IB
Union Calendar No. 240
104TH CONGRESS
2D SESSION
H. R. 2337
[Report No. 104–506]
To amend the Internal Revenue Code of 1986 to provide for increased
taxpayer protections.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 14, 1995
Mrs. JOHNSON of Connecticut (for herself and Mr. MATSUI) introduced the
following bill; which was referred to the Committee on Ways and Means
MARCH 28, 1996
Additional sponsors: Mr. SPRATT, Mr. SCHIFF, Mr. WICKER, and Mr.
CRAMER
MARCH 28, 1996
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on September 14, 1995]
A BILL
To amend the Internal Revenue Code of 1986 to provide
for increased taxpayer protections.
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 otherwise
expressly provided, whenever in this Act an amendment or
repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
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. Notification of reasons for termination of installment agreements.
Sec. 202. Administrative review of termination of installment agreement.
TITLE III—ABATEMENT OF INTEREST AND PENALTIES
Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after notice and de-
mand.
Sec. 304. Abatement of penalty for failure to make required deposits of payroll
taxes in certain cases.
TITLE IV—JOINT RETURNS
Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full payment
of tax.
Sec. 403. Disclosure of collection activities.
TITLE V—COLLECTION ACTIVITIES
Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
Sec. 503. Offers-in-compromise.
TITLE VI—INFORMATION RETURNS
Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of information re-
turns.
TITLE VII—AWARDING OF COSTS AND CERTAIN FEES
Sec. 701. United States must establish that its position in proceeding was sub-
stantially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment proceed-
ings.
TITLE VIII—MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR
UNAUTHORIZED COLLECTION ACTIONS
Sec. 801. Increase in limit on recovery of civil damages for unauthorized collec-
tion actions.
Sec. 802. Court discretion to reduce award for litigation costs for failure to ex-
haust administrative remedies.
TITLE IX—MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT
AND PAY OVER TAX
Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person liable for
penalty for failure to collect and pay over tax.
Sec. 903. Right of contribution where more than 1 person liable for penalty for
failure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt from pen-
alty for failure to collect and pay over tax.
TITLE X—MODIFICATIONS OF RULES RELATING TO SUMMONSES
Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.
TITLE XI—RELIEF FROM RETROACTIVE APPLICATION OF
TREASURY DEPARTMENT REGULATIONS
Sec. 1101. Relief from retroactive application of Treasury Department regula-
tions.
TITLE XII—MISCELLANEOUS PROVISIONS
Sec. 1201. Phone number of person providing payee statements required to be
shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent accounts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
Sec. 1207. Disclosure of returns and return information to designee of taxpayer.
Sec. 1208. Study of netting of interest on overpayments and liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-timely-filing rule.
Sec. 1211. Reports on misconduct of IRS employees.
TITLE XIII—REVENUE OFFSETS
Subtitle A—Application of Failure-to-Pay Penalty to Substitute Returns
Sec. 1301. Application of failure-to-pay penalty to substitute returns.
Subtitle B—Excise Taxes on Amounts of Private Excess Benefits
Sec. 1311. Excise taxes for failure by certain charitable organizations to meet cer-
tain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to file com-
plete and timely annual returns.
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 Com-
missioner of Internal Revenue; Assistant Commissioner
(Employee Plans and Exempt Organizations)) is amended
by adding at the end the following new subsection:
‘‘(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 shall be
under the supervision and direction of an official to
be known as the ‘Taxpayer Advocate’ who shall be ap-
pointed by and report directly to the Commissioner of
Internal Revenue. The Taxpayer Advocate shall be en-
titled to compensation at the same rate as the highest
level official reporting directly to the Deputy Com-
missioner of the Internal Revenue Service.
‘‘(2) FUNCTIONS OF OFFICE.—
‘‘(A) IN GENERAL.—It shall be the function
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 Committee
on Finance of the Senate on the objectives
of the Taxpayer Advocate for the fiscal year
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,
‘‘(IX) describe the extent to which
regional problem resolution officers
participate in the selection and evalua-
tion of local problem resolution officers,
and
‘‘(X) include such other informa-
tion 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, the Secretary
of the Treasury, any other officer or em-
ployee of the Department of the Treasury,
or the Office of Management and Budget.
‘‘(3) RESPONSIBILITIES OF COMMISSIONER.—The
Commissioner of Internal Revenue shall establish pro-
cedures requiring a formal response to all rec-
ommendations submitted to the Commissioner by the
Taxpayer Advocate within 3 months after submission
to the Commissioner.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 7811 (relating to Taxpayer Assist-
ance Orders) is amended—
(A) by striking ‘‘the Office of Ombudsman’’
in subsection (a) and inserting ‘‘the Office of the
Taxpayer Advocate’’, and
(B) by striking ‘‘Ombudsman’’ each place it
appears (including in the headings of subsections
(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 is amended by striking the item relating
to section 7802 and inserting the following new item:
‘‘Sec. 7802. Commissioner of Internal Revenue; Assistant Commis-
sioners; 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) TERMS OF ORDERS.—Subsection (b) of section
7811 (relating to terms of Taxpayer Assistance Orders) is
amended—
(1) by inserting ‘‘within a specified time period’’
after ‘‘the Secretary’’, and
(2) by inserting ‘‘take any action as permitted
by law,’’ after ‘‘cease any action,’’.
(b) 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 Tax-
payer Assistance Order issued by the Taxpayer Advocate
under this section may be modified or rescinded—
‘‘(1) only by the Taxpayer Advocate, the Com-
missioner of Internal Revenue, or the Deputy Com-
missioner of Internal Revenue, and
‘‘(2) only if a written explanation of the reasons
for the modification or rescission is provided to the
Taxpayer Advocate.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
TITLE II—MODIFICATIONS TO IN-
STALLMENT 
AGREEMENT
PROVISIONS
SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION
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) CONFORMING AMENDMENT.—Paragraph (3) of sec-
tion 6159(b) is amended to read as follows:
‘‘(3) SUBSEQUENT CHANGE IN FINANCIAL CONDI-
TIONS.—If the Secretary makes a determination that
the financial condition of a taxpayer with whom the
Secretary has entered into an agreement under sub-
section (a) has significantly changed, the Secretary
may alter, modify, or terminate such agreement.’’
(c) 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. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF
INSTALLMENT AGREEMENT.
(a) GENERAL RULE.—Section 6159 (relating to agree-
ments for payment of tax liability in installments) is
amended by adding at the end the following new subsection:
‘‘(c) ADMINISTRATIVE REVIEW.—The Secretary shall
establish procedures for an independent administrative re-
view of terminations of installment agreements under this
section for taxpayers who request such a review.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on January 1, 1997.
TITLE III—ABATEMENT OF
INTEREST AND PENALTIES
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 and inserting ‘‘in perform-
ing a ministerial or managerial act’’.
(b) CLERICAL AMENDMENT.—The subsection heading
for subsection (e) of section 6404 is amended—
(1) by striking ‘‘ASSESSMENTS’’ and inserting
‘‘ABATEMENT’’, and
(2) by inserting ‘‘UNREASONABLE’’ before ‘‘ER-
RORS’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to interest accruing with respect to defi-
ciencies or payments for taxable years beginning after the
date of the enactment of this Act.
SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.
(a) IN GENERAL.—Section 6404 is amended by adding
at the end the following new subsection:
‘‘(g) REVIEW OF DENIAL OF REQUEST FOR ABATE-
MENT OF INTEREST.—
‘‘(1) IN GENERAL.—The Tax Court shall have ju-
risdiction over any action brought by a taxpayer who
meets the requirements referred to in section
7430(c)(4)(A)(iii) to determine whether the Sec-
retary’s failure to abate interest under this section
was an abuse of discretion, and may order an abate-
ment, if such action is brought within 180 days after
the date of the mailing of the Secretary’s final deter-
mination not to abate such interest.
‘‘(2) SPECIAL RULES.—
‘‘(A) DATE OF MAILING.—Rules similar to
the rules of section 6213 shall apply for purposes
of determining the date of the mailing referred to
in paragraph (1).
‘‘(B) RELIEF.—Rules similar to the rules of
section 6512(b) shall apply for purposes of this
subsection.
‘‘(C) REVIEW.—An order of the Tax Court
under this subsection shall be reviewable in the
same manner as a decision of the Tax Court, but
only with respect to the matters determined in
such order.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to requests for abatement after the date
of the enactment of this Act.
SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAY-
MENT OF TAX AFTER NOTICE AND DEMAND.
(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 de-
mand is made for payment of any amount and if
such amount is paid within 21 calendar days (10
business 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 period after the date of such notice and de-
mand.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6601(e)(2) is
amended by striking ‘‘10 days from the date of notice
and demand therefor’’ and inserting ‘‘21 calendar
days from the date of notice and demand therefor (10
business days if the amount for which such notice and
demand is made equals or exceeds $100,000)’’.
(2) Paragraph (3) of section 6651(a) is amended
by striking ‘‘10 days of the date of the notice and de-
mand therefor’’ and inserting ‘‘21 calendar days from
the date of notice and demand therefor (10 business
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 demand
given after December 31, 1996.
SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE
REQUIRED DEPOSITS OF PAYROLL TAXES IN
CERTAIN CASES.
(a) IN GENERAL.—Section 6656 (relating to failure to
make deposit of taxes) is amended by adding at the end
the following new subsections:
‘‘(c) EXCEPTION
FOR FIRST-TIME DEPOSITORS
OF
EMPLOYMENT TAXES.—The Secretary may waive the pen-
alty imposed by subsection (a) on a person’s inadvertent
failure to deposit any employment tax if—
‘‘(1) such person meets the requirements referred
to in section 7430(c)(4)(A)(iii),
‘‘(2) such failure occurs during the 1st quarter
that such person was required to deposit any employ-
ment tax, and
‘‘(3) the return of such tax was filed on or before
the due date.
For purposes of this subsection, the term ‘employment taxes’
means the taxes imposed by subtitle C.
‘‘(d) AUTHORITY TO ABATE PENALTY WHERE DE-
POSIT SENT TO SECRETARY.—The Secretary may abate the
penalty imposed by subsection (a) with respect to the first
time a depositor is required to make a deposit if the amount
required to be deposited is inadvertently sent to the Sec-
retary instead of to the appropriate government deposi-
tory.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to deposits required to be made after
the date of the enactment of this Act.
TITLE IV—JOINT RETURNS
SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.
The Secretary of the Treasury or his delegate and the
Comptroller General of the United States shall each conduct
separate studies of—
(1) the effects of changing the liability for tax on
a joint return from being joint and several to being
proportionate to the tax attributable to each spouse,
(2) the effects of providing that, if a divorce de-
cree allocates liability for tax on a joint return filed
before the divorce, the Secretary may collect such li-
ability only in accordance with the decree,
(3) whether those provisions of the Internal Reve-
nue Code of 1986 intended to provide relief to inno-
cent spouses provide meaningful relief in all cases
where such relief is appropriate, and
(4) the effect of providing that community in-
come (as defined in section 66(d) of such Code) which,
in accordance with the rules contained in section
879(a) of such Code, would be treated as the income
of one spouse is exempt from a levy for failure to pay
any tax imposed by subtitle A by the other spouse for
a taxable year ending before their marriage.
The reports of such studies shall be submitted to the Com-
mittee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate within 6
months after the date of the enactment 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 sub-
section (a) shall apply to taxable years beginning after the
date of the enactment of this Act.
SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.
(a) IN GENERAL.—Subsection (e) of section 6103 (re-
lating to disclosure to persons having material interest) is
amended by adding at the end the following new paragraph:
‘‘(8) DISCLOSURE
OF
COLLECTION
ACTIVITIES
WITH RESPECT TO JOINT RETURN.—If any deficiency
of tax with respect to a joint return is assessed and
the individuals filing such return are no longer mar-
ried or no longer reside in the same household, upon
request in writing by either of such individuals, the
Secretary shall disclose in writing to the individual
making the request whether the Secretary has at-
tempted to collect such deficiency from such other in-
dividual, the general nature of such collection activi-
ties, and the amount collected. The preceding sentence
shall not apply to any deficiency which may not be
collected by reason of section 6502.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to requests made 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 premature
or otherwise not in accordance with administra-
tive 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 no-
tice would be in the best interests of the taxpayer
(as determined by the Taxpayer Advocate) 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 ef-
forts to notify credit reporting agencies, and any fi-
nancial institution or creditor whose name and ad-
dress is specified in such request, of the withdrawal
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 Advocate) 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).’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 502. MODIFICATIONS TO CERTAIN LEVY EXEMPTION
AMOUNTS.
(a) FUEL, ETC.—Paragraph (2) of section 6334(a) (re-
lating to fuel, provisions, furniture, and personal effects ex-
empt from levy) is amended—
(1) by striking ‘‘If the taxpayer is the head of a
family, so’’ and inserting ‘‘So’’,
(2) by striking ‘‘his household’’ and inserting
‘‘the taxpayer’s household’’, and
(3) by striking ‘‘$1,650 ($1,550 in the case of
levies issued during 1989)’’ and inserting ‘‘$2,500’’.
(b) BOOKS, ETC.—Paragraph (3) of section 6334(a)
(relating to books and tools of a trade, business, or profes-
sion) is amended by striking ‘‘$1,100 ($1,050 in the case
of levies issued during 1989)’’ and inserting ‘‘$1,250’’.
(c) INFLATION ADJUSTMENT.—Section 6334 (relating
to property exempt from levy) is amended by adding at the
end the following new subsection:
‘‘(f) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any calendar
year beginning after 1997, 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 1996’ for
‘calendar year 1992’ in subparagraph (B) there-
of.
‘‘(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.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect with respect to levies issued after
December 31, 1996.
SEC. 503. OFFERS-IN-COMPROMISE.
(a) REVIEW REQUIREMENTS.—Subsection (b) of sec-
tion 7122 (relating to records) is amended by striking
‘‘$500.’’ and inserting ‘‘$50,000. However, such compromise
shall be subject to continuing quality review by the Sec-
retary.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
TITLE VI—INFORMATION
RETURNS
SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF IN-
FORMATION RETURNS.
(a) GENERAL RULE.—Subchapter B of chapter 76 (re-
lating 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
fraudulent information return with respect to payments
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 fraudu-
lent information return (including any costs attrib-
utable to resolving deficiencies asserted as a result of
such filing),
‘‘(2) the costs of the action, and
‘‘(3) in the court’s discretion, reasonable attor-
neys fees.
‘‘(c) PERIOD FOR BRINGING ACTION.—Notwithstand-
ing any other provision of law, an action to enforce the
liability created under this section may be brought without