[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1289 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1289

 To amend the Internal Revenue Code of 1986 to reduce the tax gap, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 28, 2011

Mr. Carper (for himself and Mrs. Boxer) 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 reduce the tax gap, 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, ETC.

    (a) Short Title.--This Act may be cited as the ``Taxpayer Advocacy 
and Government Accountability Promotion Act of 2011'' or the ``TAX GAP 
Act of 2011''.
    (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.
       TITLE I--TAXPAYER SIMPLIFICATION, PROTECTION, AND FAIRNESS

Sec. 101. Taxpayer assistance and tax simplification report.
Sec. 102. Elimination of taxpayer obligation to pay credit and debit 
                            card processing fees for certain tax 
                            payments.
Sec. 103. Make offer-in-compromise application rules less onerous for 
                            taxpayers.
Sec. 104. Elimination of special rules modifying amount of estimated 
                            tax payments by corporation.
Sec. 105. Repeal of special estimated tax payment provision for certain 
                            insurance companies.
Sec. 106. Repeal of designation of nonqualified preferred stock.
Sec. 107. De minimis apology payments pilot program.
      TITLE II--CLARIFICATION OF TAX FORMS AND FILING REQUIREMENTS

Sec. 201. Clarification of information on Schedule C.
Sec. 202. Increased electronic filing of returns.
Sec. 203. Clarification of electronic filing requirements for paid 
                            preparers.
Sec. 204. Requirement that electronically prepared paper returns 
                            include 2D barcode.
Sec. 205. Authorization to require certain employee benefit plan 
                            information returns and reports to be filed 
                            electronically.
               TITLE III--ENHANCED INFORMATION REPORTING

Sec. 301. Automatic reporting on certain government payments for 
                            property and services.
Sec. 302. Additional information on returns relating to mortgage 
                            interest.
Sec. 303. Improved information reporting on unreported and 
                            underreported financial accounts.
               TITLE IV--PAYMENTS TO CERTAIN CONTRACTORS

Sec. 401. Requirements for withholding with respect to payments to 
                            contractors.
Sec. 402. Continuous levy on payments to Medicaid providers and 
                            suppliers.
Sec. 403. Levy authority for payments to Medicare providers with 
                            delinquent tax debt.
Sec. 404. 100 percent levy for payments to Federal vendors relating to 
                            property.
         TITLE V--IMPROVED TAX ADMINISTRATION AND COORDINATION

Sec. 501. Requirement for prisons located in U.S. to provide 
                            information for tax administration.
Sec. 502. Facilitation of tax compliance with Indian tribal 
                            governments.
Sec. 503. Improvement in access to information in the National 
                            Directory of New Hires for tax 
                            administration purposes.
Sec. 504. Clarification of taxpayer privacy by improvement of 
                            investigative disclosure statute.
Sec. 505. Authorization for Financial Management Service retention of 
                            transaction fees from levied amounts.
          TITLE VI--CLARIFICATION OF PENALTIES AND LIABILITIES

Sec. 601. Clarification of penalty for failure to comply with 
                            electronic filing requirements.
Sec. 602. Increase in penalty on paid preparers who fail to comply with 
                            earned income tax credit due diligence 
                            requirements.
Sec. 603. Increase in penalties for repeated and willful failure to 
                            file tax return.
Sec. 604. Clarification of employee leasing companies liability for 
                            clients' Federal employment taxes.
Sec. 605. Extension of statute of limitations where State or local 
                            adjustment affects Federal tax liability.
Sec. 606. Elimination of restriction on offsetting refunds from former 
                            residents.
                  TITLE VII--UNDERSTANDING THE TAX GAP

Sec. 701. Tax gap strategy and reports.
Sec. 702. Studies on the impact of tax gap legislation.
Sec. 703. Reports on worker misclassification.

       TITLE I--TAXPAYER SIMPLIFICATION, PROTECTION, AND FAIRNESS

SEC. 101. TAXPAYER ASSISTANCE AND TAX SIMPLIFICATION REPORT.

    (a) In General.--Not later than 2 years after the date of the 
enactment of this Act, the Secretary of the Treasury, in consultation 
with the Commissioner of the Internal Revenue Service, shall submit to 
Congress a report on taxpayer assistance and tax simplification.
    (b) Matters Included.--The report required under subsection (a) 
shall be based on examinations of tax policy and of tax compliance 
enforcement and shall include the following:
            (1) An assessment of the current and proposed efforts of 
        the Internal Revenue Service with respect to the simplification 
        of tax forms, publications, and filing requirements for 
        individual taxpayers and for sole proprietor taxpayers, 
        including additional, plain-language guidance for taxpayers. 
        Such assessment shall include specific recommendations on--
                    (A) how these or additional efforts may be improved 
                or expanded upon, including through paid preparers and 
                tax preparation software, and
                    (B) requiring or encouraging the Internal Revenue 
                Service, to the maximum extent possible, to test its 
                forms and publications on actual taxpayers prior to 
                publication.
            (2) An assessment of the current efforts of the Internal 
        Revenue Service--
                    (A) to reduce the time between receipt of an 
                electronically filed tax return and the issuance of a 
                refund, and
                    (B) to reduce the time between receipt of a 
                manually filed tax return and the issuance of a refund.
            (3) An assessment of the efforts of the Internal Revenue 
        Service to induce voluntary compliance by individual taxpayers 
        and sole proprietor taxpayers, with a particular focus on 
        current efforts to reduce administrative and compliance 
        burdens. Such assessment shall include specific recommendations 
        on how voluntary compliance may be improved or expanded upon, 
        particularly in an environment where most taxpayers use paid 
        preparers or tax preparation software.
            (4) An assessment of the current efforts of the Internal 
        Revenue Service to improve taxpayer service, including through 
        outreach programs, taxpayer education, preparer education, tax 
        software industry coordination, and expanded availability of 
        online, Internet-based tax information and filing services 
        offered by the Internal Revenue Service. Such assessment shall 
        include specific recommendations on how these or additional 
        efforts may be improved or expanded upon.
            (5) An assessment of the efficacy of previous Internal 
        Revenue Service efforts with respect to settlement initiatives, 
        including the effect of such initiatives on improving 
        compliance and reducing current and future revenues lost due to 
        tax evasion. Such assessment shall include specific 
        recommendations on how, or whether, these or additional efforts 
        may be improved or expanded upon.
            (6) An assessment of the personnel, infrastructure, 
        information technology, and capabilities of the Internal 
        Revenue Service with respect to ensuring and promoting taxpayer 
        service, encouraging voluntary compliance, enforcing 
        involuntary compliance.
    (c) Use of Data.--The report under subsection (a) shall, wherever 
possible, be based on empirical data, agency-conducted tests, and 
quantitative evidence.

SEC. 102. ELIMINATION OF TAXPAYER OBLIGATION TO PAY CREDIT AND DEBIT 
              CARD PROCESSING FEES FOR CERTAIN TAX PAYMENTS.

    (a) In General.--Paragraph (2) of section 6311(d) is amended to 
read as follows:
            ``(2) Authority to enter into contracts.--Notwithstanding 
        section 3718(f) of title 31, United States Code--
                    ``(A) In general.--The Secretary is authorized to 
                enter into contracts to obtain services related to 
                receiving payment by other means where cost beneficial 
                to the Government. Except as provided in subparagraph 
                (B), the Secretary may not pay any fee or provide any 
                other consideration under any such contract for the use 
                of credit, debit, or charge cards for the payment of 
                taxes imposed by subtitle A.
                    ``(B) Services provided by financial agents of the 
                government.--The Secretary is authorized to utilize 
                services provided by a financial agent of the 
                Government to receive payment of delinquent tax 
                liability made by credit, debit, or charge card, and to 
                pay such financial agent any contracted fees or other 
                consideration for the acceptance and processing of card 
                transactions in connection with such services.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments made after the date of the enactment of this Act.

SEC. 103. MAKE OFFER-IN-COMPROMISE APPLICATION RULES LESS ONEROUS FOR 
              TAXPAYERS.

    (a) In General.--Section 7122 is amended by striking subsection (c) 
and by redesignating subsections (d), (e), (f), and (g) as subsections 
(c), (d), (e), and (f), respectively.
    (b) Conforming Amendments.--
            (1) Paragraph (3) of section 7122(c), as redesignated by 
        subsection (a), is amended by striking subparagraph (C), by 
        striking ``, and'' at the end of subparagraph (B) and inserting 
        a period, and by adding ``and'' at the end of subparagraph (A).
            (2) Subsection (f) of section 6159 is amended by striking 
        ``section 7122(e)'' and inserting ``section 7122(d)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to offers-in-compromise submitted after the date of the enactment 
of this Act.

SEC. 104. ELIMINATION OF SPECIAL RULES MODIFYING AMOUNT OF ESTIMATED 
              TAX PAYMENTS BY CORPORATION.

    The Corporate Estimated Tax Shift Act of 2009 (and any modification 
of such section contained in any other provision of law) and section 
561 of the Hiring Incentives to Restore Employment Act (and any 
modification of such section contained in any other provision of law) 
shall not apply with respect to any installment of corporate estimated 
tax for any taxable year beginning after December 31, 2013.

SEC. 105. REPEAL OF SPECIAL ESTIMATED TAX PAYMENT PROVISION FOR CERTAIN 
              INSURANCE COMPANIES.

    (a) In General.--Section 847 is repealed, effective for taxable 
years beginning after December 31, 2012.
    (b) Transition Rules.--
            (1) Existing special loss discount accounts.--
                    (A) In general.--In the case of a company that has 
                a special loss discount account (within the meaning of 
                section 847(a)(3) of the Internal Revenue Code of 1986, 
                as in effect on the date of the enactment of this Act) 
                on December 31, 2012, the entire amount of such account 
                shall be subtracted from such account and, unless the 
                company makes the election under subparagraph (B), 
                shall be included in gross income for such company's 
                first taxable year beginning after such date.
                    (B) Election to include amounts ratably over 4 
                years.--If a company makes the election under this 
                subparagraph, in such time and manner as the Secretary 
                may prescribe, the amount of such company's special 
                loss discount account which is subtracted from such 
                account by reason of subparagraph (A) shall be included 
                in gross income ratably over the 4-taxable-year period 
                beginning with such company's first taxable year 
                beginning after December 31, 2012.
            (2) Accumulated special estimated tax payments.--
                    (A) In general.--Unless the company makes the 
                election under paragraph (1)(B), the amount of any 
                special estimated tax payments made by such company 
                under section 847 of the Internal Revenue Code of 1986 
                in taxable years beginning before December 31, 2012, 
                which have not previously been applied to reduce tax 
                liability shall be applied to reduce any additional tax 
                liability resulting from the application of paragraph 
                (1)(A) for the company's first taxable year beginning 
                after December 31, 2012.
                    (B) Companies electing 4-year income inclusion.--In 
                the case of a company that makes the election under 
                paragraph (1)(B), the amount of any special estimated 
                tax payments made by such company under section 847 of 
                such Code in taxable years beginning before December 
                31, 2012, which have not previously been applied to 
                reduce tax liability shall be applied on a year-by-year 
                basis to reduce any additional tax liability resulting 
                from the application of paragraph (1)(B) for the 
                taxable years in the 4-taxable-year period under such 
                paragraph.
                    (C) Excess special estimated tax payments.--If the 
                amount of special estimated tax payments to which 
                subparagraph (A) or (B) applies exceeds--
                            (i) the additional tax liability resulting 
                        from the application of paragraph (1)(A) for 
                        the company's first taxable year beginning 
                        after December 31, 2012, or
                            (ii) the total additional tax liability 
                        resulting from the application of paragraph 
                        (1)(B) for the company's first 4 taxable years 
                        beginning after such date,
                whichever is applicable, such excess amount shall be 
                treated as a payment of the company's estimated tax 
                under section 6655 of such Code, beginning with the 
                first quarter of the first taxable year beginning after 
                such date or, in the case of an election under 
                paragraph (1)(B), the first quarter of the 4th taxable 
                year beginning after such date.

SEC. 106. REPEAL OF DESIGNATION OF NONQUALIFIED PREFERRED STOCK.

    (a) In General.--Section 351 is amended by striking subsection (g) 
and by redesignating subsection (h) as subsection (g).
    (b) Conforming Amendments.--
            (1) Section 45D(b)(6)(A) is amended by striking ``(other 
        than nonqualified preferred stock as defined in section 
        351(g)(2))''.
            (2) Section 354(a)(2) is amended--
                    (A) by striking ``(including nonqualified preferred 
                stock, as defined in section 351(g)(2))'' in 
                subparagraph (B), and
                    (B) by striking subparagraph (C).
            (3) Section 354(a)(3) is amended by striking ``nonqualified 
        preferred stock and''.
            (4) Section 355(a)(3) is amended--
                    (A) by striking ``(including nonqualified preferred 
                stock, as defined in section 351(g)(2))'' in 
                subparagraph (C), and
                    (B) by striking subparagraph (D).
            (5) Section 355(a)(4) is amended by striking ``nonqualified 
        preferred stock and''.
            (6) Section 356 is amended by striking subsection (e) and 
        by redesignating subsections (f) and (g) as subsections (e) and 
        (f), respectively.
            (7) Section 1036 is amended by striking subsection (b) and 
        by redesignating subsection (c) as subsection (b).
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2012.

SEC. 107. DE MINIMIS APOLOGY PAYMENTS PILOT PROGRAM.

    (a) In General.--Section 7811(b) is amended by striking ``or'' at 
the end of paragraph (1), by striking the period and inserting ``, or'' 
at the end of paragraph (2)(D), and adding at the end the following new 
paragraph:
            ``(3) to make an apology payment under subsection (h) in 
        the case of any order issued during 2012 or 2013, upon the 
        determination that such order--
                    ``(A) has been accepted, or
                    ``(B) if challenged, has been administratively 
                sustained.''.
    (b) Apology Payment.--Section 7811 is amended by adding at the end 
the following new subsection:
    ``(h) Apology Payment Program.--
            ``(1) In general.--A taxpayer assistance order may require 
        the Secretary to provide an apology payment on behalf of the 
        Internal Revenue Service to the taxpayer under this subsection 
        in any case in which the National Taxpayer Advocate determines 
        that any action or inaction by the Internal Revenue Service has 
        caused excess expense or undue burden on a taxpayer.
            ``(2) Taxpayer limitations.--In the case of any apology 
        payment required under this subsection to any taxpayer with 
        respect to any taxable year--
                    ``(A) such payment shall not be less than $100, and
                    ``(B) such payment shall not exceed $1,000.
            ``(3) Aggregate yearly limitation.--The amount of apology 
        payments which the National Taxpayer Advocate may require to be 
        paid for any fiscal year shall not exceed $250,000.''.
    (c) Reports.--Clause (ii) of section 7803(c)(2)(B) is amended by 
striking ``and'' at the end of subclause (X), by redesignating 
subclause (XI) as subclause (XII), and by inserting after subclause (X) 
the following new subclause:
                                    ``(XI) contain a summary of all 
                                Taxpayer Assistance Orders which 
                                require an apology payment under 
                                section 7811(h), and''.
    (d) Exclusion of Apology Payments From Gross Income.--
            (1) In general.--Part III of subchapter B of chapter 1 is 
        amended by inserting before section 140 the following new 
        section:

``SEC. 139F. INTERNAL REVENUE SERVICE APOLOGY PAYMENTS.

    ``Gross income shall not include any apology payment received by a 
taxpayer as a result of a Taxpayer Assistance Order described in 
section 7811(h).''.
            (2) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 is amended by inserting before the 
        item relating to section 140 the following new item:

``Sec. 139F. Internal Revenue Service apology payments.''.
    (e) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (b) shall apply to orders issued after December 31, 2011.
            (2) Reports.--The amendments made by subsection (c) shall 
        apply to reports required to be submitted after December 31, 
        2011.
            (3) Exclusion.--The amendments made by subsection (d) shall 
        apply to taxable years beginning after December 31, 2011.
    (f) Study and Report on Apology Payments Program.--Not later than 
December 31, 2013, the Secretary of the Treasury shall submit to 
Congress a report on the apology payments program under the amendments 
made by this section. Such report shall contain--
            (1) an evaluation of--
                    (A) the merits and effects of such program on--
                            (i) taxpayers who received payments under 
                        section 7811(h), and
                            (ii) the Internal Revenue Service, and
                    (B) the impact of the program on all taxpayers and 
                the public, and
            (2) recommendations whether the program should be extended, 
        and, if so, whether and how it should be improved.

      TITLE II--CLARIFICATION OF TAX FORMS AND FILING REQUIREMENTS

SEC. 201. CLARIFICATION OF INFORMATION ON SCHEDULE C.

    (a) Revision of Schedule C.--Not later than December 31, 2012, the 
Secretary of the Treasury shall revise Schedule C to Form 1040 
(hereafter in this section referred to as ``Schedule C'') to require 
that taxpayers engaged in a trade or business provide the information 
required under this subsection.
            (1) Additional gross receipts information.--With respect to 
        the gross receipts of the taxpayer from any trade or business, 
        Schedule C shall require the taxpayer to provide the following:
                    (A) The total of amount of gross receipts or sales 
                reported to the taxpayer through payee statements (as 
                defined in section 6724(d)(2) of the Internal Revenue 
                Code of 1986) and the number of such payee statements 
                received by the taxpayer.
                    (B) The total of amount of gross receipts or sales 
                not included under subparagraph (A).
            (2) Additional expense information.--With respect to 
        payments made by the taxpayer in connection with any trade or 
        business, Schedule C shall require the taxpayer to provide the 
        following:
                    (A) The total of amounts reported by the taxpayer 
                through payee statements (as so defined).
                    (B) The number of payee statements (as so defined) 
                furnished by the taxpayer.
                    (C) Such other information as required by the 
                Secretary with respect to payments in connection with--
                            (i) goods, and
                            (ii) services.
    (b) Report on Improving Voluntary Compliance by Sole Proprietors.--
            (1) In general.--Not later than 3 years after the date of 
        the enactment of this Act, the Secretary of the Treasury shall 
        submit to Congress a report setting forth recommendations on--
                    (A) whether the Internal Revenue Service should 
                provide additional assistance to first-time Schedule C 
                filers by means of regular communications, a small 
                business hotline, a published resource guide, or 
                automatic or computer-generated ``soft'' notices,
                    (B) ways in which the Internal Revenue Service can 
                work with small businesses, trade representatives, tax 
                preparation software firms, and paid preparer 
                representatives to determine whether and how specific 
                changes to existing education and guidance would help 
                those filing the Schedule C,
                    (C) ways to clarify the instructions for Schedule C 
                to indicate that information returns may be required to 
                be filed by sole proprietors who deduct expenses for 
                wages, fees, and commissions,
                    (D) suggested changes to the Internal Revenue 
                Service's electronic and computer-based system for 
                filing information returns to accommodate those filing 
                information returns on payments made to sole 
                proprietors, including whether the Internal Revenue 
                Service should develop an Internet-based system for 
                filing information returns,
                    (E) identification and analysis of the best 
                practices that are utilized by States and by foreign 
                governments with respect to encouraging voluntary tax 
                compliance by sole proprietors, and ways these best 
                practices may be adopted by the Internal Revenue 
                Service,
                    (F) whether, in the case of tax returns containing 
                income from a trade or business, the inclusion of a 
                checkbox or other indicator indicating whether the 
                taxpayer had a 1099-MISC filing requirement would 
                affect voluntary compliance by taxpayers, and
                    (G) such other improvements with respect to 
                improving voluntary compliance by sole proprietors as 
                the Secretary determines is appropriate.
            (2) Use of data.--The recommendations submitted in the 
        report under paragraph (1) shall, wherever possible, be based 
        on empirical data, agency-conducted tests, and quantitative 
        evidence.

SEC. 202. INCREASED ELECTRONIC FILING OF RETURNS.

    (a) Persons Required To File Schedule M-3.--Paragraph (2) of 
section 6011(e) is amended--
            (1) by redesignating subparagraphs (A) and (B) as 
        subparagraphs (B) and (C), respectively,
            (2) by inserting before subparagraph (B), as so 
        redesignated, the following new subparagraph:
                    ``(A) shall require any corporation or partnership 
                that has assets in excess of $10,000,000 on the last 
                day of the taxable year to file returns on magnetic 
                media,'', and
            (3) by inserting ``except as provided in subparagraph 
        (A),'' before ``shall not require'' in subparagraph (B), as so 
        redesignated.
    (b) Reduction of Threshold.--Subparagraph (B) of section 
6011(e)(2), as redesignated by subsection (a), is amended by striking 
``at least 250 returns'' and inserting ``more than a de minimis number 
of returns (as determined by the Secretary)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2012.

SEC. 203. CLARIFICATION OF ELECTRONIC FILING REQUIREMENTS FOR PAID 
              PREPARERS.

    (a) Lower Threshold for Paid Preparers.--Section 6011(e)(3)(B) is 
amended by striking ``10'' and inserting ``5''.
    (b) Threshold Based on Returns Prepared.--Paragraph (3) of section 
6011(e) is amended--
            (1) by striking ``filed'' in subparagraph (A)(i) and 
        inserting ``prepared'', and
            (2) by striking ``file'' in subparagraph (B) and inserting 
        ``prepare''.
    (c) Penalty.--Section 6695 is amended by adding at the end the 
following new subsection:
    ``(h) Failure To File Return on Magnetic Media.--Any person who is 
a tax return preparer with respect to any individual income tax return 
and who must file such return on magnetic media pursuant to the 
requirement of section 6011(e)(3) and fails to comply with the 
requirements of section 6011(e)(3) shall pay a penalty of $50 for such 
failure unless it is shown that such failure is due to reasonable cause 
and not due to willful neglect. The maximum penalty imposed under this 
subsection on any person with respect to individual income tax returns 
filed during any calendar year shall not exceed $25,000.''.
    (d) Technical Amendment.--Section 6011(e)(3)(A) is amended by 
striking ``than'' and inserting ``that''.
    (e) Effective Date.--The amendments made by this section shall 
apply to returns filed for taxable years beginning after December 31, 
2011.

SEC. 204. REQUIREMENT THAT ELECTRONICALLY PREPARED PAPER RETURNS 
              INCLUDE 2D BARCODE.

    (a) In General.--Subsection (e) of section 6011 is amended by 
adding at the end the following new paragraph:
            ``(5) Special rule for returns prepared electronically and 
        submitted on paper.--The Secretary shall require that any 
        return of tax which is prepared electronically, but is printed 
        and filed on paper, bear a matrix code or 2D barcode which can, 
        when scanned, convert such return to electronic format.''.
    (b) Conforming Amendment.--Paragraph (1) of section 6011(e) is 
amended by striking ``paragraph (3)'' and inserting ``paragraphs (3) 
and (5)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns of tax the due date for which (including extensions) 
is after December 31, 2012.

SEC. 205. AUTHORIZATION TO REQUIRE CERTAIN EMPLOYEE BENEFIT PLAN 
              INFORMATION RETURNS AND REPORTS TO BE FILED 
              ELECTRONICALLY.

    (a) In General.--Paragraph (2) of section 6011(e), as amended by 
this Act, is amended by adding at the end the following new sentence: 
``Subparagraph (B) shall not apply in the case of a return or report 
required by section 6057, 6058, or 6059.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2012.

               TITLE III--ENHANCED INFORMATION REPORTING

SEC. 301. AUTOMATIC REPORTING ON CERTAIN GOVERNMENT PAYMENTS FOR 
              PROPERTY AND SERVICES.

    (a) In General.--Section 6041, as amended by the Comprehensive 1099 
Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act 
of 2011, is amended by adding at the end the following new subsection:
    ``(h) Applications to Governmental Units.--For purposes of this 
section--
            ``(1) Treated as persons.--The term `person' includes any 
        governmental unit (and any agency or instrumentality thereof).
            ``(2) Special rules.--In the case of any payment by a 
        governmental entity or any agency or instrumentality thereof--
                    ``(A) subsection (a) shall be applied without 
                regard to the trade or business requirement contained 
                therein, and
                    ``(B) any return under this section shall be made 
                by the officer or employee having control of the 
                payment or appropriately designated for the purpose of 
                making such return.
            ``(3) Exceptions.--This subsection shall not apply to such 
        payments as the Secretary may specify in regulations prescribed 
        after the date of the enactment of this subsection. Such 
        regulations may include--
                    ``(A) payments of interest,
                    ``(B) payments for real property,
                    ``(C) payments to entities exempt from tax or 
                foreign governments,
                    ``(D) intergovernmental payments,
                    ``(E) payments made pursuant to classified or 
                confidential contracts, including contracts described 
                in section 6050M(e)(3) with respect to which the 
                requirements of section 6050M(e)(2) are met, and
                    ``(F) any other payment with respect to which 
                reporting is required under another provision of this 
                title.''.
    (b) Conforming Amendments to Returns by Governments Regarding 
Payments of Remuneration for Services and Direct Sales to 
Corporations.--Paragraph (3) of section 6041A(d) is amended--
            (1) by striking ``by federal executive agencies'' in the 
        heading,
            (2) by striking ``by any Federal executive agency (as 
        defined in section 6050M(b))'' in subparagraph (A) and 
        inserting ``by any governmental entity or any agency or 
        instrumentality thereof'', and
            (3) by inserting ``classified or confidential contracts, 
        including'' after ``services under'' in subparagraph (B)(i).
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 2012.

SEC. 302. ADDITIONAL INFORMATION ON RETURNS RELATING TO MORTGAGE 
              INTEREST.

    (a) In General.--Paragraph (2) of section 6050H(b) is amended by 
striking ``and'' at the end of subparagraph (C), by redesignating 
subparagraph (D) as subparagraph (G), and by inserting after 
subparagraph (C) the following new subparagraphs:
                    ``(D) the unpaid balance with respect to such 
                mortgage,
                    ``(E) the address of the property securing such 
                mortgage, and
                    ``(F) information with respect to whether the 
                mortgage is a refinancing that occurred in such 
                calendar year.''.
    (b) Payee Statements.--Subsection (d) of section 6050H is amended 
by striking ``and'' at the end of paragraph (1), by striking the period 
at the end of paragraph (2) and inserting ``, and'', and by inserting 
after paragraph (2) the following new paragraph:
            ``(3) the information required to be included on the return 
        under subparagraphs (D), (E), and (F) of subsection (b)(2).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns and statements the due date for which (determined 
without regard for extensions) is after December 31, 2012.

SEC. 303. IMPROVED INFORMATION REPORTING ON UNREPORTED AND 
              UNDERREPORTED FINANCIAL ACCOUNTS.

    (a) Elimination of Minimum Interest Requirement.--
            (1) In general.--Section 6049(a) is amended by striking 
        ``aggregating $10 or more'' each place it appears.
            (2) Conforming amendments.--Subparagraph (C) of section 
        6049(d)(5) is amended--
                    (A) by striking ``which involves the payment of $10 
                or more of interest'', and
                    (B) by striking ``in the case of transactions 
                involving $10 or more'' in the heading.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to returns filed after December 31, 2012.
    (b) Reporting of Non-Interest Bearing Deposits.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 is amended by inserting after section 6049 the 
        following new section:

``SEC. 6049A. RETURNS REGARDING NON-INTEREST BEARING DEPOSITS.

    ``(a) Requirement of Reporting.--Every person who holds a 
reportable deposit during any calendar year shall make a return 
according to the forms or regulations prescribed by the Secretary, 
setting forth the name and address of the person for whom such deposit 
was held.
    ``(b) Reportable Deposit.--For purposes of this section--
            ``(1) In general.--The term `reportable deposit' means--
                    ``(A) any amount on deposit with--
                            ``(i) a person carrying on the banking 
                        business,
                            ``(ii) a mutual savings bank, a savings and 
                        loan association, a building and loan 
                        association, a cooperative bank, a homestead 
                        association, a credit union, an industrial loan 
                        association or bank, or any similar 
                        organization,
                            ``(iii) a broker (as defined in section 
                        6045(c)), or
                            ``(iv) any other person provided in 
                        regulations prescribed by the Secretary, or
                    ``(B) to the extent provided by the Secretary in 
                regulations, any amount held by an insurance company, 
                an investment company (as defined in section 3 of the 
                Investment Company Act of 1940), or held in other 
                pooled funds or trusts.
            ``(2) Exceptions.--Such term shall not include--
                    ``(A) any amount with respect to which a report is 
                made under section 6049,
                    ``(B) any amount on deposit with or held by a 
                natural person,
                    ``(C) except to the extent provided in regulations, 
                any amount--
                            ``(i) held with respect to a person 
                        described in section 6049(b)(4),
                            ``(ii) with respect to which section 
                        6049(b)(5) would apply if a payment were made 
                        with respect to such amount, or
                            ``(iii) on deposit with or held by a person 
                        described in section 6049(b)(2)(C), or
                    ``(D) any amount for which the Secretary determines 
                there is already sufficient reporting.
    ``(c) Statements To Be Furnished to Persons With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every person required to make a return 
        under subsection (a) shall furnish to each person whose name is 
        required to be set forth in such return a written statement 
        showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the reportable account with respect to which 
                such return was made.
            ``(2) Time and form of statement.--The written statement 
        under paragraph (1)--
                    ``(A) shall be furnished at a time and in a manner 
                similar to the time and manner that statements are 
                required to be filed under section 6049(c)(2), and
                    ``(B) shall be in such form as the Secretary may 
                prescribe by regulations.
    ``(d) Person.--For purposes of this section, the term `person', 
when referring to the person for whom a deposit is held, includes any 
governmental unit and any agency or instrumentality thereof and any 
international organization and any agency or instrumentality 
thereof.''.
            (2) Assessable penalties.--
                    (A) Failure to file return.--Subparagraph (B) of 
                section 6724(d)(1) is amended by striking ``or'' at the 
                end of clause (xxii), by striking ``and'' at the end of 
                clause (xxiv) and inserting ``or'', and by inserting 
                after clause (xxiv) the following new clause:
                            ``(xxvi) section 6049A (relating to returns 
                        regarding non-interest bearing deposits), 
                        and''.
                    (B) Failure to file payee statement.--Paragraph (2) 
                of section 6724(d) is amended by striking ``or'' at the 
                end of subparagraph (GG), by striking the period at the 
                end of subparagraph (HH) and inserting ``, or'' and by 
                inserting after subparagraph (HH) the following new 
                subparagraph:
                    ``(II) section 6049A(c) (relating to returns 
                regarding non-interest bearing deposits).''.
            (3) Clerical amendment.--The table of section for subpart B 
        of part III of subchapter A of chapter 61 is amended by 
        inserting after the item relating to section 6049 the following 
        new item:

``Sec. 6049A. Returns regarding non-interest bearing deposits.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to returns filed after December 31, 2012.

               TITLE IV--PAYMENTS TO CERTAIN CONTRACTORS

SEC. 401. REQUIREMENTS FOR WITHHOLDING WITH RESPECT TO PAYMENTS TO 
              CONTRACTORS.

    (a) In General.--
            (1) Requirement.--Paragraph (1) of section 3406(a) is 
        amended by striking ``or'' at the end of subparagraph (C), by 
        inserting ``or'' at the end of subparagraph (D), and by 
        inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) the Secretary has not provided verification 
                to the payor that the TIN furnished by the payee is 
                correct,''.
            (2) Application only to certain transactions.--Subsection 
        (a) of section 3406 is amended by adding at the end the 
        following new paragraph:
            ``(3) Subparagraph (E) of paragraph (1) applies only to 
        certain other reportable payments.--Subparagraph (E) of 
        paragraph (1) shall only apply to other reportable payments 
        described in subparagraph (B) of subsection (b)(3).''.
            (3) Period of withholding.--
                    (A) In general.--Section 3406(e) is amended by 
                redesignating paragraph (5) as paragraph (6) and by 
                inserting after paragraph (4) the following new 
                paragraph:
            ``(5) No matching tin.--In any case in which the Secretary 
        has not provided verification to the payor that the TIN 
        furnished by the payee is correct pursuant to subsection 
        (a)(1)(E), subsection (a) shall apply to such payment and any 
        subsequent such payment made by the payor after the date such 
        TIN was submitted to the Secretary for verification until the 
        payee furnishes another TIN in the manner required and such TIN 
        is verified by the Secretary as correct.''.
                    (B) Conforming amendment.--Paragraph (2) of section 
                3406(e) is amended by inserting ``pursuant to 
                subsection (a)(1)(B),'' after ``is incorrect''.
    (b) Voluntary Withholding.--Section 3402(p) is amended by 
redesignating paragraph (3) as paragraph (4) and by inserting after 
paragraph (2) the following new paragraph:
            ``(3) Certain payments to contractors.--
                    ``(A) In general.--If, at the time of any specified 
                payment to any person, a request by such person is in 
                effect that such payment be subject to withholding 
                under this chapter, the person making such payment 
                shall deduct and withhold from such payment an amount 
                equal to the rate in effect under such request.
                    ``(B) Specified payment.--For purposes of this 
                paragraph, the term `specified payment' means any 
                payment described in subparagraph (A) or (B) of section 
                3406(b)(3).
                    ``(C) Request.--A request to subject a specified 
                payment to withholding shall be made at such time and 
                in such manner as the Secretary may by regulations 
                prescribe, and shall specify a uniform percentage of 
                withholding which is equal to any rate at which tax is 
                imposed under subsection (a), (b), (c), or (d) of 
                section 1, as appropriate,''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to payments made 
        after December 31, 2012.
            (2) Certification.--The amendments made by subsection (a) 
        shall not take effect before the date on which the Secretary of 
        the Treasury has certified that there is a system in place to 
        provide notifications in an accurate and timely manner 
        regarding the verification of taxpayer identification numbers 
        submitted pursuant to section 3406(a)(1)(E) of the Internal 
        Revenue Code of 1986 (as added by subsection (a)).

SEC. 402. CONTINUOUS LEVY ON PAYMENTS TO MEDICAID PROVIDERS AND 
              SUPPLIERS.

    (a) In General.--Section 6331(h)(2) is amended by striking ``and'' 
at the end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by adding at the end the 
following new subparagraph:
                    ``(D) any payment to any Medicaid provider or 
                supplier under a State plan under title XIX of the 
                Social Security Act.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to levies issued after December 31, 2012.

SEC. 403. LEVY AUTHORITY FOR PAYMENTS TO MEDICARE PROVIDERS WITH 
              DELINQUENT TAX DEBT.

    (a) In General.--Section 6331(h)(2), as amended by this Act, is 
amended by striking ``and'' at the end of subparagraph (C), by striking 
the period at the end of subparagraph (D) and inserting ``, and'', and 
by adding at the end the following new subparagraph:
                    ``(E) any payment to any Medicare provider or 
                supplier under title XVIII of the Social Security 
                Act.''.
    (b) 100 Percent Levy.--Section 6331(h)(3) is amended by inserting 
``or to a provider or supplier described in paragraph (2)(E)'' after 
``Government''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments after the date of the enactment of this Act.

SEC. 404. 100 PERCENT LEVY FOR PAYMENTS TO FEDERAL VENDORS RELATING TO 
              PROPERTY.

    (a) In General.--Section 6331(h)(3) is amended by striking ``goods 
or services'' and inserting ``property, goods, or services''.
    (b) Effective Date.--The amendment made by this section shall apply 
to levies issued after the date of the enactment of this Act.

         TITLE V--IMPROVED TAX ADMINISTRATION AND COORDINATION

SEC. 501. REQUIREMENT FOR PRISONS LOCATED IN U.S. TO PROVIDE 
              INFORMATION FOR TAX ADMINISTRATION.

    (a) In General.--Subchapter B of chapter 61 is amended by 
redesignating section 6116 as section 6117 and by inserting after 
section 6115 the following new section:

``SEC. 6116. REQUIREMENT FOR PRISONS LOCATED IN UNITED STATES TO 
              PROVIDE INFORMATION FOR TAX ADMINISTRATION.

    ``(a) In General.--Not later than September 15, 2011, and annually 
thereafter, the head of the Federal Bureau of Prisons and the head of 
any State agency charged with the responsibility for administration of 
prisons shall provide to the Secretary in electronic format a list with 
the information described in subsection (b) of all the inmates 
incarcerated within the prison system for any part of the prior 2 
calendar years or the current calendar year through August 31.
    ``(b) Information.--The information with respect to each inmate 
is--
            ``(1) first, middle, and last name,
            ``(2) date of birth,
            ``(3) institution of current incarceration or, for released 
        inmates, most recent incarceration,
            ``(4) prison assigned inmate number,
            ``(5) the date of incarceration,
            ``(6) the date of release or anticipated date of release,
            ``(7) the date of work release,
            ``(8) taxpayer identification number and whether the prison 
        has verified such number,
            ``(9) last known address, and
            ``(10) any additional information as the Secretary may 
        provide.
    ``(c) Format.--The Secretary shall determine the electronic format 
of the information described in subsection (b).''.
    (b) Clerical Amendment.--The table of sections for such subchapter 
is amended by striking the item relating to section 6116 and by adding 
at the end the following new items:

``Sec. 6116. Requirement for prisons located in United States to 
                            provide information for tax administration.
``Sec. 6117. Cross reference.''.

SEC. 502. FACILITATION OF TAX COMPLIANCE WITH INDIAN TRIBAL 
              GOVERNMENTS.

    (a) In General.--Paragraph (5) of section 6103(b) is amended--
            (1) by striking ``and'' at the end of clause (ii)(III),
            (2) by striking the period at the end of clause (iii)(II) 
        and inserting ``, and'', and
            (3) by adding at the end the following new clause:
                            ``(iv) for purposes of subsections (d)(1) 
                        and (p), any Indian tribal government which 
                        imposes a tax on any income, wages, or other 
                        activity or transaction which is also taxed 
                        under any chapter of this title described in 
                        such subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to disclosures made after the date of the enactment of this Act.

SEC. 503. IMPROVEMENT IN ACCESS TO INFORMATION IN THE NATIONAL 
              DIRECTORY OF NEW HIRES FOR TAX ADMINISTRATION PURPOSES.

    (a) In General.--Paragraph (3) of section 453(i) of the Social 
Security Act (42 U.S.C. 653(i)) is amended to read as follows:
            ``(3) Administration of federal tax laws.--The Secretary of 
        the Treasury shall have access to the information in the 
        National Directory of New Hires for purposes of administering 
        the Internal Revenue Code of 1986.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 504. CLARIFICATION OF TAXPAYER PRIVACY BY IMPROVEMENT OF 
              INVESTIGATIVE DISCLOSURE STATUTE.

    (a) In General.--Paragraph (6) of section 6103(k) is amended--
            (1) by inserting ``(A) In general.--'' before ``An internal 
        revenue officer'', and
            (2) by adding at the end the following new subparagraph:
            ``(B) Identity disclosure.--Nothing in this section shall 
        be construed to prohibit agents of the Department of the 
        Treasury from identifying themselves, their organizational 
        affiliation, the identity of the subject of an investigation, 
        and the nature of such investigation when contacting third 
        parties either in writing or otherwise.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to disclosures after the date of the enactment of this Act.

SEC. 505. AUTHORIZATION FOR FINANCIAL MANAGEMENT SERVICE RETENTION OF 
              TRANSACTION FEES FROM LEVIED AMOUNTS.

    Notwithstanding any other provision of law, the Financial 
Management Service may charge the Internal Revenue Service, and the 
Internal Revenue Service may pay the Financial Management Service, a 
fee sufficient to cover the full cost of implementing a continuous levy 
program under subsection (h) of section 6331 of the Internal Revenue 
Code of 1986. Any such fee shall be based on actual levies made and 
shall be collected by the Financial Management Service by the retention 
of a portion of amounts collected by levy pursuant to that subsection. 
Amounts received by the Financial Management Service as fees under that 
subsection shall be deposited into the account of the Department of the 
Treasury under section 3711(g)(7) of title 31, United States Code, and 
shall be collected and accounted for in accordance with the provisions 
of that section.

          TITLE VI--CLARIFICATION OF PENALTIES AND LIABILITIES

SEC. 601. CLARIFICATION OF PENALTY FOR FAILURE TO COMPLY WITH 
              ELECTRONIC FILING REQUIREMENTS.

    (a) In General.--Part I of subchapter B of chapter 68 is amended by 
inserting after section 6720C the following new section:

``SEC. 6720D. FAILURE TO FILE CERTAIN RETURNS ELECTRONICALLY.

    ``(a) In General.--Any person who fails to file a return described 
in section 6651 or 6652(c)(1) in electronic form as required under 
section 6011(e) shall pay a penalty equal to--
            ``(1) $5,000, in the case of an organization required to 
        file the return described in section 6033(a)(1), and
            ``(2) $25,000, in any other case.
    ``(b) No Penalty for Additional Failures.--No person shall pay more 
than one penalty under this section in a taxable year.
    ``(c) Exception Where No Return Filed.--If a penalty is imposed 
under section 6651(a)(1) or 6652(c)(1) with respect any failure, the 
penalty under subsection (a) shall not apply.
    ``(d) Deficiency Procedures Not To Apply.--Subchapter B of chapter 
63 shall not apply in respect of the assessment or collection of any 
penalty imposed by this section.''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by inserting after the item 
relating to section 6720C the following new item:

``Sec. 6720D. Failure to file certain returns electronically.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed on or after January 1, 2013.

SEC. 602. INCREASE IN PENALTY ON PAID PREPARERS WHO FAIL TO COMPLY WITH 
              EARNED INCOME TAX CREDIT DUE DILIGENCE REQUIREMENTS.

    (a) In General.--Section 6695(g) is amended by striking ``$100'' 
and inserting ``$500''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns required to be filed after December 31, 2012.

SEC. 603. INCREASE IN PENALTIES FOR REPEATED AND WILLFUL FAILURE TO 
              FILE TAX RETURN.

    (a) In General.--Section 7203 is amended--
            (1) in the first sentence, by striking ``Any person'' and 
        inserting the following:
    ``(a) In General.--Any person'',
            (2) in the third sentence, by striking ``section'' and 
        inserting ``subsection'', and
            (3) by adding at the end the following new subsection:
    ``(b) Aggravated Failure To File.--
            ``(1) In general.--In the case of any failure described in 
        paragraph (2), the first sentence of subsection (a) shall be 
        applied by substituting--
                    ``(A) `felony' for `misdemeanor',
                    ``(B) `$250,000 ($500,000' for `$25,000 ($100,000', 
                and
                    ``(C) `5 years' for `1 year'.
            ``(2) Failure described.--A failure described in this 
        paragraph is--
                    ``(A) a failure to make a return described in 
                subsection (a) for any 3 taxable years occurring during 
                any period of 5 consecutive taxable years if the 
                aggregate tax liability for such period is not less 
                than $50,000, or
                    ``(B) a failure to make a return by any person who 
                has income attributable to conduct punishable as a 
                felony under State or Federal law, where such income 
                gives rise to a requirement to make a return.''.
    (b) Penalty May Be Applied in Addition to Other Penalties.--Section 
7204 is amended by striking ``the penalty provided in section 6674'' 
and inserting ``the penalties provided in sections 6674 and 7203(b)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed after December 31, 2012.

SEC. 604. CLARIFICATION OF EMPLOYEE LEASING COMPANIES LIABILITY FOR 
              CLIENTS' FEDERAL EMPLOYMENT TAXES.

    With respect to employment tax returns required to be filed with 
respect to wages paid on or after January 1, 2013, the Secretary of the 
Treasury shall issue regulations establishing--
            (1) standards for holding employee leasing companies 
        jointly and severally liable with their clients for Federal 
        employment taxes under chapters 21, 22, 23, and 24 of the 
        Internal Revenue Code of 1986, and
            (2) standards for holding such companies solely liable for 
        such taxes.

SEC. 605. EXTENSION OF STATUTE OF LIMITATIONS WHERE STATE OR LOCAL 
              ADJUSTMENT AFFECTS FEDERAL TAX LIABILITY.

    (a) In General.--Subsection (c) of section 6501 is amended by 
adding at the end the following new paragraph:
            ``(11) State and local tax adjustments affecting federal 
        tax liability.--If any return, amended return, or other 
        adjustment with respect to State or local taxes results in an 
        increase of Federal tax liability for a taxable year (as 
        reported by the taxpayer in an amended Federal return or as 
        determined by the Secretary on the basis of information sharing 
        with State or local revenue authorities), the period for the 
        assessment of such increase shall not expire until the later 
        of--
                    ``(A) 1 year after the date the taxpayer first 
                files an amended Federal return reflecting such 
                increase, or
                    ``(B) 2 years after the date the Secretary first 
                receives information relating to such increase from 
                State or local revenue authorities.
        Any further amended returns or information sharing with respect 
        to such increase shall not further extend the period specified 
        in the preceding sentence.''.
    (b) Credits and Refunds.--
            (1) In general.--Subsection (b) of section 6511 is amended 
        by adding at the end the following new paragraph:
            ``(3) State and local tax adjustments affecting federal tax 
        liability.--If any return, amended return, or other adjustment 
        with respect to State or local taxes results in an increase of 
        Federal tax liability for a taxable year (as reported by the 
        taxpayer in an amended Federal return or as determined by the 
        Secretary on the basis of information sharing with State or 
        local revenue authorities), the period during which the 
        taxpayer may claim a credit or refund offsetting such increase 
        shall not expire until the later of--
                    ``(A) 1 year after the date the taxpayer first 
                files an amended Federal return reflecting such 
                increase and stipulating that such amendment relates to 
                an adjustment with respect to State or local tax, or
                    ``(B) 2 years after the date the Secretary first 
                receives information relating to such increase from 
                State or local revenue authorities.
        Any further amended returns or information sharing with respect 
        to such increase shall not further extend the period specified 
        in the preceding sentence.''.
            (2) Conforming amendment.--Paragraph (1) of section 6511(b) 
        is amended by striking ``No credit'' and inserting ``Except as 
        provided in paragraph (3), no credit''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which is after December 31, 2012.

SEC. 606. ELIMINATION OF RESTRICTION ON OFFSETTING REFUNDS FROM FORMER 
              RESIDENTS.

    (a) In General.--Section 6402(e) (relating to collection of past-
due, legally enforceable State income tax obligations) is amended by 
striking paragraph (2) and by redesignating paragraphs (3), (4), (5), 
(6), and (7) as paragraphs (2), (3), (4), (5), and (6), respectively.
    (b) Elimination of 10-Year Restriction.--Subparagraph (B) of 
section 6402(e)(5) is amended--
            (1) by striking ``, and which has not been delinquent for 
        more than 10 years'', and
            (2) by inserting ``and'' after ``not collected,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to refunds payable for taxable years ending after the date of the 
enactment of this Act.

                  TITLE VII--UNDERSTANDING THE TAX GAP

SEC. 701. TAX GAP STRATEGY AND REPORTS.

    (a) Comprehensive Strategy for Reducing the Tax Gap.--
            (1) In general.--The Secretary of the Treasury shall submit 
        to Congress comprehensive and detailed reports on a strategy 
        for reducing the tax gap. Such reports shall include--
                    (A) a detailed assessment of the major sources and 
                causes of the tax gap, and
                    (B) a goal for reducing the tax gap and components 
                of the tax gap.
            (2) Time for submitting reports.--
                    (A) Initial report.--The first report required 
                under paragraph (1) shall be submitted not later than 
                December 31, 2012.
                    (B) Subsequent reports.--The Secretary of the 
                Treasury shall submit additional reports under 
                paragraph (1) not later than 5 years after the date on 
                which the most recent preceding report was submitted 
                under paragraph (1).
            (3) Use of data.--Any report submitted under this 
        subsection shall, wherever possible, be based on empirical 
        data, agency-conducted tests, and quantitative evidence.
    (b) Annual Tax Gap Report.--
            (1) In general.--Not later than December 31 of each year 
        beginning after 2012, the Secretary of the Treasury shall 
        submit to Congress a report on the most recent estimates of the 
        tax gap.
            (2) Matters included.--The report submitted under paragraph 
        (1) shall include--
                    (A) an update on any studies and pilot projects of 
                the Internal Revenue Service associated with specific 
                areas of the tax gap,
                    (B) an assessment of how the Internal Revenue 
                Service has aligned its enforcement and compliance 
                efforts with the goals and recommendations set forth in 
                the most recent report submitted under subsection (a),
                    (C) a detailed assessment of how effectively the 
                Internal Revenue Service is making full use of the 
                collected information to determine the causes of, and 
                potential solutions for, the tax gap,
                    (D) a detailed assessment of the benefits gained 
                from the tax gap estimation and analysis efforts, 
                including service and enforcement improvements, 
                regulatory changes, and statutory changes resulting 
                from those efforts, and
                    (E) an update and detailed assessment of 
                enforcement initiatives of the Internal Revenue 
                Service, including information sharing between the 
                Internal Revenue Service and State revenue agencies.
    (c) Tax Gap.--For purposes of this section, the term ``tax gap'' 
means, with respect to any tax year, the difference between--
            (1) the amount of taxes owed by taxpayers under the 
        Internal Revenue Code of 1986 for such tax year, and
            (2) the amount of revenue paid voluntarily and timely by 
        taxpayers under such Code for such tax year.

SEC. 702. STUDIES ON THE IMPACT OF TAX GAP LEGISLATION.

    (a) Study of Return on Investment.--
            (1) Matters studied.--
                    (A) In general.--The Secretary of the Treasury 
                shall conduct a study on--
                            (i) the revenue increases, and
                            (ii) the costs,
                with respect to tax gap legislation.
                    (B) Tax gap legislation.--For purposes of this 
                section, the term ``tax gap legislation'' means the 
                provisions of, and amendments made by--
                            (i) this Act,
                            (ii) section 403 of the Energy Improvement 
                        and Extension Act of 2008 (relating to broker 
                        reporting of customer's basis in securities 
                        transactions),
                            (iii) section 3091 of the Housing 
                        Assistance Tax Act of 2008 (relating to returns 
                        relating to payments made in settlement of 
                        payment card and third party network 
                        transactions), and
                            (iv) such other Acts, as determined 
                        appropriate by the Secretary of the Treasury.
            (2) Revenue increases.--The revenue increases considered in 
        the study conducted under paragraph (1) shall include--
                    (A) revenue collected from enforcement efforts,
                    (B) revenue increases from voluntary compliance by 
                taxpayers in response to tax gap legislation (including 
                cases in which the Internal Revenue Service has not yet 
                effectively or fully implemented a data matching 
                system), and
                    (C) any other revenue, administrative, or other 
                cost savings to the Government and to taxpayers.
            (3) Costs.--The costs considered in this study conducted 
        under paragraph (1) shall include--
                    (A) administrative and other costs of the Internal 
                Revenue Service,
                    (B) compliance costs to taxpayers, and
                    (C) compliance costs to any affected third parties, 
                such as persons required to file information returns.
    (b) Reports.--
            (1) Initial report.--
                    (A) In general.--Not later than 4 years after the 
                date of the enactment of this Act, the Secretary of the 
                Treasury shall submit to Congress a report on the 
                matters studied under subsection (a).
                    (B) Assessment with respect to data limitations.--
                The report under subparagraph (A) shall include--
                            (i) an assessment of the limitations of the 
                        Internal Revenue Service with respect to the 
                        collection of data used to assess the matters 
                        studied under subsection (a), and
                            (ii) recommendations regarding steps to 
                        overcome any such limitations.
            (2) Follow-up report.--
                    (A) In general.--Not later than 3 years after the 
                date on which the report under paragraph (1) is 
                submitted, the Secretary of the Treasury shall submit 
                to Congress a follow-up report on the matters studied 
                under subsection (a).
                    (B) Assessment with respect to implementation of 
                recommendations.--The report under subparagraph (A) 
                shall include an assessment on the implementation of 
                the recommendations included in the report submitted 
                under paragraph (1).

SEC. 703. REPORTS ON WORKER MISCLASSIFICATION.

    (a) In General.--The Secretary of the Treasury shall submit to 
Congress the following reports on worker misclassification:
            (1) A report each fiscal year on worker classification 
        which shall include the total number of examinations of 
        employers initiated because of suspected worker classification 
        issues, the total number of examinations that included 
        determinations on worker classification issues, the amount of 
        additional tax liabilities associated with worker 
        classification enforcement actions, the number of workers 
        reclassified as a result of these actions, the number of 
        requests for Determination of Worker Status (Form SS-8), and 
        technical guidance on how to understand the data provided in 
        the report.
            (2) A report each fiscal year in which new statistically 
        valid data is compiled and interpreted on worker 
        classification, prepared on the basis of information gathered 
        during an Employment Tax Study conducted by the National 
        Research Program (NRP) of the Internal Revenue Service. Such 
        report shall provide statistical estimates of the number of 
        employers misclassifying workers, the number of workers 
        misclassified, the industries involved, data interpretations 
        and conclusions, and a description of the impact of improper 
        worker classification on the employment tax gap.
    (b) Time for Submitting Reports.--The first reports required under 
subsection (a) shall be submitted not later than 3 years after the date 
of the enactment of this Act.
                                 <all>