I
107TH CONGRESS
2D SESSION
H. R. 3991
To amend the Internal Revenue Code of 1986 to protect taxpayers and
ensure accountability of the Internal Revenue Service.
IN THE HOUSE OF REPRESENTATIVES
MARCH 19, 2002
Mr. HOUGHTON 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 protect
taxpayers and ensure accountability of the Internal Rev-
enue Service.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Taxpayer Protection and IRS Accountability Act of
2002’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—PENALTIES AND INTEREST
Sec. 101. Reduction of Federal tax deposit penalty.
Sec. 102. Failure to pay estimated tax penalty converted to interest charge on
accumulated unpaid balance.
Sec. 103. Exclusion from gross income for interest on overpayments of income
tax by individuals.
Sec. 104. Abatement of interest.
Sec. 105. Deposits made to suspend running of interest on potential underpay-
ments.
Sec. 106. Expansion of interest netting for individuals.
Sec. 107. Waiver of certain penalties for first-time unintentional minor errors.
Sec. 108. Frivolous tax submissions.
TITLE II—FAIRNESS OF COLLECTION PROCEDURES
Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Additional considerations to be taken into account as bases for ac-
cepting offer-in-compromise.
Sec. 203. Extension of time for return of property.
Sec. 204. Seven-day threshold on tolling of statute of limitations during tax re-
view.
Sec. 205. Study of liens and levies.
TITLE III—EFFICIENCY OF TAX ADMINISTRATION
Sec. 301.
Revisions relating to termination of employment of Internal Revenue
Service employees for misconduct.
Sec. 302. Confirmation of authority of Tax Court to apply doctrine of equitable
recoupment.
Sec. 303. Jurisdiction of Tax Court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. Study of taxpayer notification alternatives.
TITLE IV—CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Collection activities with respect to joint return disclosable to either
spouse based on oral request.
Sec. 402. Taxpayer representatives not subject to examination on sole basis of
representation of taxpayers.
Sec. 403. Disclosure in judicial or administrative tax proceedings of return and
return information of persons who are not party to such pro-
ceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification information with
respect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of brows-
ing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
TITLE V—MISCELLANEOUS
Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt organiza-
tions.
Sec. 503. Employee misconduct report to include summary of complaints by
category.
Sec. 504. Annual report on awards of costs and certain fees in administrative
and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of failure to
file.
Sec. 508. Amendment to Treasury auction reforms.
Sec. 509. Enrolled agents.
TITLE VI—AUTHORIZATION OF APPROPRIATION
Sec. 601. Low-income taxpayer clinics.
TITLE I—PENALTIES AND
INTEREST
SEC. 101. REDUCTION OF FEDERAL TAX DEPOSIT PENALTY.
(a) IN GENERAL.—Subparagraph (A) of section
6656(b)(1) is amended to read as follows:
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘applicable percent-
age’ means 2 percent.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to deposits required to be made
after December 31, 2002.
SEC. 102. FAILURE TO PAY ESTIMATED TAX PENALTY CON-
VERTED TO INTEREST CHARGE ON ACCUMU-
LATED UNPAID BALANCE.
(a) PENALTY MOVED TO INTEREST CHAPTER OF
CODE.—The Internal Revenue Code of 1986 is amended
by redesignating section 6654 as section 6641 and by
moving section 6641 (as so redesignated) from part I of
subchapter A of chapter 68 to the end of subchapter E
of chapter 67 (as added by subsection (e)(1) of this sec-
tion).
(b) PENALTY CONVERTED TO INTEREST CHARGE.—
The heading and subsections (a) and (b) of section 6641
(as so redesignated) are amended to read as follows:
‘‘SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY
ESTIMATED INCOME TAX.
‘‘(a) IN GENERAL.—Interest shall be paid on any un-
derpayment of estimated tax by an individual for a taxable
year for each day of such underpayment. The amount of
such interest for any day shall be the product of the un-
derpayment rate established under subsection (b)(2) mul-
tiplied by the amount of the underpayment.
‘‘(b) AMOUNT
OF
UNDERPAYMENT; INTEREST
RATE.—For purposes of subsection (a)—
‘‘(1) AMOUNT.—The amount of the under-
payment on any day shall be the excess of—
‘‘(A) the sum of the required installments
for the taxable year the due dates for which are
on or before such day, over
‘‘(B) the sum of the amounts (if any) of
estimated tax payments made on or before such
day on such required installments.
‘‘(2) DETERMINATION OF INTEREST RATE.—
‘‘(A) IN
GENERAL.—The underpayment
rate with respect to any day in an installment
underpayment period shall be the under-
payment rate established under section 6621
for the first day of the calendar quarter in
which such installment underpayment period
begins.
‘‘(B) INSTALLMENT
UNDERPAYMENT
PE-
RIOD.—For purposes of subparagraph (A), the
term ‘installment underpayment period’ means
the period beginning on the day after the due
date for a required installment and ending on
the due date for the subsequent required in-
stallment (or in the case of the 4th required in-
stallment, the 15th day of the 4th month fol-
lowing the close of a taxable year).
‘‘(C) DAILY RATE.—The rate determined
under subparagraph (A) shall be applied on a
striking paragraph (1) and redesignating paragraphs
(2) and (3) as paragraphs (1) and (2), respectively.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (1) and (2) of subsection (e)
(as redesignated by subsection (c)(2)) and sub-
section (h) of section 6641 (as so designated) are
each amended by striking ‘‘addition to tax’’ each
place it occurs and inserting ‘‘interest’’.
(2) Section 167(g)(5)(D) is amended by strik-
ing ‘‘6654’’ and inserting ‘‘6641’’.
(3) Section 460(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(4) Section 3510(b) is amended—
(A) by striking ‘‘section 6654’’ in para-
graph (1) and inserting ‘‘section 6641’’;
(B) by amending paragraph (2)(B) to read
as follows:
‘‘(B) no interest would be required to be
paid (but for this section) under 6641 for such
taxable year by reason of the $2,000 amount
specified in section 6641(d)(1)(B)(i)(II).’’;
(C) by striking ‘‘section 6654(d)(2)’’ in
paragraph 
(3) 
and 
inserting 
‘‘section
6641(d)(2)’’; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(6) Section 6601(h) is amended by striking
‘‘6654’’ and inserting ‘‘6641’’.
(7) Section 6621(b)(2)(B) is amended by strik-
ing ‘‘addition to tax under section 6654’’ and insert-
ing ‘‘interest required to be paid under section
6641’’.
(8) Section 6622(b) is amended—
(A) by striking ‘‘PENALTY
FOR’’ in the
heading; and
(B) by striking ‘‘addition to tax under sec-
tion 6654 or 6655’’ and inserting ‘‘interest re-
quired to be paid under section 6641 or addi-
tion to tax under section 6655’’.
(9) Section 6658(a) is amended—
(A) by striking ‘‘6654, or 6655’’ and in-
serting ‘‘or 6655, and no interest shall be re-
quired to be paid under section 6641,’’; and
(B) by inserting ‘‘or paying interest’’ after
‘‘the tax’’ in paragraph (2)(B)(ii).
(10) Section 6665(b) is amended—
(A) in the matter preceding paragraph (1)
by striking ‘‘, 6654,’’; and
(B) in paragraph (2) by striking ‘‘6654
or’’.
(11) Section 7203 is amended by striking ‘‘sec-
tion 6654 or 6655’’ and inserting ‘‘section 6655 or
interest required to be paid under section 6641’’.
(e) CLERICAL AMENDMENTS.—
(1) Chapter 67 is amended by inserting after
subchapter D the following:
‘‘Subchapter E—Interest on Failure by
Individual to Pay Estimated Income Tax
‘‘Sec. 6641. Interest on failure by individual to pay estimated in-
come tax.’’.
(2) The table of subchapters for chapter 67 is
amended by adding at the end the following new
items:
‘‘Subchapter D. Notice requirements.
‘‘Subchapter E. Interest on failure by individual to pay estimated
income tax.’’.
(3) The table of sections for part I of sub-
chapter A of chapter 68 is amended by striking the
item relating to section 6654.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to installment payments for taxable
years beginning after December 31, 2002.
SEC. 103. EXCLUSION FROM GROSS INCOME FOR INTEREST
ON OVERPAYMENTS OF INCOME TAX BY INDI-
VIDUALS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to items specifically excluded from gross
income) is amended by inserting after section 139 the fol-
lowing new section:
‘‘SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTER-
EST ON OVERPAYMENTS OF INCOME TAX BY
INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual,
gross income shall not include interest paid under section
6611 on any overpayment of tax imposed by this subtitle.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply in
the case of a failure to claim items resulting in the over-
payment on the original return if the Secretary determines
that the principal purpose of such failure is to take advan-
tage of subsection (a).
‘‘(c) SPECIAL RULE FOR DETERMINING MODIFIED
ADJUSTED GROSS INCOME.—For purposes of this title,
interest not included in gross income under subsection (a)
shall not be treated as interest which is exempt from tax
for purposes of sections 32(i)(2)(B) and 6012(d) or any
computation in which interest exempt from tax under this
title is added to adjusted gross income.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 is amended by
inserting after the item relating to section 139 the fol-
lowing new item:
‘‘Sec. 139A. Exclusion from gross income for interest on over-
payments of income tax by individuals.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest received in calendar
years beginning after the date of the enactment of this
Act.
SEC. 104. ABATEMENT OF INTEREST.
(a) ABATEMENT OF INTEREST WITH RESPECT TO
ERRONEOUS REFUND CHECK WITHOUT REGARD TO SIZE
OF REFUND.—Paragraph (2) of section 6404(e) is amend-
ed by striking ‘‘unless—’’ and all that follows and insert-
ing ‘‘unless the taxpayer (or a related party) has in any
way caused such erroneous refund.’’.
(b) ABATEMENT OF INTEREST TO EXTENT INTER-
EST
IS ATTRIBUTABLE
TO TAXPAYER RELIANCE
ON
WRITTEN STATEMENTS OF THE IRS.—Subsection (f) of
section 6404 is amended—
(1) in the subsection heading, by striking
‘‘PENALTY OR ADDITION’’ and inserting ‘‘INTEREST,
PENALTY, OR ADDITION’’; and
(2) in paragraph (1) and in subparagraph (B)
of paragraph (2), by striking ‘‘penalty or addition’’
and inserting ‘‘interest, penalty, or addition’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to interest accruing
on or after the date of the enactment of this Act.
SEC. 105. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS.
(a) IN GENERAL.—Subchapter B of chapter 67 (re-
lating to interest on overpayments) is amended by redesig-
nating section 6612 as section 6613 and by inserting after
section 6611 the following new section:
‘‘SEC. 6612. DEPOSITS MADE TO SUSPEND RUNNING OF IN-
TEREST ON POTENTIAL UNDERPAYMENTS,
ETC.
‘‘(a) AUTHORITY TO MAKE DEPOSITS OTHER THAN
AS PAYMENT OF TAX.—A taxpayer may make a cash de-
posit with the Secretary which may be used by the Sec-
retary to pay any tax imposed under subtitle A or B or
chapter 41, 42, 43, or 44 which has not been assessed
at the time of the deposit. Such a deposit shall be made
in such manner as the Secretary shall prescribe.
‘‘(b) NO INTEREST IMPOSED.—To the extent that
such deposit is used by the Secretary to pay tax, for pur-
poses of section 6601 (relating to interest on underpay-
ments), the tax shall be treated as paid when the deposit
is made.
‘‘(c) RETURN OF DEPOSIT.—Except in a case where
the Secretary determines that collection of tax is in jeop-
ardy, the Secretary shall return to the taxpayer any
amount of the deposit (to the extent not used for a pay-
ment of tax) which the taxpayer requests in writing.
‘‘(d) PAYMENT OF INTEREST.—
‘‘(1) IN
GENERAL.—For purposes of section
6611 (relating to interest on overpayments), a de-
posit which is returned to a taxpayer shall be treated
as a payment of tax for any period to the extent
(and only to the extent) attributable to a disputable
tax for such period. Under regulations prescribed by
the Secretary, rules similar to the rules of section
6601(e)(2) shall apply.
‘‘(2) DISPUTABLE TAX.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘disputable tax’ means the
amount of tax specified at the time of the de-
posit as the taxpayer’s reasonable estimate of
the maximum amount of any tax attributable to
disputable items.
‘‘(B) SAFE
HARBOR
BASED
ON
30-DAY
LETTER.—In the case of a taxpayer who has
been issued a 30-day letter, the maximum
amount of tax under subparagraph (A) shall
not be less than the amount of the proposed
deficiency specified in such letter.
‘‘(3) OTHER
DEFINITIONS.—For purposes of
paragraph (2)—
‘‘(A) DISPUTABLE ITEM.—The term ‘dis-
putable item’ means any item of income, gain,
loss, deduction, or credit which the taxpayer
reasonably believes the Secretary has a reason-
able basis for disputing the treatment on the
taxpayer’s return.
‘‘(B) 30-DAY LETTER.—The term ‘30-day
letter’ means the first letter of proposed defi-
ciency which allows the taxpayer an opportunity
for administrative review in the Internal Rev-
enue Service Office of Appeals.
‘‘(4) RATE OF INTEREST.—The rate of interest
allowable under this subsection shall be the Federal
short-term rate determined under section 6621(b),
compounded daily.
‘‘(e) USE OF DEPOSITS.—
‘‘(1) PAYMENT OF TAX.—Except as otherwise
provided by the taxpayer, deposits shall be treated
as used for the payment of tax in the order depos-
ited.
‘‘(B) RETURNS OF DEPOSITS.—Deposits shall
be treated as returned to the taxpayer on a last-in,
first-out basis.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 67 is amended by striking
the last item and inserting the following new items:
‘‘Sec. 6612. Deposits made to suspend running of interest on po-
tential underpayments, etc.
‘‘Sec. 6613. Cross references.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to deposits made after the
date of the enactment of this Act.
(2) COORDINATION
WITH
DEPOSITS
MADE
UNDER REVENUE PROCEDURE 84–58.—In the case of
an amount held by the Secretary of the Treasury or
his delegate on the date of the enactment of this Act
as a deposit in the nature of a cash bond deposit
pursuant to Revenue Procedure 84–58, the date that
the taxpayer identifies such amount as a deposit
made pursuant to section 6612 of the Internal Rev-
enue Code (as added by this Act) shall be treated as
the date such amount is deposited for purposes of
such section 6612.
SEC. 106. EXPANSION OF INTEREST NETTING FOR INDIVID-
UALS.
(a) IN GENERAL.—Subsection (d) of section 6621
(relating to elimination of interest on overlapping periods
of tax overpayments and underpayments) is amended by
adding at the end the following: ‘‘Solely for purposes of
the preceding sentence, section 6611(e) shall not apply in
the case of an individual.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to interest accrued after Decem-
ber 31, 2002.
SEC. 107. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME
UNINTENTIONAL MINOR ERRORS.
(a) IN GENERAL.—Section 6651 (relating to failure
to file tax return or to pay tax) is amended by adding
at the end the following new subsection:
‘‘(i) TREATMENT
OF
FIRST-TIME
UNINTENTIONAL
MINOR ERROR.—In the case of a return of tax imposed
by subtitle A filed by an individual, the Secretary may
waive an addition to tax under subsection (a) if—
‘‘(1) the individual has a history of compliance
with the requirements of this title,
‘‘(2) it is shown that the failure is due to an
unintentional minor error,
‘‘(3) the penalty would otherwise be dispropor-
tionate to the amount involved, and
‘‘(4) waiving the penalty would promote compli-
ance with the requirements of this title and effective
tax administration.
The preceding sentence shall not apply if the Secretary
has waived any addition to tax under this subsection with
respect to any prior failure by such individual.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on January 1, 2003.
SEC. 108. FRIVOLOUS TAX SUBMISSIONS.
(a) CIVIL PENALTIES.—Section 6702 is amended to
read as follows:
‘‘SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
‘‘(a) CIVIL PENALTY
FOR FRIVOLOUS TAX RE-
TURNS.—A person shall pay a penalty of $5,000 if—
‘‘(1) such person files what purports to be a re-
turn of a tax imposed by this title but which—
‘‘(A) does not contain information on
which the substantial correctness of the self-as-
sessment may be judged, or
‘‘(B) contains information that on its face
indicates that the self-assessment is substan-
tially incorrect; and
‘‘(2) the conduct referred to in paragraph (1)—
‘‘(A) is based on a position which the Sec-
retary has identified as frivolous under sub-
section (c), or
‘‘(B) reflects a desire to delay or impede
the administration of Federal tax laws.
‘‘(b) CIVIL PENALTY
FOR SPECIFIED FRIVOLOUS
SUBMISSIONS.—
‘‘(1) IMPOSITION OF PENALTY.—Except as pro-
vided in paragraph (3), any person who submits a
specified frivolous submission shall pay a penalty of
$5,000.
‘‘(2) SPECIFIED FRIVOLOUS SUBMISSION.—For
purposes of this section—
‘‘(A) 
SPECIFIED
FRIVOLOUS
SUBMIS-
SION.—The term ‘specified frivolous submis-
sion’ means a specified submission if any por-
tion of such submission—
‘‘(i) is based on a position which the
Secretary has identified as frivolous under
subsection (c), or
‘‘(ii) reflects a desire to delay or im-
pede the administration of Federal tax
laws.
‘‘(B) 
SPECIFIED
FRIVOLOUS
SUBMIS-
SION.—The 
term 
‘specified 
submission’
means—
‘‘(i) a request for a hearing under—
‘‘(I) section 6320 (relating to no-
tice and opportunity for hearing upon
filing of notice of lien), or
‘‘(II) section 6330 (relating to
notice and opportunity for hearing be-
fore levy), and
‘‘(ii) an application under—
‘‘(I) section 7811 (relating to
taxpayer assistance orders),
‘‘(II) section 6159 (relating to
agreements for payment of tax liabil-
ity in installments), or
‘‘(III) section 7122 (relating to
compromises).
‘‘(3) OPPORTUNITY
TO
WITHDRAW
SUBMIS-
SION.—If the Secretary provides a person with no-
tice that a submission is a specified frivolous sub-
mission and such person withdraws such submission
promptly after such notice, the penalty imposed
under paragraph (1) shall not apply with respect to
such submission.
‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec-
retary shall prescribe (and periodically revise) a list of po-
sitions which the Secretary has identified as being frivo-
lous for purposes of this subsection. The Secretary shall
not include in such list any position that the Secretary
determines 
meets 
the 
requirement 
of 
section
6662(d)(2)(B)(ii)(II).
‘‘(d) REDUCTION OF PENALTY.—The Secretary may
reduce the amount of any penalty imposed under this sec-
tion if the Secretary determines that such reduction would
promote compliance with and administration of the Fed-
eral tax laws.
‘‘(e) PENALTIES
IN ADDITION
TO OTHER PEN-
ALTIES.—The penalties imposed by this section shall be
in addition to any other penalty provided by law.’’.
(b) TREATMENT
OF FRIVOLOUS REQUESTS
FOR
HEARINGS BEFORE LEVY.—
(1) FRIVOLOUS
REQUESTS
DISREGARDED.—
Section 6330 (relating to notice and opportunity for
hearing before levy) is amended by adding at the
end the following new subsection:
‘‘(g) FRIVOLOUS REQUESTS FOR HEARING, ETC.—
Notwithstanding any other provision of this section, if the
Secretary determines that any portion of a request for a
hearing under this section or section 6320 meets the re-
quirement of clause (i) or (ii) of section 6702(b)(2)(A),
then the Secretary may treat such portion as if it were
never submitted and such portion shall not be subject to
any further administrative or judicial review.’’.
(2) PRECLUSION
FROM
RAISING
FRIVOLOUS
ISSUES
AT
HEARING.—Section 
6330(c)(4) 
is
amended—
(A) by striking ‘‘(A)’’ and inserting
‘‘(A)(i)’’;
(B) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’;
(C) by striking the period at the end of the
first sentence and inserting ‘‘; or’’; and
(D) by inserting after subparagraph (A)(ii)
(as so redesignated) the following:
‘‘(B) the issue meets the requirement of
clause (i) or (ii) of section 6702(b)(2)(A).’’.
(3) 
STATEMENT
OF
GROUNDS.—Section
6330(b)(1) is amended by striking ‘‘under sub-
section (a)(3)(B)’’ and inserting ‘‘in writing under
subsection (a)(3)(B) and states the grounds for the
requested appeal’’.
(c) TREATMENT
OF FRIVOLOUS REQUESTS
FOR
HEARINGS UPON FILING OF NOTICE OF LIEN.—Section
6320 is amended—
(1) in subsection (b)(1), by striking ‘‘under sub-
section (a)(3)(B)’’ and inserting ‘‘in writing under
subsection (a)(3)(B) and states the grounds for the
requested appeal’’.
(2) in subsection (c), by striking ‘‘and (e)’’ and
inserting ‘‘(e), and (g)’’.
(d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR
OFFERS-IN-COMPROMISE
AND
INSTALLMENT
AGREE-
MENTS.—Section 7122 is amended by adding at the end
the following new subsection:
‘‘(e) FRIVOLOUS
SUBMISSIONS, ETC.—Notwith-
standing any other provision of this section, if the Sec-
retary determines that any portion of an application for
an offer-in-compromise or installment agreement sub-
mitted under this section or section 6159 meets the re-
quirement of clause (i) or (ii) of section 6702(b)(2)(A),
then the Secretary may treat such portion as if it were
never submitted and such portion shall not be subject to
any further administrative or judicial review.’’.
(e) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is amended
by striking the item relating to section 6702 and inserting
the following new item:
‘‘Sec. 6702. Frivolous tax submissions.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to submissions made and issues
raised after the date on which the Secretary first pre-
scribes a list under section 6702(c) of the Internal Rev-
enue Code of 1986, as amended by subsection (a).
TITLE II—FAIRNESS OF
COLLECTION PROCEDURES
SEC. 201. PARTIAL PAYMENT OF TAX LIABILITY IN IN-
STALLMENT AGREEMENTS.
(a) IN GENERAL.—
(1) Section 6159(a) (relating to authorization
of agreements) is amended—
(A) by striking ‘‘satisfy liability for pay-
ment of’’ and inserting ‘‘make payment on’’,
and
(B) by inserting ‘‘full or partial’’ after ‘‘fa-
cilitate’’.
(2) Section 6159(c) (relating to Secretary re-
quired to enter into installment agreements in cer-
tain cases) is amended in the matter preceding para-
graph (1) by inserting ‘‘full’’ before ‘‘payment’’.
(b) REQUIREMENT TO REVIEW PARTIAL PAYMENT
AGREEMENTS EVERY TWO YEARS.—Section 6159 is
amended by redesignating subsections (d) and (e) as sub-
sections (e) and (f), respectively, and inserting after sub-
section (c) the following new subsection:
‘‘(d) SECRETARY REQUIRED TO REVIEW INSTALL-
MENT AGREEMENTS FOR PARTIAL COLLECTION EVERY
TWO YEARS.—In the case of an agreement entered into
by the Secretary under subsection (a) for partial collection
of a tax liability, the Secretary shall review the agreement
at least once every 2 years.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to agreements entered into on or
after the date of the enactment of this Act.
SEC. 202. ADDITIONAL CONSIDERATIONS TO BE TAKEN
INTO ACCOUNT AS BASES FOR ACCEPTING
OFFER-IN-COMPROMISE.
(a) IN GENERAL.—Paragraph (3) of section 7122(c)
(relating to special rules relating to treatment of offers)
is amended by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subparagraph
(B) and inserting a semicolon, and by adding at the end
the following new subparagraphs:
‘‘(C) in all cases, consideration shall be
given to—
‘‘(i) whether the taxpayer has a his-
tory of complying with the requirements of
this title,
‘‘(ii) whether there is evidence of an
error by the Internal Revenue Service in
determining or administering the tax which
is the subject of the offer-in-compromise,
and
‘‘(iii) whether the taxpayer has made
a good faith effort to resolve and pay the
liability;
‘‘(D) a reasonable annual allowance shall
be made for voluntary payments for the support
of any dependent (as defined in section 152) of
the taxpayer;
‘‘(E) a reasonable allowance shall be made
for payments on unsecured debt of the taxpayer
to the extent such debt is attributable to Fed-
eral, State, or local income taxes, medical care
expenses, burial expenses, or other basic living
expenses; and
‘‘(F) consideration shall be given to the
level of the taxpayer’s education and financial
and business experience relative the complexity
of the transaction giving rise to the liability.’’
(b) LIMITATIONS.—Subsection (c) of section 7122 is
amended by adding at the end the following new para-
graph:
‘‘(4) LIMITATIONS
ON
CERTAIN
FACTORS
IN
CONSIDERING OFFER-IN-COMPROMISE.—
‘‘(A) PERIOD
FOR
CERTAIN
CONSIDER-
ATIONS.—Subparagraph (E) of paragraph (3)
shall apply only during the 3-year period begin-
ning on whichever of the following is the ear-
liest:
‘‘(i) The date of the receipt by the
taxpayer of the notice of the decision of
the Internal Revenue Service Office of Ap-
peals.
‘‘(ii) The date of the notice of defi-
ciency.
‘‘(iii) The date on which the first let-
ter of proposed deficiency which allows the
taxpayer an opportunity for administrative
review in the Internal Revenue Service Of-
fice of Appeals is sent.
‘‘(B) DOLLAR LIMITATIONS.—
‘‘(i) ALLOWANCES.—The allowances
under subparagraphs (D) and (E) shall
not exceed the dollar amount in effect
under section 2503(b).
‘‘(ii) CONSIDERATION OF EDUCATION
AND
FINANCIAL
SOPHISTICATION.—Sub-
paragraph (F) of paragraph (3) shall apply
only if the amount of the liability does not
exceed the dollar amount in effect under
section 2503(b).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to proposed offers-in-compromise
submitted after the date of the enactment of this Act.
SEC. 203. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) EXTENSION OF TIME FOR RETURN OF PROPERTY
SUBJECT TO LEVY.—Subsection (b) of section 6343 (re-
lating to return of property) is amended by striking ‘‘9
months’’ and inserting ‘‘2 years’’.
(b) PERIOD OF LIMITATION ON SUITS.—Subsection
(c) of section 6532 (relating to suits by persons other than
taxpayers) is amended—
(1) in paragraph (1) by striking ‘‘9 months’’
and inserting ‘‘2 years’’, and
(2) in paragraph (2) by striking ‘‘9-month’’ and
inserting ‘‘2-year’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to—
(1) levies made after the date of the enactment
of this Act, and
(2) levies made on or before such date if the 9-
month period has not expired under section 6343(b)
of the Internal Revenue Code of 1986 (without re-
gard to this section) as of such date.
SEC. 204. SEVEN-DAY THRESHOLD ON TOLLING OF STAT-
UTE OF LIMITATIONS DURING TAX REVIEW.
(a) IN GENERAL.—Section 7811(d)(1) (relating to
suspension of running of period of limitation) is amended
by inserting after ‘‘application,’’ the following: ‘‘but only
if the date of such decision is at least 7 days after the
date of the taxpayer’s application’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to applications filed after the date
of the enactment of this Act.
SEC. 205. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary’s del-
egate, shall conduct a study of the practices of the Inter-
nal Revenue Service concerning liens and levies. The study
shall examine—
(1) the declining use of liens and levies by the
Internal Revenue Service, and
(2) the practicality of recording liens and lev-
ying against property in cases in which the cost of
such actions exceeds the amount to be realized from
such property.
Not later than 1 year after the date of the enactment of
this Act, the Secretary shall submit such study to the
Committee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the Senate.
TITLE III—EFFICIENCY OF TAX
ADMINISTRATION
SEC. 301. REVISIONS RELATING TO TERMINATION OF EM-
PLOYMENT OF INTERNAL REVENUE SERVICE
EMPLOYEES FOR MISCONDUCT.
(a) IN GENERAL.—Subchapter A of chapter 80 (re-
lating to application of internal revenue laws) is amended
by inserting after section 7804 the following new section:
‘‘SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MIS-
CONDUCT.
‘‘(a) IN GENERAL.—Subject to subsection (c), the
Commissioner of Internal Revenue shall terminate the em-
ployment of any employee of the Internal Revenue Service
if there is a final administrative or judicial determination
that such employee committed any act or omission de-
scribed under subsection (b) in the performance of the em-
ployee’s official duties or where a nexus to the employee’s
position exists.
‘‘(b) ACTS OR OMISSIONS.—The acts or omissions re-
ferred to under subsection (a) are—
‘‘(1) willful failure to obtain the required ap-
proval signatures on documents authorizing the sei-
zure of a taxpayer’s home, personal belongings, or
business assets;
‘‘(2) willfully providing a false statement under
oath with respect to a material matter involving a
taxpayer or taxpayer representative;
‘‘(3) with respect to a taxpayer or taxpayer rep-
resentative, the willful violation of—
‘‘(A) any right under the Constitution of
the United States;
‘‘(B) any civil right established under—
‘‘(i) title VI or VII of the Civil Rights
Act of 1964;
‘‘(ii) title IX of the Education Amend-
ments of 1972;
‘‘(iii) the Age Discrimination in Em-
ployment Act of 1967;
‘‘(iv) the Age Discrimination Act of
1975;
‘‘(v) section 501 or 504 of the Reha-
bilitation Act of 1973; or
‘‘(vi) title I of the Americans with
Disabilities Act of 1990; or
‘‘(C) the Internal Revenue Service policy
on unauthorized inspection of returns or return
information;
‘‘(4) willfully falsifying or destroying documents
to conceal mistakes made by any employee with re-
spect to a matter involving a taxpayer or taxpayer
representative;
‘‘(5) assault or battery on a taxpayer or tax-
payer representative, but only if there is a criminal
conviction, or a final adverse judgment by a court in
a civil case, with respect to the assault or battery;
‘‘(6) willful violations of this title, Department
of the Treasury regulations, or policies of the Inter-
nal Revenue Service (including the Internal Revenue
Manual) for the purpose of retaliating against, or
harassing, a taxpayer or taxpayer representative;
‘‘(7) willful misuse of the provisions of section
6103 for the purpose of concealing information from
a congressional inquiry;
‘‘(8) willful failure to file any return of tax re-
quired under this title on or before the date pre-
scribed therefor (including any extensions) when a
tax is due and owing, unless such failure is due to
reasonable cause and not due to willful neglect;
‘‘(9) willful understatement of Federal tax li-
ability, unless such understatement is due to reason-
able cause and not due to willful neglect; and
‘‘(10) threatening to audit a taxpayer, or to
take other action under this title, for the purpose of
extracting personal gain or benefit.
‘‘(c) DETERMINATIONS OF COMMISSIONER.—
‘‘(1) IN
GENERAL.—The Commissioner may
take a personnel action other than termination for
an act or omission under subsection (a).
‘‘(2) DISCRETION.—The exercise of authority
under paragraph (1) shall be at the sole discretion
of the Commissioner and may not be delegated to
any other officer. The Commissioner, in his sole dis-
cretion, may establish a procedure to determine if an
individual should be referred to the Commissioner
for a determination by the Commissioner under
paragraph (1).
‘‘(3) NO APPEAL.—Notwithstanding any other
provision of law, any determination of the Commis-
sioner under this subsection may not be reviewed in
any administrative or judicial proceeding. A finding
that an act or omission described in subsection (b)
occurred may be reviewed.
‘‘(d) DEFINITION.—For the purposes of the provi-
sions described in clauses (i), (ii), and (iv) of subsection
(b)(3)(B), references to a program or activity regarding
Federal financial assistance or an education program or
activity receiving Federal financial assistance shall include
any program or activity conducted by the Internal Rev-
enue Service for a taxpayer.
‘‘(e) ANNUAL REPORT.—The Commissioner shall
submit to Congress annually a report on terminations of
employment under this section.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 80 is amended by inserting after the item re-
lating to section 7804 the following new item:
‘‘Sec. 7804A. Termination of employment for misconduct.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 302. CONFIRMATION OF AUTHORITY OF TAX COURT
TO 
APPLY 
DOCTRINE 
OF 
EQUITABLE
RECOUPMENT.
(a) CONFIRMATION OF AUTHORITY OF TAX COURT
TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.—
Subsection (b) of section 6214 (relating to jurisdiction
over other years and quarters) is amended by adding at
the end the following new sentence: ‘‘Notwithstanding the
preceding sentence, the Tax Court may apply the doctrine
of equitable recoupment to the same extent that it is avail-
able in civil tax cases before the district courts of the
United States and the United States Court of Federal
Claims.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to any action or proceeding in the
Tax Court with respect to which a decision has not become
final (as determined under section 7481 of the Internal
Revenue Code of 1986) as of the date of the enactment
of this Act.
SEC. 303. JURISDICTION OF TAX COURT OVER COLLECTION
DUE PROCESS CASES.
(a) IN GENERAL.—Section 6330(d)(1) (relating to
judicial review of determination) is amended to read as
follows:
‘‘(1) JUDICIAL REVIEW OF DETERMINATION.—
The person may, within 30 days of a determination
under this section, appeal such determination to the
Tax Court (and the Tax Court shall have jurisdic-
tion with respect to such matter).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to appeals filed after the date
of the enactment of this Act.
SEC. 304. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS
IN COMPROMISE.
(a) IN GENERAL.—Section 7122(b) (relating to
record) is amended by striking ‘‘Whenever a compromise’’
and all that follows through ‘‘his delegate’’ and inserting
‘‘If the Secretary determines that an opinion of the Gen-
eral Counsel for the Department of the Treasury, or the
Counsel’s delegate, is required with respect to a com-
promise, there shall be placed on file in the office of the
Secretary such opinion’’.
(b) CONFORMING AMENDMENTS.—Section 7122(b) is
amended by striking the second and third sentences.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to offers-in-compromise submitted
or pending on or after the date of the enactment of this
Act.
SEC. 305. STUDY OF TAXPAYER NOTIFICATION ALTER-
NATIVES.
The Secretary of the Treasury, or the Secretary’s del-
egate, shall conduct a study of alternative methods of noti-
fying taxpayers of determinations and other actions of the
Secretary. The study shall examine the advantages and
disadvantages of—
(1) the use of certificates of mailing,
(2) modifications to certified or registered mail
requirements which eliminate return receipt re-
quested, and
(3) modifications with respect to dual notices to
taxpayers filing a joint return and residing at the
same address.
Not later than 1 year after the date of the enactment of
this Act, the Secretary shall submit such study to the
Committee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the Senate.
TITLE IV—CONFIDENTIALITY
AND DISCLOSURE
SEC. 401. COLLECTION ACTIVITIES WITH RESPECT TO
JOINT RETURN DISCLOSABLE TO EITHER
SPOUSE BASED ON ORAL REQUEST.
(a) IN GENERAL.—Paragraph (8) of section 6103(e)
(relating to disclosure of collection activities with respect
to joint return) is amended by striking ‘‘in writing’’ the
first place it appears.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to requests made after the date
of the enactment of this Act.
SEC. 402. TAXPAYER REPRESENTATIVES NOT SUBJECT TO
EXAMINATION ON SOLE BASIS OF REPRESEN-
TATION OF TAXPAYERS.
(a) IN GENERAL.—Subsection (h) of section 6103
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amend-
ed by adding at the end the following new paragraph:
‘‘(7) TAXPAYER REPRESENTATIVES.—Notwith-
standing paragraph (1), the return of the represent-
ative of a taxpayer whose return is being examined
by an officer or employee of the Department of the
Treasury shall not be open to inspection by such of-
ficer or employee on the sole basis of the representa-
tive’s relationship to the taxpayer unless a super-
visor of such officer or employee has approved the
inspection of the return of such representative on a
basis other than by reason of such relationship.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 403. DISCLOSURE IN JUDICIAL OR ADMINISTRATIVE
TAX PROCEEDINGS OF RETURN AND RETURN
INFORMATION OF PERSONS WHO ARE NOT
PARTY TO SUCH PROCEEDINGS.
(a) IN GENERAL.—Paragraph (4) of section 6103(h)
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amend-
ed by adding at the end the following new subparagraph:
‘‘(B) DISCLOSURE IN JUDICIAL OR ADMIN-
ISTRATIVE TAX PROCEEDINGS OF RETURN AND
RETURN INFORMATION OF PERSONS NOT PARTY
TO SUCH PROCEEDINGS.—
‘‘(i) NOTICE.—Return or return infor-
mation of any person who is not a party to
a judicial or administrative proceeding de-
scribed in paragraph (4) shall not be dis-
closed under clause (ii) or (iii) of subpara-
graph (A) until after the Secretary makes
a reasonable effort to give notice to such
person and an opportunity for such person
to request the deletion of matter from such
return or return information, including any
of the items referred to in paragraphs (1)
through (7) of section 6110(c). Such notice
shall include a statement of the issue or
issues the resolution of which is the reason
such return or return information is
sought. In the case of S corporations, part-
nerships, estates, and trusts, such notice
shall be made at the entity level.
‘‘(ii) DISCLOSURE LIMITED TO PERTI-
NENT PORTION.—The only portion of a re-
turn or return information described in
clause (i) which may be disclosed under
subparagraph (A) is that portion of such
return or return information that directly
relates to the resolution of an issue in such
proceeding.
‘‘(iii) EXCEPTIONS.—Clause (i) shall
not apply to—
‘‘(I) any ex parte proceeding for
obtaining a search warrant, order for
entry on premises or safe deposit
boxes, or similar ex parte proceeding,
‘‘(II) disclosure of third party re-
turn information by indictment or
criminal information, or
‘‘(III) if the Secretary determines
that the application of such clause
would seriously impair a criminal tax
investigation.’’.
(b) CONFORMING AMENDMENTS.—Paragraph (4) of
section 6103(h) is amended by—
(1) by striking ‘‘PROCEEDINGS.—A return’’ and
inserting ‘‘PROCEEDINGS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a return’’;
(2) by redesignating subparagraphs (A), (B),
(C), and (D) clauses (i), (ii), (iii), and (iv), respec-
tively; and
(3) in the matter following clause (iv) (as so re-
designated), by striking ‘‘subparagraph (A), (B), or
(C)’’ and inserting ‘‘clause (i), (ii), or (iii)’’ and by
moving such matter 2 ems to the right.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to proceedings commenced after
the date of the enactment of this Act.
SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER
IDENTIFICATION 
INFORMATION 
WITH 
RE-
SPECT TO DISCLOSURE OF ACCEPTED OF-
FERS-IN-COMPROMISE.
(a) IN GENERAL.—Paragraph (1) of section 6103(k)
(relating to disclosure of certain returns and return infor-
mation for tax administrative purposes) is amended by in-
serting ‘‘(other than the tax payer’s address and TIN)’’
after ‘‘Return information’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to disclosures made after the date
of the enactment of this Act.
SEC. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDEN-
TIALITY SAFEGUARDS.
(a) IN GENERAL.—Section 6103(p) (relating to State
law requirements) is amended by adding at the end the
following new paragraph:
‘‘(9) DISCLOSURE TO CONTRACTORS.—Notwith-
standing any other provision of this section, no re-
turn or return information shall be disclosed by any
officer or employee of any Federal agency or State
to any contractor of such agency or State unless
such agency or State—
‘‘(A) has requirements in effect which re-
quire each contractor of such agency or State
which would have access to returns or return
information to provide safeguards (within the
meaning of paragraph (4)) to protect the con-
fidentiality of such returns or return informa-
tion,
‘‘(B) agrees to conduct an annual, on-site
review (mid-point review in the case of con-
tracts of less than 1 year in duration) of each
contractor to determine compliance with such
requirements,
‘‘(C) submits the findings of the most re-
cent review conducted under subparagraph (B)
to the Secretary as part of the report required
by paragraph (4)(E), and
‘‘(D) certifies to the Secretary for the most
recent annual period that all contractors are in
compliance with all such requirements.
The certification required by subparagraph (D) shall
include the name and address of each contractor, a
description of the contract of the contractor with the
Federal agency or State, and the duration of such
contract.’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B)
of section 6103(p)(8) is amended by inserting ‘‘or para-
graph (9)’’ after ‘‘subparagraph (A)’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to disclosures made after De-
cember 31, 2002.
(2) CERTIFICATIONS.—The first certification
under section 6103(p)(9)(D) of the Internal Revenue
Code of 1986, as added by subsection (a), shall be
made with respect to calendar year 2003.
SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND
CONSENTS TO DISCLOSURE.
(a) IN GENERAL.—Subsection (c) of section 6103
(relating to disclosure of returns and return information
to designee of taxpayer) is amended by adding at the end
the following new paragraphs:
‘‘(2) REQUIREMENTS
FOR
VALID
REQUESTS
AND CONSENTS.—A request for or consent to disclo-
sure under paragraph (1) shall only be valid for pur-
poses of this section or sections 7213, 7213A, or
7431 if—
‘‘(A) at the time of execution, such request
or consent designates a recipient of such disclo-
sure and is dated, and
‘‘(B) at the time such request or consent
is submitted to the Secretary, the submitter of
such request or consent certifies, under penalty
of perjury, that such request or consent com-
plied with subparagraph (A).
‘‘(3) RESTRICTIONS
ON
PERSONS
OBTAINING
INFORMATION.—Any person shall, as a condition for
receiving return or return information under para-
graph (1)—
‘‘(A) ensure that such return and return
information is kept confidential,
‘‘(B) use such return and return informa-
tion only for the purpose for which it was re-
quested, and
‘‘(C) not disclose such return and return
information except to accomplish the purpose
for which it was requested, unless a separate
consent from the taxpayer is obtained.
‘‘(4) REQUIREMENTS
FOR
FORM
PRESCRIBED
BY SECRETARY.—For purposes of this subsection,
the Secretary shall prescribe a form for requests and
consents which shall—
‘‘(A) contain a warning, prominently dis-
played, informing the taxpayer that the form
should not be signed unless it is completed,
‘‘(B) state that if the taxpayer believes
there is an attempt to coerce him to sign an in-
complete or blank form, the taxpayer should re-
port the matter to the Treasury Inspector Gen-
eral for Tax Administration, and
‘‘(C) contain the address and telephone
number of the Treasury Inspector General for
Tax Administration.’’.
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Treasury Inspector
General for Tax Administration shall submit a report to
the Congress on compliance with the designation and cer-
tification requirements applicable to requests for or con-
sent to disclosure of returns and return information under
section 6103(c) of the Internal Revenue Code of 1986, as
amended by subsection (a). Such report shall—
(1) evaluate (on the basis of random sampling)
whether—
(A) the amendments made by subsection
(a) are achieving the purposes of this section;
(B) requesters and submitters for such dis-
closure are continuing to evade the purposes of
this section and, if so, how; and
(C) the sanctions for violations of such re-
quirements are adequate; and
(2) include such recommendations that the
Treasury Inspector General for Tax Administration
considers necessary or appropriate to better achieve
the purposes of this section.
(c) CONFORMING AMENDMENT.—Section 6103(c) is
amended by striking ‘‘TAXPAYER.—The Secretary’’ and
inserting ‘‘TAXPAYER.—
‘‘(1) IN GENERAL.—The Secretary’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests and consents made
after 3 months after the date of the enactment of this
Act.
SEC. 407. NOTICE TO TAXPAYER CONCERNING ADMINIS-
TRATIVE DETERMINATION OF BROWSING; AN-
NUAL REPORT.
(a) NOTICE TO TAXPAYER.—Subsection (e) of section
7431 (relating to notification of unlawful inspection and
disclosure) is amended by adding at the end the following:
‘‘The Secretary shall also notify such taxpayer if the
Treasury Inspector General for Tax Administration deter-
mines that such taxpayer’s return or return information
was inspected or disclosed in violation of any of the provi-
sions specified in paragraph (1), (2), or (3).’’.
(b) REPORTS.—Subsection (p) of section 6103 (relat-
ing to procedure and recordkeeping), as amended by sec-
tion 405, is further amended by adding at the end the
following new paragraph:
‘‘(10) REPORT ON UNAUTHORIZED DISCLOSURE
AND INSPECTION.—As part of the report required by
paragraph (3)(C) for each calendar year, the Sec-
retary shall furnish information regarding the unau-
thorized disclosure and inspection of returns and re-
turn information, including the number, status, and
results of—
‘‘(A) administrative investigations,
‘‘(B) civil lawsuits brought under section
7431 (including the amounts for which such
lawsuits were settled and the amounts of dam-
ages awarded), and
‘‘(C) criminal prosecutions.’’.
(c) EFFECTIVE DATE.—
(1) NOTICE.—The amendment made by sub-
section (a) shall apply to determinations made after
the date of the enactment of this Act.
(2) REPORTS.—The amendment made by sub-
section (b) shall apply to calendar years ending after
the date of the enactment of this Act.
SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIR-
CUMSTANCES.
(a) IN GENERAL.—Section 6103(i)(3)(B) (relating to
danger of death or physical injury) is amended by striking
‘‘or State’’ and inserting ‘‘, State, or local’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX
REFUND PURPOSES.
(a) IN GENERAL.—Paragraph (1) of section 6103(m)
(relating to disclosure of taxpayer identity information) is
amended by striking ‘‘and other media’’ and by inserting
‘‘, other media, and through any other means of mass
communication,’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
TITLE V—MISCELLANEOUS
SEC. 501. CLARIFICATION OF DEFINITION OF CHURCH TAX
INQUIRY.
Subsection (i) of section 7611 (relating to section not
to apply to criminal investigations, etc.) is amended by
striking ‘‘or’’ at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ‘‘, or’’,
and by inserting after paragraph (5) the following:
‘‘(6) information provided by the Secretary re-
lated to the standards for exemption from tax under
this title and the requirements under this title relat-
ing to unrelated business taxable income.’’.
SEC. 502. EXPANSION OF DECLARATORY JUDGMENT REM-
EDY TO TAX-EXEMPT ORGANIZATIONS.
(a) IN GENERAL.—Paragraph (1) of section 7428(a)
(relating to creation of remedy) is amended—
(1) in subparagraph (B) by inserting after
‘‘509(a))’’ the following: ‘‘or as a private operating
foundation (as defined in section 4942(j)(3))’’; and
(2) by amending subparagraph (C) to read as
follows:
‘‘(C) with respect to the initial qualifica-
tion or continuing qualification of an organiza-
tion as an organization described in section
501(c) (other than paragraph (3)) which is ex-
empt from tax under section 501(a), or’’.
(b) COURT JURISDICTION.—Subsection (a) of section
7428 is amended in the material following paragraph (2)
by striking ‘‘United States Tax Court, the United States
Claims Court, or the district court of the United States
for the District of Columbia’’ and inserting the following:
‘‘United States Tax Court (in the case of any such deter-
mination or failure) or the United States Claims Court
or the district court of the United States for the District
of Columbia (in the case of a determination or failure with
respect to an issue referred to in subparagraph (A) or (B)
of paragraph (1)),’’.
(c) FAILURE OF SERVICE TO ACT ON DETERMINA-
TIONS TREATED AS EXHAUSTION OF REMEDIES.—The
second sentence of paragraph (2) of section 7428(b) (re-
lating to exhaustion of administrative remedies) is amend-
ed to read as follows: ‘‘An organization which requests the
determination of an issue referred to in subsection (a)(1)
and which has taken, in a timely manner, all reasonable
steps to secure such determination, shall be deemed to
have exhausted its administrative remedies with respect
to—
‘‘(A) a failure by the Secretary to make a
determination with respect to such issue, at the
expiration of 270 days after the date on which
the request for such determination was made,
and
‘‘(B) a failure by any office of the Internal
Revenue Service (other than the office which is
responsible for initial determinations with re-
spect to such issue) to make a determination
with respect to such issue, at the expiration of
450 days after the date on which such request
was made.’’.
(d) EFFECTIVE DATES.—
(1) DECLARATORY
JUDGMENT.—The amend-
ments made by subsections (a) and (b) shall apply
to pleadings filed with respect to determinations (or
requests for determinations) made after the date of
the enactment of this Act.
(2) FAILURE
OF
SERVICE
TO
ACT.—The
amendments made by subsection (c) shall apply to
applications received in the national office of the In-
ternal Revenue Service after the date of the enact-
ment of this Act.
SEC. 503. EMPLOYEE MISCONDUCT REPORT TO INCLUDE
SUMMARY OF COMPLAINTS BY CATEGORY.
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section
7803(d)(2)(A) is amended by inserting before the semi-
colon at the end the following: ‘‘, including a summary
(by category) of the 10 most common complaints made
and the number of such common complaints’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to reporting periods
ending after the date of the enactment of this Act.
SEC. 504. ANNUAL REPORT ON AWARDS OF COSTS AND
CERTAIN 
FEES 
IN 
ADMINISTRATIVE 
AND
COURT PROCEEDINGS.
Not later than 3 months after the close of each Fed-
eral fiscal year after fiscal year 2001, the Treasury In-
spector General for Tax Administration shall submit a re-
port to Congress which specifies for such year—
(1) the number of payments made by the
United States pursuant to section 7430 of the Inter-
nal Revenue Code of 1986 (relating to awarding of
costs and certain fees);
(2) the amount of each such payment;
(3) an analysis of any administrative issue giv-
ing rise to such payments; and
(4) changes (if any) which will be implemented
as a result of such analysis and other changes (if
any) recommended by the Treasury Inspector Gen-
eral for Tax Administration as a result of such anal-
ysis.
SEC. 505. ANNUAL REPORT ON ABATEMENT OF PENALTIES.
Not later than 6 months after the close of each Fed-
eral fiscal year after fiscal year 2001, the Treasury In-
spector General for Tax Administration shall submit a re-
port to Congress on abatements of penalties under the In-
ternal Revenue Code of 1986 during such year, including
information on the reasons and criteria for such abate-
ments.
SEC. 506. BETTER MEANS OF COMMUNICATING WITH TAX-
PAYERS.
Not later than 18 months after the date of the enact-
ment of this Act, the Treasury Inspector General for Tax
Administration shall submit a report to Congress evalu-
ating whether technological advances, such as e-mail and
facsimile transmission, permit the use of alternative
means for the Internal Revenue Service to communicate
with taxpayers.
SEC. 507. EXPLANATION OF STATUTE OF LIMITATIONS AND
CONSEQUENCES OF FAILURE TO FILE.
The Secretary of the Treasury or the Secretary’s del-
egate shall, as soon as practicable but not later than 180
days after the date of the enactment of this Act, revise
the statement required by section 6227 of the Omnibus
Taxpayer Bill of Rights (Internal Revenue Service Publi-
cation No. 1), and any instructions booklet accompanying
a general income tax return form for taxable years begin-
ning in 2000 and later (including forms 1040, 1040A,
1040EZ, and any similar or successor forms relating
thereto), to provide for an explanation of—
(1) the limitations imposed by section 6511 of
the Internal Revenue Code of 1986 on credits and
refunds; and
(2) the consequences under such section 6511
of the failure to file a return of tax.
SEC. 508. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) IN GENERAL.—Clause (i) of section 202(c)(4)(B)
of the Government Securities Act Amendments of 1993
(31 U.S.C. 3121 note) is amended by inserting before the
semicolon ‘‘(or, if earlier, at the time the Secretary re-
leases the minutes of the meeting in accordance with para-
graph (2))’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to meetings held after the date
of the enactment of this Act.
SEC. 509. ENROLLED AGENTS.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the
following new section:
‘‘SEC. 7527. ENROLLED AGENTS.
‘‘(a) IN GENERAL.—The Secretary may prescribe
such regulations as may be necessary to regulate the con-
duct of enrolled agents in regards to their practice before
the Internal Revenue Service.
‘‘(b) USE OF CREDENTIALS.—Any enrolled agents
properly licensed to practice as required under rules pro-
mulgated under section (a) herein shall be allowed to use
the credentials or designation as ‘enrolled agent’, ‘EA’, or
‘E.A.’.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 7525. Enrolled agents.’’
(c) PRIOR REGULATIONS.—Nothing in the amend-
ments made by this section shall be construed to have any
effect on part 10 of title 31, Code of Federal Regulations,
or any other Federal rule or regulation issued before the
date of the enactment of this Act.
TITLE VI—AUTHORIZATION OF
APPROPRIATION
SEC. 601. LOW-INCOME TAXPAYER CLINICS.
(a) LIMITATION ON AMOUNT OF GRANTS.—Para-
graph (1) of section 7526(c) (relating to special rules and
limitations) is amended by striking ‘‘$6,000,000 per year’’
and inserting ‘‘$9,000,000 for 2002, $12,000,000 for
2003, and $15,000,000 for each year thereafter’’.
(b) LIMITATION ON USE OF CLINICS FOR TAX RE-
TURN PREPARATION.—Section 7526(b)(1) is amended by
adding at the end the following new subparagraph:
‘‘(C) LIMITATION REGARDING TAX RETURN
PREPARATION.—A clinic meets the require-
ments of subparagraph (A)(ii)(II) if the pro-
grams operated by the clinic do not include rou-
tine tax return preparation.’’.
(c) PROMOTION
OF CLINICS.—Section 7526(c) is
amended by adding at the end the following new para-
graph:
‘‘(7) PROMOTION OF CLINICS.—The Secretary
is authorized to promote the benefits of and encour-
age the use of low-income taxpayer clinics through
the use of mass communications, referrals, and other
means.’’.
Æ