Stop CHEATERS Act
Bill: H.R.1200 | Sponsor: Rep. Khanna, Ro (D-CA)
Policy area: Taxation

Summary:
Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly Act or the Stop CHEATERS Act
This bill provides additional appropriations through FY2031 for the enforcement activities of the Internal Revenue Service and to increase audits yearly until 2025 to reach specified targets. It also provides additional appropriations for taxpayer services and operations support.
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 a taxable income greater than $5 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 ``Stop Corporations and High Earners 
from Avoiding Taxes and Enforce the Rules Strictly Act'' or the ``Stop 
CHEATERS Act''.

SEC. 2. POLICY OF CONGRESS.

    It is the policy of Congress that--
            (1) tax compliance, to raise revenue for national needs, 
        restore fairness, and protect the integrity of the tax system, 
        high-income United States citizens and corporations should pay 
        all of the taxes they owe,
            (2) tax compliance, as indicated by the fraction of taxes 
        due that are reported and paid, should be comparable among 
        groups of taxpayers regardless of the legal entity,
            (3) the Internal Revenue Service should be given resources 
        to increase audits and enforcement of tax compliance of high-
        income individuals to reduce the tax gap, 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, and to modernize its technology in order to 
        better serve taxpayers and enforce the tax laws,
            (4) pursuing non-filers is one of the most efficient 
        enforcement strategies of the Internal Revenue Service because 
        issuing non-filer notices can be a cost-effective tool that 
        requires little more than automated notices,
            (5) priorities for actions and resources to improve 
        compliance should be guided by the relative revenue loss from 
        non-compliance,
            (6) it should be the goal of the Internal Revenue Service 
        that, by the tenth tax year after the effective date of this 
        statute, the net tax gap, as measured by the fraction of taxes 
        that are due that are not reported and paid, should be reduced 
        by at least one-third, as compared with the fraction estimated 
        in the most recent Internal Revenue Service study prior to 
        enactment of this statute, and
            (7) 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. ADDITIONAL APPROPRIATIONS FOR THE INTERNAL REVENUE SERVICE.

    (a) Enforcement.--
            (1) There is appropriated each amount listed in paragraph 
        (2) for additional amounts for the ``Department of the 
        Treasury--Internal Revenue Service--Enforcement'' account for 
        the salaries and expenses of additional staff to strengthen the 
        enforcement capacity of the IRS and increase audits yearly 
        until 2025 so that the following minimum targets are reached:
                    (A) 50 percent of individual tax returns with a 
                disclosed total income of not less than $10,000,000.
                    (B) 33 percent of individual tax returns with a 
                disclosed total income of not less than $5,000,000 and 
                less than $10,000,000.
                    (C) 20 percent of individual tax returns with a 
                disclosed total income of not less than $1,000,000 and 
                less than $5,000,000.
                    (D) 95 percent of corporations with more than 
                $20,000,000,000 in assets reported on Schedule L.
                    (E) 40 percent of returns reflecting taxes related 
                to estates larger than $10,000,000.
                    (F) 1.2 percent of returns reflecting taxes related 
                to gifts.
                    (G) 0.22 percent of tax returns filed by an 
                employer with respect to employee compensation.
            (2) The amounts listed in this paragraph are the following:
                    (A) For fiscal year 2022, $2,000,000,000.
                    (B) For fiscal year 2023, $4,000,000,000.
                    (C) For fiscal year 2024, $5,000,000,000.
                    (D) For fiscal year 2025, $8,000,000,000.
                    (E) For fiscal year 2026, $8,500,000,000.
                    (F) For fiscal year 2027, $8,500,000,000.
                    (G) For fiscal year 2028, $8,500,000,000.
                    (H) For fiscal year 2029, $8,500,000,000.
                    (I) For fiscal year 2030, $8,500,000,000.
                    (J) For fiscal year 2031, $8,500,000,000.
    (b) Taxpayer Services.--There are appropriated the following 
additional amounts for the ``Department of the Treasury--Internal 
Revenue Service--Taxpayer Services'' account to carry out this Act:
            (1) For fiscal year 2022, $1,000,000,000.
            (2) For fiscal year 2023, $1,000,000,000.
            (3) For fiscal year 2024, $1,000,000,000.
            (4) For fiscal year 2025, $2,500,000,000.
            (5) For fiscal year 2026, $2,500,000,000.
            (6) For fiscal year 2027, $2,500,000,000.
            (7) For fiscal year 2028, $2,500,000,000.
            (8) For fiscal year 2029, $2,500,000,000.
            (9) For fiscal year 2030, $2,500,000,000.
            (10) For fiscal year 2031, $2,500,000,000.
    (c) Operations Support.--There are appropriated the following 
additional amounts for the ``Department of the Treasury--Internal 
Revenue Service--Operations Support'' account to overhaul outdated 
technology of the IRS and improve the capacity of the IRS to detect 
fraud related to income from a trade or business:
            (1) For fiscal year 2022, $1,000,000,000.
            (2) For fiscal year 2023, $1,000,000,000.
            (3) For fiscal year 2024, $1,000,000,000.
            (4) For fiscal year 2025, $1,000,000,000.
            (5) For fiscal year 2026, $1,000,000,000.
            (6) For fiscal year 2027, $1,000,000,000.
            (7) For fiscal year 2028, $1,000,000,000.
            (8) For fiscal year 2029, $1,000,000,000.
            (9) For fiscal year 2030, $1,000,000,000.
            (10) For fiscal year 2031, $1,000,000,000.
    (d) Availability.--Each additional amount appropriated by this 
section shall remain available until expended.

SEC. 4. RETURNS RELATING TO CERTAIN BUSINESS TRANSACTIONS.

    (a) In General.--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 CERTAIN TRANSACTIONS.

    ``(a) Requirement of Reporting.--Any bank or other financial 
institution prescribed by the Secretary by regulation which, in the 
course of any calendar year, maintains an account for a covered 
taxpayer shall make the information return described in subsection (b) 
with respect to each such taxpayer 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--
                    ``(A) the name, address, and TIN of the covered 
                taxpayer on behalf of whom such bank or financial 
                institution managed an account,
                    ``(B) a summary report of total deposits received 
                and total withdrawals made in each such account of such 
                covered taxpayer, and
                    ``(C) such other information as the Secretary may 
                require.
    ``(c) Covered Account.--
            ``(1) In general.--For purposes of this section, the term 
        `covered account' means any account belonging to a covered 
        taxpayer the Internal Revenue Service identifies to a bank or 
        financial institution via electronic communication with such 
        bank or financial institution.
            ``(2) Regulations and guidance.--The Secretary may 
        prescribe such regulations and other guidance as may be 
        appropriate or necessary to facilitate--
                    ``(A) the identification of a covered account by 
                the Internal Revenue Service,
                    ``(B) the exchange of electronic information 
                between the Internal Revenue Service and a bank or 
                financial institution, and
                    ``(C) the reconciliation of covered accounts with 
                the tax return of a covered taxpayer.
    ``(d) Covered Taxpayer.--For purposes of this section, the term 
`covered taxpayer' means--
            ``(1) an individual who, with respect to the applicable 
        taxable year--
                    ``(A) has an adjusted gross income of $400,000 or 
                more, and
                    ``(B) has any income that is not otherwise reported 
                on any other return or statement submitted to the 
                Internal Revenue Service by a third party, or
            ``(2) a pass-thru business entity, including a partnership 
        or S corporation, in which an individual described in paragraph 
        (1) has an ownership interest.
    ``(e) Statement To Be Furnished to Taxpayers With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every bank or other financial 
        institution prescribed by the Secretary by regulation that is 
        required to make a return under subsection (a) shall furnish to 
        a covered taxpayer whose identity is required to be set forth 
        in such return a written statement showing the name, address, 
        and phone number of the information contact of the qualified 
        entity required to make such a return.
            ``(2) Furnishing of information.--The written statement 
        required under paragraph (1) shall be furnished to the taxpayer 
        on or before January 31 of the year following the calendar year 
        for which the return under subsection (a) is required to be 
        made.
    ``(f) Applicable Taxable Year.--For purposes of this section, the 
term `applicable taxable year' means the taxable year ending in the 
calendar year with respect to which a report is made under subsection 
(a).
    ``(g) Regulations and Guidance.--The Secretary may prescribe such 
regulations and other guidance as may be appropriate or necessary to 
carry out the purposes of this section, including guidance that 
facilitates the following objectives:
            ``(1) Annually on a date to be determined by the Secretary, 
        banks and financial institutions will provide to the Internal 
        Revenue Service an electronic file containing a complete list 
        of the accounts of covered taxpayers and their corresponding 
        taxpayer ID numbers.
            ``(2) The Secretary shall compare the files described in 
        paragraph (1) with the tax returns of taxpayers and use such 
        comparison to determine if a taxpayer is a covered taxpayer, 
        and inform the proper bank or financial institution if such 
        taxpayer is a covered taxpayer.
            ``(3) Banks and financial institutions shall issue a 1099 
        or other Form, as designated by the Secretary, to accounts 
        identified under paragraph (2).''.
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 61 of such Code is amended by adding at the end the following 
new item:

``Sec. 6050Z. Returns relating to certain transactions.''.
    (c) 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 every 2 years thereafter, the Commissioner of the Internal Revenue 
Service, after consultation with the Comptroller General, shall submit 
to Congress a report containing--
            (1) 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 tax filers, 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) an estimate of revenue loss from offshore tax evasion, 
        and
            (3) information with respect to revenue loss due to such 
        tax evasion, organized by groups of taxpayers arranged by the 
        true income level of such taxpayers, as determined by the 
        Secretary.

SEC. 6. IRS ENFORCEMENT 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) Effective Date.--The amendment made by this section shall apply 
to returns on the due date which (determined without regard to 
extensions) is after December 31, 2022.
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