[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 1747 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 1747

 To amend the Internal Revenue Code of 1986 to provide for additional 
taxpayer rights and taxpayer education, notice, and resources, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 11, 1998

  Mr. Grassley (for himself, Mr. Reid, and Mr. Kerrey) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide for additional 
taxpayer rights and taxpayer education, notice, and resources, 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 ``Taxpayer Bill of 
Rights 3''.
    (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.
Sec. 2. Findings.
                        TITLE I--TAXPAYER RIGHTS

Sec. 101. Disclosure of criteria for examination selection.
Sec. 102. Civil damages for negligence in collection actions.
Sec. 103. Freedom of information.
Sec. 104. Elimination of application of failure to pay penalty during 
                            period of installment agreement.
Sec. 105. Safe harbor for qualification for installment agreements.
Sec. 106. Cataloging complaints.
Sec. 107. Suspension of statute of limitations on filing refund claims 
                            during periods of disability.
Sec. 108. Limitation on financial status audit techniques.
Sec. 109. Notice of deficiency to specify deadlines for filing tax 
                            court petition.
Sec. 110. Refund or credit of overpayments before final determination.
Sec. 111. Threat of audit prohibited to coerce tip reporting 
                            alternative commitment agreements.
Sec. 112. Court approval for seizure of taxpayer's property.
Sec. 113. Expansion of authority to issue taxpayer assistance orders.
Sec. 114. Modifications to certain levy exemption amounts.
Sec. 115. Offers-in-compromise.
Sec. 116. Increase in overpayment rate payable to taxpayers other than 
                            corporations.
Sec. 117. Levy prohibited during certain negotiations.
Sec. 118. Application of certain fair debt collection procedures.
Sec. 119. Allowance of civil damage suits by persons other than 
                            taxpayers for IRS unauthorized collection 
                            actions.
Sec. 120. Cooperative agreements with State tax authorities.
          TITLE II--TAXPAYER EDUCATION, NOTICE, AND RESOURCES

Sec. 201. Explanation of taxpayers' rights.
Sec. 202. Toll-free customer help line.
Sec. 203. Notice of various telephone numbers.
Sec. 204. Procedures involving taxpayer interviews.
Sec. 205. Explanation of joint and several liability.
Sec. 206. Procedures relating to extensions of statute of limitations 
                            by agreement.
Sec. 207. Explanations of appeals and collection process.
Sec. 208. Independent operation of local taxpayer advocates.

SEC. 2. FINDINGS.

    The Senate finds that--
            (1) the National Commission on Restructuring the Internal 
        Revenue Service has found the urgent need for significant 
        Internal Revenue Service reform;
            (2) the ongoing hearings of the Committee on Finance of the 
        Senate have uncovered consistent abuse of taxpayers by the 
        Internal Revenue Service;
            (3) the Internal Revenue Service should be responsible and 
        held accountable for its treatment of taxpayers;
            (4) the American public expects and deserves timely and 
        accurate service from the Internal Revenue Service; and
            (5) additional taxpayer protections are necessary to ensure 
        that taxpayers receive fair, impartial, and courteous 
        assistance from the Internal Revenue Service.

                        TITLE I--TAXPAYER RIGHTS

SEC. 101. 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.--Such 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. 102. 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) 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. 103. FREEDOM OF INFORMATION.

    (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, develop procedures under 
which expedited access will be granted to requests under section 551 of 
title 5, United States Code, when--
            (1) there exists widespread and exceptional media interest 
        in the requested information, and
            (2) expedited processing is warranted because the 
        information sought involves possible questions about the 
        government's integrity which affect public confidence.
In addition, such procedures shall require the Internal Revenue Service 
to provide an explanation to the person making the request if the 
request is not satisfied within 30 days, including a summary of actions 
taken to date and the expected completion date. Finally, to the extent 
that any such request is not satisfied in full within 60 days, such 
person may seek a determination of whether such request should be 
granted by the appropriate Federal district court.
    (b) Transmission to Committees of Congress.--Such Secretary shall 
transmit drafts of the procedures required under subsection (a) (or 
proposed revisions to any such procedures) 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. 104. ELIMINATION OF APPLICATION OF FAILURE TO PAY PENALTY DURING 
              PERIOD OF INSTALLMENT AGREEMENT.

    (a) In General.--Subsection (c) of section 6651 (relating to the 
penalty for failure to file tax return or to pay tax) is amended by 
adding at the end the following:
            ``(3) Tolling during period of installment agreement.--If 
        the amount required to be paid is the subject of an agreement 
        for payment of tax liability in installments made pursuant to 
        section 6159, the additions imposed under subsection (a) shall 
        not apply so long as such agreement remains in effect.''
    (b) Effective Date.--The amendment made by this section shall apply 
to agreements entered into after the date of the enactment of this Act.

SEC. 105. SAFE HARBOR FOR QUALIFICATION FOR INSTALLMENT AGREEMENTS.

    (a) In General.--Subsection (a) of section 6159 (relating to 
agreements for payment of tax liability in installments) is amended--
            (1) by striking ``The Secretary is'' and inserting the 
        following:
            ``(1) In general.--The Secretary is'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following:
            ``(2) Safe harbor.--The Secretary shall enter into an 
        agreement to accept the payment of a tax liability in 
        installments if--
                    ``(A) the amount of such liability does not exceed 
                $10,000,
                    ``(B) the taxpayer has not failed to file any tax 
                return or pay any tax required to be shown thereon 
                during the immediately preceding 5 years, and
                    ``(C) the taxpayer has not entered into any prior 
                installment agreement under this paragraph.''
    (b) Effective Date.--The amendments made by this section shall 
apply to agreements entered into after the date of the enactment of 
this Act.

SEC. 106. CATALOGING COMPLAINTS.

    (a) In General.--The Commissioner of Internal Revenue shall, as 
soon as practicable, but not later than 180 days after the date of the 
enactment of this Act, develop procedures to catalog and review 
taxpayer complaints of misconduct by Internal Revenue Service 
employees. Such procedures should include guidelines for internal 
review and discipline of employees, as warranted by the scope of such 
complaints.
    (b) Hotline.-- The Commissioner of Internal Revenue shall, as soon 
as practicable, but not later than 180 days after the date of the 
enactment of this Act, establish a toll-free telephone number for 
taxpayers to register complaints of misconduct by Internal Revenue 
Service employees, and shall publish such number in Publication 1.

SEC. 107. 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:
    ``(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 periods of disability before, on, or after the date of the 
enactment of this Act but shall not apply to any claim for credit or 
refund which (without regard to such amendment) is barred by the 
operation of any law or rule of law (including res judicata) as of 
January 1, 1998.

SEC. 108. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

    Section 7602 is amended by adding at the end the following:
    ``(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. 109. 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: ``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. 110. 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:
            ``(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: ``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. 111. 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.

SEC. 112. COURT APPROVAL FOR SEIZURE OF TAXPAYER'S PROPERTY.

    (a) In General.--Section 6331(a) (relating to levy and distraint) 
is amended by adding at the end the following:
            ``(2) Limitation on authority of secretary.--
        Notwithstanding paragraph (1), the Secretary shall not levy 
        upon any property or rights to property until a court of 
        competent jurisdiction--
                    ``(A) has determined that--
                            ``(i) such levy is reasonable under the 
                        circumstances, and
                            ``(ii) in the case of a levy upon the 
                        principal residence or business establishment 
                        of the taxpayer, the Secretary has exhausted 
                        all other payment options, and
                    ``(B) issues a writ of execution.''
    (b) Conforming Amendment.--Section 6331(a) is amended by striking 
``If any person'' and inserting:
            ``(1) In general.--If any person''.
    (c) Effective Date.--The amendments made by this section shall be 
effective for seizures occurring on or after the date of the enactment 
of this Act.

SEC. 113. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE ORDERS.

    (a) In General.--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:
            ``(2) Determination of hardship.--For purposes of 
        determining whether a taxpayer is suffering or about to suffer 
        a significant hardship, the Taxpayer Advocate should consider--
                    ``(A) whether the Internal Revenue Service employee 
                to which such order would issue is following applicable 
                published administrative guidance, including the 
                Internal Revenue Manual,
                    ``(B) whether there is an immediate threat of 
                adverse action,
                    ``(C) whether there has been a delay of more than 
                30 days in resolving taxpayer account problems,
                    ``(D) the prospect that the taxpayer will have to 
                pay significant professional fees for representation,
                    ``(E) whether the taxpayer will suffer irreparable 
                injury, or a long-term adverse impact, if relief is not 
                granted, and
                    ``(F) any other factor the Taxpayer Advocate deems 
                appropriate.''
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 114. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Section 6334(a)(2) (relating to fuel, provisions, 
furniture, and personal effects) is amended by striking ``$2,500'' and 
inserting ``$5,000''.
    (b) Books, Etc.--Section 6334(a)(3) (relating to books and tools of 
a trade, business, or profession) is amended by striking ``$1,250'' and 
inserting ``$10,000''.
    (c) Conforming Amendment.--Section 6334(f)(1) (relating to 
inflation adjustment) is amended--
            (1) by striking ``1997'' and inserting ``1999'', and
            (2) by striking ``1996'' in subparagraph (B) and inserting 
        ``1998''.
    (d) Effective Date.--The amendments made by this section shall take 
effect with respect to levies issued after December 31, 1998.

SEC. 115. OFFERS-IN-COMPROMISE.

    (a) In General.--Section 7122 (relating to offers-in-compromise) is 
amended by adding at the end the following:
    ``(c) Allowances.--The Secretary shall develop and publish 
guidelines for national and local allowances to ensure that taxpayers 
entering into a compromise have an adequate means to provide for basic 
living expenses.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 116. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS OTHER THAN 
              CORPORATIONS.

    (a) In General.--Subparagraph (B) of section 6621(a)(1) (defining 
overpayment rate) is amended to read as follows:
                    ``(B) 3 percentage points (2 percentage points in 
                the case of a corporation).''
    (b) Effective Date.--The amendment made by this section shall apply 
to interest for calendar quarters beginning after the date of the 
enactment of this Act.

SEC. 117. LEVY PROHIBITED DURING CERTAIN NEGOTIATIONS.

    (a) In General.--Section 6331 (relating to levy and distraint) is 
amended by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following:
    ``(j) No Levy During Certain Negotiations.--
            ``(1) In general.--No levy may be made under subsection (a) 
        on the salary or wages or other property of any person with 
        respect to any unpaid tax in a case, and during the period, to 
        which paragraph (2) or (3) applies.
            ``(2) Offers in compromise; installment agreements.--This 
        paragraph applies to any unpaid tax of such person--
                    ``(A) during the period that an offer by such 
                person in compromise under section 7122, or for an 
                installment agreement under section 6159, of such 
                unpaid tax is pending with the Secretary, and
                    ``(B) if such offer is rejected by the Secretary, 
                during the 30 days thereafter (and, if an appeal of 
                such rejection is filed within such 30 days, during the 
                period that such appeal is pending).
            ``(3) Certain assessments of individual income tax.--This 
        paragraph applies to any unpaid tax of an individual which is 
        imposed by subtitle A during the 60-day period beginning on the 
        date such individual requests that this paragraph apply to such 
        tax if--
                    ``(A) such tax was included in a notice of 
                deficiency under section 6212 mailed to the last known 
                address of such individual, and
                    ``(B) the assessment of such tax was not prevented 
                at any prior time by reason of any action taken by such 
                individual.
            ``(4) Exception.--Paragraph (1) shall not apply if the 
        Secretary finds that--
                    ``(A) the collection of the tax is in jeopardy, or
                    ``(B) the offer or request is made solely to delay 
                collection.
            ``(5) Suspension of statute of limitations on collection.--
        Subsection (i)(4) shall apply for purposes of this 
        subsection.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxes assessed on or after the 60th day after the date of the 
enactment of this Act.

SEC. 118. APPLICATION OF CERTAIN FAIR DEBT COLLECTION PROCEDURES.

    (a) In General.--Subchapter A of chapter 64 (relating to 
collection) is amended by inserting after section 6303 the following:

``SEC. 6304. FAIR TAX COLLECTION PRACTICES.

    ``(a) Communication With the Taxpayer.--Without the prior consent 
of the taxpayer given directly to the Secretary or the express 
permission of a court of competent jurisdiction, the Secretary may not 
communicate with a taxpayer in connection with the collection of any 
unpaid tax--
            ``(1) at any unusual time or place or a time or place known 
        or which should be known to be inconvenient to the taxpayer;
            ``(2) if the Secretary knows the taxpayer is represented by 
        an attorney with respect to such unpaid tax and has knowledge 
        of, or can readily ascertain, such attorney's name and address, 
        unless the attorney fails to respond within a reasonable period 
        of time to a communication from the Secretary or unless the 
        attorney consents to direct communication with the taxpayer; or
            ``(3) at the taxpayer's place of employment if the 
        Secretary knows or has reason to know that the taxpayer's 
        employer prohibits the taxpayer from receiving such 
        communication.
In the absence of knowledge of circumstances to the contrary, the 
Secretary shall assume that the convenient time for communicating with 
a taxpayer is after 8 a.m. and before 9 p.m., local time at the 
taxpayer's location.
    ``(b) Prohibition of Harassment and Abuse.--The Secretary may not 
engage in any conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with any unpaid tax. Without 
limiting the general application of the foregoing, the following 
conduct is a violation of this subsection:
            ``(1) The use or threat of use of violence or other 
        criminal means to harm the physical person, reputation, or 
        property of any person.
            ``(2) The use of obscene or profane language or language 
        the natural consequence of which is to abuse the hearer or 
        reader.
            ``(3) The publication of a list of taxpayers who allegedly 
        refuse to pay taxes, except to a consumer reporting agency or 
        to persons meeting the requirements of section 603(f) or 
        604(a)(3) of the Fair Credit Reporting Act.
            ``(4) Causing a telephone to ring or engaging any person in 
        telephone conversation repeatedly or continuously with intent 
        to annoy, abuse, or harass any person at the called number.
            ``(5) Except as provided under rules similar to the rules 
        in section 804 of the Fair Debt Collection Practices Act (15 
        U.S.C. 1692b), the placement of telephone calls without 
        meaningful disclosure of the caller's identity.
    ``(c) Civil Action for Violations of Section.--

                                ``For civil action for violations of 
this section, see section 7433.''
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 64 is amended by inserting after the item relating to section 
6303 the following:

                              ``Sec. 6304. Fair tax collection 
                                        practices.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 119. ALLOWANCE OF CIVIL DAMAGE SUITS BY PERSONS OTHER THAN 
              TAXPAYERS FOR IRS UNAUTHORIZED COLLECTION ACTIONS.

    (a) In General.--Section 7433(a) (relating to civil damages for 
certain unauthorized collection damages) is amended--
            (1) by striking ``a taxpayer'' and inserting ``any 
        person'', and
            (2) by striking ``such taxpayer'' and inserting ``such 
        person''.
    (b) Effective Date.--The amendments made by this section shall 
apply to actions by officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 120. COOPERATIVE AGREEMENTS WITH STATE TAX AUTHORITIES.

    (A) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding after section 7524 the following:

``SEC. 7525. TAX ADMINISTRATION AGREEMENTS.

    ``(a) In General.--To the extent provided in regulations, the 
Secretary is authorized to enter into tax administration agreements 
with any State agency, body, or commission described in section 
6103(d)(1). Under such agreements, the Secretary may delegate powers 
relating to the administration of this title to officers and employees 
of such State agency, body, or commission, only if such officers and 
employees in exercising such powers are under the supervision of the 
Secretary.
    ``(b) Tax Administration Agreement Defined.--A tax administration 
agreement is a written agreement entered into by the Secretary and a 
State agency, body, or commission described in section 6103(d)(1) that 
provides for a delegation of tax administration powers or a payment of 
reasonable compensation for activities conducted by either party to the 
agreement. Each Federal or State tax administration power to be 
exercised pursuant to a tax administration agreement shall be performed 
in accordance with the terms of the agreement to the extent such terms 
do not conflict with the Federal or State laws that otherwise authorize 
the respective tax administration function.
    ``(c) Judicial Proceedings.--
            ``(1) Review by the united states courts.--Nothing in this 
        subchapter shall give any court of the United States any 
        additional jurisdiction nor diminish its jurisdiction.
            ``(2) Prohibition of review by the state courts.--No court 
        or other tribunal of any State shall have jurisdiction to 
        adjudicate in any action, legal or equitable, the validity or 
        scope of an assessment of an internal revenue tax that is the 
        subject of a tax administration agreement.
            ``(3) Limitation on personal jurisdiction.--No court or 
        other tribunal of any State shall have jurisdiction over an 
        individual who exercises Federal tax administration powers 
        pursuant to a tax administration agreement for actions relating 
        to the exercise of those powers.
    ``(d) Payment for Services.--The Secretary is authorized to pay 
reasonable compensation for activities conducted by a State pursuant to 
a tax administration agreement. The Secretary is authorized to collect 
reasonable compensation for activities conducted by the United States 
pursuant to a tax administration agreement.
    ``(e) Availability of Funds.--Any funds appropriated for purposes 
of the administration of this title shall be available for purposes of 
carrying out the Secretary's responsibilities under a tax 
administration agreement. Any reasonable compensation received pursuant 
to a tax administration agreement shall be credited to the amounts so 
appropriated and shall remain available to the Internal Revenue Service 
until expended to supplement appropriations made available to the 
appropriations accounts in the fiscal year during which this provision 
is enacted and all fiscal years thereafter.
    ``(f) Tax Treaties and Other International Agreements.--To the 
extent the provisions of this subchapter or a tax administration 
agreement may conflict with the terms of any tax treaty, or other 
international agreement of the United States containing provisions 
relating to taxation or the administration of tax laws, the terms of 
the treaty or international agreement shall control.
    ``(g) Employee Status.--Any officer or employee of the United 
States acting pursuant to a tax administration agreement shall be 
deemed to remain a Federal employee. Except as otherwise expressly 
provided by the laws of the United States, any officer or employee of a 
State acting pursuant to a tax administration agreement shall be deemed 
to remain a State employee.''
    (b) Conforming Amendments.--
            (1) Section 6103(d) is amended--
                    (A) by amending paragraph (1) to read as follows:
            ``(1)(A) In general.--Returns and return information with 
        respect to taxes imposed by chapters 1, 2, 6, 11, 12, 21, 23, 
        24, 31, 32, 44, 51, and 52 and subchapter D of chapter 36 shall 
        be open to inspection by, or disclosure to, any State agency, 
        body, or commission, or its legal representative, which is 
        charged under the laws of such State with the responsibility 
        for the administration of State tax laws for the purpose of, 
        and only to the extent necessary in--
                    ``(i) the administration of such laws, including 
                any procedures with respect to locating, any person who 
                may be entitled to a refund; or
                    ``(ii) the administration of Federal tax laws 
                pursuant to a tax administration agreement entered into 
                between such agency, body or commission and the 
                Secretary under section 7525.
            ``(B) Written request by agency head required for 
        disclosure.--The inspection of returns and return information 
        under this paragraph shall be permitted, or disclosure of such 
        returns and return information made, only upon written request 
        by the head of such agency, body, or commission, and only to 
        the representatives of such agency, body, or commission 
        designated in such written request as the individuals who are 
        to inspect or receive the returns or return information on 
        behalf of such agency, body, or commission.
            ``(C) Permissible recipients.--The representatives of such 
        agency, body, or commission to whom disclosure is permitted 
        under this paragraph shall include only employees or legal 
        representatives of such agency, body, or commission, or a 
        person described in subsection (n) of this section. However, 
        notwithstanding the foregoing, disclosure shall not be 
        permitted to any individual who is the chief executive officer 
        of such State.
            ``(D) Confidential informants; impairment of 
        investigations.--Return information shall not be disclosed 
        under this paragraph to the extent that the Secretary 
        determines that such disclosure would identify a confidential 
        informant or seriously impair any civil or criminal tax 
        investigation.''; and
                    (B) by adding at the end the following:
            ``(5) Joint return filing programs.--
                    ``(A) In general.--Upon written request by the head 
                of any agency, body, or commission described in 
                paragraph (1), the Secretary may disclose common data 
                to such agency, body or commission for the purpose of 
                carrying out a joint return filing program entered into 
                under section 7525.
                    ``(B) Common data defined.--For purposes of this 
                paragraph, `common data' means any item of information 
                that is required by both Federal and State law to be 
                attached to or included on the respective Federal and 
                State returns.
                    ``(C) Procedures for state agencies.--Subsections 
                (a)(2) and (p)(4) of this section shall not apply with 
                respect to any disclosures made pursuant to this 
                paragraph. However, common data disclosed pursuant to 
                this paragraph is subject to subsection (p)(8) of this 
                section.''
            (2) Section 6103(p)(3) is amended--
                    (A) in subparagraph (A) by inserting ``(d),'' after 
                ``subsections (c),''; and
                    (B) in subparagraph (C)(i) by striking ``(d),''.
            (3) Section 7212(a) is amended by inserting ``or any State 
        officer or employee who is authorized to administer Federal tax 
        laws pursuant to an agreement authorized by section 7525'' 
        after ``any officer or employee of the United States'' in both 
        places it appears.
            (4) Section 7213(a)(2) is amended by deleting ``(d),'' and 
        inserting instead ``(d)(1), (2), (3), or (4),''.
            (5) Section 7214 is amended--
                    (A) in subsection (a), by inserting ``or any State 
                officer or employee who is authorized to administer 
                Federal tax laws pursuant to an agreement authorized by 
                section 7525'' after ``Any officer or employee of the 
                United States''; and
                    (B) in subsection (b), by inserting ``or any State 
                employee who is authorized to administer Federal tax 
                laws pursuant to an agreement authorized by section 
                7525'' after ``Any internal revenue officer or 
                employee''.
            (6) Section 7431(a)(1) is amended by inserting ``or any 
        State employee who is authorized to administer Federal tax laws 
        pursuant to an agreement authorized by section 7525'' after 
        ``If any officer or employee of the United States''.
            (7) Section 7432(a) is amended by inserting ``or any State 
        employee who is authorized to release liens under section 6325 
        pursuant to an agreement authorized by section 7525'' after 
        ``If any officer or employee of the Internal Revenue Service''.
            (8) Section 7433(a), as amended by this Act, is amended by 
        inserting ``or any State employee who is authorized to collect 
        Federal taxes pursuant to an agreement authorized by section 
        7525'' after ``If, in connection with any collection of Federal 
        tax with respect to any person, any officer or employee of the 
        Internal Revenue Service''.
    (c) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following:

                              ``Sec. 7525.  Tax administration 
                                        agreements.''

          TITLE II--TAXPAYER EDUCATION, NOTICE, AND RESOURCES

SEC. 201. EXPLANATION OF TAXPAYERS' RIGHTS.

    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.

SEC. 202. TOLL-FREE CUSTOMER HELP LINE.

    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 a 24-hour-a-day toll-free telephone 
customer help line, staffed at all times by a person trained in helping 
individual taxpayers and staffed during regular business hours (for all 
time zones in the United States) by a person trained in helping small 
business taxpayers.

SEC. 203. NOTICE OF VARIOUS TELEPHONE NUMBERS.

    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, provide that all paper communications received 
by a taxpayer from the Internal Revenue Service shall include in a 
prominent manner the telephone number and purpose of the nearest local 
office of the taxpayer advocate and the low income taxpayer clinic and 
the toll-free telephone number for taxpayers to register complaints of 
misconduct by Internal Revenue Service employees established under 
section 107(b).

SEC. 204. PROCEDURES INVOLVING TAXPAYER INTERVIEWS.

    (a) In General.--Paragraph (1) of section 7521(b) (relating to 
procedures involving taxpayer interviews) is amended to read as 
follows:
            ``(1) Explanations of processes.--An officer or employee of 
        the Internal Revenue Service shall--
                    ``(A) before or at an initial interview, provide to 
                the taxpayer--
                            ``(i) in the case of an in-person interview 
                        with the taxpayer relating to the determination 
                        of any tax, an explanation of the audit process 
                        and the taxpayer's rights under such process, 
                        or
                            ``(ii) in the case of an in-person 
                        interview with the taxpayer relating to the 
                        collection of any tax, an explanation of the 
                        collection process and the taxpayer's rights 
                        under such process, and
                    ``(B) before an in-person initial interview with 
                the taxpayer relating to the determination of any tax--
                            ``(i) inquire whether the taxpayer is 
                        represented by an individual described in 
                        subsection (c),
                            ``(ii) explain that the taxpayer has the 
                        right to have the interview take place in a 
                        reasonable place and that such place does not 
                        have to be the taxpayer's home,
                            ``(iii) explain the reasons for the 
                        selection of the taxpayer's return for 
                        examination, and
                            ``(iv) provide the taxpayer with a written 
                        explanation of the applicable burdens of proof 
                        on taxpayers and the Internal Revenue Service.
        If the taxpayer is represented by an individual described in 
        subsection (c), the interview may not proceed without the 
        presence of such individual unless the taxpayer consents.''
    (b) Effective Date.--The amendments made by this section shall 
apply to interviews and examinations taking place after the date of the 
enactment of this Act.

SEC. 205. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

    (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, establish procedures to 
clearly alert taxpayers of their joint and several liabilities on all 
tax forms, publications, and instructions issued during the period 
joint and several liability remains a standard of liability. Such 
procedures shall include explanations of the possible consequences of 
joint and several liability.
    (b) Transmission to Committees of Congress.--Such Secretary shall 
transmit drafts of the procedures required under subsection (a) (or 
proposed revisions to any such procedures) 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. 206. 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:
                    ``(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. 207. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

    (a) Taxpayer Specific Explanation.--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.
    (b) General Explanation.--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, make available to 
the general public, a booklet which in simple language provides an 
explanation of the appeals process and the collection process and the 
rights of taxpayers at each step of such process.

SEC. 208. INDEPENDENT OPERATION OF LOCAL TAXPAYER ADVOCATES.

    (a) Independent Operation of Local Offices.--Section 7802(d) 
(relating to Office of Taxpayer Advocate) is amended by adding at the 
end the following:
            ``(4) Operation of local offices.--
                    ``(A) Independent operation.--Each local taxpayer 
                advocate shall, at the taxpayer advocate's discretion, 
                not disclose to the Internal Revenue Service contact 
                with, or information provided by, a taxpayer.
                    ``(B) Maintenance of independent communications.--
                Each local office of the taxpayer advocate shall 
                maintain separate phone, facsimile, and other 
                electronic communication access, and a separate post 
                office address from the Internal Revenue Service 
                district office or service center which it serves.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>