[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 3156 Placed on Calendar Senate (PCS)]

<DOC>





                                                       Calendar No. 554
114th CONGRESS
  2d Session
                                S. 3156

                          [Report No. 114-298]

  To provide enhanced protections for taxpayers from fraud and other 
              illegal activities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 12, 2016

   Mr. Hatch, from the Committee on Finance, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
  To provide enhanced protections for taxpayers from fraud and other 
              illegal activities, 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 
Protection Act of 2016''.
    (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) Definitions.--In this Act:
            (1) Applicable congressional committees.--The term 
        ``applicable Congressional committees'' means the Committee on 
        Ways and Means of the House of Representatives and the 
        Committee on Finance of the Senate.
            (2) Comptroller general.--The term ``Comptroller General'' 
        means the Comptroller General of the United States.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
    (d) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; etc.
                 TITLE I--PROTECTION OF TAXPAYER RIGHTS

       Subtitle A--Reform of Assessment and Collection Procedures

Sec. 101. Report on IRS authority to compromise tax matters.
Sec. 102. Report on opportunity for hearing by the IRS Office of 
                            Appeals.
Sec. 103. Extending time limit for contesting IRS levy.
Sec. 104. Individuals held harmless on improper levy on retirement 
                            plans.
Sec. 105. Report on IRS audit criteria.
    Subtitle B--Assistance to Individual Taxpayers in Filing Returns

Sec. 111. Return preparation programs for low-income taxpayers.
Sec. 112. Limiting redisclosures and uses of consent-based disclosures 
                            of tax return information.
Sec. 113. Clarification of equitable relief from joint liability.
Sec. 114. Modification of user fee requirements for installment 
                            agreements.
Sec. 115. Reports on Future State and similar online initiatives.
Sec. 116. Notice from IRS regarding closure of Taxpayer Assistance 
                            Centers.
Sec. 117. Recovery of certain improperly withheld severance payments.
                 Subtitle C--Whistleblower Protections

Sec. 121. Reports concerning whistleblower awards.
Sec. 122. Whistleblower reforms.
Subtitle D--Reform of Laws Governing Internal Revenue Service Employees

Sec. 131. Electronic record retention.
Sec. 132. Sense of the Senate on revision of the Hatch Act.
Sec. 133. Prohibition on rehiring former IRS employees who were 
                            involuntarily separated for misconduct.
Sec. 134. Authority to remove or transfer senior IRS executives who 
                            fail in their performance or engage in 
                            serious misconduct.
Sec. 135. Limit participation of third-party contractors for sworn 
                            testimony taken pursuant to a summons from 
                            the IRS.
Sec. 136. Notification of unauthorized inspection or disclosure of 
                            returns and return information.
                    Subtitle E--Exempt Organizations

Sec. 141. Mandatory e-filing by exempt organizations.
Sec. 142. Repeal of substantiation exception for certain charitable 
                            contributions reported by the donee 
                            organization.
Sec. 143. Prohibit the use of IRS funds for political targeting.
Sec. 144. Notification to exempt organizations prior to revoking exempt 
                            status for failing to file information 
                            returns.
  TITLE II--PROTECTION OF TAXPAYERS FROM IDENTITY THEFT AND TAX FRAUD

Sec. 201. Single point of contact for identity theft victims.
Sec. 202. Protecting taxpayers from telephone scams.
Sec. 203. Information on identity theft and tax scams.
Sec. 204. Report on Federal employee wage and tax withholding reporting 
                            to State tax agencies.
Sec. 205. Notification of suspected identity theft.

                 TITLE I--PROTECTION OF TAXPAYER RIGHTS

       Subtitle A--Reform of Assessment and Collection Procedures

SEC. 101. REPORT ON IRS AUTHORITY TO COMPROMISE TAX MATTERS.

    Not later than 12 months after the date of the enactment of this 
Act, the Comptroller General shall submit a report to the applicable 
Congressional committees which evaluates--
            (1) how the Internal Revenue Service exercises its 
        authority to compromise tax matters under section 7122 of the 
        Internal Revenue Code of 1986, including any recommendations 
        for such legislative and administrative actions as the 
        Comptroller General determines appropriate, and
            (2) the role of the Office of the Chief Counsel for the 
        Internal Revenue Service in consideration of offers under such 
        section, including any recommendations regarding whether to 
        amend or eliminate the requirement under subsection (b) of such 
        section of a written opinion for cases in which the unpaid 
        amount of tax assessed exceeds $50,000.

SEC. 102. REPORT ON OPPORTUNITY FOR HEARING BY THE IRS OFFICE OF 
              APPEALS.

    Not later than 12 months after the date of the enactment of this 
Act, the Comptroller General shall submit a report to the applicable 
Congressional committees which evaluates--
            (1) the reasoning put forth by the Internal Revenue Service 
        for denying taxpayers an opportunity for administrative review 
        through the Internal Revenue Service Office of Appeals,
            (2) the process used by the Internal Revenue Service for 
        designating a case for litigation, including the methodology by 
        which the Internal Revenue Service determines--
                    (A) whether designating a case for litigation is in 
                the interest of sound tax administration, and
                    (B) whether there is a critical need for 
                enforcement activity with respect to legal issues 
                raised in a case,
            (3) the result of cases designated for litigation over the 
        preceding 10 years, including cases in which a settlement was 
        subsequently reached,
            (4) taxpayer access to the Internal Revenue Service Office 
        of Appeals, including--
                    (A) a comparison between States in which an Appeals 
                Officer or a Settlement Officer has a permanent 
                presence and States in which no such officer has a 
                permanent presence, and
                    (B) the effect on taxpayers in States in which an 
                Appeals Officer or a Settlement Officer does not have a 
                permanent presence, and
            (5) any relevant factors relating to resolution of cases by 
        the Internal Revenue Service Office of Appeals, including the 
        average amount of time for a taxpayer to initially meet with an 
        Appeals Officer or a Settlement Officer, the average amount of 
        time required to resolve a case, geographic and technological 
        constraints, and taxpayer satisfaction with the appeals process 
        of the Internal Revenue Service.

SEC. 103. EXTENDING TIME LIMIT FOR CONTESTING IRS LEVY.

    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and 
inserting ``2 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
is amended--
            (1) by striking ``9 months'' in paragraph (1) and inserting 
        ``2 years'', and
            (2) by striking ``9-month'' in paragraph (2) 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) or 6532(c), as 
        applicable, of the Internal Revenue Code of 1986 (as in effect 
        before the amendments made by this section) as of such date.

SEC. 104. INDIVIDUALS HELD HARMLESS ON IMPROPER LEVY ON RETIREMENT 
              PLANS.

    (a) In General.--Section 6343 is amended by adding at the end the 
following new subsection:
    ``(f) Individuals Held Harmless on Wrongful Levy, etc. on 
Retirement Plan.--
            ``(1) In general.--If the Secretary determines that an 
        individual's account or benefit under an eligible retirement 
        plan (as defined in section 402(c)(8)(B)) has been levied upon 
        in a case to which subsection (b) or (d)(2)(A) applies and 
        property or an amount of money is returned to the individual--
                    ``(A) the individual may contribute such property 
                or an amount equal to the sum of--
                            ``(i) the amount of money so returned by 
                        the Secretary, and
                            ``(ii) interest paid under subsection (c) 
                        on such amount of money,
                into such eligible retirement plan if such contribution 
                is permitted by the plan, or into an individual 
                retirement plan (other than an endowment contract) to 
                which a rollover contribution of a distribution from 
                such eligible retirement plan is permitted, but only if 
                such contribution is made not later than the due date 
                (not including extensions) for filing the return of tax 
                for the taxable year in which such property or amount 
                of money is returned, and
                    ``(B) the Secretary shall, at the time such 
                property or amount of money is returned, notify such 
                individual that a contribution described in 
                subparagraph (A) may be made.
            ``(2) Treatment as rollover.--The distribution on account 
        of the levy and any contribution under paragraph (1) with 
        respect to the return of such distribution shall be treated for 
        purposes of this title as if such distribution and contribution 
        were described in section 402(c), 402A(c)(3), 403(a)(4), 
        403(b)(8), 408(d)(3), 408A(d)(3), or 457(e)(16), whichever is 
        applicable; except that--
                    ``(A) the contribution shall be treated as having 
                been made for the taxable year in which the 
                distribution on account of the levy occurred, and the 
                interest paid under subsection (c) shall be treated as 
                earnings within the plan after the contribution and 
                shall not be included in gross income, and
                    ``(B) such contribution shall not be taken into 
                account under section 408(d)(3)(B).
            ``(3) Refund, etc., of income tax on levy.--
                    ``(A) In general.--If any amount is includible in 
                gross income for a taxable year by reason of a 
                distribution on account of a levy referred to in 
                paragraph (1) and any portion of such amount is treated 
                as a rollover contribution 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.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a rollover contribution under this subsection which 
                is made from an eligible retirement plan which is not a 
                Roth IRA or a designated Roth account (within the 
                meaning of section 402A) to a Roth IRA or a designated 
                Roth account under an eligible retirement plan.
            ``(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.
            ``(5) Treatment of inherited accounts.--For purposes of 
        paragraph (1)(A), section 408(d)(3)(C) shall be disregarded in 
        determining whether an individual retirement plan is a plan to 
        which a rollover contribution of a distribution from the plan 
        levied upon is permitted.''.
    (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 December 31, 2016.

SEC. 105. REPORT ON IRS AUDIT CRITERIA.

    Not later than 2 years after the date of the enactment of this Act, 
the Treasury Inspector General for Tax Administration shall submit a 
report to the applicable Congressional committees which contains the 
results of an audit of the criteria employed by the Internal Revenue 
Service for selecting tax returns for audit, assessment, criminal 
investigation, or any heightened scrutiny or review, including whether 
such criteria has been used to target taxpayers on the basis of 
political ideology, race, religion, or any other impermissible factor.

    Subtitle B--Assistance to Individual Taxpayers in Filing Returns

SEC. 111. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

    (a) In General.--Chapter 77 is amended by inserting after section 
7526 the following new section:

``SEC. 7526A. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

    ``(a) Volunteer Income Tax Assistance Matching Grant Program.--
            ``(1) Establishment of program.--The Secretary, through the 
        Internal Revenue Service, shall establish a Community Volunteer 
        Income Tax Assistance Matching Grant Program (hereinafter in 
        this section referred to as the `VITA grant program'). Except 
        as otherwise provided in this section, the VITA grant program 
        shall be administered in a manner which is substantially 
        similar to the Community Volunteer Income Tax Assistance 
        matching grants demonstration program established under title I 
        of division D of the Consolidated Appropriations Act, 2008.
            ``(2) Matching grants.--
                    ``(A) In general.--The Secretary may, subject to 
                the availability of appropriated funds, make available 
                grants under the VITA grant program to provide matching 
                funds for the development, expansion, or continuation 
                of qualified return preparation programs assisting low-
                income taxpayers and members of underserved 
                populations.
                    ``(B) Application.--In order to be eligible for a 
                grant under this section, a qualified return 
                preparation program shall submit an application to the 
                Secretary at such time, in such manner, and containing 
                such information as the Secretary may reasonably 
                require.
                    ``(C) Priority.--In awarding grants under this 
                section, the Secretary shall give priority to 
                applications--
                            ``(i) demonstrating assistance to low-
                        income taxpayers, with emphasis on outreach to 
                        and services for such taxpayers,
                            ``(ii) demonstrating taxpayer outreach and 
                        educational activities relating to eligibility 
                        and availability of income supports available 
                        through the Internal Revenue Code of 1986, such 
                        as the earned income tax credit, and
                            ``(iii) demonstrating specific outreach and 
                        focus on one or more underserved populations.
                    ``(D) Duration of grants.--Upon application of a 
                qualified return preparation program, the Secretary is 
                authorized to award a multi-year grant not to exceed 3 
                years.
            ``(3) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $30,000,000 per fiscal year (exclusive of costs of 
        administering the program) to carry out the purposes of this 
        section.
    ``(b) Use of Funds.--
            ``(1) In general.--Qualified return preparation programs 
        receiving a grant under this section may use the grant for--
                    ``(A) ordinary and necessary costs associated with 
                program operation in accordance with Cost Principles 
                Circulars as set forth by the Office of Management and 
                Budget, including--
                            ``(i) for wages or salaries of persons 
                        coordinating the activities of the program,
                            ``(ii) to develop training materials, 
                        conduct training, and perform quality reviews 
                        of the returns for which assistance has been 
                        provided under the program, and
                            ``(iii) for equipment purchases and 
                        vehicle-related expenses associated with remote 
                        or rural tax preparation services,
                    ``(B) outreach and educational activities described 
                in subsection (a)(2)(C)(ii), and
                    ``(C) services related to financial education and 
                capability, asset development, and the establishment of 
                savings accounts in connection with tax return 
                preparation.
            ``(2) Use of grants for overhead expenses prohibited.--No 
        grant made under this section may be used for overhead expenses 
        that are not directly related to any qualified return 
        preparation program.
    ``(c) Promotion and Referral.--
            ``(1) Promotion.--The Secretary shall promote the benefits 
        of, and encourage the use of, tax preparation through qualified 
        return preparation programs through the use of mass 
        communications, referrals, and other means.
            ``(2) Internal revenue service referrals.--The Secretary 
        may refer taxpayers to qualified return preparation programs 
        receiving funding under this section.
            ``(3) VITA grantee referral.--Qualified return preparation 
        programs receiving a grant under this section are encouraged to 
        refer, as appropriate, to local or regional Low Income Taxpayer 
        Clinics individuals who are eligible to receive services at 
        such clinics.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified return preparation program.--The term 
        `qualified return preparation program' means any program--
                    ``(A) which provides assistance to individuals, not 
                less than 90 percent of whom are low-income taxpayers, 
                in preparing and filing Federal income tax returns,
                    ``(B) which is administered by a qualified entity,
                    ``(C) in which all of the volunteers who assist in 
                the preparation of Federal income tax returns meet the 
                training requirements prescribed by the Secretary, and
                    ``(D) which uses a quality review process which 
                reviews 100 percent of all returns.
            ``(2) Qualified entity.--
                    ``(A) In general.--The term `qualified entity' 
                means any entity which--
                            ``(i) is an eligible organization (as 
                        described in subparagraph (B)),
                            ``(ii) is in compliance with Federal tax 
                        filing and payment requirements,
                            ``(iii) is not debarred or suspended from 
                        Federal contracts, grants, or cooperative 
                        agreements, and
                            ``(iv) agrees to provide documentation to 
                        substantiate any matching funds provided under 
                        the VITA grant program.
                    ``(B) Eligible organization.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `eligible organization' means--
                                    ``(I) an institution of higher 
                                education which is described in section 
                                102 (other than subsection (a)(1)(C) 
                                thereof) of the Higher Education Act of 
                                1965 (20 U.S.C. 1088), as in effect on 
                                the date of the enactment of this 
                                section, and which has not been 
                                disqualified from participating in a 
                                program under title IV of such Act,
                                    ``(II) an organization described in 
                                section 501(c) of the Internal Revenue 
                                Code of 1986 and exempt from tax under 
                                section 501(a) of such Code,
                                    ``(III) a local government agency, 
                                including--
                                            ``(aa) a county or 
                                        municipal government agency, 
                                        and
                                            ``(bb) an Indian tribe, as 
                                        defined in section 4(13) of the 
                                        Native American Housing 
                                        Assistance and Self-
                                        Determination Act of 1996 (25 
                                        U.S.C. 4103(13)), including any 
                                        tribally designated housing 
                                        entity (as defined in section 
                                        4(22) of such Act (25 U.S.C. 
                                        4103(22))), tribal subsidiary, 
                                        subdivision, or other wholly 
                                        owned tribal entity, or
                                    ``(IV) a local, State, regional, or 
                                national coalition (with one lead 
                                organization which meets the 
                                eligibility requirements of subclause 
                                (I), (II), or (III) acting as the 
                                applicant organization).
                            ``(ii) Alternative eligible organization.--
                        If no eligible organization described in clause 
                        (i) is available to assist the targeted 
                        population or community, the term `eligible 
                        organization' shall include--
                                    ``(I) a State government agency, 
                                and
                                    ``(II) a Cooperative Extension 
                                Service office.
            ``(3) Low-income taxpayers.--The term `low-income taxpayer' 
        means a taxpayer who has income for the taxable year which does 
        not exceed an amount equal to the completed phaseout amount 
        under section 32(b) for a married couple filing a joint return 
        with 3 or more qualifying children, as determined in a revenue 
        procedure or other published guidance.
            ``(4) Underserved population.--The term `underserved 
        population' includes populations of persons with disabilities, 
        persons with limited English proficiency, Native Americans, 
        individuals living in rural areas, members of the Armed Forces 
        and their spouses, and the elderly.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by inserting after the item relating to section 7526 the 
following new item:

``7526A. Return preparation programs for low-income taxpayers.''.

SEC. 112. LIMITING REDISCLOSURES AND USES OF CONSENT-BASED DISCLOSURES 
              OF TAX RETURN INFORMATION.

    (a) In General.--Subsection (c) of section 6103 is amended by 
inserting at the end the following: ``Persons who receive return 
information under this subsection shall not use the information for any 
purpose other than the express purpose for which consent was granted 
and shall not disclose return information to any other person without 
the express permission of, or request by, the taxpayer.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures made after the date of the enactment of this Act.

SEC. 113. CLARIFICATION OF EQUITABLE RELIEF FROM JOINT LIABILITY.

    (a) In General.--Section 6015 is amended--
            (1) in subsection (e), by adding at the end the following 
        new paragraph:
            ``(7) Standard and scope of review.--Any review of a 
        determination made under this section shall be reviewed de novo 
        by the Tax Court and shall be based upon--
                    ``(A) the administrative record established at the 
                time of the determination, and
                    ``(B) any additional newly discovered or previously 
                unavailable evidence.'', and
            (2) by amending subsection (f) to read as follows:
    ``(f) Equitable Relief.--
            ``(1) In general.--Under procedures prescribed by the 
        Secretary, if--
                    ``(A) taking into account all the facts and 
                circumstances, it is inequitable to hold the individual 
                liable for any unpaid tax or any deficiency (or any 
                portion of either), and
                    ``(B) relief is not available to such individual 
                under subsection (b) or (c),
        the Secretary may relieve such individual of such liability.
            ``(2) Limitation.--A request for equitable relief under 
        this subsection may be made with respect to any portion of any 
        liability that--
                    ``(A) has not been paid, provided that such request 
                is made before the expiration of the applicable period 
                of limitation under section 6502, or
                    ``(B) has been paid, provided that such request is 
                made during the period in which the individual could 
                submit a timely claim for refund or credit of such 
                payment.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to petitions or requests filed or pending on or after the date of 
the enactment of this Act.

SEC. 114. MODIFICATION OF USER FEE REQUIREMENTS FOR INSTALLMENT 
              AGREEMENTS.

    (a) In General.--Section 6159 is amended by redesignating 
subsection (f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
    ``(f) Installment Agreement Fees.--
            ``(1) Limitation on fee amount.--The amount of any fee 
        imposed on an installment agreement under this section may not 
        exceed the amount of such fee as in effect on the date of the 
        enactment of this subsection.
            ``(2) Waiver or reimbursement.--In the case of any taxpayer 
        with an adjusted gross income, as determined for the most 
        recent year for which such information is available, that does 
        not exceed 250 percent of the applicable poverty level (as 
        determined by the Secretary)--
                    ``(A) if the taxpayer has agreed to make payments 
                under the installment agreement by electronic payment 
                through a debit instrument, no fee shall be imposed on 
                an installment agreement under this section, and
                    ``(B) if the taxpayer is unable to make payments 
                under the installment agreement by electronic payment 
                through a debit instrument, the Secretary shall, upon 
                completion of the installment agreement, pay the 
                taxpayer an amount equal to any such fees imposed.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to agreements entered into on or after the date which is 60 days 
after the date of the enactment of this Act.

SEC. 115. REPORTS ON FUTURE STATE AND SIMILAR ONLINE INITIATIVES.

    (a) Internal Revenue Service.--Not later than 12 months after the 
date of the enactment of this Act, and annually thereafter, the 
Secretary shall submit a report to the applicable Congressional 
committees which provides information on the status of the efforts by 
the Internal Revenue Service to expand online taxpayer services, 
including a detailed assessment of any service which is proposed to be 
shifted to a self-service option.
    (b) Comptroller General.--Not later than 12 months after the date 
of the enactment of this Act, the Comptroller General shall submit a 
report to the applicable Congressional committees which--
            (1) evaluates the level of phone and in-person services 
        provided by the Internal Revenue Service to taxpayers residing 
        in any rural city, town, or unincorporated area which has a 
        population of not more than 50,000 inhabitants, and
            (2) provides recommendations on measures the Internal 
        Revenue Service could include in the development of its 
        expanded online taxpayer services to protect the interests of 
        taxpayers described in paragraph (1).

SEC. 116. NOTICE FROM IRS REGARDING CLOSURE OF TAXPAYER ASSISTANCE 
              CENTERS.

    (a) In General.--Not later than 90 days before the date that a 
proposed closure of a Taxpayer Assistance Center would take effect, the 
Secretary shall submit a report to the applicable Congressional 
committees which provides the reasons for the proposed closure and a 
description of the taxpayer assistance services which will be provided 
by the Internal Revenue Service after the proposed closure takes effect 
to taxpayers in any rural city, town, or unincorporated area which has 
a population of not more than 50,000 inhabitants and would be affected 
by the proposed closure.
    (b) Treatment Under Congressional Review Act.--For purposes of 
applying chapter 8 of title 5, United States Code, any closure of a 
Taxpayer Assistance Center described in subsection (a) shall be treated 
as a major rule.

SEC. 117. RECOVERY OF CERTAIN IMPROPERLY WITHHELD SEVERANCE PAYMENTS.

    (a) Restoration of Amounts Improperly Withheld for Tax Purposes 
From Severance Payments to Veterans With Combat-related Injuries.--
            (1) In general.--Not later than one year after the date of 
        the enactment of this Act, the Secretary of Defense shall--
                    (A) identify--
                            (i) the severance payments computed under 
                        section 1212 of title 10, United States Code, 
                        and paid by the Secretary of Defense after 
                        January 17, 1991--
                                    (I) which were excluded from gross 
                                income pursuant to section 104(a)(4) of 
                                the Internal Revenue Code of 1986, and
                                    (II) from which the Secretary of 
                                Defense withheld amounts for Federal 
                                income tax purposes, and
                            (ii) the individuals to whom such severance 
                        payments were made, and
                    (B) with respect to each person identified under 
                subparagraph (A)(ii), provide--
                            (i) notice of--
                                    (I) the amount of severance 
                                payments described in subparagraph 
                                (A)(i), and
                                    (II) such other information 
                                determined to be necessary by the 
                                Secretary to carry out the purposes of 
                                this section, and
                            (ii) instructions for filing amended tax 
                        returns to recover improperly withheld amounts.
            (2) Extension of limitation on time for credit or refund.--
                    (A) Period for filing claim.--If a claim for credit 
                or refund under section 6511(a) of the Internal Revenue 
                Code of 1986 relates to a specified overpayment, the 3-
                year period of limitation prescribed by such subsection 
                shall not expire before the date which is 1 year after 
                the date the notice described in paragraph (1)(B) is 
                provided. The allowable amount of credit or refund of a 
                specified overpayment shall be determined without 
                regard to section 6511(b)(2).
                    (B) Specified overpayment.--For purposes of 
                subparagraph (A), the term ``specified overpayment'' 
                means an overpayment, but only to the extent 
                attributable to amounts withheld as described in 
                paragraph (1)(A)(i).
    (b) Requirement That Secretary of Defense Ensure Amounts Are Not 
Withheld for Tax Purposes From Severance Payments Not Considered Gross 
Income.--The Secretary of Defense shall take such actions as may be 
necessary to ensure that amounts are not withheld for tax purposes from 
severance payments made by the Secretary of Defense to individuals when 
such payments are not considered gross income pursuant to section 
104(a)(4) of the Internal Revenue Code of 1986.
    (c) Report to Congress.--
            (1) In general.--After completing the identification 
        required by subsection (a)(1) and not later than 15 months 
        after the date of the enactment of this Act, the Secretary of 
        Defense shall submit to the appropriate committees of Congress 
        a report on the actions taken by the Secretary of Defense to 
        carry out this section.
            (2) Contents.--The report submitted under paragraph (1) 
        shall include the following:
                    (A) The number of individuals identified under 
                subsection (a)(1)(A)(ii).
                    (B) The aggregate amounts that the Secretary of 
                Defense withheld which are described in subsection 
                (a)(1)(A)(i)(II).
                    (C) A description of the actions the Secretary of 
                Defense plans to take to carry out subsection (b).
            (3) Appropriate committees of congress defined.--In this 
        section, the term ``appropriate committees of Congress'' 
        means--
                    (A) the Committee on Armed Services, the Committee 
                on Veterans' Affairs, and the Committee on Finance of 
                the Senate, and
                    (B) the Committee on Armed Services, the Committee 
                on Veterans' Affairs, and the Committee on Ways and 
                Means of the House of Representatives.

                 Subtitle C--Whistleblower Protections

SEC. 121. REPORTS CONCERNING WHISTLEBLOWER AWARDS.

    (a) Comptroller General.--Not later than 12 months after the date 
of the enactment of this Act, the Comptroller General shall submit a 
report to the applicable Congressional committees regarding whether, 
and to what extent, the Secretary has paid any whistleblower awards for 
information relating to--
            (1) violations under the Internal Revenue Code of 1986, or
            (2) violations of requirements mandated by subchapter II of 
        chapter 53 of title 31, United States Code (commonly known as 
        the ``Bank Secrecy Act'') relating to the Report of Foreign 
        Bank and Financial Accounts.
    (b) TIGTA.--Not later than 12 months after the date of the 
enactment of this Act, the Treasury Inspector General for Tax 
Administration shall submit a report to the applicable Congressional 
committees which evaluates whether, and to what extent, the Secretary 
has asserted penalties for violations of requirements described in 
subsection (a)(2) in lieu of applicable penalties under the Internal 
Revenue Code of 1986.

SEC. 122. WHISTLEBLOWER REFORMS.

    (a) Modifications to Disclosure Rules for Whistleblowers.--
            (1) In general.--Section 6103(k) is amended by adding at 
        the end the following new paragraph:
            ``(13) Disclosure to whistleblowers.--
                    ``(A) In general.--The Secretary may disclose, to 
                any individual providing information relating to any 
                purpose described in paragraph (1) or (2) of section 
                7623(a), return information related to the 
                investigation of any taxpayer with respect to whom the 
                individual has provided such information, but only to 
                the extent that such disclosure is necessary in 
                obtaining information, which is not otherwise 
                reasonably available, with respect to the correct 
                determination of tax liability for tax, or the amount 
                to be collected with respect to the enforcement of any 
                other provision of this title.
                    ``(B) Updates on whistleblower investigations.--The 
                Secretary shall disclose to an individual providing 
                information relating to any purpose described in 
                paragraph (1) or (2) of section 7623(a) the following:
                            ``(i) Not later than 30 days after a case 
                        for which the individual has provided 
                        information has been referred for an audit or 
                        examination, a notice with respect to such 
                        referral.
                            ``(ii) Not later than 30 days after a 
                        taxpayer with respect to whom the individual 
                        has provided information has made a payment of 
                        tax with respect to tax liability to which such 
                        information relates, a notice with respect to 
                        such payment.
                            ``(iii) Subject to such requirements and 
                        conditions as are prescribed by the Secretary, 
                        upon a written request by such individual--
                                    ``(I) information on the status and 
                                stage of any investigation or action 
                                related to such information, and
                                    ``(II) in the case of a 
                                determination of the amount of any 
                                award under section 7623(b), the 
                                reasons for such determination.
                Clause (iii) shall not apply to any information if the 
                Secretary determines that disclosure of such 
                information would seriously impair Federal tax 
                administration. Information described in clauses (i), 
                (ii), and (iii) may be disclosed to a designee of the 
                individual providing such information in accordance 
                with guidance provided by the Secretary.''.
            (2) Conforming amendments.--
                    (A) Confidentiality of information.--Section 
                6103(a)(3) is amended by striking ``subsection 
                (k)(10)'' and inserting ``paragraph (10) or (13) of 
                subsection (k)''.
                    (B) Penalty for unauthorized disclosure.--Section 
                7213(a)(2) is amended by striking ``(k)(10)'' and 
                inserting ``(k)(10) or (13)''.
                    (C) Coordination with authority to disclose for 
                investigative purposes.--Section 6103(k)(6) is amended 
                by adding at the end the following new sentence: ``This 
                paragraph shall not apply to any disclosure to an 
                individual providing information relating to any 
                purpose described in paragraph (1) or (2) of section 
                7623(a) which is made under paragraph (13)(A).''.
    (b) Protection Against Retaliation.--Section 7623 is amended by 
adding at the end the following new subsection:
    ``(c) Civil Action to Protect Against Retaliation Cases.--
            ``(1) Anti-retaliation whistleblower protection for 
        employees.--No employer or any officer, employee, contractor, 
        subcontractor, or agent of such employer may discharge, demote, 
        suspend, threaten, harass, or in any other manner discriminate 
        against an employee in the terms and conditions of employment 
        (including through an act in the ordinary course of such 
        employee's duties) in reprisal for any lawful act done by the 
        employee--
                    ``(A) to provide information, cause information to 
                be provided, or otherwise assist in an investigation 
                regarding underpayment of tax or any conduct which the 
                employee reasonably believes constitutes a violation of 
                the internal revenue laws or any provision of Federal 
                law relating to tax fraud, when the information or 
                assistance is provided to the Internal Revenue Service, 
                the Secretary of Treasury, the Treasury Inspector 
                General for Tax Administration, the Comptroller General 
                of the United States, the Department of Justice, the 
                United States Congress, a person with supervisory 
                authority over the employee, or any other person 
                working for the employer who has the authority to 
                investigate, discover, or terminate misconduct, or
                    ``(B) to testify, participate in, or otherwise 
                assist in any administrative or judicial action taken 
                by the Internal Revenue Service relating to an alleged 
                underpayment of tax or any violation of the internal 
                revenue laws or any provision of Federal law relating 
                to tax fraud.
            ``(2) Enforcement action.--
                    ``(A) In general.--A person who alleges discharge 
                or other reprisal by any person in violation of 
                paragraph (1) may seek relief under paragraph (3) by--
                            ``(i) filing a complaint with the Secretary 
                        of Labor, or
                            ``(ii) if the Secretary of Labor has not 
                        issued a final decision within 180 days of the 
                        filing of the complaint and there is no showing 
                        that such delay is due to the bad faith of the 
                        claimant, bringing an action at law or equity 
                        for de novo review in the appropriate district 
                        court of the United States, which shall have 
                        jurisdiction over such an action without regard 
                        to the amount in controversy.
                    ``(B) Procedure.--
                            ``(i) In general.--An action under 
                        subparagraph (A)(ii) shall be governed under 
                        the rules and procedures set forth in section 
                        42121(b) of title 49, United States Code.
                            ``(ii) Exception.--Notification made under 
                        section 42121(b)(1) of title 49, United States 
                        Code, shall be made to the person named in the 
                        complaint and to the employer.
                            ``(iii) Burdens of proof.--An action 
                        brought under subparagraph (A)(ii) shall be 
                        governed by the legal burdens of proof set 
                        forth in section 42121(b) of title 49, United 
                        States Code, except that in applying such 
                        section--
                                    ``(I) `behavior described in 
                                paragraph (1)' shall be substituted for 
                                `behavior described in paragraphs (1) 
                                through (4) of subsection (a)' each 
                                place it appears in paragraph (2)(B) 
                                thereof, and
                                    ``(II) `a violation of paragraph 
                                (1)' shall be substituted for `a 
                                violation of subsection (a)' each place 
                                it appears.
                            ``(iv) Statute of limitations.--A complaint 
                        under subparagraph (A)(i) shall be filed not 
                        later than 180 days after the date on which the 
                        violation occurs.
                            ``(v) Jury trial.--A party to an action 
                        brought under subparagraph (A)(ii) shall be 
                        entitled to trial by jury.
            ``(3) Remedies.--
                    ``(A) In general.--An employee prevailing in any 
                action under paragraph (2)(A) shall be entitled to all 
                relief necessary to make the employee whole.
                    ``(B) Compensatory damages.--Relief for any action 
                under subparagraph (A) shall include--
                            ``(i) reinstatement with the same seniority 
                        status that the employee would have had, but 
                        for the reprisal,
                            ``(ii) the sum of 200 percent of the amount 
                        of back pay and 100 percent of all lost 
                        benefits, with interest, and
                            ``(iii) compensation for any special 
                        damages sustained as a result of the reprisal, 
                        including litigation costs, expert witness 
                        fees, and reasonable attorney fees.
            ``(4) Rights retained by employee.--Nothing in this section 
        shall be deemed to diminish the rights, privileges, or remedies 
        of any employee under any Federal or State law, or under any 
        collective bargaining agreement.
            ``(5) Nonenforceability of certain provisions waiving 
        rights and remedies or requiring arbitration of disputes.--
                    ``(A) Waiver of rights and remedies.--The rights 
                and remedies provided for in this subsection may not be 
                waived by any agreement, policy form, or condition of 
                employment, including by a predispute arbitration 
                agreement.
                    ``(B) Predispute arbitration agreements.--No 
                predispute arbitration agreement shall be valid or 
                enforceable, if the agreement requires arbitration of a 
                dispute arising under this subsection.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by subsection (a) 
        shall apply to disclosures made after the date of the enactment 
        of this Act.
            (2) Civil protection.--The amendment made by subsection (b) 
        shall take effect on the date of the enactment of this Act.

Subtitle D--Reform of Laws Governing Internal Revenue Service Employees

SEC. 131. ELECTRONIC RECORD RETENTION.

    (a) Retention of Records.--
            (1) In general.--Email records of the Internal Revenue 
        Service shall be retained in an appropriate electronic system 
        that supports records management and litigation requirements, 
        including the capability to identify, retrieve, and retain the 
        records, in accordance with the requirements described in 
        paragraph (2).
            (2) Requirements.--
                    (A) Prior to certification.--The Commissioner of 
                Internal Revenue and the Chief Counsel for the Internal 
                Revenue Service shall retain all email records 
                generated on or after the date of the enactment of this 
                Act and before the date on which the Treasury Inspector 
                General for Tax Administration makes the certification 
                under subsection (c)(1).
                    (B) Principal officers and specified employees.--
                Not later than December 31, 2016, the Commissioner of 
                Internal Revenue and the Chief Counsel for the Internal 
                Revenue Service shall maintain email records of all 
                principal officers and specified employees of the 
                Internal Revenue Service for a period of 15 years 
                beginning on the date such record was generated.
    (b) Transmission of Records to the National Archives.--Not later 
than the last day of the 15-year period described in subsection 
(a)(2)(B), the Commissioner of Internal Revenue and the Chief Counsel 
for the Internal Revenue Service shall transfer the email records of 
principal officers and specified employees of the Internal Revenue 
Service to the Archivist of the United States.
    (c) Compliance.--
            (1) Certification.--On the date that the Treasury Inspector 
        General for Tax Administration determines that the Internal 
        Revenue Service has a program in place that complies with the 
        requirements of subsections (a)(2)(B) and (b), the Treasury 
        Inspector General for Tax Administration shall certify to the 
        applicable Congressional committees that the Internal Revenue 
        Service is in compliance with such requirements.
            (2) Reports.--
                    (A) Interim report.--Not later than September 30, 
                2016, the Treasury Inspector General for Tax 
                Administration shall submit a report to the applicable 
                Congressional committees on the steps being taken by 
                the Commissioner of Internal Revenue and the Chief 
                Counsel for the Internal Revenue Service to comply with 
                the requirements of subsections (a)(2)(B) and (b).
                    (B) Final report.--Not later than April 1, 2017, 
                the Treasury Inspector General for Tax Administration 
                shall submit a report to the applicable Congressional 
                committees describing whether the Internal Revenue 
                Service is in compliance with the requirements of 
                subsections (a)(2)(B) and (b).
    (d) Definitions.--For purposes of this section--
            (1) Principal officer.--The term ``principal officer'' 
        means, with respect to the Internal Revenue Service--
                    (A) any employee whose position is listed under the 
                Internal Revenue Service in the most recent version of 
                the United States Government Manual published by the 
                Office of the Federal Register,
                    (B) any employee who is a senior staff member 
                reporting directly to the Commissioner of Internal 
                Revenue or the Chief Counsel for the Internal Revenue 
                Service, and
                    (C) any associate counsel, deputy counsel, or 
                division head in the Office of the Chief Counsel for 
                the Internal Revenue Service.
            (2) Specified employee.--The term ``specified employee'' 
        means, with respect to the Internal Revenue Service, any 
        employee who--
                    (A) holds a Senior Executive Service position (as 
                defined in section 3132 of title 5, United States Code) 
                in the Internal Revenue Service or the Office of Chief 
                Counsel for the Internal Revenue Service, and
                    (B) is not a principal officer of the Internal 
                Revenue Service.

SEC. 132. SENSE OF THE SENATE ON REVISION OF THE HATCH ACT.

    It is the sense of the Senate that clause (i) of section 
7323(b)(2)(B) of title 5, United States Code, should be amended to 
include any employee of the Department of the Treasury who is primarily 
responsible for matters relating to organizations which are exempt from 
taxation pursuant to section 501(c) or 527 of the Internal Revenue Code 
of 1986.

SEC. 133. PROHIBITION ON REHIRING FORMER IRS EMPLOYEES WHO WERE 
              INVOLUNTARILY SEPARATED FOR MISCONDUCT.

    (a) In General.--Section 7804 is amended by adding at the end the 
following new subsection:
    ``(d) Prohibition on Rehiring Employees Involuntarily Separated.--
The Commissioner may not employ any individual previously employed by 
the Commissioner who was removed for misconduct under this subchapter 
or chapter 43 or chapter 75 of title 5, United States Code, or whose 
employment was terminated under section 1203 of the Internal Revenue 
Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note).''.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by subsection (a) shall apply with respect to 
        any employee removed from employment before, on, or after the 
        date of the enactment of this Act.
            (2) Exception.--The amendment made by subsection (a) shall 
        not apply to any employee who is employed by the Internal 
        Revenue Service as of the date of the enactment of this Act 
        with respect to any removal for misconduct which occurred 
        before such date.

SEC. 134. AUTHORITY TO REMOVE OR TRANSFER SENIOR IRS EXECUTIVES WHO 
              FAIL IN THEIR PERFORMANCE OR ENGAGE IN SERIOUS 
              MISCONDUCT.

    (a) In General.--Section 1203 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 subsection:
    ``(f) Removal of Senior Executives Based on Performance or 
Misconduct.--
            ``(1) Removal or transfer.--
                    ``(A) In general.--The Commissioner of Internal 
                Revenue (referred to in this subsection as the 
                `Commissioner') may remove an individual employed in a 
                senior executive position at the Internal Revenue 
                Service from the senior executive position if the 
                Commissioner determines the performance or misconduct 
                of the individual warrants such removal. If the 
                Commissioner so removes such an individual, the 
                Commissioner may--
                            ``(i) remove the individual from the civil 
                        service (as defined in section 2101 of title 5, 
                        United States Code); or
                            ``(ii) in the case of an individual 
                        described in subparagraph (B), transfer the 
                        individual from the senior executive position 
                        to a General Schedule position at any grade of 
                        the General Schedule for which the individual 
                        is qualified and that the Commissioner 
                        determines is appropriate.
                    ``(B) Individuals eligible for transfer.--An 
                individual described in this subparagraph is an 
                individual who--
                            ``(i) previously occupied a permanent 
                        position within the competitive service (as 
                        that term is defined in section 2102 of title 
                        5, United States Code);
                            ``(ii) previously occupied a permanent 
                        position within the excepted service (as that 
                        term is defined in section 2103 of title 5, 
                        United States Code); or
                            ``(iii) prior to employment in a senior 
                        executive position at the Internal Revenue 
                        Service, did not occupy any position within the 
                        Federal Government.
            ``(2) Pay of transferred individuals.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, including the requirements of section 
                3594 of title 5, United States Code, any individual 
                transferred to a General Schedule position under 
                paragraph (1)(A)(ii) shall, beginning on the date of 
                such transfer, receive the annual rate of pay 
                applicable to such position.
                    ``(B) Paid leave during appeal.--An individual so 
                transferred may not be placed on administrative leave 
                or any other category of paid leave during the period 
                during which an appeal (if any) under this section is 
                ongoing, and may only receive pay if the individual 
                reports for duty. If an individual so transferred does 
                not report for duty, such individual shall not receive 
                pay or other benefits pursuant to paragraph (5)(E).
            ``(3) Notice to congress.--Not later than 30 days after 
        removing or transferring an individual from a senior executive 
        position under paragraph (1), the Commissioner shall submit 
        written notice of such removal or transfer and the reason for 
        such removal or transfer to--
                    ``(A) the Committee on Finance of the Senate;
                    ``(B) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;
                    ``(C) the Committee on Ways and Means of the House 
                of Representatives; and
                    ``(D) the Committee on Oversight and Government 
                Reform of the House of Representatives.
            ``(4) Procedure.--
                    ``(A) In general.--The procedures under section 
                7543(b) of title 5, United States Code, shall not apply 
                to a removal or transfer under this section.
                    ``(B) Appeal to merit system protection board.--
                            ``(i) In general.--Subject to clause (ii) 
                        and paragraph (5), any removal or transfer 
                        under paragraph (1) may be appealed to the 
                        Merit Systems Protection Board under section 
                        7701 of title 5, United States Code.
                            ``(ii) Deadline for appeal.--An appeal 
                        under clause (i) of a removal or transfer may 
                        only be made if such appeal is made not later 
                        than 7 days after the date of such removal or 
                        transfer.
            ``(5) Expedited review by administrative law judge.--
                    ``(A) In general.--Upon receipt of an appeal under 
                paragraph (4)(B)(i), the Merit Systems Protection Board 
                shall refer such appeal to an administrative law judge 
                pursuant to section 7701(b)(1) of title 5, United 
                States Code. The administrative law judge shall 
                expedite any such appeal under such section and, in any 
                such case, shall issue a decision not later than 21 
                days after the date of the appeal.
                    ``(B) Finality of decision.--Notwithstanding any 
                other provision of law, including section 7703 of title 
                5, United States Code, the decision of an 
                administrative law judge under subparagraph (A) shall 
                be final and shall not be subject to any further 
                appeal.
                    ``(C) Failure to reach decision.--In any case in 
                which the administrative law judge cannot issue a 
                decision in accordance with the 21-day requirement 
                under subparagraph (A), the removal or transfer is 
                final. In such a case, the Merit Systems Protection 
                Board shall, within 14 days after the date that such 
                removal or transfer is final, submit to Congress and 
                the Committees described in paragraph (3) a report that 
                explains the reasons why a decision was not issued in 
                accordance with such requirement.
                    ``(D) Prohibition on stay of removal or transfer.--
                The Merit Systems Protection Board or administrative 
                law judge may not stay any removal or transfer under 
                this subsection.
                    ``(E) Period of review.--During the period 
                beginning on the date on which an individual appeals a 
                removal from the civil service under paragraph (4) and 
                ending on the date that the administrative law judge 
                issues a final decision on such appeal, such individual 
                may not receive any pay, awards, bonuses, incentives, 
                allowances, differentials, student loan repayments, 
                special payments, or benefits.
                    ``(F) Relevant information to be provided.--To the 
                maximum extent practicable, the Commissioner shall 
                provide to the Merit Systems Protection Board, and to 
                any administrative law judge to whom an appeal under 
                this section is referred, such information and 
                assistance as may be necessary to ensure an appeal 
                under this paragraph is expedited.
            ``(6) Relation to other provisions of law.--
                    ``(A) In general.--The authority provided by this 
                subsection is in addition to, and shall not be 
                construed to limit or diminish, the authority provided 
                by--
                            ``(i) subsections (a) and (c); and
                            ``(ii) section 3592 or subchapter V of 
                        chapter 75 of title 5, United States Code.
                    ``(B) Removal from senior executive service.--
                Section 3592(b)(1) of title 5, United States Code, does 
                not apply to an action to remove or transfer an 
                individual under this subsection.
            ``(7) Definitions.--For purposes of this subsection:
                    ``(A) Individual.--The term `individual' means a 
                career appointee (as that term is defined in section 
                3132(a)(4) of title 5, United States Code).
                    ``(B) Misconduct.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `misconduct' includes neglect of duty, 
                        malfeasance, or failure to accept a directed 
                        reassignment or to accompany a position in a 
                        transfer of function.
                            ``(ii) Exception.--The term `misconduct' 
                        shall not include any act or omission described 
                        in subsection (b).
                    ``(C) Senior executive position.--The term `senior 
                executive position' means a Senior Executive Service 
                position (as such term is defined in section 3132(a)(2) 
                of title 5, United States Code).''.
    (b) Establishment of Expedited Review Process.--
            (1) In general.--Not later than 60 days after the date of 
        the enactment of this Act, the Merit Systems Protection Board 
        shall establish and put into effect a process to conduct 
        expedited reviews in accordance with subsection (f) of section 
        1203 of the Internal Revenue Service Restructuring and Reform 
        Act of 1998, as added by this Act.
            (2) Inapplicability of certain regulations.--Section 
        1201.22 of title 5, Code of Federal Regulations, as in effect 
        on the day before the date of the enactment of this Act, shall 
        not apply to expedited reviews carried out under such section 
        1203(f).
            (3) Waiver.--The Merit Systems Protection Board may waive 
        any other regulation in order to provide for the expedited 
        review required under such section 1203(f).
            (4) Review by merit systems protection board.--Not later 
        than 30 days after the date of the enactment of this Act, the 
        Merit Systems Protection Board shall submit to the committees 
        described in paragraph (3) of such section 1203(f) a report on 
        the actions the Board plans to take to conduct expedited 
        reviews under such section. Such report shall include a 
        description of the resources the Board determines will be 
        necessary to conduct such reviews and a description of whether 
        any resources will be necessary to conduct such reviews that 
        were not available to the Board on the day before the date of 
        the enactment of this Act.
    (c) Temporary Exemption From Certain Limitation on Initiation of 
Removal From Senior Executive Service.--During the 120-day period 
beginning on the date of the enactment of this Act, an action to remove 
an individual from the Senior Executive Service at the Internal Revenue 
Service pursuant to section 7543 of title 5, United States Code, may be 
initiated, notwithstanding section 3592(b) of such title, or any other 
provision of law.
    (d) Construction.--Nothing in this section or section 1203(f) of 
the Internal Revenue Service Restructuring and Reform Act of 1998, as 
added by this Act, shall be construed to apply to an appeal of a 
removal, transfer, or other personnel action that was pending before 
the date of the enactment of this Act.

SEC. 135. LIMIT PARTICIPATION OF THIRD-PARTY CONTRACTORS FOR SWORN 
              TESTIMONY TAKEN PURSUANT TO A SUMMONS FROM THE IRS.

    (a) In General.--Section 7602 is amended by adding at the end the 
following new subsection:
    ``(f) Limitation on Access of Persons Other Than IRS Officers and 
Employees.--The authority granted under this section may not be 
delegated, directly or indirectly, to any person authorized to receive 
returns and return information under section 6103(n).''.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by this section shall take effect on the date of 
        the enactment of this Act.
            (2) Application to contracts in effect.--The amendment made 
        by this section shall apply to any contract in effect on the 
        date of the enactment of this Act for an activity described in 
        section 6103(n) of the Internal Revenue Code of 1986, pursuant 
        to temporary Treasury Regulation section 301.7602-1T published 
        in Internal Revenue Bulletin 2014-28 or any similar or 
        successor regulation.

SEC. 136. NOTIFICATION OF UNAUTHORIZED INSPECTION OR DISCLOSURE OF 
              RETURNS AND RETURN INFORMATION.

    (a) In General.--Subsection (e) of section 7431 is amended by 
adding at the end the following new sentences: ``The Secretary shall 
also notify such taxpayer if the Internal Revenue Service or a Federal 
or State agency (upon notice to the Secretary by such Federal or State 
agency) proposes an administrative determination as to disciplinary or 
adverse action against an employee arising from the employee's 
unauthorized inspection or disclosure of the taxpayer's return or 
return information. The notice described in this subsection shall 
include the date of the unauthorized inspection or disclosure and the 
rights of the taxpayer under such administrative determination.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to determinations proposed after the date which is 180 days after the 
date of the enactment of this Act.

                    Subtitle E--Exempt Organizations

SEC. 141. MANDATORY E-FILING BY EXEMPT ORGANIZATIONS.

    (a) In General.--Section 6033 is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:
    ``(n) Mandatory Electronic Filing.--Any organization required to 
file a return under this section shall file such return in electronic 
form.''.
    (b) Conforming Amendment.--Paragraph (7) of section 527(j) is 
amended by striking ``if the organization has'' and all that follows 
through ``such calendar year''.
    (c) Inspection of Electronically Filed Annual Returns.--Subsection 
(b) of section 6104 is amended by adding at the end the following: 
``Any annual return required to be filed electronically under section 
527(j)(7) or 6033(n) shall be made available by the Secretary to the 
public as soon as practicable in a machine readable format that does 
not permit alteration or manipulation of such return.''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after the date of the enactment of this Act.
            (2) Transitional relief.--
                    (A) Small organizations.--
                            (i) In general.--In the case of any small 
                        organization or any other organization for 
                        which the Secretary determines the application 
                        of the amendments made by subsections (a) and 
                        (b) would cause undue burden, the Secretary may 
                        waive application of such amendments to either 
                        or both of the organization's first 2 taxable 
                        years beginning after the date of the enactment 
                        of this Act.
                            (ii) Small organization.--For purposes of 
                        clause (i), the term ``small organization'' 
                        means any organization--
                                    (I) the gross receipts of which for 
                                the taxable year are less than 
                                $200,000, and
                                    (II) the aggregate gross assets of 
                                which at the end of the taxable year 
                                are less than $500,000.
                    (B) Organizations filing form 990-T.--In the case 
                of any organization described in section 511(a)(2) of 
                the Internal Revenue Code of 1986 which is subject to 
                the tax imposed by section 511(a)(1) of such Code on 
                its unrelated business taxable income, or any 
                organization required to file a return under section 
                6033 of such Code and include information under 
                subsection (e) thereof, the Secretary may waive 
                application of the amendments made by subsections (a) 
                and (b) to either or both of the organization's first 2 
                taxable years beginning after the date of the enactment 
                of this Act.

SEC. 142. REPEAL OF SUBSTANTIATION EXCEPTION FOR CERTAIN CHARITABLE 
              CONTRIBUTIONS REPORTED BY THE DONEE ORGANIZATION.

    (a) In General.--Section 170(f)(8) is amended--
            (1) by striking subparagraph (D), and
            (2) by redesignating subparagraph (E) as subparagraph (D).
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 143. PROHIBIT THE USE OF IRS FUNDS FOR POLITICAL TARGETING.

    None of the funds made available under any Act may be used by the 
Internal Revenue Service to target citizens of the United States for 
exercising any right guaranteed under the First Amendment to the 
Constitution of the United States.

SEC. 144. NOTIFICATION TO EXEMPT ORGANIZATIONS PRIOR TO REVOKING EXEMPT 
              STATUS FOR FAILING TO FILE INFORMATION RETURNS.

    (a) In General.--Section 6033(j) is amended by redesignating 
paragraphs (2) and (3) as paragraphs (3) and (4), respectively, and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) Requirement of notice.--
                    ``(A) In general.--Not later than 270 days after 
                the date an organization described in paragraph (1) 
                fails to file the annual return or notice referenced in 
                paragraph (1) for 2 consecutive years, the Secretary 
                shall notify the organization--
                            ``(i) that the Internal Revenue Service has 
                        no record of such a return or notice from such 
                        organization for 2 consecutive years, and
                            ``(ii) about the penalty that will occur 
                        under this subsection if the organization fails 
                        to file such a return or notice by the date of 
                        the next filing deadline.
                The notification under the preceding sentence shall 
                include information about how to comply with the filing 
                requirements under subsection (a)(1) and (i).''.
    (b) Reinstatement Without Application.--Paragraph (3) of section 
6033(j), as redesignated under subsection (a), is amended--
            (1) by striking ``Any organization'' and inserting the 
        following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any organization'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Retroactive reinstatement without application 
                if actual notice not provided.--If an organization 
                described in paragraph (1)--
                            ``(i) demonstrates to the satisfaction of 
                        the Secretary that the organization did not 
                        receive the notice required under paragraph 
                        (2), and
                            ``(ii) files an annual return or notice 
                        referenced in paragraph (1) for the current 
                        year,
                then the Secretary may reinstate the organization's 
                exempt status effective from the date of the revocation 
                under paragraph (1) without the need for an 
                application.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to notices and returns required to be filed after December 31, 
2015.

  TITLE II--PROTECTION OF TAXPAYERS FROM IDENTITY THEFT AND TAX FRAUD

SEC. 201. SINGLE POINT OF CONTACT FOR IDENTITY THEFT VICTIMS.

    (a) In General.--The Secretary shall establish and implement 
procedures to ensure that any taxpayer whose return has been delayed or 
otherwise adversely affected due to identity theft has a single point 
of contact at the Internal Revenue Service throughout the processing of 
the taxpayer's case. The single point of contact shall track the 
taxpayer's case to completion and coordinate with other specialized 
units to resolve case issues as quickly as possible.
    (b) Single Point of Contact.--
            (1) In general.--For purposes of subsection (a), the single 
        point of contact may consist of a team or subset of specially 
        trained employees who--
                    (A) have the ability to work across functions to 
                resolve the issues involved in the taxpayer's case, and
                    (B) shall be accountable for handling the case 
                until its resolution.
            (2) Team or subset.--The employees included within the team 
        or subset described in paragraph (1) may change as required to 
        meet the needs of the Internal Revenue Service, provided that 
        procedures have been established to--
                    (A) ensure continuity of records and case history, 
                and
                    (B) notify the taxpayer when appropriate.

SEC. 202. PROTECTING TAXPAYERS FROM TELEPHONE SCAMS.

    Not later than 12 months after the date of the enactment of this 
Act, the Treasury Inspector General for Tax Administration, in 
consultation with the Chairman of the Federal Communications Commission 
and the Chairman of the Federal Trade Commission, shall submit a report 
to the applicable Congressional committees which identifies potential 
technological solutions to help protect taxpayers from telephone calls 
from individuals who are falsely claiming to be calling from or on 
behalf of the Internal Revenue Service, including identifying 
communications providers that offer services designed to assist 
taxpayers in identifying or preventing such calls.

SEC. 203. INFORMATION ON IDENTITY THEFT AND TAX SCAMS.

    The Secretary shall provide to any taxpayer who has been placed on 
hold during a telephone call to any Internal Revenue Service help line 
the following information:
            (1) Information about common tax scams.
            (2) Information on where and how to report tax scams.
            (3) Additional advice on how taxpayers can protect 
        themselves from identity theft and tax scams.

SEC. 204. REPORT ON FEDERAL EMPLOYEE WAGE AND TAX WITHHOLDING REPORTING 
              TO STATE TAX AGENCIES.

    Not later than 12 months after the date of the enactment of this 
Act, the Comptroller General shall submit a report to the applicable 
Congressional committees which provides an analysis of the process and 
timeline by which the following entities provide Federal employee wage 
and tax withholding information to State tax agencies:
            (1) The National Finance Center of the Department of 
        Agriculture.
            (2) The Defense Finance and Accounting Service of the 
        Department of Defense.
            (3) The National Business Center of the Department of the 
        Interior.
            (4) The National Payroll Branch of the General Services 
        Administration.

SEC. 205. NOTIFICATION OF SUSPECTED IDENTITY THEFT.

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

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

    ``(a) In General.--If the Secretary determines that there has been 
or may have been an unauthorized use of the identity of any individual, 
the Secretary shall, without jeopardizing an investigation relating to 
tax administration--
            ``(1) as soon as practicable, notify the individual of such 
        determination and provide--
                    ``(A) instructions on how to file a report with law 
                enforcement regarding the unauthorized use of the 
                identity of the individual,
                    ``(B) the identification of any forms necessary for 
                the individual to complete and submit to law 
                enforcement to permit access to personal information of 
                the individual during the investigation,
                    ``(C) information regarding actions the individual 
                may take in order to protect the individual from harm 
                relating to such unauthorized use, and
                    ``(D) an offer of identity protection measures to 
                be provided to the individual by the Internal Revenue 
                Service, such as the use of an identity protection 
                personal identification number (as defined in section 
                6109(e)), and
            ``(2) at the time the information described in paragraph 
        (1) is provided (or, if not available at such time, as soon as 
        practicable thereafter), issue additional notifications to such 
        individual (or such individual's designee) regarding--
                    ``(A) whether an investigation has been initiated 
                in regards to such unauthorized use,
                    ``(B) whether the investigation substantiated an 
                unauthorized use of the identity of the individual, and
                    ``(C) whether--
                            ``(i) any action has been taken against a 
                        person relating to such unauthorized use, or
                            ``(ii) any referral has been made for 
                        criminal prosecution of such person and, to the 
                        extent such information is available, whether 
                        such person has been criminally charged by 
                        indictment or information.
    ``(b) Employment-related Identity Theft.--
            ``(1) In general.--For purposes of this section, the 
        unauthorized use of the identity of an individual includes the 
        unauthorized use of the identity of the individual to obtain 
        employment.
            ``(2) Determination of employment-related identity theft.--
        For purposes of this section, in making a determination as to 
        whether there has been or may have been an unauthorized use of 
        the identity of an individual to obtain employment, the 
        Secretary shall review any information--
                    ``(A) obtained from a statement described in 
                section 6051 or an information return relating to 
                compensation for services rendered other than as an 
                employee, or
                    ``(B) provided to the Internal Revenue Service by 
                the Social Security Administration regarding any 
                statement described in section 6051,
        which indicates that the social security account number 
        provided on such statement or information return does not 
        correspond with the name provided on such statement or 
        information return or the name on the tax return reporting the 
        income which is included on such statement or information 
        return.''.
    (b) Additional Measures.--
            (1) Examination of both paper and electronic statements and 
        returns.--The Secretary shall examine the statements, 
        information returns, and tax returns described in section 
        7529(b)(2) for any evidence of employment-related identity 
        theft, regardless of whether such statements or returns are 
        submitted electronically or on paper.
            (2) Improvement of effective return processing program with 
        social security administration.--Section 232 of the Social 
        Security Act (42 U.S.C. 432) is amended by inserting after the 
        third sentence the following: ``For purposes of carrying out 
        the return processing program described in the preceding 
        sentence, the Commissioner of Social Security shall request, 
        not less than annually, such information described in section 
        7529(b)(2) of the Internal Revenue Code of 1986 as may be 
        necessary to ensure the accuracy of the records maintained by 
        the Commissioner of Social Security related to the amounts of 
        wages paid to, and the amounts of self-employment income 
        derived by, individuals.''.
            (3) Underreporting of income.--The Secretary shall 
        establish procedures to ensure that income reported in 
        connection with the unauthorized use of a taxpayer's identity 
        is not taken into account in determining any penalty for 
        underreporting of income by the victim of identity theft.
    (c) 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.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to determinations made after the date of the enactment of this 
Act.
                                                       Calendar No. 554

114th CONGRESS

  2d Session

                                S. 3156

                          [Report No. 114-298]

_______________________________________________________________________

                                 A BILL

  To provide enhanced protections for taxpayers from fraud and other 
              illegal activities, and for other purposes.

_______________________________________________________________________

                             July 12, 2016

                 Read twice and placed on the calendar