[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2215 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2215

   To protect taxpayers from improper audits by the Internal Revenue 
                                Service.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 7, 2014

  Mr. Cornyn introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To protect taxpayers from improper audits by the Internal Revenue 
                                Service.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Eliminating 
Improper and Abusive IRS Audits Act of 2014''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Civil damages allowed for reckless or intentional disregard of 
                            internal revenue laws.
Sec. 3. Modifications relating to certain offenses by officers and 
                            employees in connection with revenue laws.
Sec. 4. Modifications relating to civil damages for unauthorized 
                            inspection or disclosure of returns and 
                            return information.
Sec. 5. Extension of time for contesting IRS levy.
Sec. 6. Increase in monetary penalties for certain unauthorized 
                            disclosures of information.
Sec. 7. Ban on raising new issues on appeal.
Sec. 8. Limitation on enforcement of liens against principal 
                            residences.
Sec. 9. Additional provisions relating to mandatory termination for 
                            misconduct.
Sec. 10. Extension of declaratory judgment procedures to social welfare 
                            organizations.
Sec. 11. Review by the Treasury Inspector General for Tax 
                            Administration.

SEC. 2. CIVIL DAMAGES ALLOWED FOR RECKLESS OR INTENTIONAL DISREGARD OF 
              INTERNAL REVENUE LAWS.

    (a) Increase in Amount of Damages.--Section 7433(b) of the Internal 
Revenue Code of 1986 is amended by striking ``$1,000,000 ($100,000, in 
the case of negligence)'' and inserting ``$3,000,000 ($300,000, in the 
case of negligence)''.
    (b) Extension of Time To Bring Action.--Section 7433(d)(3) of the 
Internal Revenue Code of 1986 is amended by striking ``2 years'' and 
inserting ``5 years''.
    (c) Effective Date.--The amendments made by this section shall 
apply to actions of employees of the Internal Revenue Service after the 
date of the enactment of this Act.

SEC. 3. MODIFICATIONS RELATING TO CERTAIN OFFENSES BY OFFICERS AND 
              EMPLOYEES IN CONNECTION WITH REVENUE LAWS.

    (a) Increase in Penalty.--Section 7214 of the Internal Revenue Code 
of 1986 is amended--
            (1) by striking ``$10,000'' in subsection (a) and inserting 
        ``$25,000'', and
            (2) by striking ``$5,000'' in subsection (b) and inserting 
        ``$10,000''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4. MODIFICATIONS RELATING TO CIVIL DAMAGES FOR UNAUTHORIZED 
              INSPECTION OR DISCLOSURE OF RETURNS AND RETURN 
              INFORMATION.

    (a) Increase in Amount of Damages.--Subparagraph (A) of section 
7431(c)(1) of the Internal Revenue Code of 1986 is amended by striking 
``$1,000'' and inserting ``$10,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to inspections and disclosure occurring on and after the date of the 
enactment of this Act.

SEC. 5. EXTENSION OF TIME FOR CONTESTING IRS LEVY.

    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 of the Internal Revenue Code of 1986 is 
amended by striking ``9 months'' and inserting ``3 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
of the Internal Revenue Code of 1986 is amended--
            (1) in paragraph (1) by striking ``9 months'' and inserting 
        ``3 years'', and
            (2) in paragraph (2) by striking ``9-month'' and inserting 
        ``3-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. 6. INCREASE IN MONETARY PENALTIES FOR CERTAIN UNAUTHORIZED 
              DISCLOSURES OF INFORMATION.

    (a) In General.--Paragraphs (1), (2), (3), and (4) of section 
7213(a) of the Internal Revenue Code of 1986 are each amended by 
striking ``$5,000'' and inserting ``$10,000''.
    (b) Effective Date.--The amendments made by this section shall 
apply to disclosures made after the date of the enactment of this Act.

SEC. 7. BAN ON RAISING NEW ISSUES ON APPEAL.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7529. PROHIBITION ON INTERNAL REVENUE SERVICE RAISING NEW ISSUES 
              IN AN INTERNAL APPEAL.

    ``(a) In General.--In reviewing an appeal of any determination 
initially made by the Internal Revenue Service, the Internal Revenue 
Service Office of Appeals may not consider or decide any issue that is 
not within the scope of the initial determination.
    ``(b) Certain Issues Deemed Outside of Scope of Determination.--For 
purposes of subsection (a), the following matters shall be considered 
to be not within the scope of a determination:
            ``(1) Any issue that was not raised in a notice of 
        deficiency or an examiner's report which is the subject of the 
        appeal.
            ``(2) Any deficiency in tax which was not included in the 
        initial determination.
            ``(3) Any theory or justification for a tax deficiency 
        which was not considered in the initial determination.
    ``(c) No Inference With Respect to Issues Raised by Taxpayers.--
Nothing in this section shall be construed to provide any limitation in 
addition to any limitations in effect on the date of the enactment of 
this section on the right of a taxpayer to raise an issue, theory, or 
justification on an appeal from a determination initially made by the 
Internal Revenue Service that was not within the scope of the initial 
determination.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
such Code is amended by adding at the end the following new item:

``Sec. 7529. Prohibition on Internal Revenue Service raising new issues 
                            in an internal appeal.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to matters filed or pending with the Internal Revenue Service 
Office of Appeals on or after the date of the enactment of this Act.

SEC. 8. LIMITATION ON ENFORCEMENT OF LIENS AGAINST PRINCIPAL 
              RESIDENCES.

    (a) In General.--Section 7403(a) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``In any case'' and inserting the 
        following:
            ``(1) In general.--In any case'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Limitation with respect to principal residence.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any property used as the principal residence of the 
                taxpayer (within the meaning of section 121) unless the 
                Secretary of the Treasury makes a written determination 
                that--
                            ``(i) all other property of the taxpayer, 
                        if sold, is insufficient to pay the tax or 
                        discharge the liability, and
                            ``(ii) such action will not create an 
                        economic hardship for the taxpayer.
                    ``(B) Delegation.--For purposes of this paragraph, 
                the Secretary of the Treasury may not delegate any 
                responsibilities under subparagraph (A) to any person 
                other than--
                            ``(i) the Commissioner of Internal Revenue, 
                        or
                            ``(ii) a district director or assistant 
                        district director of the Internal Revenue 
                        Service.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to actions filed after the date of the enactment of this Act.

SEC. 9. ADDITIONAL PROVISIONS RELATING TO MANDATORY TERMINATION FOR 
              MISCONDUCT.

    (a) Termination of Unemployment for Inappropriate Review of Tax-
Exempt Status.--Section 1203(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended 
by striking ``and'' at the end of paragraph (9), by striking the period 
at the end of paragraph (10) and inserting ``; and'', and by adding at 
the end the following new paragraph:
            ``(11) in the case of any review of an application for tax-
        exempt status by an organization described in section 501(c) of 
        the Internal Revenue Code of 1986, developing or using any 
        methodology that applies disproportionate scrutiny to any 
        applicant based on the ideology expressed in the name or 
        purpose of the organization.''.
    (b) Mandatory Unpaid Administrative Leave for Misconduct.--
Paragraph (1) of Section 1203(c) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended 
by adding at the end the following new sentence: ``Notwithstanding the 
preceding sentence, if the Commissioner of Internal Revenue takes a 
personnel action other than termination for an act or omission 
described in subsection (b), the Commissioner shall place the employee 
on unpaid administrative leave for a period of not less than 30 
days.''.
    (c) Limitation on Alternative Punishment.--Paragraph (1) of section 
1203(c) of the Internal Revenue Service Restructuring and Reform Act of 
1998 (26 U.S.C. 7804 note) is amended by striking ``The Commissioner'' 
and inserting ``Except in the case of an act or omission described in 
subsection (b)(3)(A), the Commissioner''.

SEC. 10. EXTENSION OF DECLARATORY JUDGMENT PROCEDURES TO SOCIAL WELFARE 
              ORGANIZATIONS.

    (a) In General.--Section 7428(a)(1) of the Internal Revenue Code of 
1986 is amended by striking ``or'' at the end of subparagraph (C) and 
by adding at the end the following new subparagraph:
                    ``(E) with respect to the initial classification or 
                continuing classification of an organization described 
                in section 501(c)(4) which is exempt from tax under 
                section 501(a), or''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to pleading filed after the date of the enactment of 
this Act.

SEC. 11. REVIEW BY THE TREASURY INSPECTOR GENERAL FOR TAX 
              ADMINISTRATION.

    (a) Review.--Subsection (k)(1) of section 8D of the Inspector 
General Act of 1978 (5 U.S.C. App.) is amended--
            (1) in subparagraph (C), by striking ``and'' at the end;
            (2) by redesignating subparagraph (D) as subparagraph (E);
            (3) by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) shall--
                            ``(i) review any criteria employed by the 
                        Internal Revenue Service to select tax returns 
                        (including applications for recognition of tax-
                        exempt status) for examination or audit, 
                        assessment or collection of deficiencies, 
                        criminal investigation or referral, refunds for 
                        amounts paid, or any heightened scrutiny or 
                        review in order to determine whether the 
                        criteria discriminates against taxpayers on the 
                        basis of race, religion, or political ideology; 
                        and
                            ``(ii) consult with the Internal Revenue 
                        Service on recommended amendments to such 
                        criteria in order to eliminate any 
                        discrimination identified pursuant to the 
                        review described in clause (i); and''; and
            (4) in subparagraph (E), as so redesignated, by striking 
        ``and (C)'' and inserting ``(C), and (D)''.
    (b) Semiannual Report.--Subsection (g) of such section is amended 
by adding at the end the following new paragraph:
            ``(3) Any semiannual report made by the Treasury Inspector 
        General for Tax Administration that is required pursuant to 
        section 5(a) shall include--
                    ``(A) a statement affirming that the Treasury 
                Inspector General for Tax Administration has reviewed 
                the criteria described in subsection (k)(1)(D) and 
                consulted with the Internal Revenue Service regarding 
                such criteria; and
                    ``(B) a description and explanation of any such 
                criteria that was identified as discriminatory by the 
                Treasury Inspector General for Tax Administration.''.
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