[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2676 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 2676

 To amend the Internal Revenue Code of 1986 to restructure and reform 
         the Internal Revenue Service, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 21, 1997

 Mr. Archer (for himself, Mr. Portman, and Mr. Cardin) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
 and in addition to the Committees on Government Reform and Oversight, 
 and Rules, for a period to be subsequently determined by the Speaker, 
 in each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to restructure and reform 
         the Internal Revenue Service, 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; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Internal Revenue 
Service Restructuring and Reform Act of 1997''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.
   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

Sec. 101. Internal Revenue Service Oversight Board.
Sec. 102. Commissioner of Internal Revenue; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer 
                            audits and collection activity.
                  Subtitle B--Personnel Flexibilities

Sec. 111. Personnel flexibilities.
                      TITLE II--ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Due date for certain information returns filed 
                            electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.
               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 300. Short title.
                      Subtitle A--Burden of Proof

Sec. 301. Burden of proof.
                  Subtitle B--Proceedings by Taxpayers

Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.
  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 321. Spouse relieved in whole or in part of liability in certain 
                            cases.
Sec. 322. Suspension of statute of limitations on filing refund claims 
                            during periods of disability.
 Subtitle D--Elimination of Interest Rate Differential on Overlapping 
    Periods of Interest on Income Tax Overpayments and Underpayments

Sec. 331. Elimination of interest rate differential on overlapping 
                            periods of interest on income tax 
                            overpayments and underpayments.
 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

Sec. 341. Privilege of confidentiality extended to taxpayer's dealings 
                            with non-attorneys authorized to practice 
                            before Internal Revenue Service.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer 
                            source code.
Sec. 345. Procedures relating to extensions of statute of limitations 
                            by agreement.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax 
                            Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting 
                            Alternative Commitment Agreements.
                  Subtitle F--Disclosures to Taxpayers

Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers' rights in interviews with the 
                            Internal Revenue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Disclosure of field service advice memoranda.
Sec. 355. Explanations of appeals and collection process.
                Subtitle G--Low Income Taxpayer Clinics

Sec. 361. Low income taxpayer clinics.
                       Subtitle H--Other Matters

Sec. 371. Actions for refund with respect to certain estates which have 
                            elected the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.
Sec. 375. Clarification of authority of Secretary relating to the 
                            making of elections.
                          Subtitle I--Studies

Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

Sec. 401. Expansion of duties of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.
                           Subtitle B--Budget

Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.
                     Subtitle C--Tax Law Complexity

Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.
     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

Sec. 501. Clarification of deduction for deferred compensation.

   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

SEC. 101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    (a) In General.--Section 7802 (relating to the Commissioner of 
Internal Revenue) is amended to read as follows:

``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    ``(a) Establishment.--There is established within the Department of 
the Treasury the Internal Revenue Service Oversight Board (hereafter in 
this subchapter referred to as the `Oversight Board').
    ``(b) Membership.--
            ``(1) Composition.--The Oversight Board shall be composed 
        of 11 members, as follows:
                    ``(A) 8 members shall be individuals who are not 
                Federal officers or employees and who are appointed by 
                the President, by and with the advice and consent of 
                the Senate.
                    ``(B) 1 member shall be the Secretary of the 
                Treasury or, if the Secretary so designates, the Deputy 
                Secretary of the Treasury.
                    ``(C) 1 member shall be the Commissioner of 
                Internal Revenue.
                    ``(D) 1 member shall be an individual who is a 
                representative of an organization that represents a 
                substantial number of Internal Revenue Service 
                employees and who is appointed by the President, by and 
                with the advice and consent of the Senate.
            ``(2) Qualifications and terms.--
                    ``(A) Qualifications.--Members of the Oversight 
                Board described in paragraph (1)(A) shall be appointed 
                solely on the basis of their professional experience 
                and expertise in 1 or more of the following areas:
                            ``(i) Management of large service 
                        organizations.
                            ``(ii) Customer service.
                            ``(iii) Federal tax laws, including tax 
                        administration and compliance.
                            ``(iv) Information technology.
                            ``(v) Organization development.
                            ``(vi) The needs and concerns of taxpayers.
                In the aggregate, the members of the Oversight Board 
                described in paragraph (1)(A) should collectively bring 
                to bear expertise in all of the areas described in the 
                preceding sentence.
                    ``(B) Terms.--Each member who is described in 
                paragraph (1)(A) or (D) shall be appointed for a term 
                of 5 years, except that of the members first appointed 
                under paragraph (1)(A)--
                            ``(i) 1 member shall be appointed for a 
                        term of 1 year,
                            ``(ii) 1 member shall be appointed for a 
                        term of 2 years,
                            ``(iii) 2 members shall be appointed for a 
                        term of 3 years, and
                            ``(iv) 2 members shall be appointed for a 
                        term of 4 years.
                Such terms shall begin on the date of appointment.
                    ``(C) Reappointment.--An individual who is 
                described in paragraph (1)(A) may be appointed to no 
                more than two 5-year terms on the Oversight Board.
                    ``(D) Vacancy.--Any vacancy on the Oversight Board 
                shall be filled in the same manner as the original 
                appointment. Any member appointed to fill a vacancy 
                occurring before the expiration of the term for which 
                the member's predecessor was appointed shall be 
                appointed for the remainder of that term.
                    ``(E) Special government employees.--During such 
                periods as they are performing services for the 
                Oversight Board, members who are not Federal officers 
                or employees shall be treated as special government 
                employees (as defined in section 202 of title 18, 
                United States Code).
            ``(4) Quorum.--6 members of the Oversight Board shall 
        constitute a quorum. A majority of members present and voting 
        shall be required for the Oversight Board to take action.
            ``(5) Removal.--
                    ``(A) In general.--Any member of the Oversight 
                Board may be removed at the will of the President.
                    ``(B) Secretary and commissioner.--An individual 
                described in subparagraph (B) or (C) of paragraph (1) 
                shall be removed upon termination of employment.
                    ``(C) Representative of internal revenue service 
                employees.--The member described in paragraph (1)(D) 
                shall be removed upon termination of employment, 
                membership, or other affiliation with the organization 
                described in such paragraph.
            ``(6) Claims.--
                    ``(A) In general.--Members of the Oversight Board 
                who are described in paragraph (1)(A) or (D) shall have 
                no personal liability under Federal law with respect to 
                any claim arising out of or resulting from an act or 
                omission by such member within the scope of service as 
                a member. The preceding sentence shall not be construed 
                to limit personal liability for criminal acts or 
                omissions, willful or malicious conduct, acts or 
                omissions for private gain, or any other act or 
                omission outside the scope of the service of such 
                member on the Oversight Board.
                    ``(B) Effect on other law.--This paragraph shall 
                not be construed--
                            ``(i) to affect any other immunities and 
                        protections that may be available to such 
                        member under applicable law with respect to 
                        such transactions,
                            ``(ii) to affect any other right or remedy 
                        against the United States under applicable law, 
                        or
                            ``(iii) to limit or alter in any way the 
                        immunities that are available under applicable 
                        law for Federal officers and employees.
    ``(c) General Responsibilities.--
            ``(1) In general.--The Oversight Board shall oversee the 
        Internal Revenue Service in its administration, management, 
        conduct, direction, and supervision of the execution and 
        application of the internal revenue laws or related statutes 
        and tax conventions to which the United States is a party.
            ``(2) Exceptions.--The Oversight Board shall have no 
        responsibilities or authority with respect to--
                    ``(A) the development and formulation of Federal 
                tax policy relating to existing or proposed internal 
                revenue laws, related statutes, and tax conventions,
                    ``(B) law enforcement activities of the Internal 
                Revenue Service, including compliance activities such 
                as criminal investigations, examinations, and 
                collection activities, or
                    ``(C) specific procurement activities of the 
                Internal Revenue Service.
            ``(3) Restriction on disclosure of return information to 
        oversight board members.--No return, return information, or 
        taxpayer return information (as defined in section 6103(b)) may 
        be disclosed to any member of the Oversight Board described in 
        subsection (b)(1)(A) or (D). Any request for information not 
        permitted to be disclosed under the preceding sentence, and any 
        contact relating to a specific taxpayer, made by a member of 
        the Oversight Board so described to an officer or employee of 
        the Internal Revenue Service shall be reported by such officer 
        or employee to the Secretary and the Joint Committee on 
        Taxation.
    ``(d) Specific Responsibilities.--The Oversight Board shall have 
the following specific responsibilities:
            ``(1) Strategic plans.--To review and approve strategic 
        plans of the Internal Revenue Service, including the 
        establishment of--
                    ``(A) mission and objectives, and standards of 
                performance relative to either, and
                    ``(B) annual and long-range strategic plans.
            ``(2) Operational plans.--To review the operational 
        functions of the Internal Revenue Service, including--
                    ``(A) plans for modernization of the tax system,
                    ``(B) plans for outsourcing or managed competition, 
                and
                    ``(C) plans for training and education.
            ``(3) Management.--To--
                    ``(A) recommend to the President candidates for 
                appointment as the Commissioner of Internal Revenue and 
                recommend to the President the removal of the 
                Commissioner,
                    ``(B) review the Commissioner's selection, 
                evaluation, and compensation of senior managers, and
                    ``(C) review and approve the Commissioner's plans 
                for reorganization of the Internal Revenue Service.
            ``(4) Budget.--To--
                    ``(A) review and approve the budget request of the 
                Internal Revenue Service prepared by the Commissioner,
                    ``(B) submit such budget request to the Secretary 
                of the Treasury, and
                    ``(C) ensure that the budget request supports the 
                annual and long-range strategic plans.
The Secretary shall submit the budget request referred to in paragraph 
(4)(B) for any fiscal year to the President who shall submit such 
request, without revision, to Congress together with the President's 
annual budget request for the Internal Revenue Service for such fiscal 
year.
    ``(e) Board Personnel Matters.--
            ``(1) Compensation of members.--
                    ``(A) In general.--Each member of the Oversight 
                Board who is described in subsection (b)(1)(A) shall be 
                compensated at a rate of $30,000 per year. All other 
                members of the Oversight Board shall serve without 
                compensation for such service.
                    ``(B) Chairperson.--In lieu of the amount specified 
                in subparagraph (A), the Chairperson of the Oversight 
                Board shall be compensated at a rate of $50,000.
            ``(2) Travel expenses.--The members of the Oversight Board 
        shall be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Oversight Board.
            ``(3) Staff.--At the request of the Chairperson of the 
        Oversight Board, the Commissioner shall detail to the Oversight 
        Board such personnel as may be necessary to enable the 
        Oversight Board to perform its duties. Such detail shall be 
        without interruption or loss of civil service status or 
        privilege.
            ``(4) Procurement of temporary and intermittent services.--
        The Chairperson of the Oversight Board may procure temporary 
        and intermittent services under section 3109(b) of title 5, 
        United States Code.
    ``(f) Administrative Matters.--
            ``(1) Chair.--The members of the Oversight Board shall 
        elect for a 2-year term a chairperson from among the members 
        appointed under subsection (b)(1)(A).
            ``(2) Committees.--The Oversight Board may establish such 
        committees as the Oversight Board determines appropriate.
            ``(3) Meetings.--The Oversight Board shall meet at least 
        once each month and at such other times as the Oversight Board 
        determines appropriate.
            ``(4) Reports.--The Oversight Board shall each year report 
        to the President and the Congress with respect to the conduct 
        of its responsibilities under this title.''.
    (b) Conforming Amendments.--
            (1) Section 4946(c) (relating to definitions and special 
        rules for chapter 42) is amended--
                    (A) by striking ``or'' at the end of paragraph (5),
                    (B) by striking the period at the end of paragraph 
                (6) and inserting ``, or'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(7) a member of the Internal Revenue Service Oversight 
        Board.''.
            (2) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7802 and 
        inserting the following new item:

                              ``Sec. 7802. Internal Revenue Service 
                                        Oversight Board.''
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Nominations to internal revenue service oversight 
        board.--The President shall submit nominations under section 
        7802 of the Internal Revenue Code of 1986, as added by this 
        section, to the Senate not later than 6 months after the date 
        of the enactment of this Act.

SEC. 102. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    (a) In General.--Section 7803 (relating to other personnel) is 
amended to read as follows:

``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    ``(a) Commissioner of Internal Revenue.--
            ``(1) Appointment.--
                    ``(A) In general.--There shall be in the Department 
                of the Treasury a Commissioner of Internal Revenue who 
                shall be appointed by the President, by and with the 
                advice and consent of the Senate, to a 5-year term. The 
                appointment shall be made without regard to political 
                affiliation or activity.
                    ``(B) Vacancy.--Any individual appointed to fill a 
                vacancy in the position of Commissioner occurring 
                before the expiration of the term for which such 
                individual's predecessor was appointed shall be 
                appointed only for the remainder of that term.
                    ``(C) Removal.--The Commissioner may be removed at 
                the will of the President.
            ``(2) Duties.--The Commissioner shall have such duties and 
        powers as the Secretary may prescribe, including the power to--
                    ``(A) administer, manage, conduct, direct, and 
                supervise the execution and application of the internal 
                revenue laws or related statutes and tax conventions to 
                which the United States is a party; and
                    ``(B) recommend to the President a candidate for 
                appointment as Chief Counsel for the Internal Revenue 
                Service when a vacancy occurs, and recommend to the 
                President the removal of such Chief Counsel.
        If the Secretary determines not to delegate a power specified 
        in subparagraph (A) or (B), such determination may not take 
        effect until 30 days after the Secretary notifies the 
        Committees on Ways and Means, Government Reform and Oversight, 
        and Appropriations of the House of Representatives, the 
        Committees on Finance, Government Operations, and 
        Appropriations of the Senate, and the Joint Committee on 
        Taxation.
            ``(3) Consultation with board.--The Commissioner shall 
        consult with the Oversight Board on all matters set forth in 
        paragraphs (2) and (3) (other than paragraph (3)(A)) of section 
        7802(d).
    ``(b) Assistant Commissioner for Employee Plans and Exempt 
Organizations.--There is established within the Internal Revenue 
Service an office to be known as the `Office of Employee Plans and 
Exempt Organizations' to be under the supervision and direction of an 
Assistant Commissioner of Internal Revenue. As head of the Office, the 
Assistant Commissioner shall be responsible for carrying out such 
functions as the Secretary may prescribe with respect to organizations 
exempt from tax under section 501(a) and with respect to plans to which 
part I of subchapter D of chapter 1 applies (and with respect to 
organizations designed to be exempt under such section and plans 
designed to be plans to which such part applies) and other nonqualified 
deferred compensation arrangements. The Assistant Commissioner shall 
report annually to the Commissioner with respect to the Assistant 
Commissioner's responsibilities under this section.
    ``(c) Office of Taxpayer Advocate.--
            ``(1) In general.--
                    ``(A) Establishment.--There is established in the 
                Internal Revenue Service an office to be known as the 
                `Office of the Taxpayer Advocate'. Such office shall be 
                under the supervision and direction of an official to 
                be known as the `Taxpayer Advocate' who shall be 
                appointed with the approval of the Oversight Board by 
                the Commissioner of Internal Revenue and shall report 
                directly to the Commissioner. The Taxpayer Advocate 
                shall be entitled to compensation at the same rate as 
                the highest level official reporting directly to the 
                Commissioner of Internal Revenue.
                    ``(B) Restriction on subsequent employment.--An 
                individual who is an officer or employee of the 
                Internal Revenue Service may be appointed as Taxpayer 
                Advocate only if such individual agrees not to accept 
                any employment with the Internal Revenue Service for at 
                least 5 years after ceasing to be the Taxpayer 
                Advocate.
            ``(2) Functions of office.--
                    ``(A) In general.--It shall be the function of the 
                Office of Taxpayer Advocate to--
                            ``(i) assist taxpayers in resolving 
                        problems with the Internal Revenue Service,
                            ``(ii) identify areas in which taxpayers 
                        have problems in dealings with the Internal 
                        Revenue Service,
                            ``(iii) to the extent possible, propose 
                        changes in the administrative practices of the 
                        Internal Revenue Service to mitigate problems 
                        identified under clause (ii), and
                            ``(iv) identify potential legislative 
                        changes which may be appropriate to mitigate 
                        such problems.
                    ``(B) Annual reports.--
                            ``(i) Objectives.--Not later than June 30 
                        of each calendar year, the Taxpayer Advocate 
                        shall report to the Committee on Ways and Means 
                        of the House of Representatives and the 
                        Committee on Finance of the Senate on the 
                        objectives of the Taxpayer Advocate for the 
                        fiscal year beginning in such calendar year. 
                        Any such report shall contain full and 
                        substantive analysis, in addition to 
                        statistical information.
                            ``(ii) Activities.--Not later than December 
                        31 of each calendar year, the Taxpayer Advocate 
                        shall report to the Committee on Ways and Means 
                        of the House of Representatives and the 
                        Committee on Finance of the Senate on the 
                        activities of the Taxpayer Advocate during the 
                        fiscal year ending during such calendar year. 
                        Any such report shall contain full and 
                        substantive analysis, in addition to 
                        statistical information, and shall--
                                    ``(I) identify the initiatives the 
                                Taxpayer Advocate has taken on 
                                improving taxpayer services and 
                                Internal Revenue Service 
                                responsiveness,
                                    ``(II) contain recommendations 
                                received from individuals with the 
                                authority to issue Taxpayer Assistance 
                                Orders under section 7811,
                                    ``(III) contain a summary of at 
                                least 20 of the most serious problems 
                                encountered by taxpayers, including a 
                                description of the nature of such 
                                problems,
                                    ``(IV) contain an inventory of the 
                                items described in subclauses (I), 
                                (II), and (III) for which action has 
                                been taken and the result of such 
                                action,
                                    ``(V) contain an inventory of the 
                                items described in subclauses (I), 
                                (II), and (III) for which action 
                                remains to be completed and the period 
                                during which each item has remained on 
                                such inventory,
                                    ``(VI) contain an inventory of the 
                                items described in subclauses (I), 
                                (II), and (III) for which no action has 
                                been taken, the period during which 
                                each item has remained on such 
                                inventory, the reasons for the 
                                inaction, and identify any Internal 
                                Revenue Service official who is 
                                responsible for such inaction,
                                    ``(VII) identify any Taxpayer 
                                Assistance Order which was not honored 
                                by the Internal Revenue Service in a 
                                timely manner, as specified under 
                                section 7811(b),
                                    ``(VIII) contain recommendations 
                                for such administrative and legislative 
                                action as may be appropriate to resolve 
                                problems encountered by taxpayers,
                                    ``(IX) identify areas of the tax 
                                law that impose significant compliance 
                                burdens on taxpayers or the Internal 
                                Revenue Service, including specific 
                                recommendations for remedying these 
                                problems,
                                    ``(X) in conjunction with the 
                                National Director of Appeals, identify 
                                the 10 most litigated issues for each 
                                category of taxpayers, including 
                                recommendations for mitigating such 
                                disputes, and
                                    ``(XI) include such other 
                                information as the Taxpayer Advocate 
                                may deem advisable.
                            ``(iii) Report to be submitted directly.--
                        Each report required under this subparagraph 
                        shall be provided directly to the committees 
                        described in clauses (i) and (ii) without any 
                        prior review or comment from the Oversight 
                        Board, the Secretary of the Treasury, any other 
                        officer or employee of the Department of the 
                        Treasury, or the Office of Management and 
                        Budget.
                    ``(C) Other responsibilities.--The Taxpayer 
                Advocate shall--
                            ``(i) monitor the coverage and geographic 
                        allocation of problem resolution officers, and
                            ``(ii) develop guidance to be distributed 
                        to all Internal Revenue Service officers and 
                        employees outlining the criteria for referral 
                        of taxpayer inquiries to problem resolution 
                        officers.
            ``(3) Responsibilities of commissioner.--The Commissioner 
        shall establish procedures requiring a formal response to all 
        recommendations submitted to the Commissioner by the Taxpayer 
        Advocate within 3 months after submission to the 
        Commissioner.''.
    (b) Conforming Amendments.--
            (1) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7803 and 
        inserting the following new item:

                              ``Sec. 7803. Commissioner of Internal 
                                        Revenue; other officials.''
            (2) Subsection (b) of section 5109 of title 5, United 
        States Code, is amended by striking ``7802(b)'' and inserting 
        ``7803(b)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Current officers.--
                    (A) In the case of an individual serving as 
                Commissioner of Internal Revenue on the date of the 
                enactment of this Act who was appointed to such 
                position before such date, the 5-year term required by 
                section 7803(a)(1) of the Internal Revenue Code of 
                1986, as added by this section, shall begin as of the 
                date of such appointment.
                    (B) Section 7803(c)(1)(B) of such Code, as added by 
                this section, shall not apply to the individual serving 
                as Taxpayer Advocate on the date of the enactment of 
                this Act.

SEC. 103. OTHER PERSONNEL.

    (a) In General.--Section 7804 (relating to the effect of 
reorganization plans) is amended to read as follows:

``SEC. 7804. OTHER PERSONNEL.

    ``(a) Appointment and Supervision.--Unless otherwise prescribed by 
the Secretary, the Commissioner of Internal Revenue is authorized to 
employ such number of persons as the Commissioner deems proper for the 
administration and enforcement of the internal revenue laws, and the 
Commissioner shall issue all necessary directions, instructions, 
orders, and rules applicable to such persons.
    ``(b) Posts of Duty of Employees in Field Service or Traveling.--
Unless otherwise prescribed by the Secretary--
            ``(1) Designation of post of duty.--The Commissioner shall 
        determine and designate the posts of duty of all such persons 
        engaged in field work or traveling on official business outside 
        of the District of Columbia.
            ``(2) Detail of personnel from field service.--The 
        Commissioner may order any such person engaged in field work to 
        duty in the District of Columbia, for such periods as the 
        Commissioner may prescribe, and to any designated post of duty 
        outside the District of Columbia upon the completion of such 
        duty.
    ``(c) Delinquent Internal Revenue Officers and Employees.--If any 
officer or employee of the Treasury Department acting in connection 
with the internal revenue laws fails to account for and pay over any 
amount of money or property collected or received by him in connection 
with the internal revenue laws, the Secretary shall issue notice and 
demand to such officer or employee for payment of the amount which he 
failed to account for and pay over, and, upon failure to pay the amount 
demanded within the time specified in such notice, the amount so 
demanded shall be deemed imposed upon such officer or employee and 
assessed upon the date of such notice and demand, and the provisions of 
chapter 64 and all other provisions of law relating to the collection 
of assessed taxes shall be applicable in respect of such amount.''.
    (b) Conforming Amendments.--
            (1) Subsection (b) of section 6344 is amended by striking 
        ``section 7803(d)'' and inserting ``section 7804(c)''.
            (2) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7804 and 
        inserting the following new item:

                              ``Sec. 7804. Other personnel.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 104. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
              AUDITS AND COLLECTION ACTIVITY.

    (a) In General.--Part I of subchapter A of chapter 75 (relating to 
crimes, other offenses, and forfeitures) is amended by adding after 
section 7216 the following new section:

``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
              AUDITS AND COLLECTION ACTIVITY.

    ``(a) Prohibition.--It shall be unlawful for any applicable person 
to request any officer or employee of the Internal Revenue Service to 
conduct or terminate an audit or other investigation of any particular 
taxpayer with respect to the tax liability of such taxpayer.
    ``(b) Reporting Requirement.--Any officer or employee of the 
Internal Revenue Service receiving any request prohibited by subsection 
(a) shall report the receipt of such request to the Chief Inspector of 
the Internal Revenue Service.
    ``(c) Exceptions.--Subsection (a) shall not apply to--
            ``(1) any request made to an applicable person by the 
        taxpayer or a representative of the taxpayer and forwarded by 
        such applicable person to the Internal Revenue Service,
            ``(2) any request by an applicable person for disclosure of 
        return or return information under section 6103 if such request 
        is made in accordance with the requirements of such section, or
            ``(3) any request by the Secretary of the Treasury as a 
        consequence of the implementation of a change in tax policy.
    ``(d) Penalty.--Any person who willfully violates subsection (a) or 
fails to report under subsection (b) shall be punished upon conviction 
by a fine in any amount not exceeding $5,000, or imprisonment of not 
more than 5 years, or both, together with the costs of prosecution.
    ``(e) Applicable Person.--For purposes of this section, the term 
`applicable person' means--
            ``(1) the President, the Vice President, any employee of 
        the executive office of the President, and any employee of the 
        executive office of the Vice President, and
            ``(2) any individual (other than the Attorney General of 
        the United States) serving in a position specified in section 
        5312 of title 5, United States Code.''
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter A of chapter 75 is amended by adding after the item relating 
to section 7216 the following new item:

                              ``Sec. 7217. Prohibition on executive 
                                        branch influence over taxpayer 
                                        audits and collection 
                                        activity.''
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made after the date of the enactment of this Act.

                  Subtitle B--Personnel Flexibilities

SEC. 111. PERSONNEL FLEXIBILITIES.

    (a) In General.--Part III of title 5, United States Code, is 
amended by adding at the end the following new subpart:

                       ``Subpart I--Miscellaneous

``CHAPTER 93--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                SERVICE

``Sec.
``9301. General requirements.
``9302. Flexibilities relating to performance management.
``9303. Staffing flexibilities.
``9304. Flexibilities relating to demonstration projects.
``Sec. 9301. General requirements
    ``(a) Conformance With Merit System Principles, Etc.--Any 
flexibilities under this chapter shall be exercised in a manner 
consistent with--
            ``(1) chapter 23, relating to merit system principles and 
        prohibited personnel practices; and
            ``(2) provisions of this title (outside of this subpart) 
        relating to preference eligibles.
    ``(b) Requirement Relating to Units Represented by Labor 
Organizations.--
            ``(1) Written agreement required.--Employees within a unit 
        with respect to which a labor organization is accorded 
        exclusive recognition under chapter 71 shall not be subject to 
        the exercise of any flexibility under section 9302, 9303, or 
        9304, unless there is a written agreement between the Internal 
        Revenue Service and the organization permitting such exercise.
            ``(2) Definition of a written agreement.--In order to 
        satisfy paragraph (1), a written agreement--
                    ``(A) need not be a collective bargaining agreement 
                within the meaning of section 7103(8); and
                    ``(B) may not be an agreement imposed by the 
                Federal Service Impasses Panel under section 7119.
``Sec. 9302. Flexibilities relating to performance management
    ``(a) In General.--The Commissioner of Internal Revenue shall, 
within a year after the date of the enactment of this chapter, 
establish a performance management system which--
            ``(1) subject to section 9301(b), shall cover all employees 
        of the Internal Revenue Service other than--
                    ``(A) the members of the Internal Revenue Service 
                Oversight Board;
                    ``(B) the Commissioner of Internal Revenue; and
                    ``(C) the Chief Counsel for the Internal Revenue 
                Service;
            ``(2) shall maintain individual accountability by--
                    ``(A) establishing standards of performance which--
                            ``(i) shall permit the accurate evaluation 
                        of each employee's performance on the basis of 
                        the individual and organizational performance 
                        requirements applicable with respect to the 
                        evaluation period involved, taking into account 
                        individual contributions toward the attainment 
                        of any goals or objectives under paragraph (3);
                            ``(ii) shall be communicated to an employee 
                        before the start of any period with respect to 
                        which the performance of such employee is to be 
                        evaluated using such standards; and
                            ``(iii) shall include at least 2 standards 
                        of performance, the lowest of which shall 
                        denote the retention standard and shall be 
                        equivalent to fully successful performance;
                    ``(B) providing for periodic performance 
                evaluations to determine whether employees are meeting 
                all applicable retention standards; and
                    ``(C) using the results of such employee's 
                performance evaluation as a basis for adjustments in 
                pay and other appropriate personnel actions; and
            ``(3) shall provide for (A) establishing goals or 
        objectives for individual, group, or organizational performance 
        (or any combination thereof), consistent with Internal Revenue 
        Service performance planning procedures, including those 
        established under the Government Performance and Results Act of 
        1993, the Information Technology Management Reform Act of 1996, 
        Revenue Procedure 64-22 (as in effect on July 30, 1997), and 
        taxpayer service surveys, (B) communicating such goals or 
        objectives to employees, and (C) using such goals or objectives 
        to make performance distinctions among employees or groups of 
        employees.
For purposes of this title, performance of an employee during any 
period in which such employee is subject to standards of performance 
under paragraph (2) shall be considered to be `unacceptable' if the 
performance of such employee during such period fails to meet any 
retention standard.
    ``(b) Awards.--
            ``(1) For superior accomplishments.--In the case of a 
        proposed award based on the efforts of an employee or former 
        employee of the Internal Revenue Service, any approval required 
        under the provisions of section 4502(b) shall be considered to 
        have been granted if the Office of Personnel Management does 
        not disapprove the proposed award within 60 days after 
        receiving the appropriate certification described in such 
        provisions.
            ``(2) For employees who report directly to the 
        commissioner.--
                    ``(A) In general.--In the case of an employee of 
                the Internal Revenue Service who reports directly to 
                the Commissioner of Internal Revenue, a cash award in 
                an amount up to 50 percent of such employee's annual 
                rate of basic pay may be made if the Commissioner finds 
                such an award to be warranted based on such employee's 
                performance.
                    ``(B) Nature of an award.--A cash award under this 
                paragraph shall not be considered to be part of basic 
                pay.
                    ``(C) Tax enforcement results.--A cash award under 
                this paragraph may not be based solely on tax 
                enforcement results.
                    ``(D) Eligible employees.--Whether or not an 
                employee is an employee who reports directly to the 
                Commissioner of Internal Revenue shall, for purposes of 
                this paragraph, be determined under regulations which 
                the Commissioner shall prescribe, except that in no 
                event shall more than 8 employees be eligible for a 
                cash award under this paragraph in any calendar year.
                    ``(E) Limitation on compensation.--For purposes of 
                applying section 5307 to an employee in connection with 
                any calendar year to which an award made under this 
                paragraph to such employee is attributable, subsection 
                (a)(1) of such section shall be applied by substituting 
                `to equal or exceed the annual rate of compensation for 
                the Vice President for such calendar year' for `to 
                exceed the annual rate of basic pay payable for level I 
                of the Executive Schedule, as of the end of such 
                calendar year'.
                    ``(F) Approval required.--An award under this 
                paragraph may not be made unless--
                            ``(i) the Commissioner of Internal Revenue 
                        certifies to the Office of Personnel Management 
                        that such award is warranted; and
                            ``(ii) the Office approves, or does not 
                        disapprove, the proposed award within 60 days 
                        after the date on which it is so certified.
            ``(3) Based on savings.--
                    ``(A) In general.--The Commissioner of Internal 
                Revenue may authorize the payment of cash awards to 
                employees based on documented financial savings 
                achieved by a group or organization which such 
                employees comprise, if such payments are made pursuant 
                to a plan which--
                            ``(i) specifies minimum levels of service 
                        and quality to be maintained while achieving 
                        such financial savings; and
                            ``(ii) is in conformance with criteria 
                        prescribed by the Office of Personnel 
                        Management.
                    ``(B) Funding.--A cash award under this paragraph 
                may be paid from the fund or appropriation available to 
                the activity primarily benefiting or the various 
                activities benefiting.
                    ``(C) Tax enforcement results.--A cash award under 
                this paragraph may not be based solely on tax 
                enforcement results.
    ``(c) Other Provisions.--
            ``(1) Notice provisions.--In applying sections 
        4303(b)(1)(A) and 7513(b)(1) to employees of the Internal 
        Revenue Service, `15 days' shall be substituted for `30 days'.
            ``(2) Appeals.--Notwithstanding the second sentence of 
        section 5335(c), an employee of the Internal Revenue Service 
        shall not have a right to appeal the denial of a periodic step 
        increase under section 5335 to the Merit Systems Protection 
        Board.
``Sec. 9303. Staffing flexibilities
    ``(a) In General.--
            ``(1) Permanent appointment in the competitive service.--
                    ``(A) Qualified veterans.--
                            ``(i) In general.--No veteran described in 
                        clause (ii) shall be denied the opportunity to 
                        compete for an announced vacant competitive 
                        service position within the Internal Revenue 
                        Service by reason of--
                                    ``(I) not having acquired 
                                competitive status; or
                                    ``(II) not being an employee of 
                                that agency.
                            ``(ii) Description.--An individual shall, 
                        for purposes of a position for which such 
                        individual is applying, be considered a veteran 
                        described in this clause if such individual--
                                    ``(I) is either a preference 
                                eligible, or an individual (other than 
                                a preference eligible) who has been 
                                separated from the armed forces under 
                                honorable conditions after at least 3 
                                years of active service; and
                                    ``(II) meets the minimum 
                                qualification requirements for the 
                                position sought.
                    ``(B) Qualified temporary employees.--
                            ``(i) In general.--No temporary employee 
                        described in clause (ii) shall be denied the 
                        opportunity to compete for an announced vacant 
                        competitive service position within the 
                        Internal Revenue Service by reason of not 
                        having acquired competitive status.
                            ``(ii) Description.--An individual shall, 
                        for purposes of a position for which such 
                        individual is applying, be considered a 
                        temporary employee described in this clause 
                        if--
                                    ``(I) such individual is then 
                                currently serving as a temporary 
                                employee in the Internal Revenue 
                                Service;
                                    ``(II) such individual has 
                                completed at least 2 years of current 
                                continuous service in the competitive 
                                service under 1 or more term 
                                appointments, each of which was made 
                                under competitive procedures prescribed 
                                for permanent appointments;
                                    ``(III) such individual's 
                                performance under each term appointment 
                                referred to in subclause (II) met all 
                                applicable retention standards; and
                                    ``(IV) such individual meets the 
                                minimum qualification requirements for 
                                the position sought.
    ``(b) Rating Systems.--
            ``(1) In general.--Notwithstanding subchapter I of chapter 
        33, the Commissioner of Internal Revenue may establish category 
        rating systems for evaluating job applicants for positions in 
        the competitive service, under which qualified candidates are 
        divided into 2 or more quality categories on the basis of 
        relative degrees of merit, rather than assigned individual 
        numerical ratings. Each applicant who meets the minimum 
qualification requirements for the position to be filled shall be 
assigned to an appropriate category based on an evaluation of the 
applicant's knowledge, skills, and abilities relative to those needed 
for successful performance in the job to be filled.
            ``(2) Treatment of preference eligibles.--Within each 
        quality category established under paragraph (1), preference 
        eligibles shall be listed ahead of individuals who are not 
        preference eligibles. For other than scientific and 
        professional positions at or higher than GS-9 (or equivalent), 
        preference eligibles who have a compensable service-connected 
        disability of 10 percent or more, and who meet the minimum 
        qualification standards, shall be listed in the highest quality 
        category.
            ``(3) Selection process.--An appointing authority may 
        select any applicant from the highest quality category or, if 
        fewer than 3 candidates have been assigned to the highest 
        quality category, from a merged category consisting of the 
        highest and second highest quality categories. Notwithstanding 
        the preceding sentence, the appointing authority may not pass 
        over a preference eligible in the same or a higher category 
        from which selection is made, unless the requirements of 
        section 3317(b) or 3318(b), as applicable, are satisfied, 
        except that in no event may certification of a preference 
        eligible under this subsection be discontinued by the Internal 
        Revenue Service under section 3317(b) before the end of the 6-
        month period beginning on the date of such employee's first 
        certification.
    ``(c) Involuntary Reassignments and Removals of Career Appointees 
in the Senior Executive Service.--Neither section 3395(e)(1) nor 
section 3592(b)(1) shall apply with respect to the Internal Revenue 
Service.
    ``(d) Probationary Periods.--Notwithstanding any other provision of 
law or regulation, the Commissioner of Internal Revenue may establish a 
period of probation under section 3321 of up to 3 years for any 
position if, as determined by the Commissioner, a shorter period would 
be insufficient for the incumbent to demonstrate complete proficiency 
in such position.
    ``(e) Provisions That Remain Applicable.--No provision of this 
section exempts the Internal Revenue Service from--
            ``(1) any employment priorities established under direction 
        of the President for the placement of surplus or displaced 
        employees; or
            ``(2) its obligations under any court order or decree 
        relating to the employment practices of the Internal Revenue 
        Service.
``Sec. 9304. Flexibilities relating to demonstration projects
    ``(a) Authority To Conduct.--The Commissioner of Internal Revenue 
may, in accordance with this section, conduct 1 or more demonstration 
projects to improve personnel management; provide increased individual 
accountability; eliminate obstacles to the removal of or imposing any 
disciplinary action with respect to poor performers, subject to the 
requirements of due process; expedite appeals from adverse actions or 
performance-based actions; and promote pay based on performance.
    ``(b) General Requirements.--Except as provided in subsection (c), 
each demonstration project under this section shall comply with the 
provisions of section 4703.
    ``(c) Special Rules.--For purposes of any demonstration project 
under this section--
            ``(1) Authority of commissioner.--The Commissioner of 
        Internal Revenue shall exercise the authority provided to the 
        Office of Personnel Management under section 4703.
            ``(2) Provisions not applicable.--The following provisions 
        of section 4703 shall not apply:
                    ``(A) Paragraphs (3) through (6) of subsection (b).
                    ``(B) Paragraphs (1), (2)(B)(ii), and (4) of 
                subsection (c).
                    ``(C) Subsections (d) through (g).
    ``(d) Notification Required To Be Given.--
            ``(1) To employees.--The Commissioner of Internal Revenue 
        shall notify employees likely to be affected by a project 
        proposed under this section at least 90 days in advance of the 
        date such project is to take effect.
            ``(2) To congress and opm.--The Commissioner of Internal 
        Revenue shall, with respect to each demonstration project under 
        this section, provide each House of Congress and the Office of 
        Personnel Management with a report, at least 30 days in advance 
        of the date such project is to take effect, setting forth the 
        final version of the plan for such project. Such report shall, 
        with respect to the project to which it relates, include the 
        information specified in section 4703(b)(1).
    ``(e) Limitations.--No demonstration project under this section 
may--
            ``(1) provide for a waiver of any regulation prescribed 
        under any provision of law referred to in paragraph (2)(B)(i) 
or (3) of section 4703(c);
            ``(2) provide for a waiver of subchapter V of chapter 63 or 
        subpart G of part III (or any regulations prescribed under such 
        subchapter or subpart);
            ``(3) provide for a waiver of any law or regulation 
        relating to preference eligibles as defined in section 2108 or 
        subchapter II or III of chapter 73 (or any regulations 
        prescribed thereunder);
            ``(4) permit collective bargaining over pay or benefits, or 
        require collective bargaining over any matter which would not 
        be required under section 7106; or
            ``(5) include a system for measuring performance that 
        provides for only 1 level of performance at or above the level 
        of fully successful or better.
    ``(f) Permissible Projects.--Notwithstanding any other provision of 
law, a demonstration project under this section--
            ``(1) may establish alternative means of resolving any 
        dispute within the jurisdiction of the Equal Employment 
        Opportunity Commission, the Merit Systems Protection Board, the 
        Federal Labor Relations Authority, or the Federal Service 
        Impasses Panel; and
            ``(2) may permit the Internal Revenue Service to adopt any 
        alternative dispute resolution procedure that a private entity 
        may lawfully adopt.
    ``(g) Consultation and Coordination.--The Commissioner of Internal 
Revenue shall consult with the Director of the Office of Personnel 
Management in the development and implementation of each demonstration 
project under this section and shall submit such reports to the 
Director as the Director may require. The Director or the Commissioner 
of Internal Revenue may terminate a demonstration project under this 
section if either of them determines that the project creates a 
substantial hardship on, or is not in the best interests of, the 
public, the Federal Government, employees, or qualified applicants for 
employment with the Internal Revenue Service.
    ``(h) Termination.--Each demonstration project under this section 
shall terminate before the end of the 5-year period beginning on the 
date on which the project takes effect, except that any such project 
may continue beyond the end of such period, for not to exceed 2 years, 
if the Commissioner of Internal Revenue, with the concurrence of the 
Director, determines such extension is necessary to validate the 
results of the project. Not later than 6 months before the end of the 
5-year period and any extension under the preceding sentence, the 
Commissioner of Internal Revenue shall, with respect to the 
demonstration project involved, submit a legislative proposal to the 
Congress if the Commissioner determines that such project should be 
made permanent, in whole or in part.''
    (b) Clerical Amendment.--The analysis for part III of title 5, 
United States Code, is amended by adding at the end the following:

                       ``Subpart I--Miscellaneous

``93. Personnel Flexibilities Relating to the Internal          9301''.
Revenue Service.
    (c) Effective Date.--This section shall take effect on the date of 
enactment of this Act.

                      TITLE II--ELECTRONIC FILING

SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

    (a) In General.--It is the policy of the Congress that paperless 
filing should be the preferred and most convenient means of filing tax 
and information returns, and that by the year 2007, no more than 20 
percent of all such returns should be filed on paper.
    (b) Strategic Plan.--
            (1) In general.--Not later than 180 days after the date of 
        the enactment of this Act, the Secretary of the Treasury or the 
        Secretary's delegate (hereafter in this section referred to as 
        the ``Secretary'') shall establish a plan to eliminate 
        barriers, provide incentives, and use competitive market forces 
        to increase electronic filing gradually over the next 10 years 
        while maintaining processing times for paper returns at 40 
        days. To the extent practicable, such plan shall provide that 
        all returns prepared electronically for taxable years beginning 
        after 2001 shall be filed electronically.
            (2) Electronic commerce advisory group.--To ensure that the 
        Secretary receives input from the private sector in the 
        development and implementation of the plan required by 
        paragraph (1), the Secretary shall convene an electronic 
        commerce advisory group to include representatives from the tax 
        practitioner, preparer, and computerized tax processor 
        communities and other representatives from the electronic 
        filing industry.
    (c) Promotion of Electronic Filing and Incentives.--Section 6011 is 
amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Promotion of Electronic Filing.--
            (1) In general.--The Secretary is authorized to promote the 
        benefits of and encourage the use of electronic tax 
        administration programs, as they become available, through the 
        use of mass communications and other means.
            ``(2) Incentives.--The Secretary may implement procedures 
        to provide for the payment of appropriate incentives for 
        electronically filed returns.''
    (d) Annual Reports.--Not later than June 30 of each calendar year 
after 1997, the Chairperson of the Internal Revenue Service Oversight 
Board, the Secretary, and the Chairperson of the electronic commerce 
advisory group established under subsection (b)(2) shall report to the 
Committees on Ways and Means, Appropriations, and Government Reform and 
Oversight of the House of Representatives, the Committees on Finance, 
Appropriations, and Government Affairs of the Senate, and the Joint 
Committee on Taxation, on--
            (1) the progress of the Internal Revenue Service in meeting 
        the goal of receiving electronically 80 percent of tax and 
        information returns by 2007;
            (2) the status of the plan required by subsection (b); and
            (3) the legislative changes necessary to assist the 
        Internal Revenue Service in meeting such goal.

SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS FILED 
              ELECTRONICALLY.

    (a) In General.--Section 6071 (relating to time for filing returns 
and other documents) is amended by redesignating subsection (b) as 
subsection (c) and by inserting after subsection (a) the following new 
subsection:
    ``(b) Electronically Filed Information Returns.--Returns made under 
subparts B and C of part III of this subchapter which are filed 
electronically shall be filed on or before March 31 of the year 
following the calendar year to which such returns relate.''
    (b) Effective Date.--The amendment made by this section shall apply 
to returns required to be filed after December 31, 1999.

SEC. 203. PAPERLESS ELECTRONIC FILING.

    (a) In General.--Section 6061 (relating to signing of returns and 
other documents) is amended--
            (1) by striking ``Except as otherwise provided by'' and 
        inserting the following:
    ``(a) General Rule.--Except as otherwise provided by subsection (b) 
and'', and
            (2) by adding at the end the following new subsection:
    ``(b) Electronic Signatures.--
            ``(1) In general.--The Secretary shall develop procedures 
        for the acceptance of signatures in digital or other electronic 
        form. Until such time as such procedures are in place, the 
        Secretary may waive the requirement of a signature for all 
        returns or classes of returns, or may provide for alternative 
        methods of subscribing all returns, declarations, statements, 
        or other documents required or permitted to be made or written 
        under internal revenue laws and regulations.
            ``(2) Treatment of alternative methods.--Notwithstanding 
        any other provision of law, any return, declaration, statement 
        or other document filed without signature under the authority 
        of this subsection or verified, signed or subscribed under any 
        method adopted under paragraph (1) shall be treated for all 
        purposes (both civil and criminal, including penalties for 
        perjury) in the same manner as though signed and subscribed. 
        Any such return, declaration, statement or other document shall 
        be presumed to have been actually submitted and subscribed by 
        the person on whose behalf it was submitted.
            ``(3) Published guidance.--The Secretary shall publish 
        guidance as appropriate to define and implement any waiver of 
        the signature requirements.''
    (b) Acknowledgment of Electronic Filing.--Section 7502(c) is 
amended to read as follows:
    ``(c) Registered and Certified Mailing; Electronic Filing.--
            ``(1) Registered mail.--For purposes of this section, if 
        any return, claim, statement, or other document, or payment, is 
        sent by United States registered mail--
                    ``(A) such registration shall be prima facie 
                evidence that the return, claim, statement, or other 
                document was delivered to the agency, officer, or 
                office to which addressed, and
                    ``(B) the date of registration shall be deemed the 
                postmark date.
            ``(2) Certified mail; electronic filing.--The Secretary is 
        authorized to provide by regulations the extent to which the 
        provisions of paragraph (1) with respect to prima facie 
        evidence of delivery and the postmark date shall apply to 
        certified mail and electronic filing.''.
    (c) Establishment of Procedures for Other Information.--In the case 
of taxable periods beginning after December 31, 1998, the Secretary of 
the Treasury or the Secretary's delegate shall, to the extent 
practicable, establish procedures to accept, in electronic form, any 
other information, statements, elections, or schedules, from taxpayers 
filing returns electronically, so that such taxpayers will not be 
required to file any paper.
    (d) Procedures for Communications Between IRS and Preparer of 
Electronically-Filed Returns.--The Secretary shall establish procedures 
for taxpayers to authorize, on electronically filed returns, the 
preparer of such returns to communicate with the Internal Revenue 
Service on matters included on such returns.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 204. RETURN-FREE TAX SYSTEM.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall develop procedures for the implementation of a return-
free tax system under which appropriate individuals would be permitted 
to comply with the Internal Revenue Code of 1986 without making the 
return required under section 6012 of such Code for taxable years 
beginning after 2007.
    (b) Report.--Not later than June 30 of each calendar year after 
1999, such Secretary shall report to the Committee on Ways and Means of 
the House of Representatives, the Committee on Finance of the Senate, 
and the Joint Committee on Taxation on--
            (1) what additional resources the Internal Revenue Service 
        would need to implement such a system,
            (2) the changes to the Internal Revenue Code of 1986 that 
        could enhance the use of such a system,
            (3) the procedures developed pursuant to subsection (a), 
        and
            (4) the number and classes of taxpayers that would be 
        permitted to use the procedures developed pursuant to 
        subsection (a).

SEC. 205. ACCESS TO ACCOUNT INFORMATION.

    Not later than December 31, 2006, the Secretary of the Treasury or 
the Secretary's delegate shall develop procedures under which a 
taxpayer filing returns electronically would be able to review the 
taxpayer's account electronically, but only if all necessary safeguards 
to ensure the privacy of such account information are in place.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

SEC. 300. SHORT TITLE.

    This title may be cited as the ``Taxpayer Bill of Rights 3''.

                      Subtitle A--Burden of Proof

SEC. 301. BURDEN OF PROOF.

    (a) In General.--Chapter 76 (relating to judicial proceedings) is 
amended by adding at the end the following new subchapter:

                    ``Subchapter E--Burden of Proof

                              ``Sec. 7491. Burden of proof.

``SEC. 7491. BURDEN OF PROOF.

    ``(a) General Rule.--The Secretary shall have the burden of proof 
in any court proceeding with respect to any factual issue relevant to 
ascertaining the income tax liability of a taxpayer.
    ``(b) Limitations.--Subsection (a) shall only apply with respect to 
an issue if--
            ``(1) the taxpayer asserts a reasonable dispute with 
        respect to such issue,
            ``(2) the taxpayer has fully cooperated with the Secretary 
        with respect to such issue, including providing, within a 
        reasonable period of time, access to and inspection of all 
        witnesses, information, and documents within the control of the 
        taxpayer, as reasonably requested by the Secretary, and
            ``(3) in the case of a partnership, corporation, or trust, 
        the taxpayer is described in section 7430(c)(4)(A)(ii).
    ``(c) Substantiation.--Nothing in this section shall be construed 
to override any requirement of this title to substantiate any item.''
    (b) Conforming Amendments.--
            (1) Section 6201 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
            (2) The table of subchapters for chapter 76 is amended by 
        adding at the end the following new item:

                              ``Subchapter E. Burden of proof.''
    (c) Effective Date.--The amendments made by this section shall 
apply to court proceedings arising in connection with examinations 
commencing after the date of the enactment of this Act.

                  Subtitle B--Proceedings by Taxpayers

SEC. 311. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES.

    (a) Award of Higher Attorney's Fees Based on Complexity of 
Issues.--Clause (iii) of section 7430(c)(1)(B) (relating to the award 
of costs and certain fees) is amended by inserting ``, the difficulty 
of the issues presented in the case, or the local availability of tax 
expertise,'' before ``justifies a higher rate''.
    (b) Award of Administrative Costs Incurred After 30-Day Letter.--
Paragraph (2) of section 7430(c) is amended by striking the last 
sentence and inserting the following:
        ``Such term shall only include costs incurred on or after 
        whichever of the following is the earliest: (i) the date of the 
        receipt by the taxpayer of the notice of the decision of the 
        Internal Revenue Service Office of Appeals, (ii) the date of 
        the notice of deficiency, or (iii) the date on which the 1st 
        letter of proposed deficiency which allows the taxpayer an 
        opportunity for administrative review in the Internal Revenue 
        Service Office of Appeals is sent. Clause (iii) of the 
        preceding sentence shall apply only if, on the basis of 
        information in the possession of the United States as of the 
        date referred to in such clause, there is no reasonable basis 
        for the position of the United States.''
    (c) Award of Fees for Certain Additional Services.--Paragraph (3) 
of section 7430(c) is amended to read as follows:
            ``(3) Attorney's fees.--
                    ``(A) In general.--For purposes of paragraphs (1) 
                and (2), fees for the services of an individual 
                (whether or not an attorney) who is authorized to 
practice before the Tax Court or before the Internal Revenue Service 
shall be treated as fees for the services of an attorney.
                    ``(B) Pro bono services.--In any case in which the 
                court could have awarded attorney's fees under 
                subsection (a) but for the fact that an individual is 
                representing the prevailing party for a fee which 
                (taking into account all the facts and circumstances) 
                is no more than a nominal fee, the court may also award 
                a judgment or settlement for such amounts as the court 
                determines to be appropriate (based on hours worked and 
                costs expended) for services of such individual but 
                only if such award is paid to such individual or such 
                individual's employer.''
    (d) Determination of Whether Position of United States is 
Substantially Justified.--Subparagraph (B) of section 7430(c)(4) is 
amended by redesignating clause (iii) as clause (iv) and by inserting 
after clause (ii) the following new clause:
                            ``(iii) Effect of losing on substantially 
                        similar issues.--In determining for purposes of 
                        clause (i) whether the position of the United 
                        States was substantially justified, the court 
                        shall take into account whether the United 
                        States has lost in courts of appeal for other 
                        circuits on substantially similar issues.''
    (e) Effective Date.--The amendments made by this section shall 
apply to costs incurred (and, in the case of the amendment made by 
subsection (c), services performed) more than 180 days after the date 
of the enactment of this Act.

SEC. 312. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.

    (a) In General.--Section 7433 (relating to civil damages for 
certain unauthorized collection actions) is amended--
            (1) in subsection (a), by inserting ``, or by reason of 
        negligence,'' after ``recklessly or intentionally'', and
            (2) in subsection (b)--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``($100,000, in the case of negligence)'' 
                after ``$1,000,000'', and
                    (B) in paragraph (1), by inserting ``or negligent'' 
                after ``reckless or intentional''.
    (b) Requirement That Administrative Remedies Be Exhausted.--
Paragraph (1) of section 7433(d) is amended to read as follows:
            ``(1) Requirement that administrative remedies be 
        exhausted.--A judgment for damages shall not be awarded under 
        subsection (b) unless the court determines that the plaintiff 
        has exhausted the administrative remedies available to such 
        plaintiff within the Internal Revenue Service.''
    (c) Effective Date.--The amendments made by this section shall 
apply to actions of officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 313. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE CALENDAR.

    (a) In General.--Subsection (a) of section 7463 (relating to 
disputes involving $10,000 or less) is amended by striking ``$10,000'' 
each place it appears and inserting ``$25,000''.
    (b) Conforming Amendments.--
            (1) The section heading for section 7463 is amended by 
        striking ``$10,000'' and inserting ``$25,000''.
            (2) The item relating to section 7463 in the table of 
        sections for part II of subchapter C of chapter 76 is amended 
        by striking ``$10,000'' and inserting ``$25,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to proceedings commencing after the date of the enactment of this 
Act.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

SEC. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LIABILITY IN CERTAIN 
              CASES.

    (a) In General.--Subpart B of part II of subchapter A of chapter 61 
is amended by inserting after section 6014 the following new section:

``SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.

    ``(a) Spouse Relieved of Liability in Certain Cases.--
            ``(1) In general.--Under procedures prescribed by the 
        Secretary, if--
                    ``(A) a joint return has been made under section 
                6013 for a taxable year,
                    ``(B) on such return there is an understatement of 
                tax attributable to erroneous items of 1 spouse,
                    ``(C) the other spouse establishes that in signing 
                the return he or she did not know, and had no reason to 
                know, that there was such understatement,
                    ``(D) taking into account all the facts and 
                circumstances, it is inequitable to hold the other 
                spouse liable for the deficiency in tax for such 
                taxable year attributable to such understatement, and
                    ``(E) the other spouse claims (in such form as the 
                Secretary may prescribe) the benefits of this 
                subsection not later than the date which is 2 years 
                after the date of the assessment of such deficiency,
        then the other spouse shall be relieved of liability for tax 
        (including interest, penalties, and other amounts) for such 
        taxable year to the extent such liability is attributable to 
        such understatement.
            ``(2) Apportionment of relief.--If a spouse who, but for 
        paragraph (1)(C), would be relieved of liability under 
        paragraph (1), establishes that in signing the return such 
        spouse did not know, and had no reason to know, the extent of 
        such understatement, then such spouse shall be relieved of 
        liability for tax (including interest, penalties, and other 
        amounts) for such taxable year to the extent that such 
        liability is attributable to the portion of such understatement 
        of which such spouse did not know and had no reason to know.
            ``(3) Understatement.--For purposes of this subsection, the 
        term `understatement' has the meaning given to such term by 
        section 6662(d)(2)(A).
            ``(4) Special rule for community property income.--For 
        purposes of this subsection, the determination of the spouse to 
        whom items of gross income (other than gross income from 
        property) are attributable shall be made without regard to 
        community property laws.
    ``(b) Petition for Review by Tax Court.--In the case of an 
individual who has filed a claim under subsection (a) within the period 
specified in subsection (a)(1)(E)--
            ``(1) In general.--Such individual may petition the Tax 
        Court (and the Tax Court shall have jurisdiction) to determine 
        such claim if such petition is filed during the 90-day period 
        beginning on the earlier of--
                    ``(A) the date which is 6 months after the date 
                such claim is filed with the Secretary, or
                    ``(B) the date on which the Secretary mails by 
                certified or registered mail a notice to such 
                individual denying such claim.
        Such 90-day period shall be determined by not counting 
        Saturday, Sunday, or a legal holiday in the District of 
        Columbia as the last day of such period.
            ``(2) Restrictions applicable to collection of 
        assessment.--
                    ``(A) In general.--Except as otherwise provided in 
                section 6851, 6852, or 6861, no levy or proceeding in 
                court for collection of any assessment to which such 
                claim relates shall be made, begun, or prosecuted, 
                until the expiration of the 90-day period described in 
                paragraph (1), nor, if a petition has been filed with 
                the Tax Court, until the decision of the Tax Court has 
                become final. Rules similar to the rules of section 
                7485 shall apply with respect to the collection of such 
                assessment.
                    ``(B) Authority to enjoin collection actions.--
                Notwithstanding the provisions of section 7421(a), the 
                beginning of such proceeding or levy during the time 
                the prohibition under subparagraph (A) is in force may 
                be enjoined by a proceeding in the proper court, 
                including the Tax Court.
                    ``(C) Jeopardy collection.--If the Secretary makes 
                a finding that the collection of the tax is in 
                jeopardy, nothing in this subsection shall prevent the 
                immediate collection of such tax.
    ``(c) Suspension of Running of Period of Limitations.--The running 
of the period of limitations in section 6502 on the collection of the 
assessment to which the petition under subsection (b) relates shall be 
suspended for the period during which the Secretary is prohibited by 
subsection (b) from collecting by levy or a proceeding in court and for 
60 days thereafter.
    ``(d) Applicable Rules.--
            ``(1) Allowance of application.--Except as provided in 
        paragraph (2), notwithstanding any other law or rule of law 
        (other than section 6512(b), 7121, or 7122), credit or refund 
        shall be allowed or made to the extent attributable to the 
        application of this section.
            ``(2) Res judicata.--In the case of any claim under 
        subsection (a), the determination of the Tax Court in any prior 
        proceeding for the same taxable periods in which the decision 
        has become final, shall be conclusive except with respect to 
the qualification of the spouse for relief which was not an issue in 
such proceeding. The preceding sentence shall not apply if the Tax 
Court determines that the spouse participated meaningfully in such 
prior proceeding.
            ``(3) Limitation on tax court jurisdiction.--If a suit for 
        refund is begun by either spouse pursuant to section 6532, the 
        Tax Court shall lose jurisdiction of the spouse's action under 
        this section to whatever extent jurisdiction is acquired by the 
        district court or the United States Court of Federal Claims 
        over the taxable years that are the subject of the suit for 
        refund.''
    (b) Separate Form for Applying for Spousal Relief.--Not later than 
180 days after the date of the enactment of this Act, the Secretary of 
the Treasury shall develop a separate form with instructions for use by 
taxpayers in applying for relief under section 6015(a) of the Internal 
Revenue Code of 1986, as added by this section.
    (c) Conforming Amendment.--Section 6013 is amended by striking 
subsection (e).
    (d) Clerical Amendment.--The table of sections for subpart B of 
part II of subchapter A of chapter 61 is amended by inserting after the 
item relating to section 6014 the following new item:

                              ``Sec. 6015. Innocent spouse relief; 
                                        petition to Tax Court.''

    (e) Effective Date.--The amendments made by this section shall 
apply to understatements for taxable years beginning after the date of 
the enactment of this Act.

SEC. 322. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING REFUND CLAIMS 
              DURING PERIODS OF DISABILITY.

    (a) In General.--Section 6511 (relating to limitations on credit or 
refund) is amended by redesignating subsection (h) as subsection (i) 
and by inserting after subsection (g) the following new subsection:
    ``(h) Running of Periods of Limitation Suspended While Taxpayer Is 
Unable To Manage Financial Affairs Due to Disability.--
            ``(1) In general.--In the case of an individual, the 
        running of the periods specified in subsections (a), (b), and 
        (c) shall be suspended during any period of such individual's 
        life that such individual is financially disabled.
            ``(2) Financially disabled.--
                    ``(A) In general.--For purposes of paragraph (1), 
                an individual is financially disabled if such 
                individual is unable to manage his financial affairs by 
                reason of his medically determinable physical or mental 
                impairment which can be expected to result in death or 
                which has lasted or can be expected to last for a 
                continuous period of not less than 12 months. An 
                individual shall not be considered to have such an 
                impairment unless proof of the existence thereof is 
                furnished in such form and manner as the Secretary may 
                require.
                    ``(B) Exception where individual has guardian, 
                etc.--An individual shall not be treated as financially 
                disabled during any period that such individual's 
                spouse or any other person is authorized to act on 
                behalf of such individual in financial matters.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to claims for credit or refund for periods ending after the date 
of the enactment of this Act.

 Subtitle D--Elimination of Interest Rate Differential on Overlapping 
    Periods of Interest on Income Tax Overpayments and Underpayments

SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON OVERLAPPING 
              PERIODS OF INTEREST ON INCOME TAX OVERPAYMENTS AND 
              UNDERPAYMENTS.

    (a) In General.--Section 6621 (relating to determination of rate of 
interest) is amended by adding at the end the following new subsection:
    ``(d) Elimination of Interest on Overlapping Periods of Income Tax 
Overpayments and Underpayments.--To the extent that, for any period, 
interest is payable under subchapter A and allowable under subchapter B 
on equivalent underpayments and overpayments by the same taxpayer of 
tax imposed by chapters 1 and 2, the net rate of interest under this 
section on such amounts shall be zero for such period.''
    (b) Conforming Amendment.--Subsection (f) of section 6601 (relating 
to satisfaction by credits) is amended by adding at the end the 
following ``The preceding sentence shall not apply to the extent that 
section 6621(d) applies.''
    (c) Effective Date.--The amendments made by this section shall 
apply to interest for calendar quarters beginning after the date of the 
enactment of this Act.

 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S DEALINGS 
              WITH NON-ATTORNEYS AUTHORIZED TO PRACTICE BEFORE INTERNAL 
              REVENUE SERVICE.

    Section 7602 (relating to examination of books and witnesses) is 
amended by adding at the end the following new subsection:
    ``(d) Privilege of Confidentiality Extended to Taxpayer's Dealings 
with Non-Attorneys Authorized to Practice Before Internal Revenue 
Service.--
            ``(1) In general.--In any noncriminal proceeding before the 
        Internal Revenue Service, the taxpayer shall be entitled to the 
        same common law protections of confidentiality with respect to 
        tax advice furnished by any qualified individual as the 
        taxpayer would have if such individual were an attorney.
            ``(2) Qualified individual.--For purposes of paragraph (1), 
        the term `qualified individual' means any individual (other 
        than an attorney)--
                    ``(A) who is authorized to practice before the 
                Internal Revenue Service, and
                    ``(B) who is providing the tax advice within the 
                scope permitted under State law for such individual's 
                profession.''

SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE ORDERS.

    Section 7811(a) (relating to taxpayer assistance orders) is 
amended--
            (1) by striking ``Upon application'' and inserting the 
        following:
            ``(1) In general.--Upon application'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraphs:
            ``(2) Issuance of taxpayer assistance orders.--For purposes 
        of determining whether to issue a taxpayer assistance order, 
        the Taxpayer Advocate shall consider the following factors, 
        among others:
                    ``(A) Whether there is an immediate threat of 
                adverse action.
                    ``(B) Whether there has been an unreasonable delay 
                in resolving taxpayer account problems.
                    ``(C) Whether the taxpayer will have to pay 
                significant costs (including fees for professional 
                representation) if relief is not granted.
                    ``(D) Whether the taxpayer will suffer irreparable 
                injury, or a long-term adverse impact, if relief is not 
                granted.
            ``(3) Standard where administrative guidance not 
        followed.--In cases where any Internal Revenue Service employee 
        is not following applicable published administrative guidance 
        (including the Internal Revenue Manual), the Taxpayer Advocate 
        shall construe the factors taken into account in determining 
        whether to issue a taxpayer assistance order in the manner most 
        favorable to the taxpayer.''

SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

    Section 7602 is amended by adding at the end the following new 
subsection:
    ``(e) Limitation on Examination on Unreported Income.--The 
Secretary shall not use financial status or economic reality 
examination techniques to determine the existence of unreported income 
of any taxpayer unless the Secretary has a reasonable indication that 
there is a likelihood of such unreported income.''

SEC. 344. LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF COMPUTER 
              SOURCE CODE.

    (a) In General.--Section 7602 is amended by adding at the end the 
following new subsection:
    ``(f) Limitation on Authority To Require Production of Computer 
Source Code.--
            ``(1) In general.--No summons may be issued under this 
        title, and the Secretary may not begin any action under section 
        7604 to enforce any summons, to produce or examine any tax-
        related computer source code.
            ``(2) Exception where information not otherwise available 
        to verify correctness of item on return.--Paragraph (1) shall 
        not apply to any portion of a tax-related computer source code 
        if--
                    ``(A) the Secretary is unable to otherwise 
                reasonably ascertain the correctness of any item on a 
                return from--
                            ``(i) the taxpayer's books, papers, 
                        records, or other data, or
                            ``(ii) the computer software program and 
                        the associated data which, when executed, 
                        produces the output to prepare the return for 
                        the period involved, and
                    ``(B) the Secretary identifies with reasonable 
                specificity such portion as to be used to verify the 
                correctness of such item.
        The Secretary shall be treated as meeting the requirements of 
        subparagraphs (A) and (B) after the 90th day after the 
        Secretary makes a formal request to the taxpayer and the owner 
        or developer of the computer software program for the material 
        described in subparagraph (A)(ii) if such material is not 
        provided before the close of such 90th day.
            ``(3) Other exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any inquiry into any offense connected with 
                the administration or enforcement of the internal 
                revenue laws, and
                    ``(B) any tax-related computer source code 
                developed by (or primarily for the benefit of) the 
                taxpayer or a related person (within the meaning of 
                section 267 or 707(b)) for internal use by the taxpayer 
                or such person and not for commercial distribution.
            ``(4) Tax-related computer source code.--For purposes of 
        this subsection, the term `tax-related computer source code' 
        means--
                    ``(A) the computer source code for any computer 
                software program for accounting, tax return preparation 
                or compliance, or tax planning, or
                    ``(B) design and development materials related to 
                such a software program (including program notes and 
                memoranda).
            ``(5) Right to contest summons.--The determination of 
        whether the requirements of subparagraphs (A) and (B) of 
        paragraph (2) are met or whether any exception under paragraph 
        (3) applies may be contested in any proceeding under section 
        7604.
            ``(6) Protection of trade secrets and other confidential 
        information.--In any court proceeding to enforce a summons for 
        any portion of a tax-related computer source code, the court 
        may issue any order necessary to prevent the disclosure of 
        trade secrets or other confidential information with respect to 
        such source code, including providing that any information be 
        placed under seal to be opened only as directed by the court.''
    (b) Application of Special Procedures for Third-Party Summonses.--
Paragraph (3) of section 7609(a) (defining third-party recordkeeper) is 
amended by striking ``and'' at the end of subparagraph (H), by striking 
a period at the end of subparagraph (I) and inserting ``; and'', and by 
adding at the end the following new subparagraph:
                    ``(J) any owner or developer of a tax-related 
                computer source code (as defined in section 
                7602(f)(4)).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to summonses issued more than 90 days after the date of the 
enactment of this Act.

SEC. 345. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF LIMITATIONS 
              BY AGREEMENT.

    (a) In General.--Paragraph (4) of section 6501(c) (relating to the 
period for limitations on assessment and collection) is amended--
            (1) by striking ``Where'' and inserting the following:
                    ``(A) In general.--Where'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new subparagraph:
                    ``(B) Notice to taxpayer of right to refuse or 
                limit extension.--The Secretary shall notify the 
                taxpayer of the taxpayer's right to refuse to extend 
                the period of limitations, or to limit such extension 
                to particular issues, on each occasion when the 
                taxpayer is requested to provide such consent.''
    (b) Effective Date.--The amendments made by this section shall 
apply to requests to extend the period of limitations made after the 
date of the enactment of this Act.

SEC. 346. OFFERS-IN-COMPROMISE.

    (a) Allowances For Basic Living Expenses.--Section 7122 (relating 
to offers-in-compromise) is amended by adding at the end the following 
new subsection:
    ``(c) Allowances For Basic Living Expenses.--The Secretary shall 
develop and publish schedules of national and local allowances designed 
to provide that taxpayers entering into a compromise have an adequate 
means to provide for basic living expenses.''
    (b) Preparation of Statement Relating to Offers-in-Compromise.--The 
Secretary of the Treasury shall prepare a statement which sets forth in 
simple, nontechnical terms the rights of a taxpayer and the obligations 
of the Internal Revenue Service relating to offers-in-compromise. Such 
statement shall--
            (1) advise taxpayers who have entered into a compromise 
        agreement of the advantages of promptly notifying the Internal 
        Revenue Service of any change of address or marital status, and
            (2) provide notice to taxpayers that in the case of a 
        compromise agreement terminated due to the actions of 1 spouse 
        or former spouse, the Internal Revenue Service will, upon 
        application, reinstate such agreement with the spouse or former 
        spouse who remains in compliance with such agreement.

SEC. 347. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR FILING TAX 
              COURT PETITION.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall include on each notice of deficiency under section 6212 
of the Internal Revenue Code of 1986 the date determined by such 
Secretary (or delegate) as the last day on which the taxpayer may file 
a petition with the Tax Court.
    (b) Later Filing Deadlines Specified on Notice of Deficiency To Be 
Binding.--Subsection (a) of section 6213 (relating to restrictions 
applicable to deficiencies; petition to Tax Court) is amended by adding 
at the end the following new sentence: ``Any petition filed with the 
Tax Court on or before the last date specified for filing such petition 
by the Secretary in the notice of deficiency shall be treated as timely 
filed.''
    (c) Effective Date.--Subsection (a) and the amendment made by 
subsection (b) shall apply to notices mailed after December 31, 1998.

SEC. 348. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL DETERMINATION.

    (a) Tax Court Proceedings.--Subsection (a) of section 6213 is 
amended--
            (1) by striking ``, including the Tax Court.'' and 
        inserting ``, including the Tax Court, and a refund may be 
        ordered by such court of any amount collected within the period 
        during which the Secretary is prohibited from collecting by 
        levy or through a proceeding in court under the provisions of 
        this subsection.'', and
            (2) by striking ``to enjoin any action or proceeding'' and 
        inserting ``to enjoin any action or proceeding or order any 
        refund''.
    (b) Other Proceedings.--Subsection (a) of section 6512 is amended 
by striking the period at the end of paragraph (4) and inserting ``, 
and'', and by inserting after paragraph (4) the following new 
paragraphs:
            ``(5) As to any amount collected within the period during 
        which the Secretary is prohibited from making the assessment or 
        from collecting by levy or through a proceeding in court under 
        the provisions of section 6213(a), and
            ``(6) As to overpayments the Secretary is authorized to 
        refund or credit pending appeal as provided in subsection 
        (b).''
    (c) Refund or Credit Pending Appeal.--Paragraph (1) of section 
6512(b) is amended by adding at the end the following new sentence: 
``If a notice of appeal in respect of the decision of the Tax Court is 
filed under section 7483, the Secretary is authorized to refund or 
credit the overpayment determined by the Tax Court to the extent the 
overpayment is not contested on appeal.''
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 349. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING 
              ALTERNATIVE COMMITMENT AGREEMENTS.

    The Secretary of the Treasury or the Secretary's delegate shall 
instruct employees of the Internal Revenue Service that they may not 
threaten to audit any taxpayer in an attempt to coerce the taxpayer 
into entering into a Tip Reporting Alternative Commitment Agreement.

                  Subtitle F--Disclosures to Taxpayers

SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable, but not later than 180 days after the date of the 
enactment of this Act, establish procedures to clearly alert married 
taxpayers of their joint and several liabilities on all appropriate 
publications and instructions.

SEC. 352. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH THE 
              INTERNAL REVENUE SERVICE.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable, but not later than 180 days after the date of the 
enactment of this Act, revise the statement required by section 6227 of 
the Omnibus Taxpayer Bill of Rights (Internal Revenue Service 
Publication No. 1) to more clearly inform taxpayers of their rights--
            (1) to be represented at interviews with the Internal 
        Revenue Service by any person authorized to practice before the 
        Internal Revenue Service, and
            (2) to suspend an interview pursuant to section 7521(b)(2) 
        of the Internal Revenue Code of 1986.

SEC. 353. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall, as soon as practicable, but not later than 180 days 
after the date of the enactment of this Act, incorporate into the 
statement required by section 6227 of the Omnibus Taxpayer Bill of 
Rights (Internal Revenue Service Publication No. 1) a statement which 
sets forth in simple and nontechnical terms the criteria and procedures 
for selecting taxpayers for examination. Such statement shall not 
include any information the disclosure of which would be detrimental to 
law enforcement, but shall specify the general procedures used by the 
Internal Revenue Service, including the extent to which taxpayers are 
selected for examination on the basis of information available in the 
media or on the basis of information provided to the Internal Revenue 
Service by informants.
    (b) Transmission to Committees of Congress.--The Secretary shall 
transmit drafts of the statement required under subsection (a) (or 
proposed revisions to any such statement) to the Committee on Ways and 
Means of the House of Representatives, the Committee on Finance of the 
Senate, and the Joint Committee on Taxation on the same day.

SEC. 354. DISCLOSURE OF FIELD SERVICE ADVICE MEMORANDA.

    (a) In General.--Section 6110 (relating to public inspection of 
written determinations) is amended by redesignating subsections (i), 
(j), (k), and (l) as subsections (j), (k), (l), and (m), respectively, 
and by inserting after subsection (h) the following new subsection:
    ``(i) Disclosure of Field Service Advice Memoranda.--
            ``(1) In general.--For purposes of this section, and except 
        as otherwise provided in this subsection, a field service 
        advice memorandum shall be treated as a written determination.
            ``(2) Exemptions from disclosure.--Before making a field 
        service advice memorandum open to public inspection pursuant to 
        paragraph (1), the Secretary, in addition to matters deleted 
        under subsection (c), shall also delete--
                    ``(A) information regarding the scope, direction, 
                or emphasis of audit or collection activity, including 
                case tactics, strategies, alternative theories, and 
                assessments of litigating hazards,
                    ``(B) information the disclosure of which could 
                reasonably be expected to risk circumvention of law, 
                and
                    ``(C) information the disclosure of which could 
                reasonably be expected to reveal the identity of a 
                confidential source.
            ``(3) Notice of intention to disclose.--For purposes of 
        this subsection, the notice required by subsection (f)(1) shall 
        be mailed within 180 days after the date of the issuance of a 
        field service advice memorandum, together with a copy of such 
        memorandum in which the Secretary has deleted the information 
        described in subsection (c), paragraph (2) of this subsection, 
        and the names, addresses, and other identifying details of 
        taxpayers other than the person to whom the memorandum 
        pertains. The preceding sentence shall not apply to the extent 
        that such information was provided by such person.
            ``(4) Special rules for certain field service advice 
        memoranda.--Notwithstanding subsection (g)(5), in addition to 
        matters not required to be made available to the public under 
        such subsection, the Secretary shall not be required to make 
        available to the public any field service advice memorandum 
        issued in connection with--
                    ``(A) cases docketed in any Federal or State court, 
                or
                    ``(B) any criminal investigation.
            ``(5) No evidentiary value.--A field service advice 
        memorandum shall not be considered by any court as evidence of 
        an Internal Revenue Service position or as an admission against 
        interest.
            ``(6) Certain rules inapplicable.--Subsections (d) and (e) 
        shall not apply to any field service advice memorandum.
            ``(7) Field service advice memorandum defined.--The term 
        `field service advice memorandum' means case-specific written 
        advice issued by the National Office of Chief Counsel to field 
        personnel of either the Internal Revenue Service or the Office 
        of Chief Counsel with respect to the determination of the 
        existence, or possible existence, of liability (or the amount 
        thereof) of any person under this title for any tax, penalty, 
        interest, fine, forfeiture, or other imposition, or offense.''
    (b) Legal or Factual Analyses Only Disclosable Under Section 
6110.--Paragraph (2) of section 6103(b) is amended--
            (1) in subparagraph (A), by inserting ``or analyses of law 
        or fact'' after ``data'', and
            (2) in subparagraph (B), by striking ``section 6110(b)'' 
        and inserting ``subsections (b) and (i) of section 6110''.
    (c) Effective Dates.--
            (1) Disclosure of field service memoranda.--
                    (A) In general.--The amendments made by subsection 
                (a) shall apply to any field service advice memorandum 
                issued more than 90 days after the date of the 
                enactment of this Act.
                    (B) Prior field service advice memoranda.--The 
                amendments made by subsection (a) also shall apply to 
                any field service advice memorandum issued after 1991 
                and before the 91st day after the date of the enactment 
                of this Act by the offices of the associate chief 
                counsels for domestic, employee benefits and exempt 
                organizations, and international, as follows:
                            (i) Such amendments shall take effect on 
                        January 1, 1999 (or, if later, the date which 
                        is 1 year after the date of the enactment of 
                        this Act) in the case of memoranda issued 
                        during 1992 or 1993.
                            (ii) Such amendments shall take effect on 
                        January 1, 2000 (or, if later, the date which 
is 2 years after the date of the enactment of this Act) in the case of 
memoranda issued during 1994 or 1995.
                            (iii) Such amendments shall take effect on 
                        January 1, 2001 (or, if later, the date which 
                        is 3 years after the date of the enactment of 
                        this Act) in the case of memoranda issued after 
                        1995 and before such 91st day.
                The Secretary of the Treasury or the Secretary's 
                delegate may provide that clauses (i), (ii), and (iii) 
                shall be applied by substituting effective dates which 
                are earlier than the effective dates specified in such 
                clauses.
            (2) Disclosure of legal or factual analyses.--The 
        amendments made by subsection (b) shall take effect on the date 
        of the enactment of this Act.

SEC. 355. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable but not later than 180 days after the date of the 
enactment of this Act, include with any 1st letter of proposed 
deficiency which allows the taxpayer an opportunity for administrative 
review in the Internal Revenue Service Office of Appeals an explanation 
of the appeals process and the collection process with respect to such 
proposed deficiency.

                Subtitle G--Low Income Taxpayer Clinics

SEC. 361. LOW INCOME TAXPAYER CLINICS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7525. LOW INCOME TAXPAYER CLINICS.

    ``(a) In General.--The Secretary shall make grants to provide 
matching funds for the development, expansion, or continuation of 
qualified low income taxpayer clinics.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified low income taxpayer clinic.--
                    ``(A) In general.--The term `qualified low income 
                taxpayer clinic' means a clinic that--
                            ``(i) does not charge more than a nominal 
                        fee for its services (except for reimbursement 
                        of actual costs incurred), and
                            ``(ii)(I) represents low income taxpayers 
                        in controversies with the Internal Revenue 
                        Service, or
                            ``(II) operates programs to inform 
                        individuals for whom English is a second 
                        language about their rights and 
                        responsibilities under this title.
                    ``(B) Representation of low income taxpayers.--A 
                clinic meets the requirements of subparagraph 
                (A)(ii)(I) if--
                            ``(i) at least 90 percent of the taxpayers 
                        represented by the clinic have incomes which do 
                        not exceed 250 percent of the poverty level, as 
                        determined in accordance with criteria 
                        established by the Director of the Office of 
                        Management and Budget, and
                            ``(ii) the amount in controversy for any 
                        taxable year generally does not exceed the 
                        amount specified in section 7463.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an accredited law 
                school in which students represent low income taxpayers 
                in controversies arising under this title, and
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1) through 
                representation of taxpayers or referral of taxpayers to 
                qualified representatives.
            ``(3) Qualified representative.--The term `qualified 
        representative' means any individual (whether or not an 
        attorney) who is authorized to practice before the Internal 
        Revenue Service or the applicable court.
    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $3,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(2) Limitation on individual grants.--A grant under this 
        section shall not exceed $100,000 per year.
            ``(3) Multi-year grants.--Upon application of a qualified 
        low income taxpayer clinic, the Secretary is authorized to 
        award a multi-year grant not to exceed 3 years.
            ``(4) Criteria for awards.--In determining whether to make 
        a grant under this section, the Secretary shall consider--
                    ``(A) the numbers of taxpayers who will be served 
                by the clinic, including the number of taxpayers in the 
                geographical area for whom English is a second 
                language,
                    ``(B) the existence of other low income taxpayer 
                clinics serving the same population,
                    ``(C) the quality of the program offered by the low 
                income taxpayer clinic, including the qualifications of 
                its administrators and qualified representatives, and 
                its track record, if any, in providing service to low 
                income taxpayers, and
                    ``(D) alternative funding sources available to the 
                clinic, including amounts received from other grants 
                and contributions, and the endowment and resources of 
                the institution sponsoring the clinic.
            ``(5) Requirement of matching funds.--A low income taxpayer 
        clinic must provide matching funds on a dollar for dollar basis 
        for all grants provided under this section. Matching funds may 
        include--
                    ``(A) the salary (including fringe benefits) of 
                individuals performing services for the clinic, and
                    ``(B) the cost of equipment used in the clinic.
        Indirect expenses, including general overhead of the 
        institution sponsoring the clinic, shall not be counted as 
        matching funds.''
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new section:

                              ``Sec. 7525. Low income taxpayer 
                                        clinics.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                       Subtitle H--Other Matters

SEC. 371. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES WHICH HAVE 
              ELECTED THE INSTALLMENT METHOD OF PAYMENT.

    (a) In General.--Section 7422 is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection (i) 
the following new subsection:
    ``(j) Special Rule for Actions With Respect to Estates for Which an 
Election Under Section 6166 Is Made.--
            ``(1) In general.--The district courts of the United States 
        and the United States Court of Federal Claims shall have 
        jurisdiction over any action brought by the representative of 
        an estate to which this subsection applies to determine the 
        correct amount of the estate tax liability of such estate (or 
        for any refund with respect thereto) even if the full amount of 
        such liability has not been paid.
            ``(2) Estates to which subsection applies.--This subsection 
        shall apply to any estate if, as of the date the action is 
        filed--
                    ``(A) an election under section 6166 is in effect 
                with respect to such estate,
                    ``(B) no portion of the installments payable under 
                such section have been accelerated, and
                    ``(C) all installments the due date for which is on 
                or before the date the action is filed have been paid.
            ``(3) Prohibition on collection of disallowed liability.--
        If the court redetermines under paragraph (1) the estate tax 
        liability of an estate, no part of such liability which is 
        disallowed by a decision of such court which has become final 
        may be collected by the Secretary, and amounts paid in excess 
        of the installments determined by the court as currently due 
        and payable shall be refunded.''
    (b) Extension of Time To File Refund Suit.--Section 7479 (relating 
to declaratory judgments relating to eligibility of estate with respect 
to installment payments under section 6166) is amended by adding at the 
end the following new subsection:
    ``(c) Extension of Time To File Refund Suit.--The 2-year period in 
section 6532(a)(1) for filing suit for refund after disallowance of a 
claim shall be suspended during the 90-day period after the mailing of 
the notice referred to in subsection (b)(3) and, if a pleading has been 
filed with the Tax Court under this section, until the decision of the 
Tax Court has become final.''
    (c) Effective Date.--The amendments made by this section shall 
apply to any claim for refund filed after the date of the enactment of 
this Act.

SEC. 372. CATALOGING COMPLAINTS.

    In collecting data for the report required under section 1211 of 
Taxpayer Bill of Rights 2 (Public Law 104-168), the Secretary of the 
Treasury or the Secretary's delegate shall maintain records of taxpayer 
complaints of misconduct by Internal Revenue Service employees on an 
individual employee basis.

SEC. 373. ARCHIVE OF RECORDS OF INTERNAL REVENUE SERVICE.

    (a) In General.--Subsection (l) of section 6103 (relating to 
confidentiality and disclosure of returns and return information) is 
amended by adding at the end the following new paragraph:
            ``(17) Disclosure to national archives and records 
        administration.--The Secretary shall, upon written request from 
        the Archivist of the United States, disclose or authorize the 
        disclosure of returns and return information to officers and 
        employees of the National Archives and Records Administration 
        for purposes of, and only to the extent necessary in, the 
        scheduling of records for destruction or retention. No such 
        officer or employee shall, except to the extent authorized by 
        subsections (f), (i)(7), or (p), disclose any return or return 
        information disclosed under the preceding sentence to any 
        person other than to the Secretary, or to another officer of 
        employee or the National Archives and Records Administration 
        whose official duties require such disclosure for purposes of 
        such scheduling.''
    (b) Conforming Amendments.--Section 6103(p) is amended--
            (1) in paragraph (3)(A), by striking ``or (16)'' and 
        inserting ``(16), or (17)'',
            (2) in paragraph (4), by striking ``or (14)'' and inserting 
        ``, (14), or (17)'' in the matter preceding subparagraph (A), 
        and
            (3) in paragraph (4)(F)(ii), by striking ````or (14)'' and 
        inserting ``, (14), or (17)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made by the Archivist of the United States after the 
date of the enactment of this Act.

SEC. 374. PAYMENT OF TAXES.

    The Secretary of the Treasury or the Secretary's delegate shall 
establish such rules, regulations, and procedures as are necessary to 
allow payment of taxes by check or money order made payable to the 
United States Treasury.

SEC. 375. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO THE 
              MAKING OF ELECTIONS.

    Subsection (d) of section 7805 is amended by striking ``by 
regulations or forms''.

                          Subtitle I--Studies

SEC. 381. PENALTY ADMINISTRATION.

    The Joint Committee on Taxation shall conduct a study--
            (1) reviewing the administration and implementation by the 
        Internal Revenue Service of the penalty reform provisions of 
        the Omnibus Budget Reconciliation Act of 1989, and
            (2) making any legislative and administrative 
        recommendations it deems appropriate to simplify penalty 
        administration and reduce taxpayer burden.
Such study shall be submitted to the Committee on Ways and Means of the 
House of Representatives and the Committee on Finance of the Senate not 
later than 9 months after the date of enactment of this Act.

SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMATION.

    The Joint Committee on Taxation shall conduct a study of the scope 
and use of provisions regarding taxpayer confidentiality, and shall 
report the findings of such study, together with such recommendations 
as it deems appropriate, to the Congress not later than one year after 
the date of the enactment of this Act. Such study shall examine the 
present protections for taxpayer privacy, the need for third parties to 
use tax return information, and the ability to achieve greater levels 
of voluntary compliance by allowing the public to know who is legally 
required to file tax returns, but does not file tax returns.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

SEC. 401. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON TAXATION.

    (a) In General.--Section 8021 (relating to the powers of the Joint 
Committee on Taxation) is amended by adding at the end the following 
new subsections:
    ``(e) Investigations.--The Joint Committee shall review all 
requests (other than requests by the chairman or ranking member of a 
Committee or Subcommittee) for investigations of the Internal Revenue 
Service by the General Accounting Office, and approve such requests 
when appropriate, with a view towards eliminating overlapping 
investigations, ensuring that the General Accounting Office has the 
capacity to handle the investigation, and ensuring that investigations 
focus on areas of primary importance to tax administration.
    ``(f) Relating to Joint Hearings.--
            ``(1) In general.--The Chief of Staff, and such other staff 
        as are appointed pursuant to section 8004, shall provide such 
        assistance as is required for joint hearings described in 
        paragraph (2).
            ``(2) Joint hearings.--On or before April 1 of each 
        calendar year after 1997, there shall be a joint hearing of two 
        members of the majority and one member of the minority from 
        each of the Committees on Finance, Appropriations, and 
        Government Affairs of the Senate, and the Committees on Ways 
        and Means, Appropriations, and Government Reform and Oversight 
        of the House of Representatives, to review the strategic plans 
        and budget for the Internal Revenue Service. After the 
        conclusion of the annual filing season, there shall be a second 
        annual joint hearing to review the other matters outlined in 
        section 8022(3)(C).''
    (b) Effective Dates.--
            (1) Subsection (e) of section 8021 of the Internal Revenue 
        Code of 1986, as added by subsection (a) of this section, shall 
        apply to requests made after the date of enactment of this Act.
            (2) Subsection (f) of section 8021 of the Internal Revenue 
        Code of 1986, as added by subsection (a) of this section, shall 
        take effect on the date of the enactment of this Act.

SEC. 402. COORDINATED OVERSIGHT REPORTS.

    (a) In General.--Paragraph (3) of section 8022 (relating to the 
duties of the Joint Committee on Taxation) is amended to read as 
follows:
            ``(3) Reports.--
                    ``(A) To report, from time to time, to the 
                Committee on Finance and the Committee on Ways and 
                Means, and, in its discretion, to the Senate or House 
                of Representatives, or both, the results of its 
                investigations, together with such recommendations as 
                it may deem advisable.
                    ``(B) To report, annually, to the Committee on 
                Finance and the Committee on Ways and Means on the 
                overall state of the Federal tax system, together with 
                recommendations with respect to possible simplification 
                proposals and other matters relating to the 
                administration of the Federal tax system as it may deem 
                advisable.
                    ``(C) To report, annually, to the Committees on 
                Finance, Appropriations, and Government Affairs of the 
                Senate, and to the Committees on Ways and Means, 
                Appropriations, and Government Reform and Oversight of 
                the House of Representatives, with respect to--
                            ``(i) strategic and business plans for the 
                        Internal Revenue Service;
                            ``(ii) progress of the Internal Revenue 
                        Service in meeting its objectives;
                            ``(iii) the budget for the Internal Revenue 
                        Service and whether it supports its objectives;
                            ``(iv) progress of the Internal Revenue 
                        Service in improving taxpayer service and 
                        compliance;
                            ``(v) progress of the Internal Revenue 
                        Service on technology modernization; and
                            ``(vi) the annual filing season.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                           Subtitle B--Budget

SEC. 411. FUNDING FOR CENTURY DATE CHANGE.

    It is the sense of Congress that the Internal Revenue Service 
efforts to resolve the century date change computing problems should be 
funded fully to provide for certain resolution of such problems.

SEC. 412. FINANCIAL MANAGEMENT ADVISORY GROUP.

    The Commissioner shall convene a financial management advisory 
group consisting of individuals with expertise in governmental 
accounting and auditing from both the private sector and the Government 
to advise the Commissioner on financial management issues, including--
            (1) the continued partnership between the Internal Revenue 
        Service and the General Accounting Office;
            (2) the financial accounting aspects of the Internal 
        Revenue Service's system modernization;
            (3) the necessity and utility of year-round auditing; and
            (4) the Commissioner's plans for improving its financial 
        management system.

                     Subtitle C--Tax Law Complexity

SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.

    It is the sense of Congress that the Internal Revenue Service 
should provide the Congress with an independent view of tax 
administration, and that during the legislative process, the tax 
writing committees of the Congress should hear from front-line 
technical experts at the Internal Revenue Service with respect to the 
administrability of pending amendments to the Internal Revenue Code of 
1986.

SEC. 422. TAX COMPLEXITY ANALYSIS.

    (a) In General.--Chapter 92 (relating to powers and duties of the 
Joint Committee on Taxation) is amended by adding at the end the 
following new section:

``SEC. 8024. TAX COMPLEXITY ANALYSIS.

    ``(a) In General.--If--
            ``(1) legislation is reported by the Committee on Finance 
        of the Senate, the Committee on Ways and Means of the House of 
        Representatives, or any committee of conference, and
            ``(2) such legislation includes any provision amending the 
        Internal Revenue Code of 1986,
the report or statement accompanying such legislation shall contain a 
Tax Complexity Analysis prepared by the staff of the Joint Committee on 
Taxation.
    ``(b) Content of Complexity Analysis.--Each Tax Complexity Analysis 
shall identify the provisions, if any, adding significant complexity or 
providing significant simplification, as determined by the staff of the 
Joint Committee on Taxation, and shall include the basis for such 
determination.
    ``(c) Legislation Subject to Point of Order.--It shall not be in 
order in the Senate or the House of Representatives to consider any 
legislation described in subsection (a) required to be accompanied by a 
Tax Complexity Analysis that does not contain a Tax Complexity 
Analysis.
    ``(d) Responsibilities of the Commissioner.--The Commissioner shall 
provide the Joint Committee on Taxation with such information as is 
necessary to prepare Tax Complexity Analyses.''
    (b) Clerical Amendment.--The table of sections for chapter 92 is 
amended by adding at the end the following new item:

                              ``Sec. 8024. Tax complexity analysis.''
    (c) Effective Date.--The amendments made by this section shall 
apply to legislation considered on or after January 1, 1998.

     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION.

    (a) In General.--Subsection (a) of section 404 is amended by adding 
at the end the following new paragraph:
            ``(11) Determinations relating to deferred compensation.--
                    ``(A) In general.--For purposes of determining--
                            ``(i) whether compensation of an individual 
                        is deferred compensation, and
                            ``(ii) when deferred compensation is paid,
                no amount shall be treated as received by the 
                individual, or paid, until it is actually received by 
                the individual.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to severance pay.''
    (b) Sick Leave Pay Treated Like Vacation Pay.--Paragraph (5) of 
section 404(a) is amended by inserting ``or sick leave pay'' after 
``vacation pay''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after October 8, 1997.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by this section to change its method of 
        accounting for its first taxable year ending after October 8, 
        1997--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account in such first taxable year.
                                 <all>