[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 5141 Introduced in Senate (IS)]
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119th CONGRESS
2d Session
S. 5141
To amend the Internal Revenue Code of 1986 to improve the notice and
review procedure with respect to multi-year bans on claiming credits.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 28, 2026
Mr. Bennet introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to improve the notice and
review procedure with respect to multi-year bans on claiming credits.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. NOTICE AND REVIEW WITH RESPECT TO MULTI-YEAR BANS ON
CLAIMING CREDITS.
(a) Notice.--
(1) In general.--Section 6212(a) of the Internal Revenue
Code of 1986 is amended--
(A) by striking ``If the'' and inserting the
following:
``(1) Notice.--If the'',
(B) by striking ``Such notice shall include a
notice'' and inserting the following:
``(2) Matters included.--Such notice shall include--
``(A) a notice'',
(C) by striking the period at the end of the second
sentence and inserting ``, and'', and
(D) by adding at the end the following new
subparagraph:
``(B) in any case in which such deficiency for a
taxable year is attributable to the denial of a credit
under section 24, 25A, or 32, a statement--
``(i) identifying the credit or credits
which are denied and providing the grounds for
each such denial,
``(ii) informing the taxpayer that, unless
the denial is overturned on appeal, the
taxpayer will not be able to claim such credit
for any subsequent taxable year unless the
taxpayer provides information required by the
Secretary to demonstrate eligibility for the
credit, and
``(iii) in any case in which the Secretary
has made a determination to impose a
disallowance period under section 24(g)(1),
25A(b)(4)(A), or 32(k)(1), providing the
grounds for such disallowance period (and the
length of the disallowance period unless
overturned on appeal).''.
(2) Effective date.--The amendments made by this subsection
shall apply to notices mailed 36 months after the date of
enactment of this Act.
(b) Authority of the Tax Court.--
(1) In general.--Section 6214 of the Internal Revenue Code
of 1986 is amended by redesignating subsection (e) as
subsection (f) and by inserting after subsection (d) the
following new subsection:
``(e) Jurisdiction With Respect to Multi-Year Bans With Respect to
Certain Credits.--
``(1) In general.--The Tax Court shall have jurisdiction--
``(A) to redetermine the imposition of any
disallowance period with respect to any credit under
section 24, 25A, or 32 for the taxable year in which
such disallowance period was imposed if the deficiency
relates to such taxable year, and
``(B) to determine whether any such disallowance
period should be imposed if claim therefor is asserted
by the Secretary in the answer or an amended answer
filed in accordance with the rules of the Tax Court.
``(2) Disallowance period.--For purposes of this
subsection, the term `disallowance period' has the meaning
given such term under section 6751(d).''.
(2) Effective date.--The amendments made by this subsection
apply to petitions filed on or after the date of enactment of
this Act.
(3) Transition rule for review of previously imposed
disallowance periods.--
(A) In general.--In the case of any deficiency
which is attributable to an entry on the return
claiming a credit under section 24, 25A, or 32 of the
Internal Revenue Code of 1986 for a taxable year in a
disallowance period described in subparagraph (B), the
Tax Court shall have jurisdiction to redetermine
whether the disallowance period was properly imposed.
(B) Disallowance period described.--A disallowance
period is described in this subparagraph if the notice
of the deficiency under section 6212 of such Code for
the taxable year with respect to which the
determination to impose the disallowance period was
made--
(i) did not include the grounds for such
disallowance period, and
(ii) was mailed before the date that is 36
months after the date of the enactment of this
Act.
(C) Disallowance period.--For purposes of this
paragraph, the term ``disallowance period'' has the
meaning given such term under section 6751(d) of the
Internal Revenue Code of 1986 (as added by this Act).
(D) Refunds.--Notwithstanding section 6512(b)(1) of
the Internal Revenue Code of 1986, in the case of a
petition with respect to a disallowance period
described in subparagraph (B), the Tax Court shall have
jurisdiction to determine the amount of an overpayment
for any taxable year in the disallowance period, and
such amount shall, notwithstanding section 6511, when
the decision of the Tax Court has become final, be
credited or refunded to the taxpayer. If a notice of
appeal in respect of the decision of the Tax Court is
filed under section 7483 of such Code, the Secretary of
the Treasury (or the Secretary's delegate) is
authorized to refund or credit the overpayment
determined by the Tax Court to the extent the
overpayment is not contested on appeal.
(c) Burden of Production.--
(1) In general.--Section 7491(c) of the Internal Revenue
Code of 1986 is amended--
(A) by striking ``Notwithstanding'' and inserting
the following:
``(1) In general.--Notwithstanding''.
(B) by striking ``with respect to the liability''
and inserting ``with respect to--
``(A) the liability'',
(C) by striking the period after ``title'' and
inserting ``, and'',
(D) by adding at the end the following new
paragraph:
``(A) the application of any disallowance period
(as defined in section 6751(d)) to any individual.'',
and
(E) by adding at the end the following new
paragraph:
``(2) Standard of proof for certain disallowance periods.--
In the case of any court proceeding with respect to any
disallowance period described in section 24(g)(1)(B)(i),
25A(b)(4)(A)(ii)(I), or 32(k)(1)(B)(i), the standard of proof
shall be the same standard as required in a proceeding under
section 7454(a).''.
(2) Effective date.--The amendments made by this subsection
shall apply to court proceedings beginning after the date that
is 36 months after the date of the enactment of this Act in
connection with disallowance periods (as defined in section
6751(d) of the Internal Revenue Code of 1986, as added by this
Act) determined after such date.
(d) Modification of Disallowance Period.--
(1) Child tax credit.--Section 24(g)(1) of the Internal
Revenue Code of 1986 is amended--
(A) in subparagraph (B), by striking ``for which
there was a final determination that the taxpayer's
claim of credit under this section was'' each place it
appears in clauses (i) and (ii) and inserting ``for
which a notice of deficiency has been sent under
section 6212(a) which notifies the taxpayer that the
taxpayer's claim of credit under this section was
denied, or a determination that has become final under
section 7481 has been made by the Tax Court to deny
such claim,'', and
(B) by adding at the end the following new
subparagraph:
``(C) Allowance of previously denied credits after
tax court consideration.--Notwithstanding subparagraphs
(A) and (B), a taxable year shall not be treated as a
taxable year in the disallowance period if the Tax
Court determines that the disallowance period was not
properly imposed for such year pursuant to section
6214(e).''.
(2) American opportunity tax credit.--Section 25A(b)(4)(A)
of the Internal Revenue Code of 1986 is amended--
(A) in clause (ii), by striking ``for which there
was a final determination that the taxpayer's claim of
the American Opportunity Credit under this section
was'' each place it appears in subclauses (I) and (II)
and inserting ``for which a notice of deficiency has
been sent under section 6212(a) which notifies the
taxpayer that the taxpayer's claim of credit under this
section was denied, or a determination that has become
final under section 7481 has been made by the Tax Court
to deny such claim,'', and
(B) by adding at the end the following new clause:
``(iii) Allowance of previously denied
credits after tax court consideration.--
Notwithstanding clauses (i) and (ii), a taxable
year shall not be treated as a taxable year in
the disallowance period if the Tax Court
determines that the disallowance period was not
properly imposed for such year pursuant to
section 6214(e).''.
(3) Earned income tax credit.--Section 32(k)(1) of the
Internal Revenue Code of 1986 is amended--
(A) in subparagraph (B), by striking ``for which
there was a final determination that the taxpayer's
claim of credit under this section was'' each place it
appears in clauses (i) and (ii) and inserting ``for
which a notice of deficiency has been sent under
section 6212(a) which notifies the taxpayer that the
taxpayer's claim of credit under this section was
denied, or a determination that has become final under
section 7481 has been made by the Tax Court to deny
such claim,'', and
(B) by adding at the end the following new
subparagraph:
``(C) Allowance of previously denied credits after
tax court consideration.--Notwithstanding subparagraphs
(A) and (B), a taxable year shall not be treated as a
taxable year in the disallowance period if the Tax
Court determines that the disallowance period was not
properly imposed for such year pursuant to section
6214(e).''.
(4) Suspension of running of limitations period filing of a
claim for credit or refund.--Section 6511(d) of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(9) Special rules relating to disallowance periods.--The
running of the periods described in subsections (a) and (b)(2)
with respect to any claim for a credit allowed under section
24, 25A, or 32 for any taxable year in a disallowance period
(as defined in section 6751(d)) shall be suspended during any
period in which the imposition of such disallowance period is
pending before the Tax Court.''.
(5) Effective date.--
(A) In general.--The amendments made by paragraphs
(1), (2), and (3) shall apply to--
(i) taxable years beginning after the date
that is 36 months after the date of the
enactment of this Act, and
(ii) disallowance periods (as defined in
section 6751(d) of the Internal Revenue Code of
1986, as added by this Act) in taxable years
beginning on or before such date if the notice
of deficiency for the taxable year with respect
to which the determination to impose such
disallowance period was made was sent after
such date.
(B) Suspension of running of limitations period.--
The amendment made by paragraph (4) shall apply to
petitions filed after the date of the enactment of this
Act.
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