Title: Stop CHEATERS Act
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 (IRS) and for taxpayer services and operations support. It establishes enforcement goals of annual audits of certain high-income tax returns, beginning in 2025, and each year thereafter.
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 biennially on plans to shift more of its enforcement assets toward high-income tax filers and on an estimate of revenue losses from offshore tax evasion.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1857 Introduced in Senate (IS)]

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117th CONGRESS
  1st Session
                                S. 1857

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 26, 2021

    Mr. King (for himself, Mr. Brown, and Mr. Kaine) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
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) In general.--In addition to other amounts, there is 
        appropriated the following amounts for necessary expenses to 
        strengthen the enforcement capacity of the Internal Revenue 
        Service by increasing audits annually to meet the audit goals 
        described in paragraph (2):
                    (A) For fiscal year 2022, $1,600,000,000.
                    (B) For fiscal year 2023, $3,200,000,000.
                    (C) For fiscal year 2024, $4,000,000,000.
                    (D) For fiscal year 2025, $6,400,000,000.
                    (E) For fiscal year 2026, $6,800,000,000.
                    (F) For fiscal year 2027, $6,800,000,000.
                    (G) For fiscal year 2028, $6,800,000,000.
                    (H) For fiscal year 2029, $6,800,000,000.
                    (I) For fiscal year 2030, $6,800,000,000.
                    (J) For fiscal year 2031, $6,800,000,000.
            (2) Goals.--The goals described in this subparagraph are to 
        annually audit by 2025 and each year thereafter--
                    (A) in the case of the income tax returns of 
                individuals--
                            (i) 20 percent of such returns reporting an 
                        adjusted gross income of not less than 
                        $1,000,000 but less than $5,000,000;
                            (ii) 33 percent of such returns reporting 
                        an adjusted gross income of not less than 
                        $5,000,000 but less than $10,000,000 and
                            (iii) 50 percent of such returns reporting 
                        an adjusted gross income of not less than 
                        $10,000,000;
                    (B) 95 percent of the income tax returns of 
                corporations reporting more than $20,000,000,000 in 
                assets;
                    (C) 40 percent of the estate tax returns having a 
                gross estate valued at more than $10,000,000;
                    (D) 1.2 percent of gift tax returns; and
                    (E) 0.22 percent of employment tax returns filed by 
                employers with respect to the taxes imposed under 
                chapters 21 or 22 of the Internal Revenue Code of 1986.
    (b) Taxpayer Services.--In addition to other amounts, there are 
appropriated the following amounts to provide taxpayer services, 
including pre-filing assistance and education, filing and account 
services, taxpayer advocacy services, and services related to the 
reporting required under section 6050Z of the Internal Revenue Code of 
1986 (as added by section 4):
            (1) For fiscal year 2022, $800,000,000.
            (2) For fiscal year 2023, $800,000,000.
            (3) For fiscal year 2024, $800,000,000.
            (4) For fiscal year 2025, $2,000,000,000.
            (5) For fiscal year 2026, $2,000,000,000.
            (6) For fiscal year 2027, $2,000,000,000.
            (7) For fiscal year 2028, $2,000,000,000.
            (8) For fiscal year 2029, $2,000,000,000.
            (9) For fiscal year 2030, $2,000,000,000.
            (10) For fiscal year 2031, $2,000,000,000.
    (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 Internal Revenue Service and improve the capacity of 
the Internal Revenue Service to detect fraud related to income from a 
trade or business:
            (1) For fiscal year 2022, $800,000,000.
            (2) For fiscal year 2023, $800,000,000.
            (3) For fiscal year 2024, $800,000,000.
            (4) For fiscal year 2025, $800,000,000.
            (5) For fiscal year 2026, $800,000,000.
            (6) For fiscal year 2027, $800,000,000.
            (7) For fiscal year 2028, $800,000,000.
            (8) For fiscal year 2029, $800,000,000.
            (9) For fiscal year 2030, $800,000,000.
            (10) For fiscal year 2031, $800,000,000.
    (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 covered financial service 
provider 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 service provider--
                    ``(A) the name, address, and TIN of the person on 
                whose behalf the account is maintained,
                    ``(B) a summary report of total deposits received 
                and total withdrawals made in such account, and
                    ``(C) such other information as the Secretary may 
                require.
    ``(c) Statement To Be Furnished to Taxpayers With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every covered financial service provider 
        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 service 
                provider 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 Service Provider.--For purposes of this 
section, the term `covered financial service provider' means any 
financial service provider (as determined under regulations provided by 
the Secretary) which maintains an account on behalf of another person.
    ``(e) 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.''.
    (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 certain 
                        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 certain 
                                                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 certain transactions.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2021.

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) 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, and
                    ``(B) by substituting `40 percent' for `30 percent' 
                in paragraph (2)(B) 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, and
                    ``(B) by substituting `40 percent' for `30 percent' 
                in paragraph (2)(B) 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, and
                    ``(B) by substituting `40 percent' for `30 percent' 
                in paragraph (2)(B) thereof.''.
    (c) 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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