[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1528 Referred in Senate (RFS)]

  1st Session
                                H. R. 1528


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 20, 2003

     Received; read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 AN ACT


 
  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 2003''.
    (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--PENALTY AND INTEREST REFORMS

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

Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Extension of time for return of property.
Sec. 203. Individuals held harmless on wrongful levy, etc., on 
                            individual retirement plan.
Sec. 204. Seven-day threshold on tolling of statute of limitations 
                            during tax review.
Sec. 205. Study of liens and levies.
                 TITLE III--TAX ADMINISTRATION REFORMS

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. 15-day delay in due date for electronically filed individual 
                            income tax returns.
Sec. 306. Access of National Taxpayer Advocate to independent legal 
                            counsel.
Sec. 307. Payment of motor fuel excise tax refunds by direct deposit.
Sec. 308. Family business tax simplification.
Sec. 309. Health insurance costs of eligible individuals.
Sec. 310. Suspension of tax-exempt status of terrorist organizations.
Sec. 311. Extension of joint review of strategic plans and budget for 
                            the Internal Revenue Service.
                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.
Sec. 410. Disclosure to State officials of proposed actions related to 
                            section 501(c)(3) organizations.
Sec. 411. Confidentiality of taxpayer communications with the Office of 
                            the Taxpayer Advocate.
                         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.
Sec. 510. Financial management service fees.
Sec. 511. Extension of Internal Revenue Service user fees.
                 TITLE VI--LOW-INCOME TAXPAYER CLINICS

Sec. 601. Low-income taxpayer clinics.
      TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS

Sec. 701. Applicability of certain Federal-State agreements relating to 
                            unemployment assistance.

                 TITLE I--PENALTY AND INTEREST REFORMS

SEC. 101. 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 $1,600, 
                                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 $1,600 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, 2003.

SEC. 102. 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. 103. 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. 104. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL 
              UNDERPAYMENTS.

    (a) In General.--Subchapter A of chapter 67 (relating to interest 
on underpayments) is amended by adding at the end the following new 
section:

``SEC. 6603. 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 6611(b)(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 if the taxpayer--
                            ``(i) has a reasonable basis for its 
                        treatment of such item, and
                            ``(ii) reasonably believes that the 
                        Secretary also has a reasonable basis for 
                        disallowing the taxpayer's treatment of such 
                        item.
                    ``(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.
            ``(2) 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 A of 
chapter 67 is amended by adding at the end the following new item:

                              ``Sec. 6603. Deposits made to suspend 
                                        running of interest on 
                                        potential underpayments, 
                                        etc.''.
    (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 
        6603 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 6603.

SEC. 105. 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, 2003.

SEC. 106. 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 Errors.--
            ``(1) In general.--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--
                    ``(A) the individual has a history of compliance 
                with the requirements of this title,
                    ``(B) it is shown that the failure is due to an 
                unintentional minor error,
                    ``(C) the penalty would be grossly disproportionate 
                to the action or expense that would have been needed to 
                avoid the error, and imposing the penalty would be 
                against equity and good conscience,
                    ``(D) waiving the penalty would promote compliance 
                with the requirements of this title and effective tax 
                administration, and
                    ``(E) the taxpayer took all reasonable steps to 
                remedy the error promptly after discovering it.
            ``(2) Exceptions.--Paragraph (1) shall not apply if--
                    ``(A) the Secretary has waived any addition to tax 
                under this subsection with respect to any prior failure 
                by such individual,
                    ``(B) the failure is a mathematical or clerical 
                error (as defined in section 6213(g)(2)), or
                    ``(C) the failure is the lack of a required 
                signature.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2004.

SEC. 107. 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 is based 
                on a position which the Secretary has identified as 
                frivolous under subsection (c).
                    ``(B) Specified 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 
        within 30 days 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) Clerical 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.''.
    (c) 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).

SEC. 108. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT PENALTY.

    Nothing in section 6656 of the Internal Revenue Code of 1986 shall 
be construed to permit the percentage specified in subsection 
(b)(1)(A)(iii) thereof to apply other than in a case where the failure 
is for more than 15 days.

              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. 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. 203. INDIVIDUALS HELD HARMLESS ON WRONGFUL LEVY, ETC., ON 
              INDIVIDUAL RETIREMENT PLAN.

    (a) In General.--Section 6343 (relating to authority to release 
levy and return property) is amended by adding at the end the following 
new subsection:
    ``(f) Individuals Held Harmless on Wrongful Levy, Etc. on 
Individual Retirement Plan.--
            ``(1) In general.--If the Secretary determines that an 
        individual retirement plan has been levied upon in a case to 
        which subsection (b) or (d)(2)(A) applies, an amount equal to 
        the sum of--
                    ``(A) the amount of money returned by the Secretary 
                on account of such levy, and
                    ``(B) interest paid under subsection (c) on such 
                amount of money,
        may be deposited into an individual retirement plan (other than 
        an endowment contract) to which a rollover from the plan levied 
        upon is permitted.
            ``(2) Treatment as rollover.--The distribution on account 
        of the levy and any deposit under paragraph (1) with respect to 
        such distribution shall be treated for purposes of this title 
        as if such distribution and deposit were part of a rollover 
        described in section 408(d)(3)(A)(i); except that--
                    ``(A) interest paid under subsection (c) shall be 
                treated as part of such distribution and as not 
                includible in gross income,
                    ``(B) the 60-day requirement in such section shall 
                be treated as met if the deposit is made not later than 
                the 60th day after the day on which the individual 
                receives an amount under paragraph (1) from the 
                Secretary, and
                    ``(C) such deposit shall not be taken into account 
                under section 408(d)(3)(B).
            ``(3) Refund, etc., of income tax on levy.--If any amount 
        is includible in gross income for a taxable year by reason of a 
        levy referred to in paragraph (1) and any portion of such 
        amount is treated as a rollover under paragraph (2), any tax 
        imposed by chapter 1 on such portion shall not be assessed, and 
        if assessed shall be abated, and if collected shall be credited 
        or refunded as an overpayment made on the due date for filing 
        the return of tax for such taxable year.
            ``(4) Interest.--Notwithstanding subsection (d), interest 
        shall be allowed under subsection (c) in a case in which the 
        Secretary makes a determination described in subsection 
        (d)(2)(A) with respect to a levy upon an individual retirement 
        plan.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid under subsections (b), (c), and (d)(2)(A) of section 
6343 of the Internal Revenue Code of 1986 after December 31, 2003.

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--TAX ADMINISTRATION REFORMS

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. DISCIPLINARY ACTIONS FOR MISCONDUCT.

    ``(a) Disciplinary Actions.--
            ``(1) In general.--Subject to subsection (c), the 
        Commissioner shall take an action in accordance with the 
        guidelines established under paragraph (2) against 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.
            ``(2) Guidelines.--The Commissioner shall issue guidelines 
        for determining the appropriate level of discipline, up to and 
        including termination of employment, for committing any act or 
        omission described under subsection (b).
    ``(b) Acts or Omissions.--The acts or omissions described under 
this subsection 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 a disciplinary action provided for in the 
        guidelines under subsection (a)(2) for an act or omission 
        described under subsection (b).
            ``(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 under 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 disciplinary actions 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. Disciplinary actions for 
                                        misconduct.''.
    (c) Repeal of Superseded Section.--Section 1203 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-
206; 112 Stat. 720) is repealed.
    (d) 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 judicial 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. 15-DAY DELAY IN DUE DATE FOR ELECTRONICALLY FILED INDIVIDUAL 
              INCOME TAX RETURNS.

    (a) In General.--Section 6072 (relating to time for filing income 
tax returns) is amended by adding at the end the following new 
subsection:
    ``(f) Electronically Filed Returns of Individuals.--
            ``(1) In general.--Returns of an individual under section 
        6012 or 6013 (other than an individual to whom subsection (c) 
        applies) which are filed electronically--
                    ``(A) in the case of returns filed on the basis of 
                a calendar year, shall be filed on or before the 30th 
                day of April following the close of the calendar year, 
                and
                    ``(B) in the case of returns filed on the basis of 
                a fiscal year, shall be filed on or before the last day 
                of the 4th month following the close of the fiscal 
                year.
            ``(2) Electronic filing.--Paragraph (1) shall not apply to 
        any return unless--
                    ``(A) such return is accepted by the Secretary, and
                    ``(B) the balance due (if any) shown on such return 
                is paid electronically in a manner prescribed by the 
                Secretary.
            ``(3) Special rules.--
                    ``(A) Estimated tax.--If--
                            ``(i) paragraph (1) applies to an 
                        individual for any taxable year, and
                            ``(ii) there is an overpayment of tax shown 
                        on the return for such year which the 
                        individual allows against the individual's 
                        obligation under section 6641,
                then, with respect to the amount so allowed, any 
                reference in section 6641 to the April 15 following 
                such taxable year shall be treated as a reference to 
                April 30.
                    ``(B) References to due date.--Paragraph (1) shall 
                apply solely for purposes of determining the due date 
                for the individual's obligation to file and pay tax 
                and, except as otherwise provided by the Secretary, 
                shall be treated as an extension of the due date for 
                any other purpose under this title.
            ``(4) Termination.--This subsection shall not apply to any 
        return filed with respect to a taxable year which begins after 
        December 31, 2005.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns filed with respect to taxable years beginning after December 
31, 2002.

SEC. 306. ACCESS OF NATIONAL TAXPAYER ADVOCATE TO INDEPENDENT LEGAL 
              COUNSEL.

    Clause (i) of section 7803(c)(2)(D) (relating to personnel actions) 
is amended by striking ``and'' at the end of subclause (I), by striking 
the period at the end of subclause (II) and inserting ``, and'', and by 
adding at the end the following new subclause:
                                    ``(III) appoint a counsel in the 
                                Office of the Taxpayer Advocate to 
                                report solely to the National Taxpayer 
                                Advocate.''.

SEC. 307. PAYMENT OF MOTOR FUEL EXCISE TAX REFUNDS BY DIRECT DEPOSIT.

    (a) In General.--Subchapter II of chapter 33 of title 31, United 
States Code, is amended by adding at the end the following new section:
``Sec. 3337. Payment of motor fuel excise tax refunds by direct deposit
    ``The Secretary of the Treasury shall make payments under sections 
6420, 6421, and 6427 of the Internal Revenue Code of 1986 by electronic 
funds transfer (as defined in section 3332(j)(1)) if the person who is 
entitled to the payment--
            ``(1) elects to receive the payment by electronic funds 
        transfer; and
            ``(2) satisfies the requirements of section 3332(g) with 
        respect to such payment at such time and in such manner as the 
        Secretary may require.''.
    (b) Clerical Amendment.--The table of sections for subchapter II of 
chapter 33 of title 31, United States Code, is amended by adding at the 
end the following new item:

``3337. Payment of motor fuel excise tax refunds by direct deposit.''.

SEC. 308. FAMILY BUSINESS TAX SIMPLIFICATION.

    (a) In General.--Section 761 (defining terms for purposes of 
partnerships) is amended by redesignating subsection (f) as subsection 
(g) and by inserting after subsection (e) the following new subsection:
    ``(f) Qualified Joint Venture.--
            ``(1) In general.--In the case of a qualified joint venture 
        conducted by a husband and wife who file a joint return for the 
        taxable year, for purposes of this title--
                    ``(A) such joint venture shall not be treated as a 
                partnership,
                    ``(B) all items of income, gain, loss, deduction, 
                and credit shall be divided between the spouses in 
                accordance with their respective interests in the 
                venture, and
                    ``(C) each spouse shall take into account such 
                spouse's respective share of such items as if they were 
                attributable to a trade or business conducted by such 
                spouse as a sole proprietor.
            ``(2) Qualified joint venture.--For purposes of paragraph 
        (1), the term `qualified joint venture' means any joint venture 
        involving the conduct of a trade or business if--
                    ``(A) the only members of such joint venture are a 
                husband and wife,
                    ``(B) both spouses materially participate (within 
                the meaning of section 469(h) without regard to 
                paragraph (5) thereof) in such trade or business, and
                    ``(C) both spouses elect the application of this 
                subsection.''.
    (b) Net Earnings From Self-Employment.--
            (1) Subsection (a) of section 1402 (defining net earnings 
        from self-employment) is amended by striking ``and'' at the end 
        of paragraph (14), by striking the period at the end of 
        paragraph (15) and inserting ``; and'', and by inserting after 
        paragraph (15) the following new paragraph:
            ``(16) notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint venture shall be taken into account as provided 
        in section 761(f) in determining net earnings from self-
        employment of such spouse.''.
            (2) Subsection (a) of section 211 of the Social Security 
        Act (defining net earnings from self-employment) is amended by 
        striking ``and'' at the end of paragraph (14), by striking the 
        period at the end of paragraph (15) and inserting ``; and'', 
        and by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) Notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint venture shall be taken into account as provided 
        in section 761(f) of the Internal Revenue Code of 1986 in 
        determining net earnings from self-employment of such 
        spouse.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 309. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

    (a) Consumer Options.--
            (1) In general.--Paragraph (2) of section 35(e) is amended 
        by adding at the end the following new subparagraphs:
                    ``(C) Waiver by eligible individuals.--With respect 
                to any month, clauses (i) and (ii) of subparagraph (A) 
                shall not apply with respect to any eligible individual 
                and such individual's qualifying family members if such 
                individual--
                            ``(i) does not reside in a State which the 
                        Secretary has identified by regulation, 
                        guidance, or otherwise as a State in which any 
                        coverage which--
                                    ``(I) is described in any of 
                                subparagraphs (C) through (H) of 
                                paragraph (1), and
                                    ``(II) meets the requirements of 
                                subparagraphs (A) and (B) of this 
                                paragraph,
                        is available to eligible individuals (and their 
                        qualifying family members) residing in the 
                        State, and
                            ``(ii) elects to waive the application of 
                        clauses (i) and (ii) of subparagraph (A) of 
                        this paragraph.
                    ``(D) Election.--Any election made under 
                subparagraph (C)(ii) shall be effective for the month 
                for which such election is made and for all subsequent 
                months.
                    ``(E) Termination.--Subparagraphs (C) and (D) shall 
                not apply to any month beginning after December 31, 
                2004.''.
            (2) No Impact on State Consumer Protections.--Nothing in 
        the amendment made by paragraph (1) supercedes or otherwise 
        affects the application of State law relating to consumer 
        insurance protections (including State law implementing the 
        requirements of part B of title XXVII of the Public Health 
        Service Act).
    (b) State-Based Continuation Coverage Not Subject to 
Requirements.--Subparagraphs (A) and (B)(i) of section 35(e)(2) are 
each amended by striking ``subparagraphs (B) through (H)'' and 
inserting ``subparagraphs (C) through (H)''.
    (c) Effective Date.--
            (1) Consumer options.--The amendment made by subsection (a) 
        shall apply to months beginning after the date of the enactment 
        of this Act.
            (2) State-based continuation coverage.--The amendments made 
        by subsection (b) shall take effect as if included in section 
        201(a) of the Trade Act of 2002.

SEC. 310. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST ORGANIZATIONS.

    (a) In General.--Section 501 (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Suspension of Tax-Exempt Status of Terrorist Organizations.--
            ``(1) In general.--The exemption from tax under subsection 
        (a) with respect to any organization described in paragraph 
        (2), and the eligibility of any organization described in 
        paragraph (2) to apply for recognition of exemption under 
        subsection (a), shall be suspended during the period described 
in paragraph (3).
            ``(2) Terrorist organizations.--An organization is 
        described in this paragraph if such organization is designated 
        or otherwise individually identified--
                    ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of 
                the Immigration and Nationality Act as a terrorist 
                organization or foreign terrorist organization,
                    ``(B) in or pursuant to an Executive order which is 
                related to terrorism and issued under the authority of 
                the International Emergency Economic Powers Act or 
                section 5 of the United Nations Participation Act of 
                1945 for the purpose of imposing on such organization 
                an economic or other sanction, or
                    ``(C) in or pursuant to an Executive order issued 
                under the authority of any Federal law if--
                            ``(i) the organization is designated or 
                        otherwise individually identified in or 
                        pursuant to such Executive order as supporting 
                        or engaging in terrorist activity (as defined 
                        in section 212(a)(3)(B) of the Immigration and 
                        Nationality Act) or supporting terrorism (as 
                        defined in section 140(d)(2) of the Foreign 
                        Relations Authorization Act, Fiscal Years 1988 
                        and 1989); and
                            ``(ii) such Executive order refers to this 
                        subsection.
            ``(3) Period of suspension.--With respect to any 
        organization described in paragraph (2), the period of 
        suspension--
                    ``(A) begins on the later of--
                            ``(i) the date of the first publication of 
                        a designation or identification described in 
                        paragraph (2) with respect to such 
                        organization, or
                            ``(ii) the date of the enactment of this 
                        subsection, and
                    ``(B) ends on the first date that all designations 
                and identifications described in paragraph (2) with 
                respect to such organization are rescinded pursuant to 
                the law or Executive order under which such designation 
                or identification was made.
            ``(4) Denial of deduction.--No deduction shall be allowed 
        under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
        2106(a)(2), or 2522 for any contribution to an organization 
        described in paragraph (2) during the period described in 
        paragraph (3).
            ``(5) Denial of administrative or judicial challenge of 
        suspension or denial of deduction.--Notwithstanding section 
        7428 or any other provision of law, no organization or other 
        person may challenge a suspension under paragraph (1), a 
        designation or identification described in paragraph (2), the 
        period of suspension described in paragraph (3), or a denial of 
        a deduction under paragraph (4) in any administrative or 
        judicial proceeding relating to the Federal tax liability of 
        such organization or other person.
            ``(6) Erroneous designation.--
                    ``(A) In general.--If--
                            ``(i) the tax exemption of any organization 
                        described in paragraph (2) is suspended under 
                        paragraph (1),
                            ``(ii) each designation and identification 
                        described in paragraph (2) which has been made 
                        with respect to such organization is determined 
                        to be erroneous pursuant to the law or 
                        Executive order under which such designation or 
                        identification was made, and
                            ``(iii) the erroneous designations and 
                        identifications result in an overpayment of 
                        income tax for any taxable year by such 
                        organization,
                credit or refund (with interest) with respect to such 
                overpayment shall be made.
                    ``(B) Waiver of limitations.--If the credit or 
                refund of any overpayment of tax described in 
                subparagraph (A)(iii) is prevented at any time by the 
                operation of any law or rule of law (including res 
                judicata), such credit or refund may nevertheless be 
                allowed or made if the claim therefor is filed before 
                the close of the 1-year period beginning on the date of 
                the last determination described in subparagraph 
                (A)(ii).
            ``(7) Notice of suspensions.--If the tax exemption of any 
        organization is suspended under this subsection, the Internal 
        Revenue Service shall update the listings of tax-exempt 
        organizations and shall publish appropriate notice to taxpayers 
        of such suspension and of the fact that contributions to such 
        organization are not deductible during the period of such 
        suspension.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to designations made before, on, or after the date of the 
enactment of this Act.

SEC. 311. EXTENSION OF JOINT REVIEW OF STRATEGIC PLANS AND BUDGET FOR 
              THE INTERNAL REVENUE SERVICE.

    (a) In General.--Paragraph (2) of section 8021(f) (relating to 
joint reviews) is amended by striking ``2004'' and inserting ``2009''.
    (b) Report.--Subparagraph (C) of section 8022(3) (regarding 
reports) is amended--
            (1) by striking ``2004'' and inserting ``2009'', and
            (2) by striking ``with respect to--'' and all that follows 
        and inserting ``with respect to the matters addressed in the 
        joint review referred to in section 8021(f)(2).''.

                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.--Paragraph (1) of section 6103(h) (relating to 
disclosure to certain Federal officers and employees for purposes of 
tax administration, etc.) is amended--
            (1) by striking ``Returns'' and inserting the following:
                    ``(A) In general.--Returns'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Taxpayer representatives.--Notwithstanding 
                subparagraph (A), 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 which is 180 days after 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 this 
                        paragraph 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--
                                    ``(I) to any civil action under 
                                section 7407, 7408, or 7409,
                                    ``(II) to any ex parte proceeding 
                                for obtaining a search warrant, order 
                                for entry on premises or safe deposit 
                                boxes, or similar ex parte proceeding,
                                    ``(III) to disclosure of third 
                                party return information by indictment 
                                or criminal information, or
                                    ``(IV) if the Attorney General or 
                                the Attorney General's delegate 
                                determines that the application of such 
                                clause would seriously impair a 
                                criminal tax investigation or 
                                proceeding.''.
    (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) 
        as clauses (i), (ii), (iii), and (iv), respectively, and by 
        moving such clauses 2 ems to the right; 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)  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 
taxpayer'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 and other agents.--
        Notwithstanding any other provision of this section, no return 
        or return information shall be disclosed to any contractor or 
        other agent of a Federal, State, or local agency unless such 
        agency, to the satisfaction of the Secretary--
                    ``(A) has requirements in effect which require each 
                such contractor or other agent 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 such contractor or other 
                agent 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 each such contractor or other 
                agent is in compliance with all such requirements.
        The certification required by subparagraph (D) shall include 
        the name and address of each contractor and other agent, a 
        description of the contract of the contractor or other agent 
        with the agency, 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, 2003.
            (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 
        2004.

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, sections 7213, 
        7213A, and 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 amendment made by subsection (a) is 
                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 Amendments.--
            (1) Section 6103(c) is amended by striking ``Taxpayer.--The 
        Secretary'' and inserting ``Taxpayer.--
            ``(1) In general.--The Secretary''.
            (2) Section 7213(a)(1) is amended by striking ``section 
        6103(n)'' and inserting ``subsections (c) and (n) of section 
        6103''.
            (3) Section 7213A(a)(1)(B) is amended by striking 
        ``subsection (l)(18) or (n) of section 6103'' and inserting 
        ``subsection (c), (l)(18), or (n) of section 6103''.
    (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 
substantiates 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.

SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS RELATED TO 
              SECTION 501(C)(3) ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 6104 is amended by 
striking paragraph (2) and inserting the following new paragraphs:
            ``(2) Disclosure of proposed actions.--
                    ``(A) Specific notifications.--In the case of an 
                organization to which paragraph (1) applies, the 
                Secretary may disclose to the appropriate State 
                officer--
                            ``(i) a notice of proposed refusal to 
                        recognize such organization as an organization 
                        described in section 501(c)(3) or a notice of 
                        proposed revocation of such organization's 
                        recognition as an organization exempt from 
                        taxation,
                            ``(ii) the issuance of a letter of proposed 
                        deficiency of tax imposed under section 507 or 
                        chapter 41 or 42, and
                            ``(iii) the names, addresses, and taxpayer 
                        identification numbers of organizations that 
                        have applied for recognition as organizations 
                        described in section 501(c)(3).
                    ``(B) Additional disclosures.--Returns and return 
                information of organizations with respect to which 
                information is disclosed under subparagraph (A) may be 
                made available for inspection by or disclosed to an 
                appropriate State officer.
                    ``(C) Procedures for disclosure.--Information may 
                be inspected or disclosed under subparagraph (A) or (B) 
                only--
                            ``(i) upon written request by an 
                        appropriate State officer, and
                            ``(ii) for the purpose of, and only to the 
                        extent necessary in, the administration of 
                        State laws regulating such organizations.
                Such information may only be inspected by or disclosed 
                to a person other than the appropriate State officer if 
                such person is an officer or employee of the State and 
                is designated by the appropriate State officer to 
                receive the returns or return information under this 
                paragraph on behalf of the appropriate State officer.
                    ``(D) Disclosures other than by request.--The 
                Secretary may make available for inspection or disclose 
                returns and return information of an organization to 
                which paragraph (1) applies to an appropriate State 
                officer of any State if the Secretary determines that 
                such inspection or disclosure may facilitate the 
                resolution of State or Federal issues relating to the 
                tax-exempt status of such organization.
            ``(3) Use in administrative and judicial civil 
        proceedings.--Returns and return information disclosed pursuant 
        to this subsection may be disclosed in administrative and 
        judicial civil proceedings pertaining to the enforcement of 
        State laws regulating such organizations in a manner prescribed 
        by the Secretary similar to that for tax administration 
        proceedings under section 6103(h)(4).
            ``(4) No disclosure if impairment.--Returns and return 
        information shall not be disclosed under this subsection, or in 
        any proceeding described in paragraph (3), to the extent that 
        the Secretary determines that such disclosure would seriously 
        impair Federal tax administration.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Return and return information.--The terms 
                `return' and `return information' have the respective 
                meanings given to such terms by section 6103(b).
                    ``(B) Appropriate state officer.--The term 
                `appropriate State officer' means--
                            ``(i) the State attorney general, or
                            ``(ii) any other State official charged 
                        with overseeing organizations of the type 
                        described in section 501(c)(3).''.
    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 6103(p)(3) is amended by 
        inserting ``and section 6104(c)'' after ``section'' in the 
        first sentence.
            (2) Paragraph (4) of section 6103(p) is amended--
                    (A) in the matter preceding subparagraph (A), by 
                inserting ``, or any appropriate State officer (as 
                defined in section 6104(c)),'' before ``or any other 
                person'',
                    (B) in subparagraph (F)(i), by inserting ``or any 
                appropriate State officer (as defined in section 
                6104(c)),'' before ``or any other person'', and
                    (C) in the matter following subparagraph (F), by 
                inserting ``, an appropriate State officer (as defined 
                in section 6104(c)),'' after ``including an agency'' 
                each place it appears.
            (3) Paragraph (2) of section 7213(a) is amended by striking 
        ``6103.'' and inserting ``6103 or under section 6104(c).''.
            (4) Paragraph (2) of section 7213A(a) is amended by 
        inserting ``or 6104(c)'' after ``6103''.
            (5) Paragraph (2) of section 7431(a) is amended by 
        inserting ``(including any disclosure in violation of section 
        6104(c))'' after ``6103''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act but shall not apply to 
requests made before such date.

SEC. 411. CONFIDENTIALITY OF TAXPAYER COMMUNICATIONS WITH THE OFFICE OF 
              THE TAXPAYER ADVOCATE.

    (a) In General.--Subsection (c) of section 7803 is amended by 
adding at the end the following new paragraph:
            ``(5) Confidentiality of taxpayer information.--
                    ``(A) In general.--To the extent authorized by the 
                National Taxpayer Advocate or pursuant to guidance 
                issued under subparagraph (B), any officer or employee 
                of the Office of the Taxpayer Advocate may withhold 
                from the Internal Revenue Service and the Department of 
                Justice any information provided by, or regarding 
                contact with, any taxpayer.
                    ``(B) Issuance of guidance.--In consultation with 
                the Chief Counsel for the Internal Revenue Service and 
                subject to the approval of the Commissioner of Internal 
                Revenue, the National Taxpayer Advocate may issue 
                guidance regarding the circumstances (including with 
                respect to litigation) under which, and the persons to 
                whom, employees of the Office of the Taxpayer Advocate 
                shall not disclose information obtained from a 
                taxpayer. To the extent to which any provision of the 
                Internal Revenue Manual would require greater 
                disclosure by employees of the Office of the Taxpayer 
                Advocate than the disclosure required under such 
                guidance, such provision shall not apply.
                    ``(C) Employee protection.--Section 7214(a)(8) 
                shall not apply to any failure to report knowledge or 
                information if--
                            ``(i) such failure to report is authorized 
                        under subparagraph (A), and
                            ``(ii) such knowledge or information is not 
                        of fraud committed by a person against the 
                        United States under any revenue law.''.
    (b) Conforming Amendment.--Subparagraph (A) of section 7803(c)(4) 
is amended by inserting ``and'' at the end of clause (ii), by striking 
``; and'' at the end of clause (iii) and inserting a period, and by 
striking clause (iv).

                         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 subsection (c) (other than 
                paragraph (3)) or (d) of section 501 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) Effective Date.--The amendments made by this section shall 
apply to pleadings filed with respect to determinations (or requests 
for determinations) made 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 2003, 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 2003, 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 after 2002 
(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. 7528. 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. 7528. 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.

SEC. 510. FINANCIAL MANAGEMENT SERVICE FEES.

    Notwithstanding any other provision of law, the Financial 
Management Service may charge the Internal Revenue Service, and the 
Internal Revenue Service may pay the Financial Management Service, a 
fee sufficient to cover the full cost of implementing a continuous levy 
program under subsection (h) of section 6331 of the Internal Revenue 
Code of 1986. Any such fee shall be based on actual levies made and 
shall be collected by the Financial Management Service by the retention 
of a portion of amounts collected by levy pursuant to that subsection. 
Amounts received by the Financial Management Service as fees under that 
subsection shall be deposited into the account of the Department of the 
Treasury under section 3711(g)(7) of title 31, United States Code, and 
shall be collected and accounted for in accordance with the provisions 
of that section. The amount credited against the taxpayer's liability 
on account of the continuous levy shall be the amount levied, without 
reduction for the amount paid to the Financial Management Service as a 
fee.

SEC. 511. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions), 
as amended by section 509, is further amended by adding at the end the 
following new section:

``SEC. 7529. INTERNAL REVENUE SERVICE USER FEES.

    ``(a) General Rule.--The Secretary shall establish a program 
requiring the payment of user fees for--
            ``(1) requests to the Internal Revenue Service for ruling 
        letters, opinion letters, and determination letters, and
            ``(2) other similar requests.
    ``(b) Program Criteria.--
            ``(1) In general.--The fees charged under the program 
        required by subsection (a)--
                    ``(A) shall vary according to categories (or 
                subcategories) established by the Secretary,
                    ``(B) shall be determined after taking into account 
                the average time for (and difficulty of) complying with 
                requests in each category (and subcategory), and
                    ``(C) shall be payable in advance.
            ``(2) Exemptions, etc.--
                    ``(A) In general.--The Secretary shall provide for 
                such exemptions (and reduced fees) under such program 
                as the Secretary determines to be appropriate.
                    ``(B) Exemption for certain requests regarding 
                pension plans.--The Secretary shall not require payment 
                of user fees under such program for requests for 
                determination letters with respect to the qualified 
                status of a pension benefit plan maintained solely by 1 
                or more eligible employers or any trust which is part 
                of the plan. The preceding sentence shall not apply to 
                any request--
                            ``(i) made after the later of--
                                    ``(I) the fifth plan year the 
                                pension benefit plan is in existence, 
                                or
                                    ``(II) the end of any remedial 
                                amendment period with respect to the 
                                plan beginning within the first 5 plan 
                                years, or
                            ``(ii) made by the sponsor of any prototype 
                        or similar plan which the sponsor intends to 
                        market to participating employers.
                    ``(C) Definitions and special rules.--For purposes 
                of subparagraph (B)--
                            ``(i) Pension benefit plan.--The term 
                        `pension benefit plan' means a pension, profit-
                        sharing, stock bonus, annuity, or employee 
                        stock ownership plan.
                            ``(ii) Eligible employer.--The term 
                        `eligible employer' means an eligible employer 
                        (as defined in section 408(p)(2)(C)(i)(I)) 
                        which has at least 1 employee who is not a 
                        highly compensated employee (as defined in 
                        section 414(q)) and is participating in the 
                        plan. The determination of whether an employer 
                        is an eligible employer under subparagraph (B) 
                        shall be made as of the date of the request 
                        described in such subparagraph.
                            ``(iii) Determination of average fees 
                        charged.--For purposes of any determination of 
                        average fees charged, any request to which 
                        subparagraph (B) applies shall not be taken 
                        into account.
            ``(3) Average fee requirement.--The average fee charged 
        under the program required by subsection (a) shall not be less 
        than the amount determined under the following table:

                                                                Average
``Category                                                          Fee
    Employee plan ruling and opinion..............                $250 
    Exempt organization ruling....................                $350 
    Employee plan determination...................                $300 
    Exempt organization determination.............                $275 
    Chief counsel ruling..........................                $200.
    ``(c) Termination.--No fee shall be imposed under this section with 
respect to requests made after September 30, 2013.''.
    (b) Conforming Amendments.--
            (1) The table of sections for chapter 77 is amended by 
        adding at the end the following new item:

                              ``Sec. 7529. Internal Revenue Service 
                                        user fees.''.
            (2) Section 10511 of the Revenue Act of 1987 is repealed.
            (3) Section 620 of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001 is repealed.
    (c) Limitations.--Notwithstanding any other provision of law, any 
fees collected pursuant to section 7527 of the Internal Revenue Code of 
1986, as added by subsection (a), shall not be expended by the Internal 
Revenue Service unless provided by an appropriations Act.
    (d) Effective Date.--The amendments made by this section shall 
apply to requests made after the date of the enactment of this Act.

                 TITLE VI--LOW-INCOME TAXPAYER CLINICS

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 2004, 
$12,000,000 for 2005, and $15,000,000 for each year thereafter''.
    (b) Promotion of Clinics.--Section 7526(c) is amended by adding at 
the end the following new paragraph:
            ``(6) 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.''.
    (c) Use of Grants for Overhead Expenses Prohibited.--Section 
7526(c), as amended by subsection (b), is further amended by adding at 
the end the following new paragraph:
            ``(7) Use of grants for overhead expenses prohibited.--No 
        grant made under this section may be used for the general 
        overhead expenses of any institution sponsoring a qualified 
        low-income taxpayer clinic.''.
    (d) Eligible Clinics.--
            (1) In general.--Paragraph (2) of section 7526(b) is 
        amended to read as follows:
            ``(2) Eligible clinic.--The term `eligible clinic' means--
                    ``(A) any clinical program at an accredited law, 
                business, or accounting school in which students 
                represent low-income taxpayers in controversies arising 
                under this title; and
                    ``(B) any organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1) through 
                representation of taxpayers or referral of taxpayers to 
                qualified representatives.''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        7526(b)(1) is amended by striking ``means a clinic'' and 
        inserting ``means an eligible clinic''.

      TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS

SEC. 701. APPLICABILITY OF CERTAIN FEDERAL-STATE AGREEMENTS RELATING TO 
              UNEMPLOYMENT ASSISTANCE.

    Effective as of May 25, 2003, section 208 of Public Law 107-147 is 
amended--
            (1) in subsection (a)(2), by inserting ``on or'' after 
        ``ending''; and
            (2) in subsection (b), by striking ``May 31'' each place it 
        appears and inserting ``June 1''.

            Passed the House of Representatives June 19, 2003.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.

                            By Martha C. Morrison,

                                                          Deputy Clerk.