I
106TH CONGRESS
1ST SESSION
H. R. 753
To amend the Internal Revenue Code of 1986 to provide that interest on
the tax portion of an underpayment shall be compounded annually,
to provide that the amount and timing of payments under an installment
agreement may not be modified without the taxpayer’s consent, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 11, 1999
Mr. TOWNS 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
that interest on the tax portion of an underpayment
shall be compounded annually, to provide that the
amount and timing of payments under an installment
agreement may not be modified without the taxpayer’s
consent, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Fairness in IRS Debt
Payment Act of 1999’’.
SEC. 2. INTEREST ON TAX PORTION OF UNDERPAYMENT TO
BE COMPOUNDED ANNUALLY.
(a) IN GENERAL.—Section 6622 of the Internal Rev-
enue Code of 1986 (relating to interest compounded daily)
is amended by adding at the end the following new sub-
section:
‘‘(c) INTEREST
ON
TAX
PORTION
OF
UNDER-
PAYMENT TO BE COMPOUNDED ANNUALLY.—
‘‘(1) IN GENERAL.—In the case of interest or
other amount referred to in subsection (a) which is
required to be paid by the taxpayer, such interest
and such amount shall be compounded annually.
The preceding sentence shall only apply to the ex-
tent that the amount on which such interest and
amount are imposed is tax.
‘‘(2) INTEREST AND PENALTIES NOT TREATED
AS
TAX.—Notwithstanding sections 6601(e) and
6665, interest and additions to the tax, additional
amounts, and penalties provided by chapter 68 shall
not be treated as tax for purposes of paragraph (1).
‘‘(3) ALLOCATION
OF
PAYMENTS.—For pur-
poses of paragraph (1), payments on any under-
payment shall be allocated first to amounts which
are not treated as tax under paragraph (2) and then
to amounts of tax.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to interest for periods after De-
cember 31, 1999.
SEC. 3. ALLOCATION OF PAYMENTS TO UNDERPAYMENTS.
(a) IN GENERAL.—Chapter 77 of the Internal Reve-
nue Code of 1986 is amended by adding at the end the
following new section:
‘‘SEC. 7527. ALLOCATION OF PAYMENTS TO UNDERPAY-
MENTS.
‘‘In the case of a taxpayer having underpayments for
more than 1 taxable period, payments by the taxpayer
against those underpayments shall be allocated by the Sec-
retary of the Treasury equally among such underpayments
or in such other manner as may be directed by the tax-
payer.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 77 of such Code is amended by adding at the
end the following new item:
‘‘Sec. 7527. Allocation of payments to underpayments.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments made after December
31, 1999.
SEC. 4. PROHIBITION ON MODIFICATION OF INSTALLMENT
AGREEMENTS.
(a) IN GENERAL.—Section 6159 of the Internal Rev-
enue Code of 1986 (relating to agreements for payment
of tax liability in installments) is amended by redesignat-
ing subsections (d) and (e) as subsection (e) and (f), re-
spectively, and by inserting after subsection (c) the follow-
ing new subsection:
‘‘(d) PROHIBITION OF CERTAIN MODIFICATIONS OF
INSTALLMENT AGREEMENTS.—If the Secretary enters
into an installment agreement with a taxpayer under this
section (other than under subsection (c))—
‘‘(1) such agreement shall serve as a closing
agreement with respect to the amount of the liability
specified in the installment agreement for the peri-
ods to which such liability relates, and
‘‘(2) except as provided in subsection (b)(2),
such installment agreement may not be altered,
modified, or terminated other than by reason of a
failure to make a timely payment of any installment
under such agreement.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 6159 of such Code
is amended by striking paragraphs (3) and (4) and
by redesignating paragraph (5) as paragraph (3).
(2) Paragraph (3) of section 6159(b) of such
Code (as redesignating by paragraph (1)) is amend-
ed by striking ‘‘, (3), or (4)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to agreements entered into after
December 31, 1999.
SEC. 5. LIMITATION ON AGGREGATE INTEREST AND PEN-
ALTIES.
(a) IN GENERAL.—Section 6404 of the Internal Rev-
enue Code of 1986 (relating to abatements) is amended
by adding at the end the following new subsection:
‘‘(j) ABATEMENT
OF EXCESSIVE INTEREST
AND
PENALTIES.—
‘‘(1) IN GENERAL.—The Secretary shall abate
the excessive portion of interest and penalties.
‘‘(2) EXCESSIVE PORTION.—The excessive por-
tion of interest and penalties is the amount by which
the aggregate interest, penalties, and additions to
the tax with respect to any tax exceeds the amount
of such tax.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 6. GUIDELINES AND CRITERIA FOR PENALTY ABATE-
MENT; REQUIRED EXPLANATION OF REFUSAL
TO ABATE PENALTIES.
(a) IN GENERAL.—Section 6404 of the Internal Rev-
enue Code of 1986 (relating to abatements) is amended
by adding at the end the following new subsection:
‘‘(k) GUIDELINES
AND CRITERIA
FOR PENALTY
ABATEMENT; REQUIRED EXPLANATION OF REFUSAL TO
ABATE PENALTIES.—
‘‘(1) GUIDELINES
AND
CRITERIA.—The Sec-
retary shall prescribe guidelines and criteria which
will be used by the Secretary in determining whether
to abate any penalty or addition to the tax.
‘‘(2) EXPLANATIONS.—If—
‘‘(A) a taxpayer requests (in such form
and manner as the Secretary prescribes) that
the Secretary abate any portion of a penalty or
an addition to the tax, and
‘‘(B) the Secretary does not grant such re-
quest in full,
the Secretary shall provide a written explanation to
the taxpayer of the reason for not granting such re-
quest.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
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