[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1677 Engrossed in House (EH)]

110th CONGRESS
  1st Session
                                H. R. 1677

_______________________________________________________________________

                                 AN ACT


 
    To amend the Internal Revenue Code of 1986 to enhance taxpayer 
                       protections and outreach.

    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 Act of 2007''.
    (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.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Family business tax simplification.
Sec. 3. Taxpayer notification of suspected identity theft.
Sec. 4. Extension of time for return of property for wrongful levy.
Sec. 5. Individuals held harmless on wrongful levy, etc., on individual 
                            retirement plan.
Sec. 6. Clarification of IRS unclaimed refund authority.
Sec. 7. Prohibition on IRS debt indicators for predatory refund 
                            anticipation loans.
Sec. 8. Prohibition on misuse of Department of the Treasury names and 
                            symbols.
Sec. 9. EITC outreach.
Sec. 10. Modification of rules pertaining to FIRPTA nonforeign 
                            affidavits.
Sec. 11. Disclosure of prisoner return information to Federal Bureau of 
                            Prisons.
Sec. 12. Increase in penalty for bad checks and money orders.

SEC. 2. 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 (15) and inserting a semicolon, by striking 
        the period at the end of paragraph (16) and inserting ``; 
        and'', and by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) 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, 2006.

SEC. 3. TAXPAYER NOTIFICATION OF SUSPECTED IDENTITY THEFT.

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

``SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.

    ``If, in the course of an investigation under section 7206 
(relating to fraud and false statements) or 7207 (relating to 
fraudulent returns, statements, or other documents), the Secretary 
determines that there was or may have been an unauthorized use of the 
identity of the taxpayer or dependents, the Secretary shall--
            ``(1) as soon as practicable and without jeopardizing such 
        investigation, notify the taxpayer of such determination, and
            ``(2) if any person is criminally charged by indictment or 
        information under either of such sections, notify such taxpayer 
        as soon as practicable of such charge.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7529. Notification of suspected identity theft.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to determinations made after the date of the enactment of this 
Act.

SEC. 4. EXTENSION OF TIME FOR RETURN OF PROPERTY FOR WRONGFUL LEVY.

    (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. 5. 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 such individual retirement plan or any 
        other individual retirement plan (other than an endowment 
        contract) to which a rollover from the plan levied upon is 
        permitted.
            ``(2) Treatment as rollover.--If amounts are deposited into 
        an individual retirement plan under paragraph (1) not later 
        than the 60th day after the date on which the individual 
        receives the amounts under paragraph (1)--
                    ``(A) such deposit shall be treated as a rollover 
                described in section 408(d)(3)(A)(i),
                    ``(B) to the extent the deposit includes interest 
                paid under subsection (c), such interest shall not be 
                includible in gross income, and
                    ``(C) such deposit shall not be taken into account 
                under section 408(d)(3)(B).
        For purposes of subparagraph (B), an amount shall be treated as 
        interest only to the extent that the amount deposited exceeds 
        the amount of the levy.
            ``(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 the date of the 
enactment of this Act.

SEC. 6. CLARIFICATION OF IRS UNCLAIMED REFUND AUTHORITY.

    Section 6103(m)(1) (relating to tax refunds) is amended by 
inserting ``, and through any other means of mass communication,'' 
after ``media''.

SEC. 7. PROHIBITION ON IRS DEBT INDICATORS FOR PREDATORY REFUND 
              ANTICIPATION LOANS.

    (a) In General.--Subsection (f) of section 6011 (relating to 
promotion of electronic filing) is amended by adding at the end the 
following new paragraph:
            ``(3) Prohibition on irs debt indicators for predatory 
        refund anticipation loans.--
                    ``(A) In general.--In carrying out any program 
                under this subsection, the Secretary shall not provide 
                a debt indicator to any person with respect to any 
                refund anticipation loan if the Secretary determines 
                that the business practices of such person involve 
                refund anticipation loans and related charges and fees 
                that are predatory.
                    ``(B) Refund anticipation loan.--For purposes of 
                this paragraph, the term `refund anticipation loan' 
                means a loan of money or of any other thing of value to 
                a taxpayer secured by the taxpayer's anticipated 
                receipt of a Federal tax refund.
                    ``(C) IRS debt indicator.--For purposes of this 
                paragraph, the term `debt indicator' means a 
                notification provided through a tax return's 
                acknowledgment file that a refund will be offset to 
                repay debts for delinquent Federal or State taxes, 
                student loans, child support, or other Federal agency 
                debt.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to determinations after the date of the enactment of this Act.

SEC. 8. PROHIBITION ON MISUSE OF DEPARTMENT OF THE TREASURY NAMES AND 
              SYMBOLS.

    (a) In General.--Subsection (a) of section 333 of title 31, United 
States Code, is amended by inserting ``internet domain address,'' after 
``solicitation,'' both places it appears.
    (b) Penalty for Misuse by Electronic Means.--Subsections (c)(2) and 
(d)(1) of section 333 of such Code are each amended by inserting ``or 
any other mass communications by electronic means,'' after 
``telecast,''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to violations occurring after the date of the 
enactment of this Act.

SEC. 9. EITC OUTREACH.

    (a) In General.--Section 32 (relating to earned income) is amended 
by adding at the end the following new subsection:
    ``(n) Notification of Potential Eligibility for Credit and 
Refund.--
            ``(1) In general.--To the extent possible and on an annual 
        basis, the Secretary shall provide to each taxpayer who--
                    ``(A) for any preceding taxable year for which 
                credit or refund is not precluded by section 6511, and
                    ``(B) did not claim the credit under subsection (a) 
                but may be allowed such credit for any such taxable 
                year based on return or return information (as defined 
                in section 6103(b)) available to the Secretary,
        notice that such taxpayer may be eligible to claim such credit 
        and a refund for such taxable year.
            ``(2) Notice.--Notice provided under paragraph (1) shall be 
        in writing and sent to the last known address of the 
        taxpayer.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 10. MODIFICATION OF RULES PERTAINING TO FIRPTA NONFOREIGN 
              AFFIDAVITS.

    (a) In General.--Subsection (b) of section 1445 (relating to 
exemptions) is amended by adding at the end the following:
            ``(9) Alternative procedure for furnishing nonforeign 
        affidavit.--For purposes of paragraphs (2) and (7)--
                    ``(A) In general.--Paragraph (2) shall be treated 
                as applying to a transaction if, in connection with a 
                disposition of a United States real property interest--
                            ``(i) the affidavit specified in paragraph 
                        (2) is furnished to a qualified substitute, and
                            ``(ii) the qualified substitute furnishes a 
                        statement to the transferee stating, under 
                        penalty of perjury, that the qualified 
                        substitute has such affidavit in his 
                        possession.
                    ``(B) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary or appropriate to 
                carry out this paragraph.''.
    (b) Qualified Substitute.--Subsection (f) of section 1445 (relating 
to definitions) is amended by adding at the end the following new 
paragraph:
            ``(6) Qualified substitute.--The term `qualified 
        substitute' means, with respect to a disposition of a United 
        States real property interest--
                    ``(A) the person (including any attorney or title 
                company) responsible for closing the transaction, other 
                than the transferor's agent, and
                    ``(B) the transferee's agent.''.
    (c) Exemption Not to Apply if Knowledge or Notice That Affidavit or 
Statement Is False.--
            (1) In general.--Paragraph (7) of section 1445(b) (relating 
        to special rules for paragraphs (2) and (3)) is amended to read 
        as follows:
            ``(7) Special rules for paragraphs (2), (3), and (9).--
        Paragraph (2), (3), or (9) (as the case may be) shall not apply 
        to any disposition--
                    ``(A) if--
                            ``(i) the transferee or qualified 
                        substitute has actual knowledge that the 
                        affidavit referred to in such paragraph, or the 
                        statement referred to in paragraph (9)(A)(ii), 
                        is false, or
                            ``(ii) the transferee or qualified 
                        substitute receives a notice (as described in 
                        subsection (d)) from a transferor's agent, 
                        transferee's agent, or qualified substitute 
                        that such affidavit or statement is false, or
                    ``(B) if the Secretary by regulations requires the 
                transferee or qualified substitute to furnish a copy of 
                such affidavit or statement to the Secretary and the 
                transferee or qualified substitute fails to furnish a 
                copy of such affidavit or statement to the Secretary at 
                such time and in such manner as required by such 
                regulations.''.
            (2) Liability.--
                    (A) Notice.--Paragraph (1) of section 1445(d) 
                (relating to notice of false affidavit; foreign 
                corporations) is amended to read as follows:
            ``(1) Notice of false affidavit; foreign corporations.--
        If--
                    ``(A) the transferor furnishes the transferee or 
                qualified substitute an affidavit described in 
                paragraph (2) of subsection (b) or a domestic 
                corporation furnishes the transferee an affidavit 
                described in paragraph (3) of subsection (b), and
                    ``(B) in the case of--
                            ``(i) any transferor's agent--
                                    ``(I) such agent has actual 
                                knowledge that such affidavit is false, 
                                or
                                    ``(II) in the case of an affidavit 
                                described in subsection (b)(2) 
                                furnished by a corporation, such 
                                corporation is a foreign corporation, 
                                or
                            ``(ii) any transferee's agent or qualified 
                        substitute, such agent or substitute has actual 
                        knowledge that such affidavit is false,
                such agent or qualified substitute shall so notify the 
                transferee at such time and in such manner as the 
                Secretary shall require by regulations.''.
                    (B) Failure to furnish notice.--Paragraph (2) of 
                section 1445(d) (relating to failure to furnish notice) 
                is amended to read as follows:
            ``(2) Failure to furnish notice.--
                    ``(A) In general.--If any transferor's agent, 
                transferee's agent, or qualified substitute is required 
                by paragraph (1) to furnish notice, but fails to 
                furnish such notice at such time or times and in such 
                manner as may be required by regulations, such agent or 
                substitute shall have the same duty to deduct and 
                withhold that the transferee would have had if such 
                agent or substitute had complied with paragraph (1).
                    ``(B) Liability limited to amount of 
                compensation.--An agent's or substitute's liability 
                under subparagraph (A) shall be limited to the amount 
                of compensation the agent or substitute derives from 
                the transaction.''.
                    (C) Conforming amendment.--The heading for section 
                1445(d) is amended by striking ``or Transferee's 
                Agents'' and inserting ``, Transferee's Agents, or 
                Qualified Substitutes''.
    (d) Effective Date.--The amendments made by this section shall 
apply to dispositions of United States real property interests after 
the date of the enactment of this Act.

SEC. 11. DISCLOSURE OF PRISONER RETURN INFORMATION TO FEDERAL BUREAU OF 
              PRISONS.

    (a) In General.--Subsection (k) of section 6103 (relating to 
disclosure of certain return and return information for tax 
administration purposes) is amended by adding at the end the following 
new paragraph:
            ``(10) Disclosure of certain return information of 
        prisoners to federal bureau of prisons.--
                    ``(A) In general.--Under such procedures as the 
                Secretary may prescribe, the Secretary may disclose to 
                the head of the Federal Bureau of Prisons any return 
                information with respect to individuals incarcerated in 
                Federal prison whom the Secretary has determined may 
                have filed or facilitated the filing of a false return 
                to the extent that the Secretary determines that such 
                disclosure is necessary to permit effective Federal tax 
                administration.
                    ``(B) Restriction on redisclosure.--Notwithstanding 
                subsection (n), the head of the Federal Bureau of 
                Prisons may not disclose any information obtained under 
                subparagraph (A) to any person other than an officer or 
                employee of such Bureau.
                    ``(C) Restriction on use of disclosed 
                information.--Return information received under this 
                paragraph shall be used only for purposes of and to the 
                extent necessary in taking administrative action to 
                prevent the filing of false and fraudulent returns, 
                including administrative actions to address possible 
                violations of administrative rules and regulations of 
                the prison facility.
                    ``(D) Annual report.--In each of the calendar years 
                2007 through 2010, the Secretary shall submit to 
                Congress and make publicly available a report on the 
                filing of false and fraudulent returns by individuals 
                incarcerated in Federal and State prisons. Such report 
                shall include statistics on the number of false and 
                fraudulent returns associated with each Federal and 
                State prison.
                    ``(E) Termination.--No disclosure may be made under 
                this paragraph after December 31, 2010.''.
    (b) Recordkeeping.--Paragraph (4) of section 6103(p) is amended by 
striking ``(k)(8)'' both places it appears and inserting ``(k)(8) or 
(10)''.
    (c) Evaluation by Treasury Inspector General for Tax 
Administration.--Paragraph (3) of section 7803(d) is amended by 
striking ``and'' at the end of subparagraph (A), by striking the period 
at the end of subparagraph (B) and inserting ``; and'', and by adding 
at the end the following new subparagraph:
                    ``(C) not later than December 31, 2009, submit a 
                written report to Congress on the implementation of 
                section 6103(k)(10).''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to disclosures made 
        after December 31, 2007.
            (2) Annual report.--Section 6103(k)(10)(D) of the Internal 
        Revenue Code of 1986 (relating to annual reports), as added by 
        this section, shall apply to reports submitted after the date 
        of the enactment of this Act.

SEC. 12. INCREASE IN PENALTY FOR BAD CHECKS AND MONEY ORDERS.

    (a) In General.--Section 6657 (relating to bad checks) is amended--
            (1) by striking ``$750'' and inserting ``$1,250'', and
            (2) by striking ``$15'' and inserting ``$25''.
    (b) Effective Date.--The amendments made by this section shall 
apply to checks or money orders received after the date of the 
enactment of this Act.

            Passed the House of Representatives April 17, 2007.

            Attest:

                                                                 Clerk.
110th CONGRESS

  1st Session

                               H. R. 1677

_______________________________________________________________________

                                 AN ACT

    To amend the Internal Revenue Code of 1986 to enhance taxpayer 
                       protections and outreach.