I
104TH CONGRESS
1ST SESSION
H. R. 661
To amend the Internal Revenue Code of 1986 to provide additional safeguards
to protect taxpayer rights.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 24, 1995
Mr. THORNTON introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
additional safeguards to protect taxpayer rights.
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
‘‘Taxpayer Bill of Rights 2’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—TAXPAYER ADVOCATE
Sec. 101. Establishment of position of Taxpayer Advocate within Internal Reve-
nue Service.
Sec. 102. Expansion of authority to issue taxpayer assistance orders.
TITLE II—MODIFICATIONS TO INSTALLMENT AGREEMENT
PROVISIONS
Sec. 201. Taxpayer’s right to installment agreement.
Sec. 202. Running of failure to pay penalty suspended during period install-
ment agreement in effect.
Sec. 203. Notification of reasons for termination or denial of installment agree-
ments.
Sec. 204. Administrative review of denial of request for, or termination of, in-
stallment agreement.
TITLE III—INTEREST
Sec. 301. Expansion of authority to abate interest.
Sec. 302. Extension of interest-free period for payment of tax after notice and
demand.
TITLE IV—JOINT RETURNS
Sec. 401. Disclosure of collection activities.
Sec. 402. Joint return may be made after separate returns without full pay-
ment of tax.
TITLE V—COLLECTION ACTIVITIES
Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Offers-in-compromise.
Sec. 503. Notification of examination.
Sec. 504. Increase in limit on recovery of civil damages for unauthorized collec-
tion actions.
Sec. 505. Safeguards relating to designated summons.
TITLE VI—INFORMATION RETURNS
Sec. 601. Phone number of person providing payee statements required to be
shown on such statement.
Sec. 602. Civil damages for fraudulent filing of information returns.
Sec. 603. Requirement to conduct reasonable investigations of information re-
turns.
TITLE VII—MODIFICATIONS TO PENALTY FOR FAILURE TO
COLLECT AND PAY OVER TAX
Sec. 701. Preliminary notice requirement.
Sec. 702. Disclosure of certain information where more than 1 person subject
to penalty.
Sec. 703. Penalties under section 6672.
TITLE VIII—AWARDING OF COSTS AND CERTAIN FEES
Sec. 801. Motion for disclosure of information.
Sec. 802. Increased limit on attorney fees.
Sec. 803. Failure to agree to extension not taken into account.
Sec. 804. Authority for court to award reasonable administrative costs.
Sec. 805. Effective date.
TITLE IX—OTHER PROVISIONS
Sec. 901. Required content of certain notices.
Sec. 902. Treatment of substitute returns under section 6651.
Sec. 903. Relief from retroactive application of Treasury Department regula-
tions.
Sec. 904. Required notice of certain payments.
Sec. 905. Unauthorized enticement of information disclosure.
TITLE X—FORM MODIFICATIONS; STUDIES
Sec. 1000. Definitions.
Subtitle A—Form Modifications
Sec. 1001. Explanation of certain provisions.
Sec. 1002. Improved procedures for notifying service of change of address or
name.
Sec. 1003. Rights and responsibilities of divorced individuals.
Subtitle B—Studies
Sec. 1011. Pilot program for appeal of enforcement actions.
Sec. 1012. Study on taxpayers with special needs.
Sec. 1013. Reports on taxpayer-rights education program.
Sec. 1014. Biennial reports on misconduct by Internal Revenue Service employ-
ees.
Sec. 1015. Study of notices of deficiency.
Sec. 1016. Notice and form accuracy study.
TITLE I—TAXPAYER ADVOCATE
SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER AD-
VOCATE WITHIN INTERNAL REVENUE SERV-
ICE.
(a) GENERAL RULE.—Section 7802 (relating to
Commissioner of Internal Revenue; Assistant Commis-
sioner (Employee Plans and Exempt Organizations)) is
amended by adding at the end the following new sub-
section:
‘‘(d) OFFICE OF TAXPAYER ADVOCATE.—
‘‘(1) IN GENERAL.—There is established in the
Internal Revenue Service an office to be known as
the ‘Office of the Taxpayer Advocate’. Such office,
including all problem resolution officers, shall be
under the supervision and direction of an official to
be known as the ‘Taxpayer Advocate’ who shall re-
port directly to the Commissioner of Internal Reve-
nue. The Taxpayer Advocate shall be entitled to
compensation at the same rate as the Chief Counsel
for the Internal Revenue Service.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the func-
tion of the Office of Taxpayer Advocate to—
‘‘(i) assist taxpayers in resolving prob-
lems with the Internal Revenue Service,
‘‘(ii) identify areas in which taxpayers
have problems in dealings with the Internal
Revenue Service,
‘‘(iii) to the extent possible, propose
changes in the administrative practices of
the Internal Revenue Service to mitigate
problems identified under clause (ii), and
‘‘(iv) 
identify 
potential 
legislative
changes which may be appropriate to miti-
gate such problems.
‘‘(B) ANNUAL REPORTS.—
‘‘(i) OBJECTIVES.—Not later than
June 30 of each calendar year after 1994,
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
1994, 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 (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, and
‘‘(IX) 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 referred to in clauses (i)
and (ii) without any prior review or com-
ment from the Commissioner of the Inter-
nal Revenue Service, the Secretary of the
Treasury, any other officer or employee of
the Department of the Treasury, or the
Office of Management and Budget.
‘‘(3) RESPONSIBILITIES OF COMMISSIONER OF
INTERNAL REVENUE SERVICE.—The Commissioner
of Internal Revenue shall establish procedures re-
quiring a formal response to all recommendations
submitted to the Commissioner by the Taxpayer
Advocate.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 7811 (relating to taxpayer assist-
ance orders) is amended—
(A) by striking ‘‘the Office of Ombuds-
man’’ in subsection (a) and inserting ‘‘the Of-
fice of the Taxpayer Advocate’’, and
(B) by striking ‘‘Ombudsman’’ each place
it appears (including in the headings of sub-
sections (e) and (f)) and inserting ‘‘Taxpayer
Advocate’’.
(2) The heading for section 7802 is amended to
read as follows:
‘‘SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; AS-
SISTANT COMMISSIONERS; TAXPAYER ADVO-
CATE.’’
(3) The table of sections for subchapter A of
chapter 80 of subtitle F is amended by striking the
item relating to section 7802 and inserting the
following new item:
‘‘Sec. 7802. Commissioner of Internal Revenue; Assistant Com-
missioners; Taxpayer Advocate.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER
ASSISTANCE ORDERS.
(a) TAXPAYER’S HARDSHIP.—Section 7811(a) (relat-
ing to authority to issue) is amended by striking ‘‘signifi-
cant’’.
(b) TERMS OF ORDERS.—Subsection (b) of section
7811 (relating to terms of taxpayer assistance orders) is
amended—
(1) by inserting ‘‘within a specified time pe-
riod’’ after ‘‘the Secretary’’, and
(2) by inserting ‘‘take any action as permitted
by law,’’ after ‘‘cease any action,’’.
(c) LIMITATION ON AUTHORITY TO MODIFY OR RE-
SCIND.—Section 7811(c) (relating to authority to modify
or rescind) is amended to read as follows:
‘‘(c) AUTHORITY TO MODIFY
OR RESCIND.—Any
Taxpayer Assistance Order issued by the Taxpayer Advo-
cate under this section may be modified or rescinded only
by the Taxpayer Advocate, the Commissioner, or any supe-
rior of either.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
TITLE 
II—MODIFICATIONS 
TO
INSTALLMENT 
AGREEMENT
PROVISIONS
SEC. 201. TAXPAYER’S RIGHT TO INSTALLMENT AGREE-
MENT.
(a) IN GENERAL.—Subsection (a) of section 6159
(relating to agreements for payment of tax liability in in-
stallments) is amended to read as follows:
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORIZATION
OF
AGREEMENTS.—The
Secretary is authorized to enter into written agree-
ments with any taxpayer under which such taxpayer
is allowed to satisfy liability for payment of any tax
in installment payments if the Secretary determines
that such agreement will facilitate collection of such
liability.
‘‘(2) AGREEMENT AS A MATTER OF RIGHT.—In
the case of any taxpayer other than a corporation,
the Secretary shall enter into such an agreement
if—
‘‘(A) the taxpayer requests such an agree-
ment,
‘‘(B) the tax liability is attributable to the
tax imposed under chapter 1 and is less than
$10,000, and
‘‘(C) the taxpayer has paid any tax liability
for the 3 preceding taxable years at the time
such liability was due.
‘‘(3) NOTICE.—The Secretary shall include in
the instructions for returns of the tax imposed under
chapter 1 the rights of taxpayers under this sub-
section and the steps necessary to exercise those
rights.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 202. RUNNING OF FAILURE TO PAY PENALTY SUS-
PENDED 
DURING 
PERIOD 
INSTALLMENT
AGREEMENT IN EFFECT.
(a) GENERAL RULE.—Section 6651 (relating to pen-
alty for failure to file tax return or to pay tax) is amended
by adding at the end the following new subsection:
‘‘(g) TREATMENT OF INSTALLMENT AGREEMENTS
UNDER SECTION 6159.—If—
‘‘(1) an agreement is entered into under section
6159 for the payment of any tax in installments,
and
‘‘(2) the taxpayer requested the Secretary to
enter into the agreement on or before the due date
(including extensions) for the return of the tax,
the period during which such agreement is in effect shall
be disregarded in determining the amount of any addition
under paragraph (2) or (3) of subsection (a) with respect
to such tax.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to installment agreements en-
tered into after the date of the enactment of this Act.
SEC. 203. NOTIFICATION OF REASONS FOR TERMINATION
OR DENIAL OF INSTALLMENT AGREEMENTS.
(a) TERMINATIONS.—Subsection (b) of section 6159
(relating to extent to which agreements remain in effect)
is amended by adding at the end the following new para-
graph:
‘‘(5) NOTICE REQUIREMENTS.—The Secretary
may not take any action under paragraph (2), (3),
or (4) unless—
‘‘(A) a notice of such action is provided to
the taxpayer not later than the day 30 days be-
fore the date of such action, and
‘‘(B) such notice includes an explanation
why the Secretary intends to take such action.
The preceding sentence shall not apply in any case
in which the Secretary believes that collection of any
tax to which an agreement under this section relates
is in jeopardy.’’
(b) DENIALS.—Section 6159 (relating to agreements
for payment of tax liability in installments) is amended
by adding at the end the following new subsection:
‘‘(c) NOTICE REQUIREMENTS FOR DENIALS.—The
Secretary may not deny any request for an installment
agreement under this section unless—
‘‘(1) a notice of the proposed denial is provided
to the taxpayer not later than the day 30 days be-
fore the date of such denial,
‘‘(2) such notice includes an explanation why
the Secretary intends to deny such request, and
‘‘(3) such notice includes a statement of the
taxpayer’s right to administrative review under sub-
section (d).
The preceding sentence shall not apply in any case in
which the Secretary believes that collection of any tax to
which a request for an agreement under this section re-
lates is in jeopardy.’’
(c) CONFORMING AMENDMENT.—Paragraph (3) of
section 6159(b) is amended to read as follows:
‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CON-
DITIONS.—If the Secretary makes a determination
that the financial condition of a taxpayer with whom
the Secretary has entered into an agreement under
subsection (a) has significantly changed, the Sec-
retary may alter, modify, or terminate such agree-
ment.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date 6 months after
the date of the enactment of this Act.
SEC. 204. ADMINISTRATIVE REVIEW OF DENIAL OF RE-
QUEST FOR, OR TERMINATION OF, INSTALL-
MENT AGREEMENT.
(a) GENERAL RULE.—Section 6159 (relating to
agreements for payment of tax liability in installments),
as amended by section 203(b), is amended by adding at
the end the following new subsection:
‘‘(d) ADMINISTRATIVE REVIEW.—The Secretary shall
establish procedures for an independent administrative re-
view of denials of requests for, or terminations of, install-
ment agreements under this section.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on January 1, 1996.
TITLE III—INTEREST
SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.
(a) GENERAL RULE.—Paragraph (1) of section
6404(e) (relating to abatement of interest in certain cases)
is amended—
(1) by inserting ‘‘unreasonable’’ before ‘‘error’’
each place it appears in subparagraphs (A) and (B),
and
(2) by striking ‘‘in performing a ministerial
act’’ each place it appears.
(b) MANDATORY ABATEMENT
FOR SMALL TAX-
PAYERS.—The first sentence of section 6404(e)(1) is
amended by inserting ‘‘in the case of a taxpayer not de-
scribed in section 7430(c)(4)(A)(iii) and shall abate the
assessment of such interest until the date demand for pay-
ment is made in the case of a taxpayer described in section
7430(c)(4)(A)(iii)’’ before the period at the end.
(c) CLERICAL AMENDMENT.—The subsection head-
ing for subsection (e) of section 6404 is amended by strik-
ing ‘‘Assessments’’ and inserting ‘‘Abatement’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest accruing with respect
to deficiencies or payments for taxable years beginning
after the date of the enactment of this Act.
SEC. 302. EXTENSION OF INTEREST-FREE PERIOD FOR
PAYMENT OF TAX AFTER NOTICE AND DE-
MAND.
(a) GENERAL RULE.—Paragraph (3) of section
6601(e) (relating to payments made within 10 days after
notice and demand) is amended to read as follows:
‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE-
RIOD AFTER NOTICE AND DEMAND.—If notice and
demand is made for payment of any amount and if
such amount is paid within 21 days (10 days if the
amount for which such notice and demand is made
equals or exceeds $100,000) after the date of such
notice and demand, interest under this section on
the amount so paid shall not be imposed for the pe-
riod after the date of such notice and demand.’’
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 6651(a) (relating to addition to tax for failure to
file tax return or pay tax) is amended by striking ‘‘10
days’’ and inserting ‘‘21 days (10 days if the amount for
which such notice and demand is made equals or exceeds
$100,000)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply in the case of any notice and de-
mand given after December 31, 1995.
TITLE IV—JOINT RETURNS
SEC. 401. DISCLOSURE OF COLLECTION ACTIVITIES.
(a) GENERAL RULE.—Subsection (e) of section 6103
(relating to disclosure to persons having material interest)
is amended by adding at the end the following new para-
graph:
‘‘(8) DISCLOSURE OF COLLECTION ACTIVITIES
WITH
RESPECT
TO
JOINT
RETURN.—If any defi-
ciency of tax with respect to a joint return is as-
sessed and the individuals filing such return are no
longer married or no longer reside in the same
household, upon request in writing of either of such
individuals, the Secretary may disclose in writing to
the individual making the request whether the Sec-
retary has attempted to collect such deficiency from
such other individual, the general nature of such col-
lection activities, and the amount collected.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE
RETURNS WITHOUT FULL PAYMENT OF TAX.
(a) GENERAL RULE.—Paragraph (2) of section
6013(b) (relating to limitations on filing of joint return
after filing separate returns) is amended by striking sub-
paragraph (A) and redesignating the following subpara-
graphs accordingly.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
the date of the enactment of this Act.
TITLE V—COLLECTION
ACTIVITIES
SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.
(a) WITHDRAWAL OF CERTAIN NOTICES.—Section
6323 (relating to validity and priority against certain per-
sons) is amended by adding at the end the following new
subsection:
‘‘(j) WITHDRAWAL
OF NOTICE
IN CERTAIN CIR-
CUMSTANCES.—
‘‘(1) IN GENERAL.—The Secretary may with-
draw a notice of a lien filed under this section and
this chapter shall be applied as if the withdrawn no-
tice had not been filed, if the Secretary determines
that—
‘‘(A) the filing of such notice was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the lien was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the withdrawal of such notice will fa-
cilitate the collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the withdrawal of such
notice would be in the best interests of the tax-
payer (as determined by the Taxpayer Advo-
cate) and the United States.
Any such withdrawal shall be made by filing notice
at the same office as the withdrawn notice. A copy
of such notice of withdrawal shall be provided to the
taxpayer.
‘‘(2) NOTICE
TO
CREDIT
AGENCIES, ETC.—
Upon written request by the taxpayer with respect
to whom a notice of a lien was withdrawn under
paragraph (1), the Secretary shall promptly make
reasonable efforts to notify credit reporting agencies,
and any financial institution or creditor whose name
and address is specified in such request, of the with-
drawal of such notice. Any such request shall be in
such form as the Secretary may prescribe.’’
(b) RETURN
OF LEVIED PROPERTY
IN CERTAIN
CASES.—Section 6343 (relating to authority to release
levy and return property) is amended by adding at the
end the following new subsection:
‘‘(d) RETURN OF PROPERTY IN CERTAIN CASES.—
If—
‘‘(1) any property has been levied upon, and
‘‘(2) the Secretary determines that—
‘‘(A) the levy on such property was pre-
mature or otherwise not in accordance with ad-
ministrative procedures of the Secretary,
‘‘(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the levy was imposed by
means of installment payments, unless such
agreement provides otherwise,
‘‘(C) the return of such property will facili-
tate the collection of the tax liability, or
‘‘(D) with the consent of the taxpayer or
the Taxpayer Advocate, the return of such
property would be in the best interests of the
taxpayer (as determined by the Taxpayer Advo-
cate) and the United States,
the provisions of subsection (b) shall apply in the same
manner as if such property had been wrongly levied upon,
except that no interest shall be allowed under subsection
(c).’’
(c) MODIFICATIONS IN CERTAIN LEVY EXEMPTION
AMOUNTS.—
(1) FUEL, ETC.—Paragraph (2) of section
6334(a) (relating to fuel, provisions, furniture, and
personal effects exempt from levy) is amended—
(A) by striking ‘‘If the taxpayer is the
head of a family, so’’ and inserting ‘‘So’’, and
(B) by striking ‘‘$1,650 ($1,550 in the
case of levies issued during 1989)’’ and insert-
ing ‘‘$1,750’’.
(2) BOOKS, ETC.—Paragraph (3) of section
6334(a) (relating to books and tools of a trade, busi-
ness, or profession exempt from levy) is amended by
striking ‘‘$1,100 ($1,050 in the case of levies issued
during 1989)’’ and inserting ‘‘$1,250’’.
(3) INDEXED FOR INFLATION.—Section 6334
(relating to property exempt from levy) is amended
by adding at the end the following new subsection:
‘‘(f) INFLATION ADJUSTMENTS.—
‘‘(1) IN GENERAL.—In the case of any calendar
year beginning after 1996, each dollar amount re-
ferred to in paragraphs (2) and (3) of subsection (a)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year, by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any dollar amount after
being increased under paragraph (1) is not a mul-
tiple of $10, such dollar amount shall be rounded to
the nearest multiple of $10 (or, if such dollar
amount is a multiple of $5, such dollar amount shall
be increased to the next higher multiple of $10).’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall take effect on the date of the enactment of this
Act.
(2) 
EXEMPT
AMOUNTS.—The 
amendments
made by subsection (c) shall take effect with respect
to levies issued after December 31, 1995.
SEC. 502. OFFERS-IN-COMPROMISE.
(a) GENERAL RULE.—Subsection (a) of section 7122
(relating to compromises) is amended by adding at the end
the following new sentence: ‘‘The Secretary may make
such a compromise in any case where the Secretary deter-
mines that such compromise would be in the best interests
of the United States.’’
(b) REVIEW REQUIREMENTS.—Subsection (b) of sec-
tion 7122 (relating to records) is amended by striking
‘‘$500.’’ and inserting ‘‘$50,000. However, such com-
promise shall be subject to continuing quality review by
the Secretary.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 503. NOTIFICATION OF EXAMINATION.
(a) IN GENERAL.—Section 7605 (relating to restric-
tions on examination of taxpayer) is amended by redesig-
nating subsection (c) as subsection (d) and by inserting
after subsection (b) the following new subsection:
‘‘(c) NOTIFICATION REQUIREMENT.—No examina-
tion described in subsection (a) shall be made unless the
Secretary notifies the taxpayer in writing by mail to an
address determined under section 6212(b) that the tax-
payer is under examination and provides the taxpayer with
an explanation of the process as described in section
7521(b)(1). The preceding sentence shall not apply in the
case of any examination if the Secretary determines
that—
‘‘(1) such examination is in connection with a
criminal investigation or is with respect to a tax the
collection of which is in jeopardy, or
‘‘(2) the application of the preceding sentence
would be inconsistent with national security needs or
would interfere with the effective conduct of a con-
fidential law enforcement or foreign counterintel-
ligence activity.’’
(b) CONFORMING AMENDMENT.—Paragraph (1) of
section 7521(b) (relating to safeguards) is amended by
striking ‘‘or at’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 504. INCREASE IN LIMIT ON RECOVERY OF CIVIL
DAMAGES FOR UNAUTHORIZED COLLECTION
ACTIONS.
(a) GENERAL RULE.—Subsection (b) of section 7433
(relating to damages) is amended by striking ‘‘$100,000’’
and inserting ‘‘$1,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to actions by officers or employ-
ees of the Internal Revenue Service after the date of the
enactment of this Act.
SEC. 505. SAFEGUARDS RELATING TO DESIGNATED SUM-
MONS.
(a) STANDARD OF REVIEW.—Subparagraph (A) of
section 6503(k)(2) (defining designated summons) is
amended by redesignating clauses (i) and (ii) as clauses
(ii) and (iii), respectively, and by inserting before clause
(ii) (as so redesignated) the following new clause:
‘‘(i) the issuance of such summons is
preceded by a review of such issuance by
the regional counsel of the Office of Chief
Counsel for the region in which the exam-
ination of the corporation is being con-
ducted,’’.
(b) NOTICE REQUIREMENTS FOR ISSUANCE.—Sec-
tion 6503(k) is amended by adding at the end the follow-
ing new paragraph:
‘‘(4) NOTICE REQUIREMENTS.—With respect to
any summons referred to in paragraph (1)(A) issued
to any person other than the corporation, the Sec-
retary shall promptly notify the corporation, in writ-
ing, that such summons has been issued with respect
to such corporation’s return of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to summons issued after the date
of the enactment of this Act.
TITLE VI—INFORMATION
RETURNS
SEC. 601. PHONE NUMBER OF PERSON PROVIDING PAYEE
STATEMENTS REQUIRED TO BE SHOWN ON
SUCH STATEMENT.
(a) GENERAL RULE.—The following provisions are
each amended by striking ‘‘name and address’’ and insert-
ing ‘‘name, address, and phone number of the information
contact’’:
(1) Section 6041(d)(1).
(2) Section 6041A(e)(1).
(3) Section 6042(c)(1).
(4) Section 6044(e)(1).
(5) Section 6045(b)(1).
(6) Section 6049(c)(1)(A).
(7) Section 6050B(b)(1).
(8) Section 6050H(d)(1).
(9) Section 6050I(e)(1).
(10) Section 6050J(e).
(11) Section 6050K(b)(1).
(12) Section 6050N(b)(1).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to statements required to be fur-
nished after December 31, 1995 (determined without
regard to any extension).
SEC. 602. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN-
FORMATION RETURNS.
(a) GENERAL RULE.—Subchapter B of chapter 76
(relating to proceedings by taxpayers and third parties)
is amended by redesignating section 7434 as section 7435
and by inserting after section 7433 the following new
section:
‘‘SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF
INFORMATION RETURNS.
‘‘(a) IN GENERAL.—If any person willfully files a
false or fraudulent information return with respect to pay-
ments purported to be made to any other person, such
other person may bring a civil action for damages against
the person so filing such return.
‘‘(b) DAMAGES.—In any action brought under sub-
section (a), upon a finding of liability on the part of the
defendant, the defendant shall be liable to the plaintiff in
an amount equal to the greater of $5,000 or the sum of—
‘‘(1) any actual damages sustained by the plain-
tiff as a proximate result of the filing of the false
or fraudulent information return (including any
costs attributable to resolving deficiencies asserted
as a result of such filing), and
‘‘(2) the costs of the action.
‘‘(c) PERIOD
FOR
BRINGING
ACTION.—Notwith-
standing any other provision of law, an action to enforce
the liability created under this section may be brought
without regard to the amount in controversy and may be
brought only within the later of—
‘‘(1) 6 years after the date of the filing of the
false or fraudulent information return, or
‘‘(2) 1 year after the date such false or fraudu-
lent information return would have been discovered
by exercise of reasonable care.
‘‘(d) COPY OF COMPLAINT FILED WITH IRS.—Any
person bringing an action under subsection (a) shall pro-
vide a copy of the complaint to the Internal Revenue Serv-
ice upon the filing of such complaint with the court.
‘‘(e) FINDING
OF COURT TO INCLUDE CORRECT
AMOUNT OF PAYMENT.—The judgment of the court in an
action brought under subsection (a) shall include a finding
of the correct amount which should have been reported
in the information return.
‘‘(f) INFORMATION RETURN.—For purposes of this
section, the term ‘information return’ means any state-
ment described in section 6724(d)(1)(A).’’