III of
chapter 53 (or subchapter IV of chapter 53), fix
rates of pay under a single pay-band system.
‘‘(2) DEFINITION.—For purposes of this sub-
section, the term ‘single pay-band system’ means,
for pay-setting purposes, a system similar to the
pay-setting aspects of a broad-banded system under
subsection (a), but consisting of only a single grade
or pay range, under which pay may be fixed at any
rate not less than the minimum and not more than
the maximum rate which (but for this section) would
otherwise apply with respect to the grade or pay
range involved, including any locality-based and
other similar comparability payments.
‘‘(3) SPECIAL RULES.—
‘‘(A) PROMOTION OR TRANSFER.—An em-
ployee under this subsection who is promoted or
transferred to a position in a higher grade shall
be entitled to basic pay at a rate determined
under criteria prescribed by the Office of Per-
sonnel Management based on section 5334(b).
‘‘(B) PERFORMANCE INCREASES.—In lieu
of periodic step-increases under section 5335,
an employee under this subsection who meets
retention 
standards 
under 
section
9302(a)(2)(A) shall be entitled to performance
increases under criteria prescribed by the Of-
fice. An increase under this subparagraph shall
be equal to one-ninth of the difference between
the minimum and maximum rates of pay for
the applicable grade or pay range.
‘‘(C) INCREASES FOR EXCEPTIONAL PER-
FORMANCE.—In lieu of additional step-increases
under section 5336, an employee under this
subsection who has demonstrated exceptional
performance shall be eligible for a pay increase
under this subparagraph under criteria pre-
scribed by the Office. An increase under this
subparagraph may not exceed the amount of an
increase under subparagraph (B).
‘‘(c) ALTERNATIVE CLASSIFICATION SYSTEMS.—
‘‘(1) IN GENERAL.—Subject to section 9301(c),
the Commissioner of Internal Revenue may establish
1 or more alternative classification systems that in-
clude any positions or groups of positions that the
Commissioner determines, for reasons of effective
administration—
‘‘(A) should not be classified under chapter
51 or paid under the General Schedule;
‘‘(B) should not be classified or paid under
subchapter IV of chapter 53; or
‘‘(C) should not be paid under section
5376.
‘‘(2) LIMITATIONS.—An alternative classifica-
tion system under this subsection may not—
‘‘(A) with respect to any position that (but
for this section) would otherwise be subject to
the provisions of law cited in subparagraph (A)
or (B) of paragraph (1), establish a rate of
basic pay in excess of the maximum rate for
grade GS–15 of the General Schedule, including
any locality-based and other similar comparabil-
ity payments; and
‘‘(B) with respect to any position that (but
for this section) would otherwise be subject to
the provision of law cited in paragraph (1)(C),
establish a rate of basic pay in excess of the an-
nual rate of basic pay of the Commissioner of
Internal Revenue.
‘‘(d) GRADE AND PAY RETENTION.—Subject to sec-
tion 9301(c), the Commissioner of Internal Revenue may,
with respect to employees who are covered by a broad-
banded system under subsection (a) or an alternative clas-
‘‘(C) The employee’s performance under
such term appointment or appointments met es-
tablished retention standards.
‘‘(D) The vacancy announcement for the
term appointment from which the conversion is
made stated that there was a potential for sub-
sequent conversion to a permanent appoint-
ment.
‘‘(2) CONDITION.—An appointment under this
subsection may be made only to a position the duties
and responsibilities of which are similar to those of
the position held by the employee at the time of con-
version (referred to in paragraph (1)(D)).
‘‘(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) MAXIMUM PERIOD FOR WHICH EMPLOYEE MAY
BE DETAILED.—The 120-day limitation under section
3341(b)(1) for details and renewals of details shall not
apply with respect to the Internal Revenue Service.
‘‘(d) 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.
‘‘(e) 
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.
‘‘(f) 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.
‘‘§ 9305. 
Flexibilities 
relating 
to 
demonstration
projects
‘‘(a) IN GENERAL.—For purposes of applying section
4703 with respect to the Internal Revenue Service—
‘‘(1) paragraph (1) of subsection (b) of such
section shall be deemed to read as follows:
‘‘ ‘(1) develop a plan for such project which de-
scribes its purpose, the employees to be covered, the
project itself, its anticipated outcomes, and the
method of evaluating the project;’;
‘‘(2) paragraph (3) of subsection (b) of such
section shall be disregarded;
‘‘(3) paragraph (4) of subsection (b) of such
section shall be applied by substituting ‘30 days’ for
‘180 days’;
‘‘(4) paragraph (6) of subsection (b) of such
section shall be deemed to read as follows:
‘‘ ‘(6) provide each House of the Congress with
the final version of the plan.’;
‘‘(5) paragraph (1) of subsection (c) of such
section shall be deemed to read as follows:
‘‘ ‘(1) subchapter V of chapter 63 or subpart G
of part III;’; and
‘‘(6) subsection (d)(1) of such section shall be
disregarded.
‘‘(b) NUMERICAL LIMITATION.—For purposes of ap-
plying the numerical limitation under subsection (d)(2) of
section 4703, a demonstration project shall not be counted
if or to the extent that it involves the Internal Revenue
Service.’’
(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 the 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
tax 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 implement a plan to eliminate bar-
riers, 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.
(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
tax practitioner, preparer, and computerized tax
processor communities and other representatives
from the electronic filing industry.
(c) INCENTIVES.—
(1) IN
GENERAL.—Not later than 180 days
after the date of the enactment of this Act, the Sec-
retary shall implement procedures to provide for the
payment of incentives to transmitters of qualified
electronically filed returns, based on the fair market
value of costs to transmit returns electronically.
(2) QUALIFIED
ELECTRONICALLY
FILED
RE-
TURNS.—For purposes of this section, the term
‘‘qualified electronically filed return’’ means a return
that—
(A) is transmitted electronically to the In-
ternal Revenue Service,
(B) for which the taxpayer was not
charged for the cost of such transmission, and
(C) in the case of returns transmitted after
December 31, 2004, was prepared by a paid
preparer who does not submit any return after
such date to the Internal Revenue Service on
paper.
(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 policy set forth in subsection (a);
(2) the status of the plan required by sub-
section (b); and
(3) the necessity of action by the Congress to
assist the Internal Revenue Service to satisfy the
policy set forth in subsection (a).
SEC. 202. EXTENSION OF TIME TO FILE FOR ELECTRONIC
FILERS.
(a) IN GENERAL.—Subsection (a) of section 6072
(relating to the time for filing income tax returns) is
amended—
(1) by striking ‘‘(a) GENERAL RULE.—In the
case of’’ and inserting the following:
‘‘(a) GENERAL RULES.—
‘‘(1) PAPER RETURNS.—Except as provided in
paragraph (2), in the case of’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) ELECTRONICALLY
FILED
RETURNS.—In
the case of returns filed electronically, returns made
on the basis of the calendar year shall be filed on
or before the 15th day of May following the close
of the calendar year and returns made on the basis
of a fiscal year shall be filed on or before the 15th
day of the fifth month following the close of the fis-
cal year.’’
(b) RETURNS OF CORPORATIONS.—Subsection (b) of
section 6072 (relating to the time for filing income tax
returns) is amended—
(1) by moving the text 2 ems to the right, and
(2) by adding at the end the following new
paragraph:
‘‘(2) ELECTRONICALLY
FILED
RETURNS.—In
the case of returns filed electronically, returns made
on the basis of the calendar year shall be filed on
or before the 15th day of April following the close
of the calendar year and returns made on the basis
of a fiscal year shall be filed on or before the 15th
day of the 4th month following the close of the fiscal
year.’’
(c) INFORMATION RETURNS.—Part V of chapter 61
(relating to information and returns) is amended by add-
ing the following new section:
‘‘SEC. 6073. TIME FOR FILING CERTAIN INFORMATION RE-
TURNS.
‘‘(a) ELECTRONICALLY FILED RETURNS.—In the
case of returns made under subparts B and C of part III
of this chapter that are filed electronically, such returns
shall be filed on or before March 31 of the year following
the calendar year to which such returns relate.
‘‘(b) NOTICE TO RECIPIENTS.—Notwithstanding sub-
section (a), receipts for employees required under section
6051 and any statements otherwise required to be fur-
nished to persons with respect to whom information is re-
quired, shall be furnished to such persons on or before
January 31 of the calendar year in which the return under
subsection (a) is required to be filed.
‘‘(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns required to be filed after
December 31, 1999.’’
(d) RETURNS OF PARTNERSHIPS.—Part V of chapter
61 (relating to information and returns) is amended by
adding the following new section:
‘‘SEC. 6074. TIME FOR FILING PARTNERSHIP RETURNS.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), returns made under section 6031 shall be filed on or
before the 15th day of the 3d month following the close
of the taxable year of the partnership, except that the re-
turn of a partnership consisting entirely of nonresident
aliens shall be filed on or before the 15th day of the 6th
month following the close of the taxable year of the part-
nership.
‘‘(b) ELECTRONICALLY FILED RETURNS.—In the
case of returns filed electronically, returns shall be filed
on or before the 15th day of the 4th month following the
close of the taxable year of the partnership.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years begin-
ning after December 31, 1998.
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.—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 shall accept elec-
tronically filed returns and other documents on which the
required signature(s) appears in typewritten form, but fil-
ers of such documents shall be required to retain a signed
paper original of all such filings, to be made available to
the Secretary for inspection, until the expiration of the
applicable period of limitations set forth in chapter 66.’’.
(b) DEADLINE FOR ESTABLISHING PROCEDURES.—
Not later than December 31, 1998, the Secretary of the
Treasury or the Secretary’s delegate shall establish proce-
dures 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.
(c) PROCEDURES FOR COMMUNICATIONS BETWEEN
IRS AND PREPARER
OF ELECTRONICALLY-FILED RE-
TURNS.—Such Secretary shall establish procedures for
taxpayers to authorize, on electronically filed returns, the
preparer of such returns to communicate with the Internal
Revenue Service on matters included on such returns.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 204. REGULATION OF PREPARERS.
(a) IN GENERAL.—Subsection (a) of section 330 of
title 31, United States Code, is amended—
(1) by striking ‘‘Treasury; and’’ in paragraph
(1) and inserting ‘‘Treasury and all other persons
engaged in the business of preparing returns or oth-
erwise accepting compensation for advising in the
preparation of returns,’’,
(2) by striking the period at the end of para-
graph (2) and inserting ‘‘, and’’, and
(3) by adding at the end the following:
‘‘(3) establish uniform procedures for regulating
preparers of paper and electronic tax and informa-
tion returns.
No demonstration shall be required under paragraph (2)
for persons solely engaged in the business of preparing
returns or otherwise accepting compensation for advising
in the preparation of returns.’’
(b) DIRECTOR OF PRACTICE.—Such section 330 is
amended by adding at the end the following new sub-
section:
‘‘(d) DIRECTOR OF PRACTICE.—There is established
within the Department of the Treasury an office to be
known as the ‘Office of the Director of Practice’ to be
under the supervision and direction of an official to be
known as the ‘Director of Practice’. The Director of Prac-
tice shall be responsible for regulation of all practice be-
fore the Department of the Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 205. PAPERLESS PAYMENT.
(a) IN GENERAL.—Section 6311 (relating to payment
by check or money order) is amended to read as follows:
‘‘SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPT-
ABLE MEANS.
‘‘(a) AUTHORITY TO RECEIVE.—It shall be lawful for
the Secretary to receive for internal revenue taxes (or in
payment of internal revenue stamps) any commercially ac-
ceptable means that the Secretary deems appropriate to
the extent and under the conditions provided in regula-
tions prescribed by the Secretary.
‘‘(b) ULTIMATE
LIABILITY.—If a check, money
order, or other method of payment, including payment by
credit card, debit card, charge card, or electronic funds
transfer so received is not duly paid, or is paid and subse-
quently charged back to the Secretary, the person by
whom such check, money order, or other method of pay-
ment has been tendered shall remain liable for the pay-
ment of the tax or for the stamps, and for all legal pen-
alties and additions, to the same extent as if such check,
money order, or other method of payment had not been
tendered.
‘‘(c) LIABILITY OF BANKS AND OTHERS.—If any cer-
tified, treasurer’s, or cashier’s check (or other guaranteed
draft), or any money order, or any means of payment that
has been guaranteed by a financial institution (such as
a credit card, debit card, charge card, or electronic funds
transfer transaction which has been guaranteed expressly
by a financial institution) so received is not duly paid, the
United States shall, in addition to its right to exact pay-
ment from the party originally indebted therefor, have a
lien for—
‘‘(1) the amount of such check (or draft) upon
all assets of the financial institution on which
drawn,
‘‘(2) the amount of such money order upon all
the assets of the issuer therefor,
‘‘(3) the guaranteed amount of any other trans-
action upon all the assets of the institution making
such guarantee,
and such amount shall be paid out of such assets in pref-
erence to any other claims whatsoever against such finan-
cial institution, issuer, or guaranteeing institution, except
the necessary costs and expenses of administration and
the reimbursement of the United States for the amount
expended in the redemption of the circulating notes of
such financial institution.
‘‘(d) PAYMENT BY OTHER MEANS.—
‘‘(1) AUTHORITY
TO
PRESCRIBE
REGULA-
TIONS.—The Secretary shall prescribe such regula-
tions as the Secretary deems necessary to receive
payment by commercially acceptable means, includ-
ing regulations that—
‘‘(A) specify which methods of payment by
commercially acceptable means will be accept-
able;
‘‘(B) specify when payment by such means
will be considered received;
‘‘(C) identify types of nontax matters re-
lated to payment by such means that are to be
resolved by persons ultimately liable for pay-
ment and financial intermediaries, without the
involvement of the Secretary; and
‘‘(D) ensure that tax matters will be re-
solved by the Secretary, without the involve-
ment of financial intermediaries.
‘‘(2) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—Notwithstanding section 3718(f) of title
31, United States Code, the Secretary is authorized
to enter into contracts to obtain services relating to
receiving payment by other means when cost bene-
ficial to the Government.
‘‘(3) SPECIAL PROVISIONS FOR USE OF CREDIT
CARDS.—If use of credit cards is accepted as a
method of payment of taxes pursuant to subsection
(a)—
‘‘(A) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a credit card shall not be
subject to section 161 of the Truth-in-Lending
Act (15 U.S.C. 1666), or to any similar provi-
sions of State law, if the error alleged by the
person is an error relating to the underlying tax
liability, rather than an error relating to the
credit card account such as a computational
error or numerical transposition in the credit
card transaction or an issue as to whether the
person authorized payment by use of the credit
card;
‘‘(B) a payment of internal revenue taxes
(or a payment for internal revenue stamps)
shall not be subject to section 170 of the Truth
in Lending Act (15 U.S.C. 1666i), or to any
similar provisions of State law;
‘‘(C) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a debit card shall not be
subject to section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or to any simi-
lar provisions of State law, if the error alleged
by the person is an error relating to the under-
lying tax liability, rather than an error relating
to the debit card account such as a computa-
tional error or numerical transposition in the
debit card transaction or an issue as to whether
the person authorized payment by use of the
debit card;
‘‘(D) the term ‘creditor’ under section
103(f) of the Truth in Lending Act (15 U.S.C.
1602(f)) shall not include the Secretary with re-
spect to credit card transactions in payment of
internal revenue taxes (or payment for internal
revenue stamps); and
‘‘(E) notwithstanding any other provision
of law to the contrary, in the case of payment
made by credit card or debit card transaction in
an amount owed to a person as a result of the
correction of an error under section 161 of the
Truth in Lending Act (15 U.S.C. 1666) or sec-
tion 908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693(f)), the Secretary is author-
ized to provide such amount to such person as
a credit to that person’s credit card or debit
card account through the applicable credit card
or debit card system.
‘‘(e) CONFIDENTIALITY OF INFORMATION.—
‘‘(1) IN
GENERAL.—Except as otherwise au-
thorized by this subsection, no person may use or
disclose any information relating to credit or debit
card transactions obtained pursuant to section
6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing
or collection of amounts charged or debited pursuant
thereto.
‘‘(2) EXCEPTIONS.—
‘‘(A) Debit or credit card issuers or others
acting on behalf of such issuers may also use
and disclose such information for purposes di-
rectly related to servicing an issuer’s accounts.
‘‘(B) Debit or credit card issuers or others
directly involved in the processing of credit or
debit card transactions or the billing or collec-
tion of amounts charged or debited thereto may
also use and disclose such information for pur-
poses directly related to—
‘‘(i) statistical risk and profitability
assessment,
‘‘(ii) 
transferring 
receivables, 
ac-
counts, or interest therein,
‘‘(iii) auditing the account informa-
tion,
‘‘(iv) complying with Federal, State,
or local law, and
‘‘(v) properly authorized civil, crimi-
nal, or regulatory investigation by Federal,
State, or local authorities.
‘‘(3) PROCEDURES.—Use and disclosure of in-
formation under this paragraph shall be made only
to the extent authorized by written procedures pro-
mulgated by the Secretary.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for vio-
lation of paragraph (1), see section 7431.’’
(b) SEPARATE APPROPRIATION REQUIRED FOR PAY-
MENT OF CREDIT CARD FEES.—No amount may be paid
by the United States to a credit card issuer for the right
to receive payments of internal revenue taxes by credit
card without a separate appropriation therefor.
(c) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 64 is amended by striking
the item relating to section 6311 and inserting the follow-
ing:
‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’
(d) AMENDMENTS TO SECTION 6103 AND 7431 WITH
RESPECT TO DISCLOSURE AUTHORIZATION.—
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
information) is amended by adding at the end the
following new paragraph—
‘‘(8) DISCLOSURE OF INFORMATION TO ADMIN-
ISTER SECTION 6311.—The Secretary may disclose
returns or return information to financial institu-
tions and others to the extent the Secretary deems
necessary for the administration of section 6311.
Disclosures of information for purposes other than
to accept payments by check or money orders shall
be made only to the extent authorized by written
procedures promulgated by the Secretary.’’.
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return infor-
mation) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED
UNDER SECTION 6103(k)(8).—For purposes of this sec-
tion, any reference to section 6103 shall be treated as in-
cluding a reference to section 6311(e).’’.
(3) Section 6103(p)(3)(A) is amended by strik-
ing ‘‘or (6)’’ and inserting ‘‘(6), or (8)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the day which is 9 months
after the date of the enactment of this Act.
SEC. 206. 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
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 taxable years begin-
ning 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) the procedures developed pursuant to sub-
section (a),
(2) the number and classes of taxpayers that
would be permitted to use the procedures developed
pursuant to subsection (a),
(3) the changes to the Internal Revenue Code
of 1986 that could enhance the use of such a sys-
tem, and
(4) what additional resources the Internal Reve-
nue Service would need to implement such a system.
SEC. 207. 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, including all necessary safeguards to ensure the
privacy of such account information.
TITLE III—TAXPAYER
PROTECTION AND RIGHTS
SEC. 301. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER
ASSISTANCE ORDERS.
(a) IN GENERAL.—Section 7811(a) (relating to tax-
payer assistance orders) 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
paragraph:
‘‘(2) DETERMINATION OF HARDSHIP.—For pur-
poses of determining whether a taxpayer is suffering
or about to suffer a significant hardship, the Tax-
payer Advocate should consider—
‘‘(A) whether the Internal Revenue Service
employee to which such order would issue is fol-
lowing applicable published administrative guid-
ance, including the Internal Revenue Manual,
‘‘(B) whether there is an immediate threat
of adverse action,
‘‘(C) whether there has been a delay of
more than 30 days in resolving taxpayer ac-
count problems, and
‘‘(D) the prospect that the taxpayer will
have to pay significant professional fees for rep-
resentation.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 302. EXPANSION OF AUTHORITY TO AWARD COSTS
AND CERTAIN FEES.
(a) AUTHORITY
TO AWARD 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 ‘‘, or the dif-
ficulty of the issues presented in the case or the local avail-
ability of tax expertise,’’ before ‘‘justifies a higher rate’’.
(b) AWARD OF ADMINISTRATIVE COSTS INCURRED
AFTER 30-DAY LETTER.—
(1) Paragraph (2) of section 7430(c) is amend-
ed by striking the last sentence and insert the fol-
lowing:
‘‘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.’’
(2) Subparagraph (B) of section 7430(c)(7) is
amended by striking ‘‘or’’ and the end of clause (i),
by striking the period at the end of clause (ii) and
inserting ‘‘, or’’, and by adding at the end the fol-
lowing new clause:
‘‘(iii) the date on which the 1st letter
of proposed deficiency which allows the
taxpayer an opportunity for administrative
review in the Internal Revenue Service Of-
fice of Appeals is sent.’’
(c) AWARD
OF FEES
FOR CERTAIN ADDITIONAL
SERVICES.—Paragraph (3) of section 7430(c) is amended
by adding at the end the following new sentence: ‘‘Such
term also includes such amounts as the court calculates,
based on hours worked and costs expended, for services
of an individual (whether or not an attorney) who is au-
thorized to practice before the Tax Court or before the
Internal Revenue Service and who represents the taxpayer
for no more than a nominal fee.’’
(d) DETERMINATION OF PREVAILING PARTY.—Para-
graph (4) of section 7430(c) is amended—
(A) by inserting at the end of subpara-
graph (A) the following new flush sentence:
‘‘For purposes of this section, such section
2412(d)(2)(B) shall be applied by substituting
‘$5,000,000’ for the amount otherwise applica-
ble to individuals, and ‘$35,000,000’ for the
amount otherwise applicable to businesses.’’,
and
(B) by adding at the end the following new
subparagraph:
‘‘(D) SAFE HARBOR.—The position of the
United States was not substantially justified if
the United States has not prevailed on the
same issue in at least 3 United States Courts
of Appeal.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to proceedings beginning after the
date of the enactment of this Act.
SEC. 303. 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) 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. 304. 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 the extent to which tax-
payers are selected for examination on the basis of infor-
mation available in the media or on the basis of informa-
tion provided to the Internal Revenue Service by inform-
ants.
(b) TRANSMISSION
TO
COMMITTEES
OF
CON-
GRESS.—Such 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. 305. ARCHIVAL 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:
‘‘(16) DISCLOSURE
TO
NATIONAL
ARCHIVES
AND
RECORDS
ADMINISTRATION.—The Secretary
shall, upon written request from the Archivist of the
United States, disclose to the Archivist all records of
the Internal Revenue Service for purposes of sched-
uling such records for destruction or for retention in
the National Archives. Any such information that is
retained in the National Archives shall not be dis-
closed without the express written approval of the
Secretary.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to requests made by the Archivist
after the date of the enactment of this Act.
SEC. 306. TAX RETURN INFORMATION.
The Joint Committee on Taxation shall convene 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 no later than one year after
the date of the enactment of this Act. Such study shall
be led by a panel of experts, to be appointed by the Joint
Committee on Taxation, which 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 compliance by allowing the pub-
lic to know who is legally required to do so, but does not
file tax returns.
SEC. 307. FREEDOM OF INFORMATION.
(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, develop procedures under which expedited ac-
cess will be granted to requests under section 551 of title
5, United States Code, when—
(1) there exists widespread and exceptional
media interest in the requested information, and
(2) expedited processing is warranted because
the information sought involves possible questions
about the government’s integrity which affect public
confidence.
In addition, such procedures shall require the Internal
Revenue Service to provide an explanation to the person
making the request if the request is not satisfied within
30 days, including a summary of actions taken to date
and the expected completion date. Finally, to the extent
that any such request is not satisfied in full within 60
days, such person may seek a determination of whether
such request should be granted by the appropriate Federal
district court.
(b) TRANSMISSION
TO
COMMITTEES
OF
CON-
GRESS.—Such Secretary shall transmit drafts of the pro-
cedures required under subsection (a) (or proposed revi-
sions to any such procedures) to the Committee on Ways
and Means of the House of Representatives, the Commit-
tee on Finance of the Senate, and the Joint Committee
on Taxation on the same day.
SEC. 308. OFFERS-IN-COMPROMISE.
(a) IN GENERAL.—Section 7122 (relating to offers-
in-compromise) is amended by adding at the end the fol-
lowing new subsection:
‘‘(c) ALLOWANCES.—The Secretary shall develop and
publish schedules of national and local allowances to en-
sure that taxpayers entering into a compromise have an
adequate means to provide for basic living expenses.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 309. ELIMINATION OF INTEREST DIFFERENTIAL ON
OVERPAYMENTS AND UNDERPAYMENTS.
(a) IN GENERAL.—Subsection (a) of section 6621
(relating to the determination of rate of interest) is
amended to read as follows:
‘‘(a) GENERAL RULE.—
‘‘(1) RATE.—The rate established under this
section shall be the sum of—
‘‘(A) the Federal short-term rate deter-
mined under subsection (b), plus
‘‘(B) the number of percentage points
specified by the Secretary.
‘‘(2) 
DETERMINATION
OF
PERCENTAGE
POINTS.—The number of percentage points specified
by the Secretary for purposes of paragraph (1)(B)
shall be the number which the Secretary estimates
will result in the same net revenue to the Treasury
as would have resulted without regard to the amend-
ments made by section 309 of the Internal Revenue
Service Restructuring and Reform Act of 1997.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 6621 is amended by striking sub-
section (c).
(2) The following provisions are each amended
by striking ‘‘overpayment rate’’ and inserting
‘‘rate’’: 
Sections 
42(j)(2)(B), 
167(g)(2)(C),
460(b)(2)(C), 6343(c), 6427(i)(3)(B), 6611(a), and
7426(g).
(3) The following provisions are each amended
by striking ‘‘underpayment rate’’ and inserting
‘‘rate’’: Sections 42(k)(4)(A)(ii), 148(f)(4)(C)(x)(II),
148(f)(7)(C)(ii), 
453A(c)(2)(B), 
644(a)(2)(B),
852(e)(3)(A), 
4497(c)(2), 
6332(d)(1), 
6601(a),
6602, 6654(a)(1), 6655(a)(1), and 6655(h)(1).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply for purposes of determining inter-
ests for periods after the date of the enactment of this
Act.
SEC. 310. ELIMINATION OF APPLICATION OF FAILURE TO
PAY PENALTY DURING PERIOD OF INSTALL-
MENT AGREEMENT.
(a) IN GENERAL.—Subsection (c) of section 6651
(relating to the penalty for failure to file tax return or
to pay tax) is amended by adding at the end the following
new paragraph:
‘‘(3) TOLLING
DURING
PERIOD
OF
INSTALL-
MENT AGREEMENT.—If the amount required to be
paid is the subject of an agreement for payment of
tax liability in installments made pursuant to section
6159, the additions imposed under subsection (a)
shall not apply so long as such agreement remains
in effect.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to agreements entered into after
the date of the enactment of this Act.
SEC. 311. SAFE HARBOR FOR QUALIFICATION FOR IN-
STALLMENT AGREEMENTS.
(a) IN GENERAL.—Subsection (a) of section 6159
(relating to agreements for payment of tax liability in in-
stallments) is amended—
(1) by striking ‘‘The Secretary is’’ and inserting
the following:
‘‘(1) IN GENERAL.—The Secretary is’’,
(2) by moving the test 2 ems to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) SAFE HARBOR.—The Secretary shall enter
into an agreement to accept the payment of a tax li-
ability in installments if—
‘‘(A) the amount of such liability does not
exceed $10,000,
‘‘(B) the taxpayer has not failed to file any
tax return or pay any tax required to be shown
thereon during the immediately preceding 5
years, and
‘‘(C) the taxpayer has not entered into any
prior installment agreement under this para-
graph.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to agreements entered into after
the date of the enactment of this Act.
SEC. 312. PAYMENT OF TAXES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall establish such rules, regulations, and
procedures as are necessary to require payment of taxes
by check or money order to be made payable to the Treas-
urer, United States of America.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 313. LOW INCOME TAXPAYER CLINICS.
(a) IN GENERAL.—Chapter 77 (relating to mis-
cellaneous provisions) is amended by adding at the end
thereof the following new section:
‘‘SEC. 7525. LOW INCOME TAXPAYER CLINICS.
‘‘(a) IN GENERAL.—The Secretary shall make grants
to provide 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) represents low income taxpayers
in controversies with the Internal Revenue
Service,
‘‘(ii) operates programs to inform in-
dividuals for whom English is a second
language about their rights and respon-
sibilities under this title, and
‘‘(iii) does not charge more than a
nominal fee for its services, except for re-
imbursement of actual costs incurred.
‘‘(B) REPRESENTATION OF LOW INCOME
TAXPAYERS.—A clinic meets the requirements
of subparagraph (A)(i) if—
‘‘(i) at least 90 percent of the tax-
payers represented by the clinic have in-
come which does 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