[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 894 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 894

   To assist low-income taxpayers in preparing and filing their tax 
returns and to protect taxpayers from unscrupulous refund anticipation 
                loan providers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 17, 2005

    Mr. Becerra (for himself and Mr. Brown of Ohio) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committee on Financial Services, for a period to 
      be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
   To assist low-income taxpayers in preparing and filing their tax 
returns and to protect taxpayers from unscrupulous refund anticipation 
                loan providers, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Low-Income Taxpayer Protection Act 
of 2005''.

SEC. 2. REGULATION OF INCOME TAX RETURN PREPARERS AND REFUND 
              ANTICIPATION LOAN PROVIDERS.

    (a) Definitions.--In this Act:
            (1) Income tax return preparer.--
                    (A) In general.--The term ``income tax return 
                preparer'' means any individual who is an income tax 
                return preparer (within the meaning of section 
                7701(a)(36) of the Internal Revenue Code of 1986) who 
                prepares not less than 5 returns of tax imposed by 
                subtitle A of such Code or claims for refunds of tax 
                imposed by such subtitle A per taxable year.
                    (B) Exception.--Such term shall not include a 
                federally authorized tax practitioner within the 
                meaning of section 7526(a)(3) of such Code.
            (2) Refund anticipation loan provider.--The term ``refund 
        anticipation loan provider'' means a person who makes a loan of 
        money or of any other thing of value to a taxpayer because of 
        the taxpayer's anticipated receipt of a Federal tax refund.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
    (b) Regulations.--
            (1) Registration required.--
                    (A) In general.--Not later than 120 days after the 
                date of the enactment of this Act, the Secretary shall 
                promulgate regulations that--
                            (i) require the registration of income tax 
                        return preparers and of refund anticipation 
                        loan providers with the Secretary or the 
                        designee of the Secretary, and
                            (ii) prohibit the payment of a refund of 
                        tax to a refund anticipation loan provider or 
                        an income tax return preparer that is the 
                        result of a tax return which is prepared by the 
                        refund anticipation loan provider or the income 
                        tax return preparer which does not include the 
                        refund anticipation loan provider's or the 
                        income tax return preparer's registration 
                        number.
                    (B) No disciplinary action.--The regulations shall 
                require that an applicant for registration must not 
                have demonstrated any conduct that would warrant 
                disciplinary action under part 10 of title 31, Code of 
                Federal Regulations.
                    (C) Burden of registration.--In promulgating the 
                regulations, the Secretary shall minimize the burden 
                and cost on the registrant.
            (2) Rules of conduct.--All registrants shall be subject to 
        rules of conduct that are consistent with the rules that govern 
        federally authorized tax practitioners.
            (3) Reasonable fees and interest rates.--The Secretary, 
        after consultation with any expert as the Secretary deems 
        appropriate, shall include in the regulations guidance on 
        reasonable fees and interest rates charged to taxpayers in 
        connection with loans to taxpayers made by refund anticipation 
        loan providers.
            (4) Renewal of registration.--The regulations shall 
        determine the time frame required for renewal of registration 
        and the manner in which a registered income tax return preparer 
        or a registered refund anticipation loan provider must renew 
        such registration.
            (5) Fees.--
                    (A) In general.--The Secretary may require the 
                payment of reasonable fees for registration and for 
                renewal of registration under the regulations.
                    (B) Purpose of fees.--Any fees required under this 
                paragraph shall inure to the Secretary for the purpose 
                of reimbursement of the costs of administering the 
                requirements of the regulations.
    (c) Prohibition.--Section 6695 of the Internal Revenue Code of 1986 
(relating to other assessable penalties with respect to the preparation 
of income tax returns for other persons) is amended by adding at the 
end the following new subsection:
    ``(h) Actions on a Taxpayer's Behalf by a Non-Registered Person.--
Any person not registered pursuant to the regulations promulgated by 
the Secretary under the Low Income Taxpayer Protection Act of 2005 
who--
            ``(1) prepares a tax return for another taxpayer for 
        compensation, or
            ``(2) provides a loan to a taxpayer that is linked to or in 
        anticipation of a tax refund for the taxpayer,
shall be subject to a $500 penalty for each incident of 
noncompliance.''.
    (d) Coordination With Section 6060(a).--The Secretary shall 
determine whether the registration required under the regulations 
issued pursuant to this section should be in lieu of the return 
requirements of section 6060.
    (e) Paperwork Reduction.--The Secretary shall minimize the amount 
of paperwork required of an income tax return preparer or a refund 
anticipation loan provider to meet the requirements of these 
regulations.

SEC. 3. IMPROVED SERVICES FOR TAXPAYERS.

    (a) Electronic Filing Efforts.--
            (1) In general.--The Secretary shall focus electronic 
        filing efforts on benefiting the taxpayer by--
                    (A) reducing the time between receipt of an 
                electronically filed return and remitting a refund, if 
                any,
                    (B) reducing the cost of filing a return 
                electronically,
                    (C) improving services provided by the Internal 
                Revenue Service to low- and moderate-income taxpayers,
                    (D) providing tax-related computer software at no 
                or nominal cost to low- and moderate-income taxpayers, 
                and
                    (E) providing electronic filing for all taxpayers 
                without the use of an intermediary.
            (2) Report.--Not later than 120 days after the date of the 
        enactment of this Act, the Secretary shall prepare and submit 
        to Congress a report on the efforts made pursuant to paragraph 
        (1).
    (b) Volunteer Income Tax Assistance Program.--
            (1) Study.--The Secretary shall undertake a study on the 
        expansion of the volunteer income tax assistance program to 
        service more low-income taxpayers.
            (2) Report.--Not later than 120 days after the date of the 
        enactment of this Act, the Secretary shall prepare and submit 
        to Congress a report on the study conducted pursuant to 
        paragraph (1).
    (c) Tele-Filing.--The Secretary shall ensure that tele-filing is 
available for all taxpayers for the filing of tax returns with respect 
to taxable years beginning in 2004.
    (d) Termination of the Debt Indicator Program.--The Secretary shall 
terminate the Debt Indicator program announced in Internal Revenue 
Service Notice 99-58.
    (e) Direct Deposit Accounts.--The Secretary shall allocate 
resources to programs to assist low-income taxpayers in establishing 
accounts at financial institutions that receive direct deposits from 
the United States Treasury.
    (f) Pilot Program for Mobile Tax Return Filing Offices.--
            (1) In general.--The Secretary shall establish a pilot 
        program for the creation of four mobile tax return filing 
        offices with electronic filing capabilities.
            (2) Location of service.--
                    (A) In general.--The mobile tax return filing 
                offices shall be located in communities that the 
                Secretary determines have a high incidence of taxpayers 
                claiming the earned income tax credit.
                    (B) Indian reservation.--At least one mobile tax 
                return filing office shall be on or near an Indian 
                reservation (as defined in section 168(j)(6) of the 
                Internal Revenue Code of 1986).

SEC. 4. ASSISTANCE PROGRAM TO IMPROVE ACCESS TO FEDERALLY INSURED 
              FINANCIAL INSTITUTIONS FOR TAXPAYERS.

    (a) Findings and Purpose.--
            (1) Findings.--Congress finds the following:
                    (A) Approximately 40,000,000 Americans are unbanked 
                and not utilizing mainstream, insured financial 
                institutions.
                    (B) In 1999, nearly half of the $30,000,000,000 in 
                earned income tax credits (EITC) claimed nationwide was 
                refunded through refund anticipation loans, and an 
                estimated $1,750,000,000 intended to assist low-income 
                families through the EITC was received by commercial 
                tax preparers and affiliated national banks to pay for 
                tax assistance, electronic filing of returns, and high-
                cost refund loans.
                    (C) Refund anticipation loans carry interest rates 
                in a range between 97.4 percent to more than 2000 
                percent.
                    (D) An estimated 45 percent of earned income tax 
                credit recipients pay for check cashing services, which 
                reduces EITC benefits by $130,000,000.
                    (E) Individuals with bank accounts can receive 
                their tax refunds faster than waiting for a paper check 
                and without the need to utilize refund anticipation 
                loans or check cashiers.
                    (F) Individuals with federally insured depository 
                accounts have an increased opportunity to access 
financial services at mainstream financial institutions, which 
typically have reduced costs for consumers.
            (2) Purpose.--It is the purpose of this section to 
        establish a grant program to provide unbanked low- and 
        moderate-income taxpayers with tax preparation services and 
        increase their access to financial services by the 
        establishment of an account at a federally insured depository 
        institution or credit union and the provision of financial 
        education.
    (b) Establishment of Program.--The Secretary is authorized to award 
demonstration project grants (including multi-year grants) to eligible 
entities to provide tax preparation services and assistance along with 
establishing an account in a federally insured depository institution 
for individuals that currently do not have such an account.
    (c) Eligible Entities.--
            (1) In general.--An entity is eligible to receive a grant 
        under this section if such an entity is--
                    (A) an organization described in section 501(c)(3) 
                of the Internal Revenue Code of 1986 and exempt from 
                tax under section 501(a) of such Code,
                    (B) a federally insured depository institution,
                    (C) an agency of a State or local government,
                    (D) a community development financial institution,
                    (E) an Indian tribal organization,
                    (F) an Alaska Native Corporation,
                    (G) a Native Hawaiian organization,
                    (H) a labor organization, or
                    (I) a partnership comprised of 1 or more of the 
                entities described in the preceding subparagraphs.
            (2) Definitions.--For purposes of this section--
                    (A) Federally insured depository institution.--The 
                term ``federally insured depository institution'' means 
                any insured depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813)) and any insured credit union (as defined 
                in section 101 of the Federal Credit Union Act (12 
                U.S.C. 1752)).
                    (B) Community development financial institution.--
                The term ``community development financial 
                institution'' means any organization that has been 
                certified as such pursuant to section 1805.201 of title 
                12, Code of Federal Regulations.
                    (C) Alaska native corporation.--The term ``Alaska 
                Native Corporation'' has the same meaning as the term 
                ``Native Corporation'' under section 3(m) of the Alaska 
                Native Claims Settlement Act (43 U.S.C. 1602(m)).
                    (D) Native hawaiian organization.--The term 
                ``Native Hawaiian organization'' means any organization 
                that--
                            (i) serves and represents the interests of 
                        Native Hawaiians, and
                            (ii) has as a primary and stated purpose 
                        the provision of services to Native Hawaiians.
                    (E) Labor organization.--The term ``labor 
                organization'' means an organization in which employees 
                participate and which exists for the purpose, in whole 
                or in part, of dealing with employers concerning 
                grievances, labor disputes, wages, rates of pay, hours 
                of employment, or conditions of work.
    (d) Application.--An eligible entity desiring a grant under this 
section shall submit an application to the Secretary in such form and 
containing such information as the Secretary may require.
    (e) Limitation on Administrative Costs.--A recipient of a grant 
under this section may not use more than 6 percent of the total amount 
of such grant in any fiscal year for the administrative costs of 
carrying out the programs funded by such grant in such fiscal year.
    (f) Evaluation and Report.--For each fiscal year in which a grant 
is awarded under this section, the Secretary shall submit a report to 
Congress containing a description of the activities funded, amounts 
distributed, and measurable results, as appropriate and available.
    (g) Authorization of Appropriations.--There is authorized to be 
appropriated to the Secretary, for the grant program described in this 
section, $10,000,000, or such additional amounts as deemed necessary, 
to remain available until expended.
    (h) Regulations.--The Secretary is authorized to promulgate 
regulations to implement and administer the grant program under this 
section.

SEC. 5. MATCHING GRANTS TO LOW-INCOME TAXPAYER CLINICS FOR RETURN 
              PREPARATION.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by inserting after 
section 7526 the following new section:

``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME TAXPAYERS.

    ``(a) In General.--The Secretary may, subject to the availability 
of appropriated funds, make grants to provide matching funds for the 
development, expansion, or continuation of qualified return preparation 
clinics.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified return preparation clinic.--
                    ``(A) In general.--The term `qualified return 
                preparation clinic' means a clinic which--
                            ``(i) does not charge more than a nominal 
                        fee for its services (except for reimbursement 
                        of actual costs incurred), and
                            ``(ii) operates programs which assist low-
                        income taxpayers in preparing and filing their 
                        Federal income tax returns, including schedules 
                        reporting sole proprietorship or farm income.
                    ``(B) Assistance to low-income taxpayers.--A clinic 
                is treated as assisting low-income taxpayers under 
                subparagraph (A)(ii) if at least 90 percent of the 
                taxpayers assisted by the clinic have incomes which do 
                not exceed 250 percent of the poverty level, as 
                determined in accordance with criteria established by 
                the Director of the Office of Management and Budget.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an eligible educational 
                institution (as defined in section 529(e)(5)) which 
                satisfies the requirements of paragraph (1) through 
                student assistance of taxpayers in return preparation 
                and filing, and
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1).
    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $10,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(2) Other applicable rules.--Rules similar to the rules 
        under paragraphs (2) through (5) of section 7526(c) shall apply 
        with respect to the awarding of grants to qualified return 
        preparation clinics.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by inserting after the 
item relating to section 7526 the following new item:

                              ``Sec. 7526A. Return preparation clinics 
                                        for low-income taxpayers.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to grants made after the date of the enactment of this Act.
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