Restoring the IRS Act
Bill: S.1788 | Sponsor: Sen. Warren, Elizabeth (D-MA)
Policy area: Taxation

Summary:
Restoring the IRS Act
This bill provides additional appropriations after FY2021 for the expenses of the Internal Revenue Service (IRS) for taxpayer services, enforcement activities, and business systems modernization.
The bill establishes new reporting requirements for certain banks or other financial institutions and increases enforcement penalties for accuracy-related underpayments of tax up to a maximum of 40% of the underpayment for taxpayers with taxable incomes greater than $5 million.
The IRS must report to Congress annually on plans to shift more of its auditing and enforcement assets toward high-income tax filers. The report must also include a tax gap analysis and a comprehensive analysis and description of whether there are any racial disparities in its enforcement activities or audits.
The bill also applies false claims rules to claims, records, or statements made by taxpayers whose gross income equals or exceeds $10 million for the taxable year, and the damages sustained by the government due to such false claims exceed $1 million.

To provide appropriations for the Internal Revenue Service to overhaul 
     technology and strengthen enforcement, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Restoring the IRS Act''.

SEC. 2. SENSE OF CONGRESS.

    It is the sense of Congress that--
            (1) the Internal Revenue Service should be given resources 
        to increase audits and enforcement of tax compliance of high-
        income, high-wealth individuals and corporations, with an 
        emphasis on the auditing and enforcement of tax compliance by 
        individuals with gross income of not less than $1,000,000 and 
        of large corporations;
            (2) priorities for actions and resources to improve 
        compliance with tax laws should be guided by the relative 
        revenue loss from non-compliance;
            (3) the Internal Revenue Service should ensure there are 
        not racial disparities in its enforcement activities;
            (4) it should be the goal of the Internal Revenue service 
        that, by the tenth tax year after the date of the enactment of 
        this Act, the net tax gap should be reduced by at least one-
        third, as compared with the fraction estimated in the most 
        recently Internal Revenue Service study prior to such date of 
        enactment; and
            (5) it should be the goal of the Internal Revenue Service 
        to provide quality, timely, and accurate assistance to all 
        taxpayers interacting with the Internal Revenue Service.

SEC. 3. INTERNAL REVENUE SERVICE APPROPRIATIONS.

    (a) In General.--There is hereby appropriated to each fiscal year 
ending after fiscal year 2021, out of any moneys in the Treasury not 
otherwise appropriated, $31,500,000,000, for necessary expenses for 
activities of the Internal Revenue Service related to the following 
activities:
            (1) To provide taxpayer services, including pre-filing 
        assistance and education, filing and account services, taxpayer 
        advocacy services, other services as authorized by 5 U.S.C. 
        3109, at such rates as may be determined by the Commissioner, 
        and other related expenses, including the Tax Counseling for 
        the Elderly Program, low-income taxpayer clinic grants, and the 
        Taxpayer Advocate Service.
            (2) Tax enforcement activities to determine and collect 
        owed taxes, to provide legal and litigation support, to conduct 
        criminal investigations, to enforce criminal statutes related 
        to violations of internal revenue laws and other financial 
        crimes, to purchase and hire passenger motor vehicles (31 
        U.S.C. 1343(b)), to increase audits of high-income taxpayers, 
        and to provide other services as authorized by 5 U.S.C. 3109, 
        at such rates as may be determined by the Commissioner.
            (3) To support taxpayer services and enforcement programs 
        and activities, including rent payments; facilities services; 
        printing; postage; physical security; headquarters and other 
        IRS-wide administration activities; research and statistics of 
        income; telecommunications; information technology development 
        and support, enhancement, operations, maintenance, and 
        security; the hire of passenger motor vehicles (31 U.S.C. 
        1343(b)); the operations of the Internal Revenue Service 
        Oversight Board; and other services as authorized by 5 U.S.C. 
        3109, at such rates as may be determined by the Commissioner.
            (4) For the business systems modernization program for the 
        capital asset acquisition of information technology systems, 
        including management and related contractual costs of said 
        acquisitions, including related Internal Revenue Service labor 
        costs, and contractual costs associated with operations 
        authorized by 5 U.S.C. 3109.
    (b) Inflation Adjustment.--
            (1) In general.--In the case of any fiscal year beginning 
        after fiscal year 2022, the dollar amount in subsection (a) 
        shall be increased by an amount equal to--
                    (A) such dollar amount, multiplied by
                    (B) the cost-of-living adjustment determined under 
                section 1(f)(3) of the Internal Revenue Code of 1986 
                for the calendar year in which such fiscal year begins 
                by substituting ``calendar year 2021'' for ``calendar 
                year 2016'' in subparagraph (A)(ii) thereof.
            (2) Rounding.--Any increase determined under paragraph (1) 
        shall be rounded to the nearest multiple of $100.
    (c) Limitation.--Of the amounts appropriated under subsection (a)--
            (1) not less than 50 percent of funds made available for 
        any fiscal year shall be used for purposes described in 
        subsection (a)(2) (or for activities described in subsection 
        (a)(3) that are related to activities described in subsection 
        (a)(2); and
            (2) not less than 15 percent of funds made available for 
        any fiscal year shall be used for purposes described in 
        subsection (a)(1).
    (d) Administrative Provisions.--None of the funds made available in 
this section may be used to enter into, renew, extend, administer, 
implement, or enforce any qualified tax collection contract (as defined 
in section 6306 of the Internal Revenue Code of 1986).

SEC. 4. RETURNS RELATING TO CERTAIN BUSINESS TRANSACTIONS.

    (a) In General.--
            (1) Return requirement.--Subpart B of part III of 
        subchapter A of chapter 61 of the Internal Revenue Code of 1986 
        is amended by adding at the end the following new section:

``SEC. 6050Z. RETURNS RELATING TO ACCOUNT TRANSACTIONS.

    ``(a) Requirement of Reporting.--Any covered financial institution 
shall make the information return described in subsection (b) at such 
time as the Secretary may by regulations prescribe.
    ``(b) Return.--A return is described in this subsection if such 
return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains, with respect to each account maintained by 
        the covered financial institution--
                    ``(A) the name, address, and TIN of the person on 
                whose behalf the account is maintained,
                    ``(B) the monthly gross inflows and outflows with 
                respect to such account,
                    ``(C) in the case of an account that is not related 
                to a trade or business, the amount of such inflows and 
                outflows that are related to--
                            ``(i) cash transactions,
                            ``(ii) foreign transactions, and
                            ``(iii) transfers to related accounts, and
                    ``(D) such other information as the Secretary may 
                require for tax administration and enforcement 
                purposes.
    ``(c) Statement To Be Furnished to Taxpayers With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every covered financial institution that 
        is required to make a return under subsection (a) shall furnish 
        to each person whose identity is required to be set forth in 
        such return a written statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the covered financial 
                institution required to make such a return, and
                    ``(B) the information required to be shown on such 
                return with respect to such person.
            ``(2) Furnishing of information.--The written statement 
        required under paragraph (1) shall be furnished to the person 
        on or before January 31 of the year following the calendar year 
        for which the return under subsection (a) is required to be 
        made.
    ``(d) Covered Financial Institution.--For purposes of this section, 
the term `covered financial institution' means any financial 
institution (as determined under regulations provided by the Secretary) 
which maintains an account on behalf of another person.''.
            (2) Regulations.--
                    (A) In general.--Not later than 12 months after the 
                date of the enactment of this Act, the Secretary of the 
                Treasury (or the Secretary's delegate) shall issue 
                regulations on information reporting required under 
                section 6050Z of the Internal Revenue Code of 1986 (as 
                added by paragraph (1)), including regulations 
                specifying any other information required to be 
                reported under such section for purposes of closing the 
                tax gap (as defined in section 4(a)(2)).
                    (B) Avoidance of additional burden.--The 
                regulations established under subparagraph (A) shall 
                minimize additional reporting burdens on taxpayers.
    (b) Penalties.--
            (1) Returns.--Section 6724(d)(1)(B) of the Internal Revenue 
        Code of 1986 is amended by striking ``or'' at the end of clause 
        (xxv), by striking ``and'' at the end of clause (xxvi), and by 
        inserting after clause (xxvi) the following new clause:
                            ``(xxvii) section 6050Z (relating to 
                        information with respect to account 
                        transactions),''.
            (2) Statements.--Section 6724(d)(2) of such Code is 
        amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (II),
                    (B) by striking the period at the end of the first 
                subparagraph (JJ) (relating to section 6035) and 
                inserting a comma,
                    (C) by redesignating the second subparagraph (JJ) 
                (relating to section 6050Y) as subparagraph (KK),
                    (D) by striking the period at the end of 
                subparagraph (KK) (as redesignated by subparagraph (C)) 
                and inserting ``, or'', and
                    (E) by inserting after subparagraph (KK) (as so 
                redesignated) the following new subparagraph:

                                                    ``(LL) section 
                                                6050Z (relating to 
                                                information with 
                                                respect to account 
                                                transactions).''.

    (c) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 of such Code is amended by 
adding at the end the following new item:

``Sec. 6050Z. Returns relating to account transactions.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 5. REPORTS TO CONGRESS.

    Not later than 1 year after the date of the enactment of this Act 
and annually thereafter, the Commissioner of the Internal Revenue 
Service, after consultation with the Comptroller General, shall submit 
to Congress a report containing the following:
            (1) Audit plan.--A comprehensive description of--
                    (A) a plan to--
                            (i) shift more of the auditing and 
                        enforcement assets of the Internal Revenue 
                        Service toward high-income, high-wealth tax 
                        filers and corporations, and
                            (ii) recruit and retain auditors with the 
                        skills essential to audit high-income 
                        individuals, and
                    (B) the progress made in implementing such plan.
            (2) Tax gap analysis.--
                    (A) In general.--A comprehensive description of the 
                tax gap, including--
                            (i) the amount attributed to high-income, 
                        high-wealth tax filers and corporations, and
                            (ii) how other information reporting 
                        improvements could reduce the tax gap, 
                        including strengthened third-party reporting on 
                        ownership of C-corporations and ultimate 
                        ownership of partnerships.
                    (B) Tax gap.--For purposes of this paragraph, the 
                term ``tax gap'' means, with respect to any tax year, 
                the difference between--
                            (i) the amount of taxes owed by taxpayers 
                        under the Internal Revenue Code of 1986 for 
                        such tax year, and
                            (ii) the amount of revenue paid voluntarily 
                        and timely by taxpayers under such Code for 
                        such tax year.
            (3) Racial disparities analysis.--A comprehensive analysis 
        and description of whether there exist any racial disparities 
        in the Internal Revenue Service's enforcement activities, 
        including audits, based on gross income, including a 
        comprehensive description of any plans the Internal Revenue 
        Service has to address any such disparities in the coming 
        fiscal year.

SEC. 6. UNDERPAYMENT PENALTIES INCREASED FOR CERTAIN TAXPAYERS.

    (a) In General.--Subsection (a) of section 6662 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(a) Imposition of Penalty.--
            ``(1) In general.--If this section applies to any portion 
        of an underpayment of tax required to be shown on a return, 
        there shall be added to the tax an amount equal to the 
        applicable percentage of the portion of the underpayment to 
        which this section applies.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) in the case of a taxpayer with a taxable 
                income of less than $2 million, 20 percent,
                    ``(B) in the case of a taxpayer with a taxable 
                income greater than $2 million but less than $5 
                million, 30 percent, and
                    ``(C) in the case of a taxpayer with a taxable 
                income greater than $5 million, 40 percent.''.
    (b) Conforming Amendments.--
            (1) Gross valuation misstatements.--Section 6662(h)(1) of 
        such Code is amended by striking ``with respect to such portion 
        by substituting'' and all that follows and inserting ``with 
        respect to such portion--
                    ``(A) by substituting `40 percent' for `20 percent' 
                in paragraph (2)(A) thereof,
                    ``(B) by substituting `45 percent' for `30 percent' 
                in paragraph (2)(B) thereof, and
                    ``(C) by substituting `50 percent' for `40 percent' 
                in paragraph (2)(C) thereof.''.
            (2) Nondisclosed noneconomic substance transactions.--
        Section 6662(i)(1) of such Code is amended by striking ``with 
        respect to such portion by substituting'' and all that follows 
        and inserting ``with respect to such portion--
                    ``(A) by substituting `40 percent' for `20 percent' 
                in paragraph (2)(A) thereof,
                    ``(B) by substituting `45 percent' for `30 percent' 
                in paragraph (2)(B) thereof, and
                    ``(C) by substituting `50 percent' for `40 percent' 
                in paragraph (2)(C) thereof.''.
            (3) Undisclosed foreign financial asset understatements.--
        Section 6662(j)(3) of such Code is amended by striking ``with 
        respect to such portion by substituting'' and all that follows 
        and inserting ``with respect to such portion--
                    ``(A) by substituting `40 percent' for `20 percent' 
                in paragraph (2)(A) thereof,
                    ``(B) by substituting `45 percent' for `30 percent' 
                in paragraph (2)(B) thereof, and
                    ``(C) by substituting `50 percent' for `40 percent' 
                in paragraph (2)(C) thereof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns on the due date which (determined without regard to 
extensions) is after December 31, 2022.

SEC. 7. APPLICATION OF FALSE CLAIMS RULES TO THE TAX CLAIMS.

    (a) In General.--Subsection (d) of section 3729 of title 31, United 
States Code is amended to read as follows:
    ``(d) Internal Revenue Code.--
            ``(1) General exclusion.--Except as provided under 
        paragraph (2), this section does not apply to claims, records, 
        or statements made under the Internal Revenue Code of 1986.
            ``(2) Exception.--This section shall apply to any claims, 
        records, or statements made under the Internal Revenue Code of 
        1986 if--
                    ``(A) the gross income of the person making the 
                claim equals or exceeds $10,000,000 for the taxable 
                year with respect to which the claim is made; and
                    ``(B) the damages sustained by the Government 
                because of the act of the person exceed $1,000,000.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to claims, records, or statements made after the date of the 
enactment of this Act.
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