Simplify, Don’t Amplify the IRS Act
Bill: S.4046 | Sponsor: Sen. Braun, Mike (R-IN)
Policy area: Taxation

Summary:
Simplify, Don't Amplify the IRS Act
This bill limits Internal Revenue Service (IRS) enforcement authority and modifies certain IRS reporting requirements. It also eliminates certain restrictions on the use of coronavirus recovery funds.
Among other provisions, the bill
The bill also requires the IRS to report annually on the tax gap estimate for the most recent taxable year. The IRS must use artificial intelligence to calculate an estimate of the tax gap. The bill defines tax gap as the difference between tax liabilities owed to the United States and those liabilities actually collected.
The bill restricts funding for IRS audits and enforcement until the IRS publishes an updated tax gap projection.

To amend the Social Security Act to remove the restriction on the use 
   of Coronavirus State Fiscal Recovery funds, to amend the Internal 
    Revenue Code of 1986 to codify the Trump administration rule on 
reporting requirements of exempt organizations, 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 ``Simplify, Don't Amplify the IRS 
Act''.

            TITLE I--CORONAVIRUS STATE FISCAL RECOVERY FUNDS

SEC. 101. REMOVAL OF RESTRICTION OF USE OF CORONAVIRUS STATE FISCAL 
              RECOVERY FUNDS.

    (a) In General.--Paragraph (2) of section 602(c) of the Social 
Security Act, as added by section 9901 of the American Rescue Plan Act 
of 2021, is amended to read as follows:
            ``(2) Further restriction on use of funds.--No State or 
        territory may use funds made available under this section for 
        deposit into any pension fund.''.
    (b) Conforming Amendments.--Section 602 of such Act is further 
amended--
            (1) in subsection (d)(2)(A), by striking ``, including, in 
        the case of a State or a territory, all modifications to the 
        State's or territory's tax revenue sources during the covered 
        period'';
            (2) in subsection (e), by striking ``such subsection,'' and 
        all that follows through the period and inserting ``such 
        subsection.''; and
            (3) in subsection (g)--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (7) as 
                paragraphs (1) through (6), respectively.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of the American Rescue Plan Act 
of 2021.

   TITLE II--PROVISIONS RELATING TO TAX ADMINISTRATION AND TAXPAYER 
                               PROTECTION

SEC. 201. PREVENTING WEAPONIZATION OF THE INTERNAL REVENUE SERVICE.

    (a) Organizations Exempt From Reporting.--
            (1) Gross receipts threshold.--Clause (ii) of section 
        6033(a)(3)(A) of the Internal Revenue Code of 1986 is amended 
        by striking ``$5,000'' and inserting ``$50,000''.
            (2) Organizations described.--Subparagraph (C) of section 
        6033(a)(3) of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``and'' at the end of clause (v),
                    (B) by striking the period at the end of clause 
                (vi) and inserting a semicolon, and
                    (C) by adding at the end the following new clauses:
                            ``(vii) any other organization described in 
                        section 501(c) (other than a private foundation 
                        or a supporting organization described in 
                        section 509(a)(3)); and
                            ``(viii) any organization (other than a 
                        private foundation or a supporting organization 
                        described in section 509(a)(3)) which is not 
                        described in section 170(c)(2)(A), or which is 
                        created or organized in a possession of the 
                        United States, which has no significant 
                        activity (including lobbying and political 
                        activity and the operation of a trade or 
                        business) other than investment activity in the 
                        United States.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after the date of the 
        enactment of this Act.
    (b) Clarification of Application to Section 527 Organizations.--
            (1) In general.--Paragraph (1) of section 6033(g) of the 
        Internal Revenue Code of 1986 is amended--
                    (A) by striking ``This section'' and inserting 
                ``Except as otherwise provided by this subsection, this 
                section'', and
                    (B) by striking ``for the taxable year.'' and 
                inserting ``for the taxable year in the same manner as 
                to an organization exempt from taxation under section 
                501(a).''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after the date of the 
        enactment of this Act.
    (c) Reporting of Names and Addresses of Contributors.--
            (1) In general.--Paragraph (1) of section 6033(a) of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following: ``Except as provided in subsections (b)(5) and 
        (g)(2)(B), such annual return shall not be required to include 
        the names and addresses of contributors to the organization.''.
            (2) Application to section 527 organizations.--Paragraph 
        (2) of section 6033(g) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (A),
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C), and
                    (C) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) containing the names and addresses of all 
                substantial contributors, and''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after the date of the 
        enactment of this Act.

SEC. 202. LIMITATION ON TAXPAYER FUNDED UNION OFFICIAL TIME FOR 
              INTERNAL REVENUE SERVICE EMPLOYEES.

    (a) In General.--Section 7131 of title 5, United States Code, is 
amended by adding at the end the following:
    ``(e) The authority provided under subsection (d) shall not apply 
with respect to the Internal Revenue Service, or an employee of the 
Internal Revenue Service, during the period each year beginning on 
February 12 and ending on April 15.''.
    (b) Conforming Amendment.--Section 7131(d) of title 5, United 
States Code, is amended, in the matter preceding paragraph (1), by 
striking ``preceding'' and inserting ``other''.
    (c) Application.--The amendments made by subsections (a) and (b) 
shall apply to any collective bargaining agreement entered into after 
the date of enactment of this section.

SEC. 203. PROTECTING TAXPAYER PRIVACY.

    (a) Increase of Penalty for Unauthorized Disclosure of Taxpayer 
Information.--
            (1) In general.--Paragraph (1) of section 7213(a) of the 
        Internal Revenue Code of 1986 is amended by striking ``$5,000'' 
        and inserting ``$250,000''.
            (2) Disclosures by tax return preparers.--Subsection (a) of 
        section 7216 of the Internal Revenue Code of 1986 is amended by 
        striking ``$1,000 ($100,000 in the case of a disclosure or use 
        to which section 6713(b) applies)'' and inserting ``$250,000''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to disclosures made on or after the date of the 
        enactment of this Act.
    (b) Removal.--
            (1) In general.--Section 7701(c)(1)(A) of title 5, United 
        States Code, is amended by inserting ``or in the case of an 
        action involving a removal from the service for an alleged 
        violation of section 7213(a)(1) of the Internal Revenue Code of 
        1986,'' after ``described in section 4303,''.
            (2) Rule of construction.--The amendments made by paragraph 
        (1) may not be construed to permit an officer or employee of 
        the United States to submit an appeal to the Merit Systems 
        Protection Board if that individual is dismissed from office or 
        discharged from employment upon conviction for a violation of 
        section 7213(a)(1) of the Internal Revenue Code of 1986.

                TITLE III--RESTRAINTS ON IRS ENFORCEMENT

SEC. 301. TAX GAP PROJECTION.

    (a) In General.--Not later than 180 days after the date of the 
enactment of this section, and no later than July 31 annually 
thereafter, the Commissioner of Internal Revenue shall submit to 
Congress a projection detailing the tax gap estimate for the most 
recent taxable year as is practicable using the most recently available 
data, and including identification and detailed descriptions of the 
data used for such projection and clear identification of the amount of 
the projected tax gap associated with nonfiling, underreporting, and 
underpayment (including identifying the amount subject to collection 
actions).
    (b) Use of Artificial Intelligence.--To the extent practicable, for 
purposes of reducing the burden on taxpayers subject to National 
Research Program audits, the Commissioner shall use artificial 
intelligence, including neural machine learning, and other available 
data analysis tools, including commercial analytic data providers, to 
calculate a projection described in subsection (a).
    (c) National Research Program Audits.--In calculating a projection 
described in subsection (a), the Commissioner of Internal Revenue shall 
not undertake more National Research Program audits in any one fiscal 
year than are undertaken in fiscal year 2021.
    (d) Tax Gap.--For purposes of this section, the term ``tax gap'' 
means the difference between tax liabilities owed to the United States 
under the Internal Revenue Code of 1986 and those liabilities actually 
collected by the Internal Revenue Service.

SEC. 302. JCT REPORT.

    (a) In General.--Not later than 180 days after the submission of 
the first tax gap projection to Congress under section 201, and not 
later than 90 days after the submission of each successive submission, 
the Chief of Staff of the Joint Committee on Taxation shall submit to 
the Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate a report analyzing such projection, 
including--
            (1) identification of methodologies used,
            (2) any statistical or methodological uncertainties,
            (3) the effect of outdated data, if any, on the accuracy of 
        such projection, and
            (4) such additional information as the Joint Committee on 
        Taxation determines is useful for Congress to use to assess and 
        analyze the tax gap projections provided by the Commissioner of 
        Internal Revenue.
    (b) Release of Information.--For purposes of facilitating the 
report described in subsection (a), the Secretary of the Treasury 
shall, in a timely manner, provide to the Joint Committee on Taxation 
such information as such committee requests.

SEC. 303. RESTRICTION ON INCREASED ENFORCEMENT FUNDS.

    (a) In General.--Notwithstanding any other provision of law, no 
funds appropriated to the Department of the Treasury for audit and 
enforcement purposes in excess of the levels appropriated for such 
purposes in fiscal year 2021 may be expended for such purposes, 
including for salaries, expenses, and enforcement activities, until 180 
days after the Internal Revenue Service publishes an updated tax gap 
projection pursuant to, and compliant with, section 201.
    (b) Sunset.--The provisions of subsection (a) shall not apply after 
the date which is one year after the date of the enactment of this 
section.

SEC. 304. RESTRICTION ON INCREASED FUNDING FOR OTHER SPECIFIED 
              PURPOSES.

    (a) In General.--Notwithstanding any other provision of law, no 
funds appropriated to the Department of the Treasury in excess of the 
levels appropriated for specified purposes in fiscal year 2021 may be 
expended for specified purposes.
    (b) Specified Purposes.--For purposes of subsection (a), the term 
``specified purposes'' means--
            (1) the implementation of new information reporting 
        requirements on flows of deposits and withdrawals in individual 
        and small-business banking accounts and other financial 
        accounts,
            (2) the targeting of United States citizens in response to 
        the exercise by such citizens of any legally protected or 
        recognized right guaranteed under the First Amendment to the 
        United States Constitution,
            (3) the targeting of a group for regulatory scrutiny based 
        on the ideological beliefs of such group,
            (4) the auditing of individual taxpayers with an adjusted 
        gross income of less than $400,000, and
            (5) the hiring under an agreement pursuant to the 
        Intragovernmental Personnel Act of 1970 (sections 3371 et seq. 
        of title 5, United States Code) or any other authority of an 
        authorized researcher who is not a full time Federal employee 
        to access data subject to privacy protections afforded by 
        section 6103 of the Internal Revenue Code of 1986.

SEC. 305. EFFICIENT USE OF EXISTING IRS RESOURCES.

    For purposes of increasing enforcement actions in areas of high 
noncompliance and reducing the corporate audit no-change rate of the 
Internal Revenue Service to below 20 percent by 2023--
            (1) the Secretary (or the Secretary's delegate) shall, not 
        later than 180 days after the date of the enactment of this 
        section--
                    (A) update the methodology that is used for the 
                selection of corporate returns for audit, and
                    (B) reassign resources of the Internal Revenue 
                Service such that the majority of high-income nonfilers 
                are subject to enforcement actions, and
            (2) the Comptroller General of the United States shall, 
        within one year after the date of the enactment of this 
        section, issue a comprehensive report to Congress on 
        information returns and data collected by the Internal Revenue 
        Service that could be deployed for compliance activities but 
        that are not currently used for such activities.

SEC. 306. IRS FELLOWSHIP PROGRAM.

    (a) Establishment.--Not later than September 30, 2022, the 
Commissioner of Internal Revenue (hereinafter known as the 
``Commissioner'') after consultation with the Chief Counsel of the 
Internal Revenue Service (hereinafter known as the ``Chief Counsel''), 
shall establish within the Internal Revenue Service a fellowship 
program (hereinafter known as the ``program'') to recruit private 
sector tax experts to join the Internal Revenue Service to create and 
participate in the audit task force established under subsection (e).
    (b) Objective.--The Commissioner, after consultation with the Chief 
Counsel, shall design the program in a manner such that the program--
            (1) addresses such tax cases handled by the Internal 
        Revenue Service as the Commissioner determines--
                    (A) are the most complex, or
                    (B) include new and emerging issues, and
            (2) recruits and retains outstanding and qualified tax 
        experts.
    (c) Advertisement of Program.--The Commissioner shall advertise the 
program in such a way as to attract mid-career tax professionals, 
including certified public accountants, tax attorneys, and such other 
tax professionals as the Commissioner determines are appropriately 
qualified to handle the most complex tax cases.
    (d) Structure.--
            (1) In general.--The program shall be staffed by not fewer 
        than 30 fellows at the discretion of the Commissioner based on 
        needs of the Internal Revenue Service and the availability of 
        qualified candidates.
            (2) Term of service.--
                    (A) In general.--Each fellow shall be hired for a 
                2-, 3-, or 4-year term of service.
                    (B) Extensions.--
                            (i) In general.--A fellow may apply for, 
                        and the Commissioner may grant, a 1-year 
                        extension of the fellowship.
                            (ii) No limit on number of extensions.--
                        There shall be no limit on the number of 
                        extensions under clause (i).
            (3) Fellowship vacancies.--The Commissioner, after 
        consultation with the Chief Counsel, shall fill vacant 
        fellowships--
                    (A) in such a manner as to ensure that the program 
                is staffed with no fewer than 15 fellows, and
                    (B) as soon as practicable after the vacancy 
                arises.
            (4) Hiring authority.--The Commissioner shall have 
        authority to permanently hire a fellow at the end of the term 
        of service for such fellow.
    (e) Task Force.--Not later than the date on which the first 
fellowship is awarded under this section, the Commissioner shall 
establish a task force within the Internal Revenue Service and the 
office of the Chief Counsel in both national and regional office 
placements that includes the fellows hired pursuant to subsection (d), 
the purpose of which is to--
            (1) perform audit case selection,
            (2) educate Internal Revenue Service employees on emerging 
        issues,
            (3) audit selected taxpayers,
            (4) address offshore tax evasion and issues implicating the 
        Foreign Account Tax Compliance Act, and
            (5) identify, mentor, and train junior employees from the 
        Internal Revenue Service with respect to audits.
    (f) Composition.--The task force established under subsection (e) 
may be composed of both--
            (1) fellows, and
            (2) permanent employees of the Internal Revenue Service.
    (g) Pay of Fellows.--
            (1) In general.--The Secretary of the Treasury (or the 
        Secretary's delegate) shall determine, subject to the 
        provisions of this subsection, the pay of fellows recruited 
        under subsection (a).
            (2) Pay scale.--For purposes of paragraph (1), the pay of a 
        fellow shall not be less than the minimum rate payable for GS-
        15 of the General Schedule and shall not exceed the amount of 
        annual compensation (excluding expenses) specified in section 
        102 of title 3, United States Code.
    (h) Administration of Program.--The Secretary may appoint a lead 
program officer to administer and advertise the program.
    (i) Annual Review and Report.--Not later than 1 year after the date 
on which the first fellowship is awarded under this section, and 
annually thereafter, the Commissioner shall submit to Congress a report 
containing--
            (1) an analysis of the effects of the program,
            (2) an analysis of the return on investment of the program, 
        including calculations of all costs incurred and all tax 
        revenue and penalties collected due to the work of the task 
        force,
            (3) a description of the total number of fellows who apply 
        each year, and
            (4) recommendations for changes to the program, if any.
    (j) Rules and Regulations.--The Commissioner, with the approval of 
the Secretary of the Treasury (or the Secretary's delegate, other than 
the Commissioner), shall promulgate such rules and regulations as may 
be necessary for the efficient administration of the program.

          TITLE IV--PROVISIONS TO REDUCE IMPROPER TAX PAYMENTS

SEC. 401. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds that when the Internal Revenue 
Service makes payments to taxpayers, the Internal Revenue Services must 
make every effort to confirm that the right recipient is receiving the 
right payment for the right reason at the right time.
    (b) Purpose.--The purpose of this title is to--
            (1) reduce improper tax payments by the Internal Revenue 
        Service--
                    (A) by intensifying efforts to eliminate payment 
                error, waste, fraud, and abuse; and
                    (B) continuing to ensure that the Internal Revenue 
                Service provides accessible taxpayer services;
            (2) adopt a comprehensive set of policies, including--
                    (A) transparency of significant improper tax 
                payments; and
                    (B) accountability for reducing improper tax 
                payments; and
            (3) protecting taxpayer services.

SEC. 402. IMPROPER TAX PAYMENT DEFINED.

    For purposes of this title, the term ``improper tax payment'' means 
any credit or refund of an overpayment of a tax imposed under the 
Internal Revenue Code of 1986 that should not have been made or that 
was made in an incorrect amount.

SEC. 403. TRANSPARENCY.

    (a) In General.--Not later than 90 days after the date of enactment 
of this section, the Secretary of the Treasury shall establish, in 
coordination with the Commissioner of Internal Revenue, annual targets 
for reducing improper tax payments made by the Internal Revenue 
Service.
    (b) Published Information.--
            (1) In general.--Not later than 180 days after the date of 
        enactment of this section, and annually thereafter, the 
        Secretary of the Treasury shall publish on the internet 
        information about improper tax payments made by the Internal 
        Revenue Service.
            (2) Contents.--The information published under paragraph 
        (1) shall include, subject to Federal privacy policies and to 
        the extent permitted by law--
                    (A) the name of the accountable official designated 
                under section 404(a);
                    (B) rates and amounts as of the date of enactment 
                of this section, and historical rates and amounts, of 
                improper tax payments made by the Internal Revenue 
                Service, including, if known and appropriate, the 
                causes of the improper tax payments;
                    (C) rates and amounts as of the date of enactment 
                of this section, and historical rates and amounts, of 
                the recovery of improper tax payments (estimated on the 
                basis of applicable samples where appropriate); and
                    (D) the annual targets for reducing improper tax 
                payments.
    (c) Methodology.--The methodology used for identifying and 
measuring improper tax payments under this section shall meet the 
requirement of section 3352(c)(1)(A) of title 31, United States Code.
    (d) Links.--The Commissioner of Internal Revenue shall prominently 
display on the homepage of the website of the Internal Revenue Service 
a link to internet-based resources for addressing improper tax 
payments, including the information published under subsection (b)(1).

SEC. 404. ACCOUNTABILITY AND COORDINATION.

    (a) Accountable Officials.--Not later than 120 days after the date 
of enactment of this section, the Commissioner of Internal Revenue 
shall designate an official to be accountable for meeting the reduction 
targets under section 403(a) without unduly burdening taxpayer 
services.
    (b) Report.--
            (1) In general.--Not later than 180 days after the date of 
        enactment of this section, and annually thereafter, the 
        official who is designated under subsection (a) shall provide 
        the Director of the Office of Management and Budget and the 
        appropriate congressional committees a report that includes--
                    (A) the methodology used for identifying and 
                measuring improper tax payments under section 403(c);
                    (B) the plans for meeting the reduction targets 
                under section 403(a); and
                    (C) the plans and supporting analysis for ensuring 
                that initiatives undertaken in accordance with this 
                title do not unduly burden taxpayer services.
            (2) Appropriate congressional committees.--For purposes of 
        paragraph (1), the term ``appropriate congressional 
        committees'' means the Committee on Finance of the Senate and 
        the Committee on Ways and Means of the House of 
        Representatives.
    (c) Duties of Inspector General.--Not later than 60 days after the 
date on which the annual report required under subsection (b) is 
submitted, the Treasury Inspector General for Tax Administration 
shall--
            (1) assess the level of risk for improper tax payments by 
        the Internal Revenue Service;
            (2) determine the extent of oversight warranted (in 
        addition to oversight requirements under section 3353 of title 
        31, United States Code); and
            (3) provide the Commissioner of Internal Revenue with 
        recommendations, if any, for modifying the methodology, 
        improper tax payment reduction plans, or taxpayer services.
    (d) Agency Failure.--
            (1) In general.--If the Internal Revenue Service does not 
        demonstrate an improvement in reducing improper tax payments, 
        fails to develop a plan to meet reduction targets under 
        subsection (b)(1)(B), or fails to implement the plans described 
        in subsection (b)(1)(C) for not less than 2 consecutive years, 
        the official designated under subsection (a) shall submit to 
        the Commissioner of Internal Revenue, the Treasury Inspector 
        General for Tax Administration, and the Chief Financial Officer 
        of the Internal Revenue Service a report that--
                    (A) describe the likely causes of the lack or 
                improvement or failure; and
                    (B) proposes a remedial plan.
            (2) Review.--Annually, the Commissioner of Internal Revenue 
        shall, with respect to a remedial plan proposed under paragraph 
        (1)(B)--
                    (A) review the remedial plan; and
                    (B) in consultation with the Treasury Inspector 
                General for Tax Administration and Chief Financial 
                Officer of the Internal Revenue Service, forward the 
                remedial plan and any additional comments and analysis 
                to the Director of the Office of Management and Budget.

SEC. 405. POLICY PROPOSALS.

    (a) In General.--Not later than 180 days after the date of 
enactment of this section, the Secretary of the Treasury, in 
consultation with the Commissioner of Internal Revenue and the Treasury 
Inspector General for Tax Administration, shall develop policy 
recommendations, including potential legislative proposals, designed to 
reduce improper tax payments, including improper tax payments caused by 
error, waste, fraud, and abuse, made by the Internal Revenue Service.
    (b) Inclusion.--The recommendations developed under subsection (a) 
shall be included, as appropriate, in the budget of the President under 
section 1105(a) of title 31, United States Code, for fiscal year 2023 
and each fiscal year thereafter.
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