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.

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.

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:

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.