[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 832 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 832

    To amend the Internal Revenue Code of 1986 to provide taxpayer 
           protection and assistance, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 18, 2005

  Mr. Bingaman (for himself, Mr. Smith, Mr. Baucus, Mr. Grassley, Mr. 
Akaka, Mr. Schumer, and Mr. Pryor) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to provide taxpayer 
           protection and assistance, and for other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Taxpayer 
Protection and Assistance Act of 2005''.
    (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.

SEC. 2. LOW-INCOME TAXPAYER CLINICS.

    (a) Grants for Return Preparation Clinics.--
            (1) In general.--Chapter 77 (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, including individuals for 
                        whom English is a second language, 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 (7) of section 7526(c) shall apply 
        with respect to the awarding of grants to qualified return 
        preparation clinics.''.
            (2) Clerical amendment.--The table of sections for chapter 
        77 is amended by inserting after the item relating to section 
        7526 the following new item:

``Sec. 7526A. Return preparation clinics for low-income taxpayers.''.
    (b) Grants for Taxpayer Representation and Assistance Clinics.--
            (1) Increase in authorized grants.--Section 7526(c)(1) 
        (relating to aggregate limitation) is amended by striking 
        ``$6,000,000'' and inserting ``$10,000,000''.
            (2) Use of grants for overhead expenses prohibited.--
                    (A) In general.--Section 7526(c) (relating to 
                special rules and limitations) is amended by adding at 
                the end the following new paragraph:
            ``(6) Use of grants for overhead expenses prohibited.--No 
        grant made under this section may be used for the overhead 
        expenses of any clinic or of any institution sponsoring such 
        clinic.''.
                    (B) Conforming amendments.--Section 7526(c)(5) is 
                amended--
                            (i) by inserting ``qualified'' before 
                        ``low-income'', and
                            (ii) by striking the last sentence.
            (3) Promotion of clinics.--Section 7526(c), as amended by 
        paragraph (2), is amended by adding at the end the following 
        new paragraph:
            ``(7) Promotion of clinics.--The Secretary is authorized to 
        promote the benefits of and encourage the use of low-income 
        taxpayer clinics through the use of mass communications, 
        referrals, and other means.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to grants made after the date of the enactment of this Act.

SEC. 3. CLARIFICATION OF ENROLLED AGENT CREDENTIALS.

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

``SEC. 7529. 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 subsection (a) 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. 7529. Enrolled agents.''.
    (c) Prior Regulations.--The authorization to prescribe regulations 
under the amendments made by this section may not be construed to have 
any effect on part 10 of title 31, Code of Federal Regulations, or any 
other related Federal rule or regulation issued before the date of the 
enactment of this Act.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4. REGULATION OF INCOME TAX RETURN PREPARERS.

    (a) Authorization.--Section 330(a)(1) of title 31, United States 
Code, is amended by inserting ``(including compensated preparers of tax 
returns, documents, and other submissions)'' after ``representatives''.
    (b) Requirement.--
            (1) In general.--Not later than 1 year after the date of 
        the enactment of this Act, the Secretary of the Treasury shall 
        prescribe regulations under section 330 of title 31, United 
        States Code--
                    (A) to regulate those compensated preparers not 
                otherwise regulated under regulations promulgated under 
                such section on the date of the enactment of this Act, 
                and
                    (B) to carry out the provisions of, and amendments 
                made by, this section.
            (2) Examination.--In promulgating the regulations under 
        paragraph (1), the Secretary shall develop (or approve) and 
        administer an eligibility examination designed to test--
                    (A) the technical knowledge and competency of each 
                preparer described in paragraph (1)(A)--
                            (i) to prepare Federal tax returns, 
                        including individual and business income tax 
                        returns, and
                            (ii) to properly claim the earned income 
                        tax credit under section 32 of the Internal 
                        Revenue Code of 1986 with respect to such 
                        individual returns, and
                    (B) the knowledge of each such preparer regarding 
                such ethical standards for the preparation of such 
                returns as determined appropriate by the Secretary.
            (3) Continuing eligibility.--
                    (A) In general.--The regulations under paragraph 
                (1) shall require a renewal of eligibility every 3 
                years and shall set forth the manner in which a 
                preparer described in paragraph (1)(A) must renew such 
                eligibility.
                    (B) Continuing education requirements.--As part of 
                the renewal of eligibility, such regulations shall 
                require that each such preparer show evidence of 
                completion of such continuing education requirements as 
                specified by the Secretary.
                    (C) Nonmonetary sanctions.--The regulations under 
                paragraph (1) shall provide for the suspension or 
                termination of such eligibility in the event of any 
                failure to comply with the requirements for such 
                eligibility.
    (c) Office of Professional Responsibility.--Section 330 of title 
31, United States Code, is amended by adding at the end the following 
new subsection:
    ``(e) Office of Professional Responsibility.--
            ``(1) In general.--There shall be in the Internal Revenue 
        Service an Office of Professional Responsibility the functions 
        of which shall be as prescribed by the Secretary of the 
        Treasury, including the carrying out of the purposes of this 
        section.
            ``(2) Director.--
                    ``(A) In general.--The Office of Professional 
                Responsibility shall be under the supervision and 
                direction of an official known as the `Director, Office 
                of Professional Responsibility'. The Director, Office 
                of Professional Responsibility, shall report directly 
                to the Commissioner of Internal Revenue and shall be 
                entitled to compensation at the same rate as the 
                highest rate of basic pay established for the Senior 
                Executive Service under section 5382 of title 5, or, if 
                the Secretary of the Treasury so determines, at a rate 
                fixed under section 9503 of such title.
                    ``(B) Appointment.--The Director, Office of 
                Professional Responsibility, shall be appointed by the 
                Secretary of the Treasury without regard to the 
                provisions of title 5 relating to appointments in the 
                competitive service or the Senior Executive Service.
            ``(3) Hearing.--Any hearing on an action initiated by the 
        Director, Office of Professional Responsibility to impose a 
        sanction under regulations promulgated under this section shall 
        be conducted in accordance with sections 556 and 557 of title 5 
        by 1 or more administrative law judges appointed by the 
        Secretary of the Treasury under section 3105 of title 5.
            ``(4) Information on sanctions to be available to the 
        public.--
                    ``(A) Sanctions initiated by action.--When an 
                action is initiated by the Director, Office of 
                Professional Responsibility, to impose a sanction under 
                regulations promulgated under this section, the 
                pleadings, and the record of the proceeding and hearing 
                shall be open to the public (subject to restrictions 
                imposed under subparagraph (C)).
                    ``(B) Sanction not initiated by action.--When a 
                sanction under regulations promulgated under this 
                section (other than a private reprimand) is imposed 
                without initiation of an action, the Director, Office 
                of Professional Responsibility, shall make available to 
                the public information identifying the representative, 
                employer, firm or other entity sanctioned, as well as 
                information about the conduct which gave rise to the 
                sanction (subject to restrictions imposed under 
                subparagraph (C)).
                    ``(C) Restrictions on release of information.--
                Information about clients of the representative, 
                employer, firm or other entity and medical information 
                with respect to the representative shall not be 
                released to the public or discussed in an open hearing, 
                except to the extent necessary to understand the 
                nature, scope, and impact of the conduct giving rise to 
                the sanction or proposed sanction. Disagreements 
                regarding the application of this subparagraph shall be 
                resolved by the administrative law judge or, when a 
                sanction is imposed without initiation of an action, by 
                the Director, Office of Professional Responsibility.
            ``(5) Fees.--Any fees imposed under regulations promulgated 
        under this section shall be available without fiscal year 
        limitation to the Office of Professional Responsibility for the 
        purpose of reimbursement of the costs of administering and 
        enforcing the requirements of such regulations.''.
    (d) Penalties.--
            (1) Increase in certain penalties.--Subsections (b) and (c) 
        of section 6695 (relating to other assessable penalties with 
        respect to the preparation of income tax returns for other 
        persons) are each amended by striking ``$50'' and inserting 
        ``$500''.
            (2) Use of penalties.--Unless specifically appropriated 
        otherwise, there is authorized to be appropriated and is 
        appropriated to the Office of Professional Responsibility for 
        each fiscal year for the administration of the public awareness 
        campaign described in subsection (f) an amount equal to the 
        penalties collected during the preceding fiscal year under 
        sections 6694 and 6695 of the Internal Revenue Code of 1986 and 
        under the regulations promulgated under section 330 of title 
        31, United States Code (by reason of subsection (b)(1)).
    (e) Coordination With Section 6060(a).--The Secretary of the 
Treasury shall coordinate the requirements under the regulations 
promulgated under section 330 of title 31, United States Code, with the 
return requirements of section 6060 of the Internal Revenue Code of 
1986.
    (f) Public Awareness Campaign.--The Secretary of the Treasury shall 
conduct a public information and consumer education campaign, utilizing 
paid advertising--
            (1) to encourage taxpayers to use for Federal tax matters 
        only professionals who establish their competency under the 
        regulations promulgated under section 330 of title 31, United 
        States Code, and
            (2) to inform the public of the requirements that any 
        compensated preparer of tax returns, documents, and submissions 
        subject to the requirements under the regulations promulgated 
        under such section must sign the return, document, or 
        submission prepared for a fee and display notice of such 
        preparer's compliance under such regulations.
    (g) Additional Funds Available for Compliance Activities.--The 
Secretary of the Treasury may use any specifically appropriated funds 
for earned income tax credit compliance to improve and expand 
enforcement of the regulations promulgated under section 330 of title 
31, United States Code.
    (h) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 5. CONTRACT AUTHORITY FOR EXAMINATIONS OF PREPARERS.

    The Secretary of the Treasury is authorized to contract for the 
development or administration, or both, of any examinations under the 
regulations promulgated under section 330 of title 31, United States 
Code.

SEC. 6. REGULATION OF REFUND ANTICIPATION LOAN FACILITATORS.

    (a) Regulation of Refund Anticipation Loan Facilitators.--
            (1) In general.--Chapter 77 (relating to miscellaneous 
        provisions), as amended by this Act, is amended by inserting at 
        the end the following new section:

``SEC. 7530. REFUND ANTICIPATION LOAN FACILITATORS.

    ``(a) Registration.--Each refund loan facilitator shall register 
with the Secretary on an annual basis. As a part of such registration, 
each refund loan facilitator shall provide the Secretary with the 
taxpayer identification number of such facilitator.
    ``(b) Disclosure.--Each refund loan facilitator shall disclose to a 
taxpayer both orally and on a separate written form at the time such 
taxpayer applies for a refund anticipation loan the following 
information:
            ``(1) Nature of the transaction.--The refund loan 
        facilitator shall disclose--
                    ``(A) that the taxpayer is applying for a loan that 
                is based upon the taxpayer's anticipated income tax 
                refund,
                    ``(B) the expected time within which the loan will 
                be paid to the taxpayer if such loan is approved,
                    ``(C) the time frame in which tax refunds are 
                typically paid based upon the different filing options 
                available to the taxpayer,
                    ``(D) that there is no guarantee that a refund will 
                be paid in full or received within a specified time 
                period and that the taxpayer is responsible for the 
                repayment of the loan even if the refund is not paid in 
                full or has been delayed,
                    ``(E) if the refund loan facilitator has an 
                agreement with another refund loan facilitator (or any 
                lender working in conjunction with another refund loan 
                facilitator) to offset outstanding liabilities for 
                previous refund anticipation loans provided by such 
                other refund loan facilitator, that any refund paid to 
                the taxpayer may be so offset and the implication of 
                any such offset,
                    ``(F) that the taxpayer may file an electronic 
                return without applying for a refund anticipation loan 
                and the fee for filing such an electronic return, and
                    ``(G) that the loan may have substantial fees and 
                interest charges that may exceed those of other sources 
                of credit and the taxpayer should carefully consider--
                            ``(i) whether such a loan is appropriate 
                        for the taxpayer, and
                            ``(ii) other sources of credit.
            ``(2) Fees and interest.--The refund loan facilitator shall 
        disclose all refund anticipation loan fees with respect to the 
        refund anticipation loan. Such disclosure shall include--
                    ``(A) a copy of the fee schedule of the refund loan 
                facilitator,
                    ``(B) the typical fees and interest rates (using 
                annual percentage rates as defined by section 107 of 
                the Truth in Lending Act (15 U.S.C. 1606)) for several 
                typical amounts of such loans,
                    ``(C) typical fees and interest charges if a refund 
                is not paid or delayed, and
                    ``(D) the amount of a fee (if any) that will be 
                charged if the loan is not approved.
            ``(3) Other information.--The refund loan facilitator shall 
        disclose any other information required to be disclosed by the 
        Secretary.
    ``(c) Fines and Sanctions.--
            ``(1) In general.--The Secretary may impose a monetary 
        penalty on any refund loan facilitator who--
                    ``(A) fails to register under subsection (a), or
                    ``(B) fails to disclose any information required 
                under subsection (b).
            ``(2) Maximum monetary penalty.--Any monetary penalty 
        imposed under paragraph (1) shall not exceed--
                    ``(A) in the case of a failure to register, the 
                gross income derived from all refund anticipation loans 
                made during the period the refund loan facilitator was 
                not registered, and
                    ``(B) in the case of a failure to disclose 
                information, the gross income derived from all refund 
                anticipation loans with respect to which such failure 
                applied.
            ``(3) Reasonable cause exceptions.--No penalty may be 
        imposed under this subsection with respect to any failure if it 
        is shown that such failure is due to reasonable cause.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Refund loan facilitator.--
                    ``(A) In general.--The term `refund loan 
                facilitator' means any electronic return originator 
                who--
                            ``(i) solicits for, processes, receives, or 
                        accepts delivery of an application for a refund 
                        anticipation loan, or
                            ``(ii) facilitates the making of a refund 
                        anticipation loan in any other manner.
                    ``(B) Electronic return originator.--For purposes 
                of subparagraph (A), the term `electronic return 
                originator' means a person who originates the 
                electronic submission of income tax returns for another 
                person.
            ``(2) Refund anticipation loan.--The term `refund 
        anticipation loan' means any loan of money or any other thing 
        of value to a taxpayer in connection with the taxpayer's 
        anticipated receipt of a Federal tax refund. Such term includes 
        a loan secured by the tax refund or an arrangement to repay a 
        loan from the tax refund.
            ``(3) Refund anticipation loan fees.--The term `refund 
        anticipation loan fees' means the fees, charges, interest, and 
        other consideration charged or imposed by the lender or 
        facilitator for the making of a refund anticipation loan.
    ``(e) Regulations.--The Secretary may prescribe such regulation as 
necessary to implement the requirements of this section.''.
            (2) Clerical amendment.--The table of sections for chapter 
        77, as amended by this Act, is amended by adding at the end the 
        following new item:

        ``Sec. 7530. Refund anticipation loan facilitators.''.
    (b) Disclosure of Penalty.--Subsection (k) of section 6103 is 
amended by adding at the end the following new paragraph:
            ``(10) Disclosure of penalties on refund anticipation loan 
        facilitators.--The Secretary may disclose the name of any 
        person with respect to whom a penalty has been imposed under 
        section 7530 and the amount of any such penalty.''.
    (c) Use of Penalties.--Unless specifically appropriated otherwise, 
there is authorized to be appropriated and is appropriated to the 
Internal Revenue Service for each fiscal year for the administration of 
the public awareness campaign described in subsection (d) an amount 
equal to the penalties collected during the preceding fiscal year under 
section 7530 of the Internal Revenue Code of 1986.
    (d) Public Awareness Campaign.--The Secretary of the Treasury shall 
conduct a public information and consumer education campaign, utilizing 
paid advertising, to educate the public on making sound financial 
decisions with respect to refund anticipation loans (as defined under 
section 7530 of the Internal Revenue Code of 1986), including the need 
to compare--
            (1) the rates and fees of such loans with the rates and 
        fees of conventional loans; and
            (2) the amount of money received under the loan after 
        taking into consideration such costs and fees with the total 
        amount of the refund.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date that is 1 year after the date of the enactment of 
this Act.

SEC. 7. TAXPAYER ACCESS TO FINANCIAL INSTITUTIONS.

    (a) Establishment of Program.--The Secretary is authorized to award 
demonstration project grants (including multi-year grants) to eligible 
entities which partner with volunteer and low-income preparation 
organizations to provide tax preparation services and assistance in 
connection with establishing an account in a federally insured 
depository institution for individuals that currently do not have such 
an account.
    (b) 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--
                            (i) in which employees participate,
                            (ii) 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, and
                            (iii) which is described in section 
                        501(c)(5).
    (c) 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.
    (d) 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.
    (e) 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.
    (f) 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.
    (g) Regulations.--The Secretary is authorized to promulgate 
regulations to implement and administer the grant program under this 
section.
    (h) Study on Delivery of Tax Refunds.--
            (1) In general.--The Secretary of the Treasury, in 
        consultation with the National Taxpayer Advocate, shall conduct 
        a study on the payment of tax refunds through debit cards or 
        other electronic means to assist individuals that do not have 
        access to financial accounts or institutions.
            (2) Report.--Not later than 1 year after the date of the 
        enactment of this Act, the Secretary of the Treasury shall 
        submit a report to Congress containing the result of the study 
        conducted under subsection (a).

SEC. 8. EXPANDED USE OF TAX COURT PRACTICE FEES FOR PRO SE TAXPAYERS.

    (a) In General.--Section 7475(b) (relating to use of fees) is 
amended by inserting before the period at the end ``and to provide 
services to pro se taxpayers''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>