[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3991 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3991

  To amend the Internal Revenue Code of 1986 to protect taxpayers and 
         ensure accountability of the Internal Revenue Service.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 19, 2002

 Mr. Houghton introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to protect taxpayers and 
         ensure accountability of the Internal Revenue Service.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Taxpayer 
Protection and IRS Accountability Act of 2002''.
    (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; etc.
                    TITLE I--PENALTIES AND INTEREST

Sec. 101. Reduction of Federal tax deposit penalty.
Sec. 102. Failure to pay estimated tax penalty converted to interest 
                            charge on accumulated unpaid balance.
Sec. 103. Exclusion from gross income for interest on overpayments of 
                            income tax by individuals.
Sec. 104. Abatement of interest.
Sec. 105. Deposits made to suspend running of interest on potential 
                            underpayments.
Sec. 106. Expansion of interest netting for individuals.
Sec. 107. Waiver of certain penalties for first-time unintentional 
                            minor errors.
Sec. 108. Frivolous tax submissions.
              TITLE II--FAIRNESS OF COLLECTION PROCEDURES

Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Additional considerations to be taken into account as bases 
                            for accepting offer-in-compromise.
Sec. 203. Extension of time for return of property.
Sec. 204. Seven-day threshold on tolling of statute of limitations 
                            during tax review.
Sec. 205. Study of liens and levies.
              TITLE III--EFFICIENCY OF TAX ADMINISTRATION

Sec. 301.  Revisions relating to termination of employment of Internal 
                            Revenue Service employees for misconduct.
Sec. 302. Confirmation of authority of Tax Court to apply doctrine of 
                            equitable recoupment.
Sec. 303. Jurisdiction of Tax Court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. Study of taxpayer notification alternatives.
                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

Sec. 401. Collection activities with respect to joint return 
                            disclosable to either spouse based on oral 
                            request.
Sec. 402. Taxpayer representatives not subject to examination on sole 
                            basis of representation of taxpayers.
Sec. 403. Disclosure in judicial or administrative tax proceedings of 
                            return and return information of persons 
                            who are not party to such proceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification 
                            information with respect to disclosure of 
                            accepted offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of 
                            browsing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
                         TITLE V--MISCELLANEOUS

Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt 
                            organizations.
Sec. 503. Employee misconduct report to include summary of complaints 
                            by category.
Sec. 504. Annual report on awards of costs and certain fees in 
                            administrative and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of 
                            failure to file.
Sec. 508. Amendment to Treasury auction reforms.
Sec. 509. Enrolled agents.
                TITLE VI--AUTHORIZATION OF APPROPRIATION

Sec. 601. Low-income taxpayer clinics.

                    TITLE I--PENALTIES AND INTEREST

SEC. 101. REDUCTION OF FEDERAL TAX DEPOSIT PENALTY.

    (a) In General.--Subparagraph (A) of section 6656(b)(1) is amended 
to read as follows:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `applicable percentage' 
                means 2 percent.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to deposits required to be made after December 31, 2002.

SEC. 102. FAILURE TO PAY ESTIMATED TAX PENALTY CONVERTED TO INTEREST 
              CHARGE ON ACCUMULATED UNPAID BALANCE.

    (a) Penalty Moved to Interest Chapter of Code.--The Internal 
Revenue Code of 1986 is amended by redesignating section 6654 as 
section 6641 and by moving section 6641 (as so redesignated) from part 
I of subchapter A of chapter 68 to the end of subchapter E of chapter 
67 (as added by subsection (e)(1) of this section).
    (b) Penalty Converted to Interest Charge.--The heading and 
subsections (a) and (b) of section 6641 (as so redesignated) are 
amended to read as follows:

``SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY ESTIMATED INCOME 
              TAX.

    ``(a) In General.--Interest shall be paid on any underpayment of 
estimated tax by an individual for a taxable year for each day of such 
underpayment. The amount of such interest for any day shall be the 
product of the underpayment rate established under subsection (b)(2) 
multiplied by the amount of the underpayment.
    ``(b) Amount of Underpayment; Interest Rate.--For purposes of 
subsection (a)--
            ``(1) Amount.--The amount of the underpayment on any day 
        shall be the excess of--
                    ``(A) the sum of the required installments for the 
                taxable year the due dates for which are on or before 
                such day, over
                    ``(B) the sum of the amounts (if any) of estimated 
                tax payments made on or before such day on such 
                required installments.
            ``(2) Determination of interest rate.--
                    ``(A) In general.--The underpayment rate with 
                respect to any day in an installment underpayment 
                period shall be the underpayment rate established under 
                section 6621 for the first day of the calendar quarter 
                in which such installment underpayment period begins.
                    ``(B) Installment underpayment period.--For 
                purposes of subparagraph (A), the term `installment 
                underpayment period' means the period beginning on the 
                day after the due date for a required installment and 
                ending on the due date for the subsequent required 
                installment (or in the case of the 4th required 
                installment, the 15th day of the 4th month following 
                the close of a taxable year).
                    ``(C) Daily rate.--The rate determined under 
                subparagraph (A) shall be applied on a daily basis and 
                shall be based on the assumption of 365 days in a 
                calendar year.
            ``(3) Termination of estimated tax interest.--No day after 
        the end of the installment underpayment period for the 4th 
        required installment specified in paragraph (2)(B) for a 
        taxable year shall be treated as a day of underpayment with 
        respect to such taxable year.''.
    (c) Increase in Safe Harbor Where Tax is Small.--
            (1) In general.--Clause (i) of section 6641(d)(1)(B) (as so 
        redesignated) is amended to read as follows:
                            ``(i) the lesser of--
                                    ``(I) 90 percent of the tax shown 
                                on the return for the taxable year (or, 
                                if no return is filed, 90 percent of 
                                the tax for such year), or
                                    ``(II) the tax shown on the return 
                                for the taxable year (or, if no return 
                                is filed, the tax for such year) 
                                reduced (but not below zero) by $2,000, 
                                or''.
            (2) Conforming amendment.--Subsection (e) of section 6641 
        (as so redesignated) is amended by striking paragraph (1) and 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
    (d) Conforming Amendments.--
            (1) Paragraphs (1) and (2) of subsection (e) (as 
        redesignated by subsection (c)(2)) and subsection (h) of 
        section 6641 (as so designated) are each amended by striking 
        ``addition to tax'' each place it occurs and inserting 
        ``interest''.
            (2) Section 167(g)(5)(D) is amended by striking ``6654'' 
        and inserting ``6641''.
            (3) Section 460(b)(1) is amended by striking ``6654'' and 
        inserting ``6641''.
            (4) Section 3510(b) is amended--
                    (A) by striking ``section 6654'' in paragraph (1) 
                and inserting ``section 6641'';
                    (B) by amending paragraph (2)(B) to read as 
                follows:
                    ``(B) no interest would be required to be paid (but 
                for this section) under 6641 for such taxable year by 
                reason of the $2,000 amount specified in section 
                6641(d)(1)(B)(i)(II).'';
                    (C) by striking ``section 6654(d)(2)'' in paragraph 
                (3) and inserting ``section 6641(d)(2)''; and
                    (D) by striking paragraph (4).
            (5) Section 6201(b)(1) is amended by striking ``6654'' and 
        inserting ``6641''.
            (6) Section 6601(h) is amended by striking ``6654'' and 
        inserting ``6641''.
            (7) Section 6621(b)(2)(B) is amended by striking ``addition 
        to tax under section 6654'' and inserting ``interest required 
        to be paid under section 6641''.
            (8) Section 6622(b) is amended--
                    (A) by striking ``Penalty for'' in the heading; and
                    (B) by striking ``addition to tax under section 
                6654 or 6655'' and inserting ``interest required to be 
                paid under section 6641 or addition to tax under 
                section 6655''.
            (9) Section 6658(a) is amended--
                    (A) by striking ``6654, or 6655'' and inserting 
                ``or 6655, and no interest shall be required to be paid 
                under section 6641,''; and
                    (B) by inserting ``or paying interest'' after ``the 
                tax'' in paragraph (2)(B)(ii).
            (10) Section 6665(b) is amended--
                    (A) in the matter preceding paragraph (1) by 
                striking ``, 6654,''; and
                    (B) in paragraph (2) by striking ``6654 or''.
            (11) Section 7203 is amended by striking ``section 6654 or 
        6655'' and inserting ``section 6655 or interest required to be 
        paid under section 6641''.
    (e) Clerical Amendments.--
            (1) Chapter 67 is amended by inserting after subchapter D 
        the following:

  ``Subchapter E--Interest on Failure by Individual to Pay Estimated 
                               Income Tax

                              ``Sec. 6641. Interest on failure by 
                                        individual to pay estimated 
                                        income tax.''.
            (2) The table of subchapters for chapter 67 is amended by 
        adding at the end the following new items:

                              ``Subchapter D. Notice requirements.
                              ``Subchapter E. Interest on failure by 
                                        individual to pay estimated 
                                        income tax.''.
            (3) The table of sections for part I of subchapter A of 
        chapter 68 is amended by striking the item relating to section 
        6654.
    (f) Effective Date.--The amendments made by this section shall 
apply to installment payments for taxable years beginning after 
December 31, 2002.

SEC. 103. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS OF 
              INCOME TAX BY INDIVIDUALS.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by inserting 
after section 139 the following new section:

``SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS 
              OF INCOME TAX BY INDIVIDUALS.

    ``(a) In General.--In the case of an individual, gross income shall 
not include interest paid under section 6611 on any overpayment of tax 
imposed by this subtitle.
    ``(b) Exception.--Subsection (a) shall not apply in the case of a 
failure to claim items resulting in the overpayment on the original 
return if the Secretary determines that the principal purpose of such 
failure is to take advantage of subsection (a).
    ``(c) Special Rule for Determining Modified Adjusted Gross 
Income.--For purposes of this title, interest not included in gross 
income under subsection (a) shall not be treated as interest which is 
exempt from tax for purposes of sections 32(i)(2)(B) and 6012(d) or any 
computation in which interest exempt from tax under this title is added 
to adjusted gross income.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 139 the following new item:

                              ``Sec. 139A. Exclusion from gross income 
                                        for interest on overpayments of 
                                        income tax by individuals.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest received in calendar years beginning after the date 
of the enactment of this Act.

SEC. 104. ABATEMENT OF INTEREST.

    (a) Abatement of Interest With Respect to Erroneous Refund Check 
Without Regard to Size of Refund.--Paragraph (2) of section 6404(e) is 
amended by striking ``unless--'' and all that follows and inserting 
``unless the taxpayer (or a related party) has in any way caused such 
erroneous refund.''.
    (b) Abatement of Interest to Extent Interest is Attributable to 
Taxpayer Reliance on Written Statements of the IRS.--Subsection (f) of 
section 6404 is amended--
            (1) in the subsection heading, by striking ``Penalty or 
        Addition'' and inserting ``Interest, Penalty, or Addition''; 
        and
            (2) in paragraph (1) and in subparagraph (B) of paragraph 
        (2), by striking ``penalty or addition'' and inserting 
        ``interest, penalty, or addition''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to interest accruing on or after the date of the 
enactment of this Act.

SEC. 105. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL 
              UNDERPAYMENTS.

    (a) In General.--Subchapter B of chapter 67 (relating to interest 
on overpayments) is amended by redesignating section 6612 as section 
6613 and by inserting after section 6611 the following new section:

``SEC. 6612. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL 
              UNDERPAYMENTS, ETC.

    ``(a) Authority To Make Deposits Other Than As Payment of Tax.--A 
taxpayer may make a cash deposit with the Secretary which may be used 
by the Secretary to pay any tax imposed under subtitle A or B or 
chapter 41, 42, 43, or 44 which has not been assessed at the time of 
the deposit. Such a deposit shall be made in such manner as the 
Secretary shall prescribe.
    ``(b) No Interest Imposed.--To the extent that such deposit is used 
by the Secretary to pay tax, for purposes of section 6601 (relating to 
interest on underpayments), the tax shall be treated as paid when the 
deposit is made.
    ``(c) Return of Deposit.--Except in a case where the Secretary 
determines that collection of tax is in jeopardy, the Secretary shall 
return to the taxpayer any amount of the deposit (to the extent not 
used for a payment of tax) which the taxpayer requests in writing.
    ``(d) Payment of Interest.--
            ``(1) In general.--For purposes of section 6611 (relating 
        to interest on overpayments), a deposit which is returned to a 
        taxpayer shall be treated as a payment of tax for any period to 
        the extent (and only to the extent) attributable to a 
        disputable tax for such period. Under regulations prescribed by 
        the Secretary, rules similar to the rules of section 6601(e)(2) 
        shall apply.
            ``(2) Disputable tax.--
                    ``(A) In general.--For purposes of this section, 
                the term `disputable tax' means the amount of tax 
                specified at the time of the deposit as the taxpayer's 
                reasonable estimate of the maximum amount of any tax 
                attributable to disputable items.
                    ``(B) Safe harbor based on 30-day letter.--In the 
                case of a taxpayer who has been issued a 30-day letter, 
the maximum amount of tax under subparagraph (A) shall not be less than 
the amount of the proposed deficiency specified in such letter.
            ``(3) Other definitions.--For purposes of paragraph (2)--
                    ``(A) Disputable item.--The term `disputable item' 
                means any item of income, gain, loss, deduction, or 
                credit which the taxpayer reasonably believes the 
                Secretary has a reasonable basis for disputing the 
                treatment on the taxpayer's return.
                    ``(B) 30-day letter.--The term `30-day letter' 
                means the first letter of proposed deficiency which 
                allows the taxpayer an opportunity for administrative 
                review in the Internal Revenue Service Office of 
                Appeals.
            ``(4) Rate of interest.--The rate of interest allowable 
        under this subsection shall be the Federal short-term rate 
        determined under section 6621(b), compounded daily.
    ``(e) Use of Deposits.--
            ``(1) Payment of tax.--Except as otherwise provided by the 
        taxpayer, deposits shall be treated as used for the payment of 
        tax in the order deposited.
            ``(B) Returns of deposits.--Deposits shall be treated as 
        returned to the taxpayer on a last-in, first-out basis.''
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 67 is amended by striking the last item and inserting the 
following new items:

                              ``Sec. 6612. Deposits made to suspend 
                                        running of interest on 
                                        potential underpayments, etc.
                              ``Sec. 6613. Cross references.''
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to deposits made after the date of the enactment of this 
        Act.
            (2) Coordination with deposits made under revenue procedure 
        84-58.--In the case of an amount held by the Secretary of the 
        Treasury or his delegate on the date of the enactment of this 
        Act as a deposit in the nature of a cash bond deposit pursuant 
        to Revenue Procedure 84-58, the date that the taxpayer 
        identifies such amount as a deposit made pursuant to section 
        6612 of the Internal Revenue Code (as added by this Act) shall 
        be treated as the date such amount is deposited for purposes of 
        such section 6612.

SEC. 106. EXPANSION OF INTEREST NETTING FOR INDIVIDUALS.

    (a) In General.--Subsection (d) of section 6621 (relating to 
elimination of interest on overlapping periods of tax overpayments and 
underpayments) is amended by adding at the end the following: ``Solely 
for purposes of the preceding sentence, section 6611(e) shall not apply 
in the case of an individual.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to interest accrued after December 31, 2002.

SEC. 107. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME UNINTENTIONAL 
              MINOR ERRORS.

    (a) In General.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(i) Treatment of first-time unintentional minor error.--In the 
case of a return of tax imposed by subtitle A filed by an individual, 
the Secretary may waive an addition to tax under subsection (a) if--
            ``(1) the individual has a history of compliance with the 
        requirements of this title,
            ``(2) it is shown that the failure is due to an 
        unintentional minor error,
            ``(3) the penalty would otherwise be disproportionate to 
        the amount involved, and
            ``(4) waiving the penalty would promote compliance with the 
        requirements of this title and effective tax administration.
The preceding sentence shall not apply if the Secretary has waived any 
addition to tax under this subsection with respect to any prior failure 
by such individual.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2003.

SEC. 108. FRIVOLOUS TAX SUBMISSIONS.

    (a) Civil Penalties.--Section 6702 is amended to read as follows:

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

    ``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay 
a penalty of $5,000 if--
            ``(1) such person files what purports to be a return of a 
        tax imposed by this title but which--
                    ``(A) does not contain information on which the 
                substantial correctness of the self-assessment may be 
                judged, or
                    ``(B) contains information that on its face 
                indicates that the self-assessment is substantially 
                incorrect; and
            ``(2) the conduct referred to in paragraph (1)--
                    ``(A) is based on a position which the Secretary 
                has identified as frivolous under subsection (c), or
                    ``(B) reflects a desire to delay or impede the 
                administration of Federal tax laws.
    ``(b) Civil Penalty for Specified Frivolous Submissions.--
            ``(1) Imposition of Penalty.--Except as provided in 
        paragraph (3), any person who submits a specified frivolous 
        submission shall pay a penalty of $5,000.
            ``(2) Specified frivolous submission.--For purposes of this 
        section--
                    ``(A) Specified frivolous submission.--The term 
                `specified frivolous submission' means a specified 
                submission if any portion of such submission--
                            ``(i) is based on a position which the 
                        Secretary has identified as frivolous under 
                        subsection (c), or
                            ``(ii) reflects a desire to delay or impede 
                        the administration of Federal tax laws.
                    ``(B) Specified frivolous submission.--The term 
                `specified submission' means--
                            ``(i) a request for a hearing under--
                                    ``(I) section 6320 (relating to 
                                notice and opportunity for hearing upon 
                                filing of notice of lien), or
                                    ``(II) section 6330 (relating to 
                                notice and opportunity for hearing 
                                before levy), and
                            ``(ii) an application under--
                                    ``(I) section 7811 (relating to 
                                taxpayer assistance orders),
                                    ``(II) section 6159 (relating to 
                                agreements for payment of tax liability 
                                in installments), or
                                    ``(III) section 7122 (relating to 
                                compromises).
            ``(3) Opportunity to withdraw submission.--If the Secretary 
        provides a person with notice that a submission is a specified 
        frivolous submission and such person withdraws such submission 
        promptly after such notice, the penalty imposed under paragraph 
        (1) shall not apply with respect to such submission.
    ``(c) Listing of Frivolous Positions.--The Secretary shall 
prescribe (and periodically revise) a list of positions which the 
Secretary has identified as being frivolous for purposes of this 
subsection. The Secretary shall not include in such list any position 
that the Secretary determines meets the requirement of section 
6662(d)(2)(B)(ii)(II).
    ``(d) Reduction of Penalty.--The Secretary may reduce the amount of 
any penalty imposed under this section if the Secretary determines that 
such reduction would promote compliance with and administration of the 
Federal tax laws.
    ``(e) Penalties in Addition to Other Penalties.--The penalties 
imposed by this section shall be in addition to any other penalty 
provided by law.''.
    (b) Treatment of Frivolous Requests for Hearings before Levy.--
            (1) Frivolous requests disregarded.--Section 6330 (relating 
        to notice and opportunity for hearing before levy) is amended 
        by adding at the end the following new subsection:
    ``(g) Frivolous Requests for Hearing, etc.--Notwithstanding any 
other provision of this section, if the Secretary determines that any 
portion of a request for a hearing under this section or section 6320 
meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), 
then the Secretary may treat such portion as if it were never submitted 
and such portion shall not be subject to any further administrative or 
judicial review.''.
            (2) Preclusion from raising frivolous issues at hearing.--
        Section 6330(c)(4) is amended--
                    (A) by striking ``(A)'' and inserting ``(A)(i)'';
                    (B) by striking ``(B)'' and inserting ``(ii)'';
                    (C) by striking the period at the end of the first 
                sentence and inserting ``; or''; and
                    (D) by inserting after subparagraph (A)(ii) (as so 
                redesignated) the following:
                    ``(B) the issue meets the requirement of clause (i) 
                or (ii) of section 6702(b)(2)(A).''.
            (3) Statement of grounds.--Section 6330(b)(1) is amended by 
        striking ``under subsection (a)(3)(B)'' and inserting ``in 
        writing under subsection (a)(3)(B) and states the grounds for 
        the requested appeal''.
    (c) Treatment of Frivolous Requests for Hearings upon Filing of 
Notice of Lien.--Section 6320 is amended--
            (1) in subsection (b)(1), by striking ``under subsection 
        (a)(3)(B)'' and inserting ``in writing under subsection 
        (a)(3)(B) and states the grounds for the requested appeal''.
            (2) in subsection (c), by striking ``and (e)'' and 
        inserting ``(e), and (g)''.
    (d) Treatment of Frivolous Applications for Offers-in-Compromise 
and Installment Agreements.--Section 7122 is amended by adding at the 
end the following new subsection:
    ``(e) Frivolous Submissions, Etc.--Notwithstanding any other 
provision of this section, if the Secretary determines that any portion 
of an application for an offer-in-compromise or installment agreement 
submitted under this section or section 6159 meets the requirement of 
clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
treat such portion as if it were never submitted and such portion shall 
not be subject to any further administrative or judicial review.''.
    (e) Conforming Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by striking the item relating to 
section 6702 and inserting the following new item:

                              ``Sec. 6702. Frivolous tax submissions.''
    (f) Effective Date.--The amendments made by this section shall 
apply to submissions made and issues raised after the date on which the 
Secretary first prescribes a list under section 6702(c) of the Internal 
Revenue Code of 1986, as amended by subsection (a).

              TITLE II--FAIRNESS OF COLLECTION PROCEDURES

SEC. 201. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT AGREEMENTS.

    (a) In General.--
            (1) Section 6159(a) (relating to authorization of 
        agreements) is amended--
                    (A) by striking ``satisfy liability for payment 
                of'' and inserting ``make payment on'', and
                    (B) by inserting ``full or partial'' after 
                ``facilitate''.
            (2) Section 6159(c) (relating to Secretary required to 
        enter into installment agreements in certain cases) is amended 
        in the matter preceding paragraph (1) by inserting ``full'' 
        before ``payment''.
    (b) Requirement To Review Partial Payment Agreements Every Two 
Years.--Section 6159 is amended by redesignating subsections (d) and 
(e) as subsections (e) and (f), respectively, and inserting after 
subsection (c) the following new subsection:
    ``(d) Secretary Required To Review Installment Agreements for 
Partial Collection Every Two Years.--In the case of an agreement 
entered into by the Secretary under subsection (a) for partial 
collection of a tax liability, the Secretary shall review the agreement 
at least once every 2 years.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to agreements entered into on or after the date of the enactment 
of this Act.

SEC. 202. ADDITIONAL CONSIDERATIONS TO BE TAKEN INTO ACCOUNT AS BASES 
              FOR ACCEPTING OFFER-IN-COMPROMISE.

    (a) In General.--Paragraph (3) of section 7122(c) (relating to 
special rules relating to treatment of offers) is amended by striking 
``and'' at the end of subparagraph (A), by striking the period at the 
end of subparagraph (B) and inserting a semicolon, and by adding at the 
end the following new subparagraphs:
                    ``(C) in all cases, consideration shall be given 
                to--
                            ``(i) whether the taxpayer has a history of 
                        complying with the requirements of this title,
                            ``(ii) whether there is evidence of an 
                        error by the Internal Revenue Service in 
                        determining or administering the tax which is 
                        the subject of the offer-in-compromise, and
                            ``(iii) whether the taxpayer has made a 
                        good faith effort to resolve and pay the 
                        liability;
                    ``(D) a reasonable annual allowance shall be made 
                for voluntary payments for the support of any dependent 
                (as defined in section 152) of the taxpayer;
                    ``(E) a reasonable allowance shall be made for 
                payments on unsecured debt of the taxpayer to the 
                extent such debt is attributable to Federal, State, or 
                local income taxes, medical care expenses, burial 
                expenses, or other basic living expenses; and
                    ``(F) consideration shall be given to the level of 
                the taxpayer's education and financial and business 
                experience relative the complexity of the transaction 
                giving rise to the liability.''
    (b) Limitations.--Subsection (c) of section 7122 is amended by 
adding at the end the following new paragraph:
            ``(4) Limitations on certain factors in considering offer-
        in-compromise.--
                    ``(A) Period for certain considerations.--
                Subparagraph (E) of paragraph (3) shall apply only 
                during the 3-year period beginning on 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.
                            ``(iii) The date on which the first letter 
                        of proposed deficiency which allows the 
                        taxpayer an opportunity for administrative 
                        review in the Internal Revenue Service Office 
                        of Appeals is sent.
                    ``(B) Dollar limitations.--
                            ``(i) Allowances.--The allowances under 
                        subparagraphs (D) and (E) shall not exceed the 
                        dollar amount in effect under section 2503(b).
                            ``(ii) Consideration of education and 
                        financial sophistication.--Subparagraph (F) of 
                        paragraph (3) shall apply only if the amount of 
                        the liability does not exceed the dollar amount 
                        in effect under section 2503(b).''
    (c) Effective Date.--The amendments made by this section shall 
apply to proposed offers-in-compromise submitted after the date of the 
enactment of this Act.

SEC. 203. EXTENSION OF TIME FOR RETURN OF PROPERTY.

    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 (relating to return of property) is 
amended by striking ``9 months'' and inserting ``2 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
(relating to suits by persons other than taxpayers) is amended--
            (1) in paragraph (1) by striking ``9 months'' and inserting 
        ``2 years'', and
            (2) in paragraph (2) by striking ``9-month'' and inserting 
        ``2-year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to--
            (1) levies made after the date of the enactment of this 
        Act, and
            (2) levies made on or before such date if the 9-month 
        period has not expired under section 6343(b) of the Internal 
        Revenue Code of 1986 (without regard to this section) as of 
        such date.

SEC. 204. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF LIMITATIONS 
              DURING TAX REVIEW.

    (a) In General.--Section 7811(d)(1) (relating to suspension of 
running of period of limitation) is amended by inserting after 
``application,'' the following: ``but only if the date of such decision 
is at least 7 days after the date of the taxpayer's application''.
    (b) Effective Date.--The amendment made by this section shall apply 
to applications filed after the date of the enactment of this Act.

SEC. 205. STUDY OF LIENS AND LEVIES.

    The Secretary of the Treasury, or the Secretary's delegate, shall 
conduct a study of the practices of the Internal Revenue Service 
concerning liens and levies. The study shall examine--
            (1) the declining use of liens and levies by the Internal 
        Revenue Service, and
            (2) the practicality of recording liens and levying against 
        property in cases in which the cost of such actions exceeds the 
        amount to be realized from such property.
Not later than 1 year after the date of the enactment of this Act, the 
Secretary shall submit such study to the Committee on Ways and Means of 
the House of Representatives and the Committee on Finance of the 
Senate.

              TITLE III--EFFICIENCY OF TAX ADMINISTRATION

SEC. 301. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF INTERNAL 
              REVENUE SERVICE EMPLOYEES FOR MISCONDUCT.

    (a) In General.--Subchapter A of chapter 80 (relating to 
application of internal revenue laws) is amended by inserting after 
section 7804 the following new section:

``SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

    ``(a) In General.--Subject to subsection (c), the Commissioner of 
Internal Revenue shall terminate the employment of any employee of the 
Internal Revenue Service if there is a final administrative or judicial 
determination that such employee committed any act or omission 
described under subsection (b) in the performance of the employee's 
official duties or where a nexus to the employee's position exists.
    ``(b) Acts or Omissions.--The acts or omissions referred to under 
subsection (a) are--
            ``(1) willful failure to obtain the required approval 
        signatures on documents authorizing the seizure of a taxpayer's 
        home, personal belongings, or business assets;
            ``(2) willfully providing a false statement under oath with 
        respect to a material matter involving a taxpayer or taxpayer 
        representative;
            ``(3) with respect to a taxpayer or taxpayer 
        representative, the willful violation of--
                    ``(A) any right under the Constitution of the 
                United States;
                    ``(B) any civil right established under--
                            ``(i) title VI or VII of the Civil Rights 
                        Act of 1964;
                            ``(ii) title IX of the Education Amendments 
                        of 1972;
                            ``(iii) the Age Discrimination in 
                        Employment Act of 1967;
                            ``(iv) the Age Discrimination Act of 1975;
                            ``(v) section 501 or 504 of the 
                        Rehabilitation Act of 1973; or
                            ``(vi) title I of the Americans with 
                        Disabilities Act of 1990; or
                    ``(C) the Internal Revenue Service policy on 
                unauthorized inspection of returns or return 
                information;
            ``(4) willfully falsifying or destroying documents to 
        conceal mistakes made by any employee with respect to a matter 
        involving a taxpayer or taxpayer representative;
            ``(5) assault or battery on a taxpayer or taxpayer 
        representative, but only if there is a criminal conviction, or 
        a final adverse judgment by a court in a civil case, with 
        respect to the assault or battery;
            ``(6) willful violations of this title, Department of the 
        Treasury regulations, or policies of the Internal Revenue 
        Service (including the Internal Revenue Manual) for the purpose 
        of retaliating against, or harassing, a taxpayer or taxpayer 
        representative;
            ``(7) willful misuse of the provisions of section 6103 for 
        the purpose of concealing information from a congressional 
        inquiry;
            ``(8) willful failure to file any return of tax required 
        under this title on or before the date prescribed therefor 
        (including any extensions) when a tax is due and owing, unless 
        such failure is due to reasonable cause and not due to willful 
        neglect;
            ``(9) willful understatement of Federal tax liability, 
        unless such understatement is due to reasonable cause and not 
        due to willful neglect; and
            ``(10) threatening to audit a taxpayer, or to take other 
        action under this title, for the purpose of extracting personal 
        gain or benefit.
    ``(c) Determinations of Commissioner.--
            ``(1) In general.--The Commissioner may take a personnel 
        action other than termination for an act or omission under 
        subsection (a).
            ``(2) Discretion.--The exercise of authority under 
        paragraph (1) shall be at the sole discretion of the 
        Commissioner and may not be delegated to any other officer. The 
        Commissioner, in his sole discretion, may establish a procedure 
        to determine if an individual should be referred to the 
        Commissioner for a determination by the Commissioner under 
        paragraph (1).
            ``(3) No appeal.--Notwithstanding any other provision of 
        law, any determination of the Commissioner under this 
        subsection may not be reviewed in any administrative or 
        judicial proceeding. A finding that an act or omission 
        described in subsection (b) occurred may be reviewed.
    ``(d) Definition.--For the purposes of the provisions described in 
clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a 
program or activity regarding Federal financial assistance or an 
education program or activity receiving Federal financial assistance 
shall include any program or activity conducted by the Internal Revenue 
Service for a taxpayer.
    ``(e) Annual Report.--The Commissioner shall submit to Congress 
annually a report on terminations of employment under this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 80 is 
amended by inserting after the item relating to section 7804 the 
following new item:

                              ``Sec. 7804A. Termination of employment 
                                        for misconduct.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 302. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF 
              EQUITABLE RECOUPMENT.

    (a) Confirmation of Authority of Tax Court To Apply Doctrine of 
Equitable Recoupment.--Subsection (b) of section 6214 (relating to 
jurisdiction over other years and quarters) is amended by adding at the 
end the following new sentence: ``Notwithstanding the preceding 
sentence, the Tax Court may apply the doctrine of equitable recoupment 
to the same extent that it is available in civil tax cases before the 
district courts of the United States and the United States Court of 
Federal Claims.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any action or proceeding in the Tax Court with respect to 
which a decision has not become final (as determined under section 7481 
of the Internal Revenue Code of 1986) as of the date of the enactment 
of this Act.

SEC. 303. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.

    (a) In General.--Section 6330(d)(1) (relating to judicial review of 
determination) is amended to read as follows:
            ``(1) Judicial review of determination.--The person may, 
        within 30 days of a determination under this section, appeal 
        such determination to the Tax Court (and the Tax Court shall 
        have jurisdiction with respect to such matter).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to appeals filed after the date of the enactment of this Act.

SEC. 304. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN COMPROMISE.

    (a) In General.--Section 7122(b) (relating to record) is amended by 
striking ``Whenever a compromise'' and all that follows through ``his 
delegate'' and inserting ``If the Secretary determines that an opinion 
of the General Counsel for the Department of the Treasury, or the 
Counsel's delegate, is required with respect to a compromise, there 
shall be placed on file in the office of the Secretary such opinion''.
    (b) Conforming Amendments.--Section 7122(b) is amended by striking 
the second and third sentences.
    (c) Effective Date.--The amendments made by this section shall 
apply to offers-in-compromise submitted or pending on or after the date 
of the enactment of this Act.

SEC. 305. STUDY OF TAXPAYER NOTIFICATION ALTERNATIVES.

    The Secretary of the Treasury, or the Secretary's delegate, shall 
conduct a study of alternative methods of notifying taxpayers of 
determinations and other actions of the Secretary. The study shall 
examine the advantages and disadvantages of--
            (1) the use of certificates of mailing,
            (2) modifications to certified or registered mail 
        requirements which eliminate return receipt requested, and
            (3) modifications with respect to dual notices to taxpayers 
        filing a joint return and residing at the same address.
Not later than 1 year after the date of the enactment of this Act, the 
Secretary shall submit such study to the Committee on Ways and Means of 
the House of Representatives and the Committee on Finance of the 
Senate.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

SEC. 401. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN 
              DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL REQUEST.

    (a) In General.--Paragraph (8) of section 6103(e) (relating to 
disclosure of collection activities with respect to joint return) is 
amended by striking ``in writing'' the first place it appears.
    (b) Effective Date.--The amendment made by this section shall apply 
to requests made after the date of the enactment of this Act.

SEC. 402. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION ON SOLE 
              BASIS OF REPRESENTATION OF TAXPAYERS.

    (a) In General.--Subsection (h) of section 6103 (relating to 
disclosure to certain Federal officers and employees for purposes of 
tax administration, etc.) is amended by adding at the end the following 
new paragraph:
            ``(7) Taxpayer representatives.--Notwithstanding paragraph 
        (1), the return of the representative of a taxpayer whose 
        return is being examined by an officer or employee of the 
        Department of the Treasury shall not be open to inspection by 
        such officer or employee on the sole basis of the 
        representative's relationship to the taxpayer unless a 
        supervisor of such officer or employee has approved the 
        inspection of the return of such representative on a basis 
        other than by reason of such relationship.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 403. DISCLOSURE IN JUDICIAL OR ADMINISTRATIVE TAX PROCEEDINGS OF 
              RETURN AND RETURN INFORMATION OF PERSONS WHO ARE NOT 
              PARTY TO SUCH PROCEEDINGS.

    (a) In General.--Paragraph (4) of section 6103(h) (relating to 
disclosure to certain Federal officers and employees for purposes of 
tax administration, etc.) is amended by adding at the end the following 
new subparagraph:
                    ``(B) Disclosure in judicial or administrative tax 
                proceedings of return and return information of persons 
                not party to such proceedings.--
                            ``(i) Notice.--Return or return information 
                        of any person who is not a party to a judicial 
                        or administrative proceeding described in 
                        paragraph (4) shall not be disclosed under 
                        clause (ii) or (iii) of subparagraph (A) until 
                        after the Secretary makes a reasonable effort 
                        to give notice to such person and an 
                        opportunity for such person to request the 
                        deletion of matter from such return or return 
                        information, including any of the items 
                        referred to in paragraphs (1) through (7) of 
                        section 6110(c). Such notice shall include a 
                        statement of the issue or issues the resolution 
                        of which is the reason such return or return 
                        information is sought. In the case of S 
                        corporations, partnerships, estates, and 
                        trusts, such notice shall be made at the entity 
                        level.
                            ``(ii) Disclosure limited to pertinent 
                        portion.--The only portion of a return or 
                        return information described in clause (i) 
                        which may be disclosed under subparagraph (A) 
                        is that portion of such return or return 
                        information that directly relates to the 
                        resolution of an issue in such proceeding.
                            ``(iii) Exceptions.--Clause (i) shall not 
                        apply to--
                                    ``(I) any ex parte proceeding for 
                                obtaining a search warrant, order for 
                                entry on premises or safe deposit 
                                boxes, or similar ex parte proceeding,
                                    ``(II) disclosure of third party 
                                return information by indictment or 
                                criminal information, or
                                    ``(III) if the Secretary determines 
                                that the application of such clause 
                                would seriously impair a criminal tax 
                                investigation.''.
    (b) Conforming Amendments.--Paragraph (4) of section 6103(h) is 
amended by--
            (1) by striking ``proceedings.--A return'' and inserting 
        ``proceedings.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a return'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        clauses (i), (ii), (iii), and (iv), respectively; and
            (3) in the matter following clause (iv) (as so 
        redesignated), by striking ``subparagraph (A), (B), or (C)'' 
        and inserting ``clause (i), (ii), or (iii)'' and by moving such 
        matter 2 ems to the right.
    (c) Effective Date.--The amendments made by this section shall 
apply to proceedings commenced after the date of the enactment of this 
Act.

SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER IDENTIFICATION 
              INFORMATION WITH RESPECT TO DISCLOSURE OF ACCEPTED 
              OFFERS-IN-COMPROMISE.

    (a) In General.--Paragraph (1) of section 6103(k) (relating to 
disclosure of certain returns and return information for tax 
administrative purposes) is amended by inserting ``(other than the tax 
payer's address and TIN)'' after ``Return information''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures made after the date of the enactment of this Act.

SEC. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY SAFEGUARDS.

    (a) In General.--Section 6103(p) (relating to State law 
requirements) is amended by adding at the end the following new 
paragraph:
            ``(9) Disclosure to contractors.--Notwithstanding any other 
        provision of this section, no return or return information 
        shall be disclosed by any officer or employee of any Federal 
        agency or State to any contractor of such agency or State 
        unless such agency or State--
                    ``(A) has requirements in effect which require each 
                contractor of such agency or State which would have 
                access to returns or return information to provide 
                safeguards (within the meaning of paragraph (4)) to 
                protect the confidentiality of such returns or return 
                information,
                    ``(B) agrees to conduct an annual, on-site review 
                (mid-point review in the case of contracts of less than 
                1 year in duration) of each contractor to determine 
                compliance with such requirements,
                    ``(C) submits the findings of the most recent 
                review conducted under subparagraph (B) to the 
                Secretary as part of the report required by paragraph 
                (4)(E), and
                    ``(D) certifies to the Secretary for the most 
                recent annual period that all contractors are in 
                compliance with all such requirements.
        The certification required by subparagraph (D) shall include 
        the name and address of each contractor, a description of the 
        contract of the contractor with the Federal agency or State, 
        and the duration of such contract.''.
    (b) Conforming Amendment.--Subparagraph (B) of section 6103(p)(8) 
is amended by inserting ``or paragraph (9)'' after ``subparagraph 
(A)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to disclosures made after December 31, 2002.
            (2) Certifications.--The first certification under section 
        6103(p)(9)(D) of the Internal Revenue Code of 1986, as added by 
        subsection (a), shall be made with respect to calendar year 
        2003.

SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO DISCLOSURE.

    (a) In General.--Subsection (c) of section 6103 (relating to 
disclosure of returns and return information to designee of taxpayer) 
is amended by adding at the end the following new paragraphs:
            ``(2) Requirements for valid requests and consents.--A 
        request for or consent to disclosure under paragraph (1) shall 
        only be valid for purposes of this section or sections 7213, 
        7213A, or 7431 if--
                    ``(A) at the time of execution, such request or 
                consent designates a recipient of such disclosure and 
                is dated, and
                    ``(B) at the time such request or consent is 
                submitted to the Secretary, the submitter of such 
                request or consent certifies, under penalty of perjury, 
                that such request or consent complied with subparagraph 
                (A).
            ``(3) Restrictions on persons obtaining information.--Any 
        person shall, as a condition for receiving return or return 
        information under paragraph (1)--
                    ``(A) ensure that such return and return 
                information is kept confidential,
                    ``(B) use such return and return information only 
                for the purpose for which it was requested, and
                    ``(C) not disclose such return and return 
                information except to accomplish the purpose for which 
                it was requested, unless a separate consent from the 
                taxpayer is obtained.
            ``(4) Requirements for form prescribed by secretary.--For 
        purposes of this subsection, the Secretary shall prescribe a 
        form for requests and consents which shall--
                    ``(A) contain a warning, prominently displayed, 
                informing the taxpayer that the form should not be 
                signed unless it is completed,
                    ``(B) state that if the taxpayer believes there is 
                an attempt to coerce him to sign an incomplete or blank 
                form, the taxpayer should report the matter to the 
                Treasury Inspector General for Tax Administration, and
                    ``(C) contain the address and telephone number of 
                the Treasury Inspector General for Tax 
                Administration.''.
    (b) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Treasury Inspector General for Tax 
Administration shall submit a report to the Congress on compliance with 
the designation and certification requirements applicable to requests 
for or consent to disclosure of returns and return information under 
section 6103(c) of the Internal Revenue Code of 1986, as amended by 
subsection (a). Such report shall--
            (1) evaluate (on the basis of random sampling) whether--
                    (A) the amendments made by subsection (a) are 
                achieving the purposes of this section;
                    (B) requesters and submitters for such disclosure 
                are continuing to evade the purposes of this section 
                and, if so, how; and
                    (C) the sanctions for violations of such 
                requirements are adequate; and
            (2) include such recommendations that the Treasury 
        Inspector General for Tax Administration considers necessary or 
        appropriate to better achieve the purposes of this section.
    (c) Conforming Amendment.--Section 6103(c) is amended by striking 
``Taxpayer.--The Secretary'' and inserting ``Taxpayer.--
            ``(1) In General.--The Secretary''.
    (d) Effective Date.--The amendments made by this section shall 
apply to requests and consents made after 3 months after the date of 
the enactment of this Act.

SEC. 407. NOTICE TO TAXPAYER CONCERNING ADMINISTRATIVE DETERMINATION OF 
              BROWSING; ANNUAL REPORT.

    (a) Notice to Taxpayer.--Subsection (e) of section 7431 (relating 
to notification of unlawful inspection and disclosure) is amended by 
adding at the end the following: ``The Secretary shall also notify such 
taxpayer if the Treasury Inspector General for Tax Administration 
determines that such taxpayer's return or return information was 
inspected or disclosed in violation of any of the provisions specified 
in paragraph (1), (2), or (3).''.
    (b) Reports.--Subsection (p) of section 6103 (relating to procedure 
and recordkeeping), as amended by section 405, is further amended by 
adding at the end the following new paragraph:
            ``(10) Report on unauthorized disclosure and inspection.--
        As part of the report required by paragraph (3)(C) for each 
        calendar year, the Secretary shall furnish information 
        regarding the unauthorized disclosure and inspection of returns 
        and return information, including the number, status, and 
        results of--
                    ``(A) administrative investigations,
                    ``(B) civil lawsuits brought under section 7431 
                (including the amounts for which such lawsuits were 
                settled and the amounts of damages awarded), and
                    ``(C) criminal prosecutions.''.
    (c) Effective Date.--
            (1) Notice.--The amendment made by subsection (a) shall 
        apply to determinations made after the date of the enactment of 
        this Act.
            (2) Reports.--The amendment made by subsection (b) shall 
        apply to calendar years ending after the date of the enactment 
        of this Act.

SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.

    (a) In General.--Section 6103(i)(3)(B) (relating to danger of death 
or physical injury) is amended by striking ``or State'' and inserting 
``, State, or local''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND PURPOSES.

    (a) In General.--Paragraph (1) of section 6103(m) (relating to 
disclosure of taxpayer identity information) is amended by striking 
``and other media'' and by inserting ``, other media, and through any 
other means of mass communication,''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                         TITLE V--MISCELLANEOUS

SEC. 501. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

    Subsection (i) of section 7611 (relating to section not to apply to 
criminal investigations, etc.) is amended by striking ``or'' at the end 
of paragraph (4), by striking the period at the end of paragraph (5) 
and inserting ``, or'', and by inserting after paragraph (5) the 
following:
            ``(6) information provided by the Secretary related to the 
        standards for exemption from tax under this title and the 
        requirements under this title relating to unrelated business 
        taxable income.''.

SEC. 502. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Paragraph (1) of section 7428(a) (relating to 
creation of remedy) is amended--
            (1) in subparagraph (B) by inserting after ``509(a))'' the 
        following: ``or as a private operating foundation (as defined 
        in section 4942(j)(3))''; and
            (2) by amending subparagraph (C) to read as follows:
                    ``(C) with respect to the initial qualification or 
                continuing qualification of an organization as an 
                organization described in section 501(c) (other than 
                paragraph (3)) which is exempt from tax under section 
                501(a), or''.
    (b) Court Jurisdiction.--Subsection (a) of section 7428 is amended 
in the material following paragraph (2) by striking ``United States Tax 
Court, the United States Claims Court, or the district court of the 
United States for the District of Columbia'' and inserting the 
following: ``United States Tax Court (in the case of any such 
determination or failure) or the United States Claims Court or the 
district court of the United States for the District of Columbia (in 
the case of a determination or failure with respect to an issue 
referred to in subparagraph (A) or (B) of paragraph (1)),''.
    (c) Failure of Service To Act on Determinations Treated as 
Exhaustion of Remedies.--The second sentence of paragraph (2) of 
section 7428(b) (relating to exhaustion of administrative remedies) is 
amended to read as follows: ``An organization which requests the 
determination of an issue referred to in subsection (a)(1) and which 
has taken, in a timely manner, all reasonable steps to secure such 
determination, shall be deemed to have exhausted its administrative 
remedies with respect to--
                    ``(A) a failure by the Secretary to make a 
                determination with respect to such issue, at the 
                expiration of 270 days after the date on which the 
                request for such determination was made, and
                    ``(B) a failure by any office of the Internal 
                Revenue Service (other than the office which is 
                responsible for initial determinations with respect to 
                such issue) to make a determination with respect to 
                such issue, at the expiration of 450 days after the 
                date on which such request was made.''.
    (d) Effective Dates.--
            (1) Declaratory judgment.--The amendments made by 
        subsections (a) and (b) shall apply to pleadings filed with 
        respect to determinations (or requests for determinations) made 
        after the date of the enactment of this Act.
            (2) Failure of service to act.--The amendments made by 
        subsection (c) shall apply to applications received in the 
        national office of the Internal Revenue Service after the date 
        of the enactment of this Act.

SEC. 503. EMPLOYEE MISCONDUCT REPORT TO INCLUDE SUMMARY OF COMPLAINTS 
              BY CATEGORY.

    (a) In General.--Clause (ii) of section 7803(d)(2)(A) is amended by 
inserting before the semicolon at the end the following: ``, including 
a summary (by category) of the 10 most common complaints made and the 
number of such common complaints''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to reporting periods ending after the date of the 
enactment of this Act.

SEC. 504. ANNUAL REPORT ON AWARDS OF COSTS AND CERTAIN FEES IN 
              ADMINISTRATIVE AND COURT PROCEEDINGS.

    Not later than 3 months after the close of each Federal fiscal year 
after fiscal year 2001, the Treasury Inspector General for Tax 
Administration shall submit a report to Congress which specifies for 
such year--
            (1) the number of payments made by the United States 
        pursuant to section 7430 of the Internal Revenue Code of 1986 
        (relating to awarding of costs and certain fees);
            (2) the amount of each such payment;
            (3) an analysis of any administrative issue giving rise to 
        such payments; and
            (4) changes (if any) which will be implemented as a result 
        of such analysis and other changes (if any) recommended by the 
        Treasury Inspector General for Tax Administration as a result 
        of such analysis.

SEC. 505. ANNUAL REPORT ON ABATEMENT OF PENALTIES.

    Not later than 6 months after the close of each Federal fiscal year 
after fiscal year 2001, the Treasury Inspector General for Tax 
Administration shall submit a report to Congress on abatements of 
penalties under the Internal Revenue Code of 1986 during such year, 
including information on the reasons and criteria for such abatements.

SEC. 506. BETTER MEANS OF COMMUNICATING WITH TAXPAYERS.

    Not later than 18 months after the date of the enactment of this 
Act, the Treasury Inspector General for Tax Administration shall submit 
a report to Congress evaluating whether technological advances, such as 
e-mail and facsimile transmission, permit the use of alternative means 
for the Internal Revenue Service to communicate with taxpayers.

SEC. 507. EXPLANATION OF STATUTE OF LIMITATIONS AND CONSEQUENCES OF 
              FAILURE TO FILE.

    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), and any instructions booklet accompanying a general 
income tax return form for taxable years beginning in 2000 and later 
(including forms 1040, 1040A, 1040EZ, and any similar or successor 
forms relating thereto), to provide for an explanation of--
            (1) the limitations imposed by section 6511 of the Internal 
        Revenue Code of 1986 on credits and refunds; and
            (2) the consequences under such section 6511 of the failure 
        to file a return of tax.

SEC. 508. AMENDMENT TO TREASURY AUCTION REFORMS.

    (a) In General.--Clause (i) of section 202(c)(4)(B) of the 
Government Securities Act Amendments of 1993 (31 U.S.C. 3121 note) is 
amended by inserting before the semicolon ``(or, if earlier, at the 
time the Secretary releases the minutes of the meeting in accordance 
with paragraph (2))''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to meetings held after the date of the enactment of this Act.

SEC. 509. ENROLLED AGENTS.

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

``SEC. 7527. ENROLLED AGENTS.

    ``(a) In General.--The Secretary may prescribe such regulations as 
may be necessary to regulate the conduct of enrolled agents in regards 
to their practice before the Internal Revenue Service.
    ``(b) Use of Credentials.--Any enrolled agents properly licensed to 
practice as required under rules promulgated under section (a) herein 
shall be allowed to use the credentials or designation as `enrolled 
agent', `EA', or `E.A.'.''
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7525. Enrolled agents.''
    (c) Prior Regulations.--Nothing in the amendments made by this 
section shall be construed to have any effect on part 10 of title 31, 
Code of Federal Regulations, or any other Federal rule or regulation 
issued before the date of the enactment of this Act.

                TITLE VI--AUTHORIZATION OF APPROPRIATION

SEC. 601. LOW-INCOME TAXPAYER CLINICS.

    (a) Limitation on Amount of Grants.--Paragraph (1) of section 
7526(c) (relating to special rules and limitations) is amended by 
striking ``$6,000,000 per year'' and inserting ``$9,000,000 for 2002, 
$12,000,000 for 2003, and $15,000,000 for each year thereafter''.
    (b) Limitation on Use of Clinics for Tax Return Preparation.--
Section 7526(b)(1) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Limitation regarding tax return 
                preparation.--A clinic meets the requirements of 
                subparagraph (A)(ii)(II) if the programs operated by 
                the clinic do not include routine tax return 
                preparation.''.
    (c) Promotion of Clinics.--Section 7526(c) is amended by adding at 
the end the following new paragraph:
            ``(7) Promotion of clinics.--The Secretary is authorized to 
        promote the benefits of and encourage the use of low-income 
        taxpayer clinics through the use of mass communications, 
        referrals, and other means.''.
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