[Congressional Record Volume 142, Number 48 (Tuesday, April 16, 1996)]
[House]
[Pages H3399-H3412]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1215
                       TAXPAYER BILL OF RIGHTS 2

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I move to suspend the rules 
and pass the bill (H.R. 2337) to amend the Internal Revenue Code of 
1986 to provide for increased taxpayer protections, as amended.
  The Clerk read as follows:

                               H.R. 2337

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Bill of Rights 2''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.

                       TITLE I--TAXPAYER ADVOCATE

Sec. 101. Establishment of position of Taxpayer Advocate within 
              Internal Revenue Service.

[[Page H3400]]

Sec. 102. Expansion of authority to issue Taxpayer Assistance Orders.

      TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

Sec. 201. Notification of reasons for termination of installment 
              agreements.
Sec. 202. Administrative review of termination of installment 
              agreement.

             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after 
              notice and demand.
Sec. 304. Abatement of penalty for failure to make required deposits of 
              payroll taxes in certain cases.

                        TITLE IV--JOINT RETURNS

Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full 
              payment of tax.
Sec. 403. Disclosure of collection activities.

                     TITLE V--COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
Sec. 503. Offers-in-compromise.

                     TITLE VI--INFORMATION RETURNS

Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of 
              information returns.

             TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

Sec. 701. United States must establish that its position in proceeding 
              was substantially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment 
              proceedings.

TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

Sec. 801. Increase in limit on recovery of civil damages for 
              unauthorized collection actions.
Sec. 802. Court discretion to reduce award for litigation costs for 
              failure to exhaust administrative remedies.

TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                  TAX

Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person 
              liable for penalty for failure to collect and pay over 
              tax.
Sec. 903. Right of contribution where more than 1 person liable for 
              penalty for failure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt 
              from penalty for failure to collect and pay over tax.

         TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.

 TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                              REGULATIONS

Sec. 1101. Relief from retroactive application of Treasury Department 
              regulations.

                  TITLE XII--MISCELLANEOUS PROVISIONS

Sec. 1201. Phone number of person providing payee statements required 
              to be shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent 
              accounts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
Sec. 1207. Disclosure of returns and return information to designee of 
              taxpayer.
Sec. 1208. Study of netting of interest on overpayments and 
              liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-
              timely-filing rule.
Sec. 1211. Reports on misconduct of IRS employees.

                      TITLE XIII--REVENUE OFFSETS

Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

Sec. 1301. Application of failure-to-pay penalty to substitute returns.

     Subtitle B--Excise Taxes on Amounts of Private Excess Benefits

Sec. 1311. Excise taxes for failure by certain charitable organizations 
              to meet certain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to 
              file complete and timely annual returns.
                       TITLE I--TAXPAYER ADVOCATE

     SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER ADVOCATE 
                   WITHIN INTERNAL REVENUE SERVICE.

       (a) General Rule.--Section 7802 (relating to Commissioner 
     of Internal Revenue; Assistant Commissioner (Employee Plans 
     and Exempt Organizations)) is amended by adding at the end 
     the following new subsection:
       ``(d) Office of Taxpayer Advocate.--
       ``(1) In general.--There is established in the Internal 
     Revenue Service an office to be known as the `Office of the 
     Taxpayer Advocate'. Such office shall be under the 
     supervision and direction of an official to be known as the 
     `Taxpayer Advocate' who shall be appointed by and report 
     directly to the Commissioner of Internal Revenue. The 
     Taxpayer Advocate shall be entitled to compensation at the 
     same rate as the highest level official reporting directly to 
     the Deputy Commissioner of the Internal Revenue Service.
       ``(2) Functions of office.--
       ``(A) In general.--It shall be the function of the Office 
     of Taxpayer Advocate to--
       ``(i) assist taxpayers in resolving problems with the 
     Internal Revenue Service,
       ``(ii) identify areas in which taxpayers have problems in 
     dealings with the Internal Revenue Service,
       ``(iii) to the extent possible, propose changes in the 
     administrative practices of the Internal Revenue Service to 
     mitigate problems identified under clause (ii), and
       ``(iv) identify potential legislative changes which may be 
     appropriate to mitigate such problems.
       ``(B) Annual reports.--
       ``(i) Objectives.--Not later than June 30 of each calendar 
     year after 1995, the Taxpayer Advocate shall report to the 
     Committee on Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate on the objectives 
     of the Taxpayer Advocate for the fiscal year beginning in 
     such calendar year. Any such report shall contain full and 
     substantive analysis, in addition to statistical information.
       ``(ii) Activities.--Not later than December 31 of each 
     calendar year after 1995, the Taxpayer Advocate shall report 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the activities of the Taxpayer Advocate during the fiscal 
     year ending during such calendar year. Any such report shall 
     contain full and substantive analysis, in addition to 
     statistical information, and shall--

       ``(I) identify the initiatives the Taxpayer Advocate has 
     taken on improving taxpayer services and Internal Revenue 
     Service responsiveness,
       ``(II) contain recommendations received from individuals 
     with the authority to issue Taxpayer Assistance Orders under 
     section 7811,
       ``(III) contain a summary of at least 20 of the most 
     serious problems encountered by taxpayers, including a 
     description of the nature of such problems,

       ``(IV) contain an inventory of the items described in 
     subclauses (I), (II), and (III) for which action has been 
     taken and the result of such action,
       ``(V) contain an inventory of the items described in 
     subclauses (I), (II), and (III) for which action remains to 
     be completed and the period during which each item has 
     remained on such inventory,
       ``(VI) contain an inventory of the items described in 
     subclauses (II) and (III) for which no action has been taken, 
     the period during which each item has remained on such 
     inventory, the reasons for the inaction, and identify any 
     Internal Revenue Service official who is responsible for such 
     inaction,
       ``(VII) identify any Taxpayer Assistance Order which was 
     not honored by the Internal Revenue Service in a timely 
     manner, as specified under section 7811(b),
       ``(VIII) contain recommendations for such administrative 
     and legislative action as may be appropriate to resolve 
     problems encountered by taxpayers,
       ``(IX) describe the extent to which regional problem 
     resolution officers participate in the selection and 
     evaluation of local problem resolution officers, and
       ``(X) include such other information as the Taxpayer 
     Advocate may deem advisable.

       ``(iii) Report to be submitted directly.--Each report 
     required under this subparagraph shall be provided directly 
     to the Committees referred to in clauses (i) and (ii) without 
     any prior review or comment from the Commissioner, the 
     Secretary of the Treasury, any other officer or employee of 
     the Department of the Treasury, or the Office of Management 
     and Budget.
       ``(3) Responsibilities of commissioner.--The Commissioner 
     of Internal Revenue shall establish procedures requiring a 
     formal response to all recommendations submitted to the 
     Commissioner by the Taxpayer Advocate within 3 months after 
     submission to the Commissioner.''
       (b) Conforming Amendments.--
       (1) Section 7811 (relating to Taxpayer Assistance Orders) 
     is amended--
       (A) by striking ``the Office of Ombudsman'' in subsection 
     (a) and inserting ``the Office of the Taxpayer Advocate'', 
     and
       (B) by striking ``Ombudsman'' each place it appears 
     (including in the headings of subsections (e) and (f)) and 
     inserting ``Taxpayer Advocate''.
       (2) The heading for section 7802 is amended to read as 
     follows:

     ``SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT 
                   COMMISSIONERS; TAXPAYER ADVOCATE.''

       (3) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7802 and 
     inserting the following new item:

``Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; 
              Taxpayer Advocate.''

[[Page H3401]]

       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       (a) Terms of Orders.--Subsection (b) of section 7811 
     (relating to terms of Taxpayer Assistance Orders) is 
     amended--
       (1) by inserting ``within a specified time period'' after 
     ``the Secretary'', and
       (2) by inserting ``take any action as permitted by law,'' 
     after ``cease any action,''.
       (b) Limitation on Authority To Modify or Rescind.--Section 
     7811(c) (relating to authority to modify or rescind) is 
     amended to read as follows:
       ``(c) Authority To Modify or Rescind.--Any Taxpayer 
     Assistance Order issued by the Taxpayer Advocate under this 
     section may be modified or rescinded--
       ``(1) only by the Taxpayer Advocate, the Commissioner of 
     Internal Revenue, or the Deputy Commissioner of Internal 
     Revenue, and
       ``(2) only if a written explanation of the reasons for the 
     modification or rescission is provided to the Taxpayer 
     Advocate.''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.
      TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

     SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION OF 
                   INSTALLMENT AGREEMENTS.

       (a) Terminations.--Subsection (b) of section 6159 (relating 
     to extent to which agreements remain in effect) is amended by 
     adding at the end the following new paragraph:
       ``(5) Notice requirements.--The Secretary may not take any 
     action under paragraph (2), (3), or (4) unless--
       ``(A) a notice of such action is provided to the taxpayer 
     not later than the day 30 days before the date of such 
     action, and
       ``(B) such notice includes an explanation why the Secretary 
     intends to take such action.

     The preceding sentence shall not apply in any case in which 
     the Secretary believes that collection of any tax to which an 
     agreement under this section relates is in jeopardy.''
       (b) Conforming Amendment.--Paragraph (3) of section 6159(b) 
     is amended to read as follows:
       ``(3) Subsequent change in financial conditions.--If the 
     Secretary makes a determination that the financial condition 
     of a taxpayer with whom the Secretary has entered into an 
     agreement under subsection (a) has significantly changed, the 
     Secretary may alter, modify, or terminate such agreement.''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date 6 months after the date of the 
     enactment of this Act.

     SEC. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF INSTALLMENT 
                   AGREEMENT.

       (a) General Rule.--Section 6159 (relating to agreements for 
     payment of tax liability in installments) is amended by 
     adding at the end the following new subsection:
       ``(c) Administrative Review.--The Secretary shall establish 
     procedures for an independent administrative review of 
     terminations of installment agreements under this section for 
     taxpayers who request such a review.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 1997.
             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

     SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.

       (a) General Rule.--Paragraph (1) of section 6404(e) 
     (relating to abatement of interest in certain cases) is 
     amended--
       (1) by inserting ``unreasonable'' before ``error'' each 
     place it appears in subparagraphs (A) and (B), and
       (2) by striking ``in performing a ministerial act'' each 
     place it appears and inserting ``in performing a ministerial 
     or managerial act''.
       (b) Clerical Amendment.--The subsection heading for 
     subsection (e) of section 6404 is amended--
       (1) by striking ``Assessments'' and inserting 
     ``Abatement'', and
       (2) by inserting ``Unreasonable'' before ``Errors''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to interest accruing with respect to deficiencies 
     or payments for taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.

       (a) In General.--Section 6404 is amended by adding at the 
     end the following new subsection:
       ``(g) Review of Denial of Request for Abatement of 
     Interest.--
       ``(1) In general.--The Tax Court shall have jurisdiction 
     over any action brought by a taxpayer who meets the 
     requirements referred to in section 7430(c)(4)(A)(iii) to 
     determine whether the Secretary's failure to abate interest 
     under this section was an abuse of discretion, and may order 
     an abatement, if such action is brought within 180 days after 
     the date of the mailing of the Secretary's final 
     determination not to abate such interest.
       ``(2) Special rules.--
       ``(A) Date of mailing.--Rules similar to the rules of 
     section 6213 shall apply for purposes of determining the date 
     of the mailing referred to in paragraph (1).
       ``(B) Relief.--Rules similar to the rules of section 
     6512(b) shall apply for purposes of this subsection.
       ``(C) Review.--An order of the Tax Court under this 
     subsection shall be reviewable in the same manner as a 
     decision of the Tax Court, but only with respect to the 
     matters determined in such order.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests for abatement after the date of the 
     enactment of this Act.

     SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF 
                   TAX AFTER NOTICE AND DEMAND.

       (a) General Rule.--Paragraph (3) of section 6601(e) 
     (relating to payments made within 10 days after notice and 
     demand) is amended to read as follows:
       ``(3) Payments made within specified period after notice 
     and demand.--If notice and demand is made for payment of any 
     amount and if such amount is paid within 21 calendar days (10 
     business days if the amount for which such notice and demand 
     is made equals or exceeds $100,000) after the date of such 
     notice and demand, interest under this section on the amount 
     so paid shall not be imposed for the period after the date of 
     such notice and demand.''
       (b) Conforming Amendments.--
       (1) Subparagraph (A) of section 6601(e)(2) is amended by 
     striking ``10 days from the date of notice and demand 
     therefor'' and inserting ``21 calendar days from the date of 
     notice and demand therefor (10 business days if the amount 
     for which such notice and demand is made equals or exceeds 
     $100,000)''.
       (2) Paragraph (3) of section 6651(a) is amended by striking 
     ``10 days of the date of the notice and demand therefor'' and 
     inserting ``21 calendar days from the date of notice and 
     demand therefor (10 business days if the amount for which 
     such notice and demand is made equals or exceeds $100,000)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply in the case of any notice and demand given after 
     December 31, 1996.

     SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE REQUIRED 
                   DEPOSITS OF PAYROLL TAXES IN CERTAIN CASES.

       (a) In General.--Section 6656 (relating to failure to make 
     deposit of taxes) is amended by adding at the end the 
     following new subsections:
       ``(c) Exception for First-Time Depositors of Employment 
     Taxes.--The Secretary may waive the penalty imposed by 
     subsection (a) on a person's inadvertent failure to deposit 
     any employment tax if--
       ``(1) such person meets the requirements referred to in 
     section 7430(c)(4)(A)(iii),
       ``(2) such failure occurs during the 1st quarter that such 
     person was required to deposit any employment tax, and
       ``(3) the return of such tax was filed on or before the due 
     date.
     For purposes of this subsection, the term `employment taxes' 
     means the taxes imposed by subtitle C.
       ``(d) Authority To Abate Penalty Where Deposit Sent to 
     Secretary.--The Secretary may abate the penalty imposed by 
     subsection (a) with respect to the first time a depositor is 
     required to make a deposit if the amount required to be 
     deposited is inadvertently sent to the Secretary instead of 
     to the appropriate government depository.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to deposits required to be made after the date of 
     the enactment of this Act.
                        TITLE IV--JOINT RETURNS

     SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.

       The Secretary of the Treasury or his delegate and the 
     Comptroller General of the United States shall each conduct 
     separate studies of--
       (1) the effects of changing the liability for tax on a 
     joint return from being joint and several to being 
     proportionate to the tax attributable to each spouse,
       (2) the effects of providing that, if a divorce decree 
     allocates liability for tax on a joint return filed before 
     the divorce, the Secretary may collect such liability only in 
     accordance with the decree,
       (3) whether those provisions of the Internal Revenue Code 
     of 1986 intended to provide relief to innocent spouses 
     provide meaningful relief in all cases where such relief is 
     appropriate, and
       (4) the effect of providing that community income (as 
     defined in section 66(d) of such Code) which, in accordance 
     with the rules contained in section 879(a) of such Code, 
     would be treated as the income of one spouse is exempt from a 
     levy for failure to pay any tax imposed by subtitle A by the 
     other spouse for a taxable year ending before their marriage.

     The reports of such studies shall be submitted to the 
     Committee on Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate within 6 months 
     after the date of the enactment of this Act.

     SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS 
                   WITHOUT FULL PAYMENT OF TAX.

       (a) General Rule.--Paragraph (2) of section 6013(b) 
     (relating to limitations on filing of joint return after 
     filing separate returns) is amended by striking subparagraph 
     (A) and redesignating the following subparagraphs 
     accordingly.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.

       (a) In General.--Subsection (e) of section 6103 (relating 
     to disclosure to persons having material interest) is amended 
     by adding at the end the following new paragraph:
       ``(8) Disclosure of collection activities with respect to 
     joint return.--If any deficiency of tax with respect to a 
     joint return is assessed and the individuals filing such 
     return are no longer married or no longer reside in the same 
     household, upon request in writing by either of such 
     individuals, the Secretary shall disclose in writing to the 
     individual making the request whether the Secretary has 
     attempted to collect such deficiency from such other 
     individual, the general nature of such collection activities, 
     and the amount collected. The preceding

[[Page H3402]]

     sentence shall not apply to any deficiency which may not be 
     collected by reason of section 6502.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.
                     TITLE V--COLLECTION ACTIVITIES

     SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.

       (a) Withdrawal of Certain Notices.--Section 6323 (relating 
     to validity and priority against certain persons) is amended 
     by adding at the end the following new subsection:
       ``(j) Withdrawal of Notice in Certain Circumstances.--
       ``(1) In general.--The Secretary may withdraw a notice of a 
     lien filed under this section and this chapter shall be 
     applied as if the withdrawn notice had not been filed, if the 
     Secretary determines that--
       ``(A) the filing of such notice was premature or otherwise 
     not in accordance with administrative procedures of the 
     Secretary,
       ``(B) the taxpayer has entered into an agreement under 
     section 6159 to satisfy the tax liability for which the lien 
     was imposed by means of installment payments, unless such 
     agreement provides otherwise,
       ``(C) the withdrawal of such notice will facilitate the 
     collection of the tax liability, or
       ``(D) with the consent of the taxpayer or the Taxpayer 
     Advocate, the withdrawal of such notice would be in the best 
     interests of the taxpayer (as determined by the Taxpayer 
     Advocate) and the United States.

     Any such withdrawal shall be made by filing notice at the 
     same office as the withdrawn notice. A copy of such notice of 
     withdrawal shall be provided to the taxpayer.
       ``(2) Notice to credit agencies, etc.--Upon written request 
     by the taxpayer with respect to whom a notice of a lien was 
     withdrawn under paragraph (1), the Secretary shall promptly 
     make reasonable efforts to notify credit reporting agencies, 
     and any financial institution or creditor whose name and 
     address is specified in such request, of the withdrawal of 
     such notice. Any such request shall be in such form as the 
     Secretary may prescribe.''
       (b) Return of Levied Property in Certain Cases.--Section 
     6343 (relating to authority to release levy and return 
     property) is amended by adding at the end the following new 
     subsection:
       ``(d) Return of Property in Certain Cases.--If--
       ``(1) any property has been levied upon, and
       ``(2) the Secretary determines that--
       ``(A) the levy on such property was premature or otherwise 
     not in accordance with administrative procedures of the 
     Secretary,
       ``(B) the taxpayer has entered into an agreement under 
     section 6159 to satisfy the tax liability for which the levy 
     was imposed by means of installment payments, unless such 
     agreement provides otherwise,
       ``(C) the return of such property will facilitate the 
     collection of the tax liability, or
       ``(D) with the consent of the taxpayer or the Taxpayer 
     Advocate, the return of such property would be in the best 
     interests of the taxpayer (as determined by the Taxpayer 
     Advocate) and the United States,

     the provisions of subsection (b) shall apply in the same 
     manner as if such property had been wrongly levied upon, 
     except that no interest shall be allowed under subsection 
     (c).''
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 502. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

       (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating 
     to fuel, provisions, furniture, and personal effects exempt 
     from levy) is amended--
       (1) by striking ``If the taxpayer is the head of a family, 
     so'' and inserting ``So'',
       (2) by striking ``his household'' and inserting ``the 
     taxpayer's household'', and
       (3) by striking ``$1,650 ($1,550 in the case of levies 
     issued during 1989)'' and inserting ``$2,500''.
       (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating 
     to books and tools of a trade, business, or profession) is 
     amended by striking ``$1,100 ($1,050 in the case of levies 
     issued during 1989)'' and inserting ``$1,250''.
       (c) Inflation Adjustment.--Section 6334 (relating to 
     property exempt from levy) is amended by adding at the end 
     the following new subsection:
       ``(f) Inflation Adjustment.--
       ``(1) In general.--In the case of any calendar year 
     beginning after 1997, each dollar amount referred to in 
     paragraphs (2) and (3) of subsection (a) shall be increased 
     by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, by substituting 
     `calendar year 1996' for `calendar year 1992' in subparagraph 
     (B) thereof.
       ``(2) Rounding.--If any dollar amount after being increased 
     under paragraph (1) is not a multiple of $10, such dollar 
     amount shall be rounded to the nearest multiple of $10.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect with respect to levies issued after 
     December 31, 1996.

     SEC. 503. OFFERS-IN-COMPROMISE.

       (a) Review Requirements.--Subsection (b) of section 7122 
     (relating to records) is amended by striking ``$500.'' and 
     inserting ``$50,000. However, such compromise shall be 
     subject to continuing quality review by the Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.
                     TITLE VI--INFORMATION RETURNS

     SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION 
                   RETURNS.

       (a) General Rule.--Subchapter B of chapter 76 (relating to 
     proceedings by taxpayers and third parties) is amended by 
     redesignating section 7434 as section 7435 and by 
     inserting after section 7433 the following new section:

     ``SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF 
                   INFORMATION RETURNS.

       ``(a) In General.--If any person willfully files a 
     fraudulent information return with respect to payments 
     purported to be made to any other person, such other person 
     may bring a civil action for damages against the person so 
     filing such return.
       ``(b) Damages.--In any action brought under subsection (a), 
     upon a finding of liability on the part of the defendant, the 
     defendant shall be liable to the plaintiff in an amount equal 
     to the greater of $5,000 or the sum of--
       ``(1) any actual damages sustained by the plaintiff as a 
     proximate result of the filing of the fraudulent information 
     return (including any costs attributable to resolving 
     deficiencies asserted as a result of such filing),
       ``(2) the costs of the action, and
       ``(3) in the court's discretion, reasonable attorneys fees.
       ``(c) Period for Bringing Action.--Notwithstanding any 
     other provision of law, an action to enforce the liability 
     created under this section may be brought without regard to 
     the amount in controversy and may be brought only within the 
     later of--
       ``(1) 6 years after the date of the filing of the 
     fraudulent information return, or
       ``(2) 1 year after the date such fraudulent information 
     return would have been discovered by exercise of reasonable 
     care.
       ``(d) Copy of Complaint Filed With IRS--Any person bringing 
     an action under subsection (a) shall provide a copy of the 
     complaint to the Internal Revenue Service upon the filing of 
     such complaint with the court.
       ``(e) Finding of Court To Include Correct Amount of 
     Payment.--The decision of the court awarding damages in an 
     action brought under subsection (a) shall include a finding 
     of the correct amount which should have been reported in the 
     information return.
       ``(f) Information Return.--For purposes of this section, 
     the term `information return' means any statement described 
     in section 6724(d)(1)(A).''
       (b) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 76 is amended by striking the item 
     relating to section 7434 and inserting the following:

``Sec. 7434. Civil damages for fraudulent filing of information 
              returns.
``Sec. 7435. Cross references.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to fraudulent information returns filed after the 
     date of the enactment of this Act.

     SEC. 602. REQUIREMENT TO CONDUCT REASONABLE INVESTIGATIONS OF 
                   INFORMATION RETURNS.

       (a) General Rule.--Section 6201 (relating to assessment 
     authority) is amended by redesignating subsection (d) as 
     subsection (e) and by inserting after subsection (c) the 
     following new subsection:
       ``(d) Required Reasonable Verification of Information 
     Returns.--In any court proceeding, if a taxpayer asserts a 
     reasonable dispute with respect to any item of income 
     reported on an information return filed with the Secretary 
     under subpart B or C of part III of subchapter A of chapter 
     61 by a third party and the taxpayer has fully cooperated 
     with the Secretary (including providing, within a reasonable 
     period of time, access to and inspection of all witnesses, 
     information, and documents within the control of the taxpayer 
     as reasonably requested by the Secretary), the Secretary 
     shall have the burden of producing reasonable and probative 
     information concerning such deficiency in addition to such 
     information return.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
             TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

     SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSITION IN 
                   PROCEEDING WAS SUBSTANTIALLY JUSTIFIED.

       (a) General Rule.--Subparagraph (A) of section 7430(c)(4) 
     (defining prevailing party) is amended by striking clause (i) 
     and by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively.
       (b) Burden of Proof on United States.--Paragraph (4) of 
     section 7430(c) is amended by redesignating subparagraph (B) 
     as subparagraph (C) and by inserting after subparagraph (A) 
     the following new subparagraph:
       ``(B) Exception if united states establishes that its 
     position was substantially justified.--
       ``(i) General rule.--A party shall not be treated as the 
     prevailing party in a proceeding to which subsection (a) 
     applies if the United States establishes that the position of 
     the United States in the proceeding was substantially 
     justified.
       ``(ii) Presumption of no justification if internal revenue 
     service did not follow certain published guidance.--For 
     purposes of clause (i), the position of the United States 
     shall be presumed not to be substantially justified if the 
     Internal Revenue Service did not follow its applicable 
     published guidance in the administrative proceeding. Such 
     presumption may be rebutted.
       ``(iii) Applicable published guidance.--For purposes of 
     clause (ii), the term `applicable published guidance' means--

       ``(I) regulations, revenue rulings, revenue procedures, 
     information releases, notices, and announcements, and
       ``(II) any of the following which are issued to the 
     taxpayer: private letter rulings, technical advice memoranda, 
     and determination letters.''

[[Page H3403]]

       (c) Conforming Amendments.--
       (1) Subparagraph (B) of section 7430(c)(2) is amended by 
     striking ``paragraph (4)(B)'' and inserting ``paragraph 
     (4)(C)''.
       (2) Subparagraph (C) of section 7430(c)(4), as redesignated 
     by subsection (b), is amended by striking ``subparagraph 
     (A)'' and inserting ``this paragraph''.
       (3) Sections 6404(g) and 6656(c)(1), as amended by this 
     Act, are each amended by striking ``section 
     7430(c)(4)(A)(iii)'' and inserting ``section 
     7430(c)(4)(A)(ii)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.

       (a) In General.--Paragraph (1) of section 7430(c) (defining 
     reasonable litigation costs) is amended--
       (1) by striking ``$75'' in clause (iii) of subparagraph (B) 
     and inserting ``$110'',
       (2) by striking ``an increase in the cost of living or'' in 
     clause (iii) of subparagraph (B), and
       (3) by adding after clause (iii) the following:
     ``In the case of any calendar year beginning after 1996, the 
     dollar amount referred to in clause (iii) shall be increased 
     by an amount equal to such dollar amount multiplied by the 
     cost-of-living adjustment determined under section 1(f)(3) 
     for such calendar year, by substituting `calendar year 1995' 
     for `calendar year 1992' in subparagraph (B) thereof. If any 
     dollar amount after being increased under the preceding 
     sentence is not a multiple of $10, such dollar amount shall 
     be rounded to the nearest multiple of $10.''
       (b) Effective Date.--The amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN INTO 
                   ACCOUNT.

       (a) In General.--Paragraph (1) of section 7430(b) (relating 
     to requirement that administrative remedies be exhausted) is 
     amended by adding at the end the following new sentence: 
     ``Any failure to agree to an extension of the time for the 
     assessment of any tax shall not be taken into account for 
     purposes of determining whether the prevailing party meets 
     the requirements of the preceding sentence.''
       (b) Effective Date.--The amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.

     SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY 
                   JUDGMENT PROCEEDINGS.

       (a) In General.--Subsection (b) of section 7430 is amended 
     by striking paragraph (3) and by redesignating paragraph (4) 
     as paragraph (3).
       (b) Effective Date.--The amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.
TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

     SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES FOR 
                   UNAUTHORIZED COLLECTION ACTIONS.

       (a) General Rule.--Subsection (b) of section 7433 (relating 
     to damages) is amended by striking ``$100,000'' and inserting 
     ``$1,000,000''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to actions by officers or employees of the 
     Internal Revenue Service after the date of the enactment of 
     this Act.

     SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION 
                   COSTS FOR FAILURE TO EXHAUST ADMINISTRATIVE 
                   REMEDIES.

       (a) General Rule.--Paragraph (1) of section 7433(d) 
     (relating to civil damages for certain unauthorized 
     collection actions) is amended to read as follows:
       ``(1) Award for damages may be reduced if administrative 
     remedies not exhausted.--The amount of damages awarded under 
     subsection (b) may be reduced if the court determines that 
     the plaintiff has not exhausted the administrative remedies 
     available to such plaintiff within the Internal Revenue 
     Service.''
       (b) Effective Date.--The amendment made by this section 
     shall apply in the case of proceedings commenced after the 
     date of the enactment of this Act.
TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                  TAX

     SEC. 901. PRELIMINARY NOTICE REQUIREMENT.

       (a) In General.--Section 6672 (relating to failure to 
     collect and pay over tax, or attempt to evade or defeat tax) 
     is amended by redesignating subsection (b) as subsection (c) 
     and by inserting after subsection (a) the following new 
     subsection:
       ``(b) Preliminary Notice Requirement.--
       ``(1) In general.--No penalty shall be imposed under 
     subsection (a) unless the Secretary notifies the taxpayer in 
     writing by mail to an address as determined under section 
     6212(b) that the taxpayer shall be subject to an assessment 
     of such penalty.
       ``(2) Timing of notice.--The mailing of the notice 
     described in paragraph (1) shall precede any notice and 
     demand of any penalty under subsection (a) by at least 60 
     days.
       ``(3) Statute of limitations.--If a notice described in 
     paragraph (1) with respect to any penalty is mailed before 
     the expiration of the period provided by section 6501 for the 
     assessment of such penalty (determined without regard to this 
     paragraph), the period provided by such section for the 
     assessment of such penalty shall not expire before the later 
     of--
       ``(A) the date 90 days after the date on which such notice 
     was mailed, or
       ``(B) if there is a timely protest of the proposed 
     assessment, the date 30 days after the Secretary makes a 
     final administrative determination with respect to such 
     protest.
       ``(4) Exception for jeopardy.--This subsection shall not 
     apply if the Secretary finds that the collection of the 
     penalty is in jeopardy.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to proposed assessments made after June 30, 1996.

     SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE MORE THAN 1 
                   PERSON LIABLE FOR PENALTY FOR FAILURE TO 
                   COLLECT AND PAY OVER TAX.

       (a) In General.--Subsection (e) of section 6103 (relating 
     to disclosure to persons having material interest), as 
     amended by section 403, is amended by adding at the end the 
     following new paragraph:
       ``(9) Disclosure of certain information where more than 1 
     person subject to penalty under section 6672.--If the 
     Secretary determines that a person is liable for a penalty 
     under section 6672(a) with respect to any failure, upon 
     request in writing of such person, the Secretary shall 
     disclose in writing to such person--
       ``(A) the name of any other person whom the Secretary has 
     determined to be liable for such penalty with respect to such 
     failure, and
       ``(B) whether the Secretary has attempted to collect such 
     penalty from such other person, the general nature of such 
     collection activities, and the amount collected.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1 PERSON 
                   LIABLE FOR PENALTY FOR FAILURE TO COLLECT AND 
                   PAY OVER TAX.

       (a) In General.--Section 6672 (relating to failure to 
     collect and pay over tax, or attempt to evade or defeat tax) 
     is amended by adding at the end the following new subsection:
       ``(d) Right of Contribution Where More Than 1 Person Liable 
     for Penalty.--If more than 1 person is liable for the penalty 
     under subsection (a) with respect to any tax, each person who 
     paid such penalty shall be entitled to recover from other 
     persons who are liable for such penalty an amount equal to 
     the excess of the amount paid by such person over such 
     person's proportionate share of the penalty. Any claim for 
     such a recovery may be made only in a proceeding which is 
     separate from, and is not joined or consolidated with--
       ``(1) an action for collection of such penalty brought by 
     the United States, or
       ``(2) a proceeding in which the United States files a 
     counterclaim or third-party complaint for the collection of 
     such penalty.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to penalties assessed after the date of the 
     enactment of this Act.

     SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT ORGANIZATIONS 
                   EXEMPT FROM PENALTY FOR FAILURE TO COLLECT AND 
                   PAY OVER TAX.

       (a) In General.--Section 6672 is amended by adding at the 
     end the following new subsection:
       ``(e) Exception for Voluntary Board Members of Tax-Exempt 
     Organizations.--No penalty shall be imposed by subsection (a) 
     on any unpaid, volunteer member of any board of trustees or 
     directors of an organization exempt from tax under subtitle A 
     if such member--
       ``(1) is solely serving in an honorary capacity,
       ``(2) does not participate in the day-to-day or financial 
     operations of the organization, and
       ``(3) does not have actual knowledge of the failure on 
     which such penalty is imposed.

     The preceding sentence shall not apply if it results in no 
     person being liable for the penalty imposed by subsection 
     (a).''
       (b) Public Information Requirements.--
       (1) In general.--The Secretary of the Treasury or the 
     Secretary's delegate (hereafter in this subsection referred 
     to as the ``Secretary'') shall take such actions as may be 
     appropriate to ensure that employees are aware of their 
     responsibilities under the Federal tax depository system, the 
     circumstances under which employees may be liable for the 
     penalty imposed by section 6672 of the Internal Revenue Code 
     of 1986, and the responsibility to promptly report to the 
     Internal Revenue Service any failure referred to in 
     subsection (a) of such section 6672. Such actions shall 
     include--
       (A) printing of a warning on deposit coupon booklets and 
     the appropriate tax returns that certain employees may be 
     liable for the penalty imposed by such section 6672, and
       (B) the development of a special information packet.
       (2) Development of explanatory materials.--The Secretary 
     shall develop materials explaining the circumstances under 
     which board members of tax-exempt organizations (including 
     voluntary and honorary members) may be subject to penalty 
     under section 6672 of such Code. Such materials shall be made 
     available to tax-exempt organizations.
       (3) IRS instructions.--The Secretary shall clarify the 
     instructions to Internal Revenue Service employees on the 
     application of the penalty under section 6672 of such Code 
     with regard to voluntary members of boards of trustees or 
     directors of tax-exempt organizations.
         TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

     SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY 
                   RECORDKEEPERS.

       (a) In General.--Paragraph (3) of section 7609(a) (relating 
     to third-party recordkeeper defined) is amended by striking 
     ``and'' at the end of subparagraph (G), by striking the 
     period at the end of subparagraph (H) and inserting ``; 
     and'', and by adding at the end the following the 
     subparagraph:
       ``(I) any enrolled agent.''

[[Page H3404]]

       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.

       (a) Standard of Review.--Subparagraph (A) of section 
     6503(k)(2) (defining designated summons) is amended by 
     redesignating clauses (i) and (ii) as clauses (ii) and (iii), 
     respectively, and by inserting before clause (ii) (as so 
     redesignated) the following new clause:
       ``(i) the issuance of such summons is preceded by a review 
     of such issuance by the regional counsel of the Office of 
     Chief Counsel for the region in which the examination of the 
     corporation is being conducted,''.
       (b) Limitation on Persons to Whom Designated Summons May Be 
     Issued.--Paragraph (1) of section 6503(k) is amended by 
     striking ``with respect to any return of tax by a 
     corporation'' and inserting ``to a corporation (or to any 
     other person to whom the corporation has transferred records) 
     with respect to any return of tax by such corporation for a 
     taxable year (or other period) for which such corporation is 
     being examined under the coordinated examination program (or 
     any successor program) of the Internal Revenue Service''.
       (c) Clerical Amendment.--Section 6503 is amended by 
     redesignating subsections (k) and (l) (as amended by this 
     section) as subsections (j) and (k), respectively.
       (d) Effective Date.--The amendments made by this section 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. 1003. ANNUAL REPORT TO CONGRESS CONCERNING DESIGNATED 
                   SUMMONSES.

       Not later than December 31 of each calendar year after 
     1995, the Secretary of the Treasury or his delegate shall 
     report to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the number of designated summonses (as defined in section 
     6503(j) of the Internal Revenue Code of 1986) which were 
     issued during the preceding 12 months.
 TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                              REGULATIONS

     SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF TREASURY 
                   DEPARTMENT REGULATIONS.

       (a) In General.--Subsection (b) of section 7805 (relating 
     to rules and regulations) is amended to read as follows:
       ``(b) Retroactivity of Regulations.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, no temporary, proposed, or final regulation 
     relating to the internal revenue laws shall apply to any 
     taxable period ending before the earliest of the following 
     dates:
       ``(A) The date on which such regulation is filed with the 
     Federal Register.
       ``(B) In the case of any final regulation, the date on 
     which any proposed or temporary regulation to which such 
     final regulation relates was filed with the Federal Register.
       ``(C) The date on which any notice substantially describing 
     the expected contents of any temporary, proposed, or final 
     regulation is issued to the public.
       ``(2) Exception for promptly issued regulations.--Paragraph 
     (1) shall not apply to regulations filed or issued within 18 
     months of the date of the enactment of the statutory 
     provision to which the regulation relates.
       ``(3) Prevention of abuse.--The Secretary may provide that 
     any regulation may take effect or apply retroactively to 
     prevent abuse.
       ``(4) Correction of procedural defects.--The Secretary may 
     provide that any regulation may apply retroactively to 
     correct a procedural defect in the issuance of any prior 
     regulation.
       ``(5) Internal regulations.--The limitation of paragraph 
     (1) shall not apply to any regulation relating to internal 
     Treasury Department policies, practices, or procedures.
       ``(6) Congressional authorization.--The limitation of 
     paragraph (1) may be superseded by a legislative grant from 
     Congress authorizing the Secretary to prescribe the effective 
     date with respect to any regulation.
       ``(7) Election to apply retroactively.--The Secretary may 
     provide for any taxpayer to elect to apply any regulation 
     before the dates specified in paragraph (1).
       ``(8) Application to rulings.--The Secretary may prescribe 
     the extent, if any, to which any ruling (including any 
     judicial decision or any administrative determination other 
     than by regulation) relating to the internal revenue laws 
     shall be applied without retroactive effect.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to regulations which relate to 
     statutory provisions enacted on or after the date of the 
     enactment of this Act.
                  TITLE XII--MISCELLANEOUS PROVISIONS

     SEC. 1201. PHONE NUMBER OF PERSON PROVIDING PAYEE STATEMENTS 
                   REQUIRED TO BE SHOWN ON SUCH STATEMENT.

       (a) General Rule.--The following provisions are each 
     amended by striking ``name and address'' and inserting 
     ``name, address, and phone number of the information 
     contact'':
       (1) Section 6041(d)(1).
       (2) Section 6041A(e)(1).
       (3) Section 6042(c)(1).
       (4) Section 6044(e)(1).
       (5) Section 6045(b)(1).
       (6) Section 6049(c)(1)(A).
       (7) Section 6050B(b)(1).
       (8) Section 6050H(d)(1).
       (9) Section 6050I(e)(1).
       (10) Section 6050J(e).
       (11) Section 6050K(b)(1).
       (12) Section 6050N(b)(1).
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to statements required to be furnished after 
     December 31, 1996 (determined without regard to any 
     extension).

     SEC. 1202. REQUIRED NOTICE OF CERTAIN PAYMENTS.

       If any payment is received by the Secretary of the Treasury 
     or his delegate from any taxpayer and the Secretary cannot 
     associate such payment with such taxpayer, the Secretary 
     shall make reasonable efforts to notify the taxpayer of such 
     inability within 60 days after the receipt of such payment.

     SEC. 1203. UNAUTHORIZED ENTICEMENT OF INFORMATION DISCLOSURE.

       (a) In General.--Subchapter B of chapter 76 (relating to 
     proceedings by taxpayers and third parties), as amended by 
     section 601(a), is amended by redesignating section 7435 as 
     section 7436 and by inserting after section 7434 the 
     following new section:

     ``SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICEMENT OF 
                   INFORMATION DISCLOSURE.

       ``(a) In General.--If any officer or employee of the United 
     States intentionally compromises the determination or 
     collection of any tax due from an attorney, certified public 
     accountant, or enrolled agent representing a taxpayer in 
     exchange for information conveyed by the taxpayer to the 
     attorney, certified public accountant, or enrolled agent for 
     purposes of obtaining advice concerning the taxpayer's tax 
     liability, such taxpayer may bring a civil action for damages 
     against the United States in a district court of the United 
     States. Such civil action shall be the exclusive remedy for 
     recovering damages resulting from such actions.
       ``(b) Damages.--In any action brought under subsection (a), 
     upon a finding of liability on the part of the defendant, the 
     defendant shall be liable to the plaintiff in an amount equal 
     to the lesser of $500,000 or the sum of--
       ``(1) actual, direct economic damages sustained by the 
     plaintiff as a proximate result of the information 
     disclosure, and
       ``(2) the costs of the action.

     Damages shall not include the taxpayer's liability for any 
     civil or criminal penalties, or other losses attributable to 
     incarceration or the imposition of other criminal sanctions.
       ``(c) Payment Authority.--Claims pursuant to this section 
     shall be payable out of funds appropriated under section 1304 
     of title 31, United States Code.
       ``(d) Period for Bringing Action.--Notwithstanding any 
     other provision of law, an action to enforce liability 
     created under this section may be brought without regard to 
     the amount in controversy and may be brought only within 2 
     years after the date the actions creating such liability 
     would have been discovered by exercise of reasonable care.
       ``(e) Mandatory Stay.--Upon a certification by the 
     Commissioner or the Commissioner's delegate that there is an 
     ongoing investigation or prosecution of the taxpayer, the 
     district court before which an action under this section is 
     pending shall stay all proceedings with respect to such 
     action pending the conclusion of the investigation or 
     prosecution.
       ``(f) Crime-Fraud Exception.--Subsection (a) shall not 
     apply to information conveyed to an attorney, certified 
     public accountant, or enrolled agent for the purpose of 
     perpetrating a fraud or crime.''
       (b) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 76, as amended by section 601(b), is 
     amended by striking the item relating to section 7435 and by 
     adding at the end the following new items:

``Sec. 7435. Civil damages for unauthorized enticement of information 
              disclosure.
``Sec. 7436. Cross references.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to actions after the date of the enactment of 
     this Act.

     SEC. 1204. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING 
                   DELINQUENT ACCOUNTS.

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

     ``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

       ``Not less often than annually, the Secretary shall send a 
     written notice to each taxpayer who has a tax delinquent 
     account of the amount of the tax delinquency as of the date 
     of the notice.''
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new item:

``Sec. 7524. Annual notice of tax delinquency.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 1996.

     SEC. 1205. 5-YEAR EXTENSION OF AUTHORITY FOR UNDERCOVER 
                   OPERATIONS.

       (a) In General.--Paragraph (3) of section 7601(c) of the 
     Anti-Drug Abuse Act of 1988 is amended by striking all that 
     follows ``this Act'' and inserting a period.
       (b) Restoration of Authority for 5 Years.--Subsection (c) 
     of section 7608 is amended by adding at the end the following 
     new paragraph:
       ``(6) Application of section.--The provisions of this 
     subsection--
       ``(A) shall apply after November 17, 1988, and before 
     January 1, 1990, and
       ``(B) shall apply after the date of the enactment of this 
     paragraph and before January 1, 2001.

     All amounts expended pursuant to this subsection during the 
     period described in subparagraph (B) shall be recovered to 
     the extent possible, and deposited in the Treasury of the 
     United States as miscellaneous receipts, before January 1, 
     2001.''
       (c) Enhanced Oversight.--

[[Page H3405]]

       (1) Additional information required in reports to 
     congress.--Subparagraph (B) of section 7608(c)(4) is 
     amended--
       (A) by striking ``preceding the period'' in clause (ii),
       (B) by striking ``and'' at the end of clause (ii), and
       (C) by striking clause (iii) and inserting the following:
       ``(iii) the number, by programs, of undercover 
     investigative operations closed in the 1-year period for 
     which such report is submitted, and
       ``(iv) the following information with respect to each 
     undercover investigative operation pending as of the end of 
     the 1-year period for which such report is submitted or 
     closed during such 1-year period--

       ``(I) the date the operation began and the date of the 
     certification referred to in the last sentence of paragraph 
     (1),
       ``(II) the total expenditures under the operation and the 
     amount and use of the proceeds from the operation,
       ``(III) a detailed description of the operation including 
     the potential violation being investigated and whether the 
     operation is being conducted under grand jury auspices, and
       ``(IV) the results of the operation including the results 
     of criminal proceedings.''

       (2) Audits required without regard to amounts involved.--
     Subparagraph (C) of section 7608(c)(5) is amended to read as 
     follows:
       ``(C) Undercover investigative operation.--The term 
     `undercover investigative operation' means any undercover 
     investigative operation of the Service; except that, for 
     purposes of subparagraphs (A) and (C) of paragraph (4), such 
     term only includes an operation which is exempt from section 
     3302 or 9102 of title 31, United States Code.''
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.

     SEC. 1206. DISCLOSURE OF FORM 8300 INFORMATION ON CASH 
                   TRANSACTIONS.

       (a) In General.--Subsection (l) of section 6103 (relating 
     to disclosure of returns and return information for purposes 
     other than tax administration) is amended by adding at the 
     end the following new paragraph:
       ``(15) Disclosure of returns filed under section 6050i.--
     The Secretary may, upon written request, disclose to officers 
     and employees of--
       ``(A) any Federal agency,
       ``(B) any agency of a State or local government, or
       ``(C) any agency of the government of a foreign country,

     information contained on returns filed under section 6050I. 
     Any such disclosure shall be made on the same basis, and 
     subject to the same conditions, as apply to disclosures of 
     information on reports filed under section 5313 of title 31, 
     United States Code; except that no disclosure under this 
     paragraph shall be made for purposes of the administration of 
     any tax law.''
       (b) Conforming Amendments.--
       (1) Subsection (i) of section 6103 is amended by striking 
     paragraph (8).
       (2) Subparagraph (A) of section 6103(p)(3) is amended--
       (A) by striking ``(7)(A)(ii), or (8)'' and inserting ``or 
     (7)(A)(ii)'', and
       (B) by striking ``or (14)'' and inserting ``(14), or 
     (15)''.
       (3) The material preceding subparagraph (A) of section 
     6103(p)(4) is amended--
       (A) by striking ``(5), or (8)'' and inserting ``or (5)'',
       (B) by striking ``(i)(3)(B)(i), or (8)'' and inserting 
     ``(i)(3)(B)(i),'', and
       (C) by striking ``or (12)'' and inserting ``(12), or 
     (15)''.
       (4) Clause (ii) of section 6103(p)(4)(F) is amended--
       (A) by striking ``(5), or (8)'' and inserting ``or (5)'', 
     and
       (B) by striking ``or (14)'' and inserting ``(14), or 
     (15)''.
       (5) Paragraph (2) of section 7213(a) is amended by striking 
     ``or (12)'' and inserting ``(12), or (15)''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 1207. DISCLOSURE OF RETURNS AND RETURN INFORMATION TO 
                   DESIGNEE OF TAXPAYER.

       Subsection (c) of section 6103 (relating to disclosure of 
     returns and return information to designee of taxpayer) is 
     amended by striking ``written request for or consent to such 
     disclosure'' and inserting ``request for or consent to such 
     disclosure''.

     SEC. 1208. STUDY OF NETTING OF INTEREST ON OVERPAYMENTS AND 
                   LIABILITIES.

       (a) In General.--The Secretary of the Treasury or his 
     delegate shall--
       (1) conduct a study of the manner in which the Internal 
     Revenue Service has implemented the netting of interest on 
     overpayments and underpayments and of the policy and 
     administrative implications of global netting, and
       (2) before submitting the report of such study, hold a 
     public hearing to receive comments on the matters included in 
     such study.
       (b) Report.--The report of such study shall be submitted 
     not later than 6 months after the date of the enactment of 
     this Act to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate.

     SEC. 1209. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, 
                   ETC.

       (a) In General.--Section 7623 (relating to expenses of 
     deduction and punishment of frauds) is amended to read as 
     follows:

     ``SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS AND 
                   FRAUD, ETC.

       ``The Secretary, under regulations prescribed by the 
     Secretary, is authorized to pay such sums as he deems 
     necessary for--
       ``(1) detecting underpayments of tax, and
       ``(2) detecting and bringing to trial and punishment 
     persons guilty of violating the internal revenue laws or 
     conniving at the same,

     in cases where such expenses are not otherwise provided for 
     by law. Any amount payable under the preceding sentence shall 
     be paid from the proceeds of amounts (other than interest) 
     collected by reason of the information provided, and any 
     amount so collected shall be available for such payments.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 78 is amended by striking the item 
     relating to section 7623 and inserting the following new 
     item:

``Sec. 7623. Expenses of detection of underpayments and fraud, etc.''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date which is 6 months after the 
     date of the enactment of this Act.
       (d) Report.--The Secretary of the Treasury or his delegate 
     shall submit an annual report to the Committee on Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate on the payments under section 7623 
     of the Internal Revenue Code of 1986 during the year and 
     on the amounts collected for which such payments were 
     made.

     SEC. 1210. USE OF PRIVATE DELIVERY SERVICES FOR TIMELY-
                   MAILING-AS-TIMELY-FILING RULE.

       Section 7502 (relating to timely mailing treated as timely 
     filing and paying) is amended by adding at the end the 
     following new subsection:
       ``(f) Treatment of Private Delivery Services.--
       ``(1) In general.--Any reference in this section to the 
     United States mail shall be treated as including a reference 
     to any designated delivery service, and any reference in this 
     section to a postmark by the United States Postal Service 
     shall be treated as including a reference to any date 
     recorded or marked as described in paragraph (2)(C) by any 
     designated delivery service.
       ``(2) Designated delivery service.--For purposes of this 
     subsection, the term `designated delivery service' means any 
     delivery service provided by a trade or business if such 
     service is designated by the Secretary for purposes of this 
     section. The Secretary may designate a delivery service under 
     the preceding sentence only if the Secretary determines that 
     such service--
       ``(A) is available to the general public,
       ``(B) is at least as timely and reliable on a regular basis 
     as the United States mail,
       ``(C) records electronically to its data base, kept in the 
     regular course of its business, or marks on the cover in 
     which any item referred to in this section is to be 
     delivered, the date on which such item was given to such 
     trade or business for delivery, and
       ``(D) meets such other criteria as the Secretary may 
     prescribe.
       ``(3) Equivalents of registered and certified mail.--The 
     Secretary may provide a rule similar to the rule of paragraph 
     (1) with respect to any service provided by a designated 
     delivery service which is substantially equivalent to United 
     States registered or certified mail.''

     SEC. 1211. REPORTS ON MISCONDUCT OF IRS EMPLOYEES.

       On or before June 1 of each calendar year after 1996, the 
     Secretary of the Treasury shall submit to the Committee on 
     Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate a report on--
       (1) all categories of instances involving the misconduct of 
     employees of the Internal Revenue Service during the 
     preceding calendar year, and
       (2) the disposition during the preceding calendar year of 
     any such instances (without regard to the year of the 
     misconduct).
                      TITLE XIII--REVENUE OFFSETS
Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

     SEC. 1301. APPLICATION OF FAILURE-TO-PAY PENALTY TO 
                   SUBSTITUTE RETURNS.

       (a) General Rule.--Section 6651 (relating to failure to 
     file tax return or to pay tax) is amended by adding at the 
     end the following new subsection:
       ``(g) Treatment of Returns Prepared by Secretary Under 
     Section 6020(b).--In the case of any return made by the 
     Secretary under section 6020(b)--
       ``(1) such return shall be disregarded for purposes of 
     determining the amount of the addition under paragraph (1) of 
     subsection (a), but
       ``(2) such return shall be treated as the return filed by 
     the taxpayer for purposes of determining the amount of the 
     addition under paragraphs (2) and (3) of subsection (a).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply in the case of any return the due date for which 
     (determined without regard to extensions) is after the date 
     of the enactment of this Act.
     Subtitle B--Exicse Taxes on Amounts of Private Excess Benefits

     SEC. 1311. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE 
                   ORGANIZATIONS TO MEET CERTAIN QUALIFICATION 
                   REQUIREMENTS.

       (a) In General.--Chapter 42 (relating to private 
     foundations and certain other tax-exempt organizations) is 
     amended by redesignating subchapter D as subchapter E and by 
     inserting after subchapter C the following new subchapter:

  ``Subchapter D--Failure by Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

``Sec. 4958. Taxes on excess benefit transactions.

     ``SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

       ``(a) Initial Taxes.--

[[Page H3406]]

       ``(1) On the disqualified person.--There is hereby imposed 
     on each excess benefit transaction a tax equal to 25 percent 
     of the excess benefit. The tax imposed by this paragraph 
     shall be paid by any disqualified person referred to in 
     subsection (f)(1) with respect to such transaction.
       ``(2) On the management.--In any case in which a tax is 
     imposed by paragraph (1), there is hereby imposed on the 
     participation of any organization manager in the excess 
     benefit transaction, knowing that it is such a transaction, a 
     tax equal to 10 percent of the excess benefit, unless such 
     participation is not willful and is due to reasonable cause. 
     The tax imposed by this paragraph shall be paid by any 
     organization manager who participated in the excess benefit 
     transaction.
       ``(b) Additional Tax on the Disqualified Person.--In any 
     case in which an initial tax is imposed by subsection (a)(1) 
     on an excess benefit transaction and the excess benefit 
     involved in such transaction is not corrected within the 
     taxable period, there is hereby imposed a tax equal to 200 
     percent of the excess benefit involved. The tax imposed by 
     this subsection shall be paid by any disqualified person 
     referred to in subsection (f)(1) with respect to such 
     transaction.
       ``(c) Excess Benefit Transaction; Excess Benefit.--For 
     purposes of this section--
       ``(1) Excess benefit transaction.--
       ``(A) In general.--The term `excess benefit transaction' 
     means any transaction in which an economic benefit is 
     provided by an applicable tax-exempt organization directly or 
     indirectly to or for the use of any disqualified person if 
     the value of the economic benefit provided exceeds the value 
     of the consideration (including the performance of services) 
     received for providing such benefit. For purposes of the 
     preceding sentence, an economic benefit shall not be treated 
     as consideration for the performance of services unless such 
     organization clearly indicated its intent to so treat such 
     benefit.
       ``(B) Excess benefit.--The term `excess benefit' means the 
     excess referred to in subparagraph (A).
       ``(2) Authority to include certain other private 
     inurement.--To the extent provided in regulations prescribed 
     by the Secretary, the term `excess benefit transaction' 
     includes any transaction in which the amount of any economic 
     benefit provided to or for the use of a disqualified person 
     is determined in whole or in part by the revenues of 1 or 
     more activities of the organization but only if such 
     transaction results in inurement not permitted under 
     paragraph (3) or (4) of section 501(c), as the case may be. 
     In the case of any such transaction, the excess benefit shall 
     be the amount of the inurement not so permitted.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Joint and several liability.--If more than 1 person 
     is liable for any tax imposed by subsection (a) or subsection 
     (b), all such persons shall be jointly and severally liable 
     for such tax.
       ``(2) Limit for management.--With respect to any 1 excess 
     benefit transaction, the maximum amount of the tax imposed by 
     subsection (a)(2) shall not exceed $10,000.
       ``(e) Applicable Tax-Exempt Organization.--For purposes of 
     this subchapter, the term `applicable tax-exempt 
     organization' means--
       ``(1) any organization which (without regard to any excess 
     benefit) would be described in paragraph (3) or (4) of 
     section 501(c) and exempt from tax under section 501(a), and
       ``(2) any organization which was described in paragraph (1) 
     at any time during the 5-year period ending on the date of 
     the transaction.

     Such term shall not include a private foundation (as defined 
     in section 509(a)).
       ``(f) Other Definitions.--For purposes of this section--
       ``(1) Disqualified person.--The term `disqualified person' 
     means, with respect to any transaction--
       ``(A) any person who was, at any time during the 5-year 
     period ending on the date of such transaction, in a position 
     to exercise substantial influence over the affairs of the 
     organization,
       ``(B) a member of the family of an individual described in 
     subparagraph (A), and
       ``(C) a 35-percent controlled entity.
       ``(2) Organization manager.--The term `organization 
     manager' means, with respect to any applicable tax-exempt 
     organization, any officer, director, or trustee of such 
     organization (or any individual having powers or 
     responsibilities similar to those of officers, directors, or 
     trustees of the organization).
       ``(3) 35-percent controlled entity.--
       ``(A) In general.--The term `35-percent controlled entity' 
     means--
       ``(i) a corporation in which persons described in 
     subparagraph (A) or (B) of paragraph (1) own more than 35 
     percent of the total combined voting power,
       ``(ii) a partnership in which such persons own more than 35 
     percent of the profits interest, and
       ``(iii) a trust or estate in which such persons own more 
     than 35 percent of the beneficial interest.
       ``(B) Constructive ownership rules.--Rules similar to the 
     rules of paragraphs (3) and (4) of section 4946(a) shall 
     apply for purposes of this paragraph.
       ``(4) Family members.--The members of an individual's 
     family shall be determined under section 4946(d); except that 
     such members also shall include the brothers and sisters 
     (whether by the whole or half blood) of the individual and 
     their spouses.
       ``(5) Taxable period.--The term `taxable period' means, 
     with respect to any excess benefit transaction, the period 
     beginning with the date on which the transaction occurs and 
     ending on the earliest of--
       ``(A) the date of mailing a notice of deficiency under 
     section 6212 with respect to the tax imposed by subsection 
     (a)(1), or
       ``(B) the date on which the tax imposed by subsection 
     (a)(1) is assessed.
       ``(6) Correction.--The terms `correction' and `correct' 
     mean, with respect to any excess benefit transaction, undoing 
     the excess benefit to the extent possible, and taking any 
     additional measures necessary to place the organization in a 
     financial position not worse than that in which it would be 
     if the disqualified person were dealing under the highest 
     fiduciary standards.''
       (b) Application of Private Inurement Rule to Tax-Exempt 
     Organizations Described in Section 501(c)(4).--
       (1) In general.--Paragraph (4) of section 501(c) is amended 
     by inserting ``(A)'' after ``(4)'' and by adding at the end 
     the following:
       ``(B) Subparagraph (A) shall not apply to an entity unless 
     no part of the net earnings of such entity inures to the 
     benefit of any private shareholder or individual.''
       (2) Special rule for certain cooperatives.--In the case of 
     an organization operating on a cooperative basis which, 
     before the date of the enactment of this Act, was determined 
     by the Secretary of the Treasury or his delegate, to be 
     described in section 501(c)(4) of the Internal Revenue Code 
     of 1986 and exempt from tax under section 501(a) of such 
     Code, the allocation or return of net margins or capital to 
     the members of such organization in accordance with its 
     incorporating statute and bylaws shall not be treated for 
     purposes of such Code as the inurement of the net earnings 
     of such organization to the benefit of any private 
     shareholder or individual. The preceding sentence shall 
     apply only if such statute and bylaws are substantially as 
     such statute and bylaws were in existence on the date of 
     the enactment of this Act.
       (c) Technical and Conforming Amendments.--
       (1) Subsection (e) of section 4955 is amended--
       (A) by striking ``Section 4945'' in the heading and 
     inserting ``Sections 4945 and 4958'', and
       (B) by inserting before the period ``or an excess benefit 
     for purposes of section 4958''.
       (2) Subsections (a), (b), and (c) of section 4963 are each 
     amended by inserting ``4958,'' after ``4955,''.
       (3) Subsection (e) of section 6213 is amended by inserting 
     ``4958 (relating to private excess benefit),'' before 
     ``4971''.
       (4) Paragraphs (2) and (3) of section 7422(g) are each 
     amended by inserting ``4958,'' after ``4955,''.
       (5) Subsection (b) of section 7454 is amended by inserting 
     ``or whether an organization manager (as defined in section 
     4958(f)(2)) has `knowingly' participated in an excess benefit 
     transaction (as defined in section 4958(c)),'' after 
     ``section 4912(b),''.
       (6) The table of subchapters for chapter 42 is amended by 
     striking the last item and inserting the following:

``Subchapter D. Failure by certain charitable organizations to meet 
              certain qualification requirements.
``Subchapter E. Abatement of first and second tier taxes in certain 
              cases.''

       (d) Effective Dates.--
       (1) In general.--The amendments made by this section (other 
     than subsection (b)) shall apply to excess benefit 
     transactions occurring on or after September 14, 1995.
       (2) Binding contracts.--The amendments referred to in 
     paragraph (1) shall not apply to any benefit arising from a 
     transaction pursuant to any written contract which was 
     binding on September 13, 1995, and at all times thereafter 
     before such transaction occurred.
       (3) Application of private inurement rule to tax-exempt 
     organizations described in section 501(c)(4).--
       (A) In general.--The amendment made by subsection (b) shall 
     apply to inurement occurring on or after September 14, 1995.
       (B) Binding contracts.--The amendment made by subsection 
     (b) shall not apply to any inurement occurring before January 
     1, 1997, pursuant to a written contract which was binding on 
     September 13, 1995, and at all times thereafter before such 
     inurement occurred.

     SEC. 1312. REPORTING OF CERTAIN EXCISE TAXES AND OTHER 
                   INFORMATION.

       (a) Reporting by Organizations Described in Section 
     501(c)(3).--Subsection (b) of section 6033 (relating to 
     certain organizations described in section 501(c)(3)) is 
     amended by striking ``and'' at the end of paragraph (9), by 
     redesignating paragraph (10) as paragraph (14), and by 
     inserting after paragraph (9) the following new paragraphs:
       ``(10) the respective amounts (if any) of the taxes paid by 
     the organization during the taxable year under the following 
     provisions:
       ``(A) section 4911 (relating to tax on excess expenditures 
     to influence legislation),
       ``(B) section 4912 (relating to tax on disqualifying 
     lobbying expenditures of certain organizations), and
       ``(C) section 4955 (relating to taxes on political 
     expenditures of section 501(c)(3) organizations),
       ``(11) the respective amounts (if any) of the taxes paid by 
     the organization, or any disqualified person with respect to 
     such organization, during the taxable year under section 4958 
     (relating to taxes on private excess benefit from certain 
     charitable organizations),
       ``(12) such information as the Secretary may require with 
     respect to any excess benefit transaction (as defined in 
     section 4958),
       ``(13) such information with respect to disqualified 
     persons as the Secretary may prescribe, and''.
       (b) Organizations Described in Section 501(c)(4).--Section 
     6033 is amended by redesignating subsection (f) as subsection 
     (g) and by inserting after subsection (e) the following new 
     subsection:
       ``(f) Certain Organizations Described in Section 
     501(c)(4).--Every organization described in section 501(c)(4) 
     which is subject to

[[Page H3407]]

     the requirements of subsection (a) shall include on the 
     return required under subsection (a) the information referred 
     to in paragraphs (11), (12) and (13) of subsection (b) with 
     respect to such organization.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns for taxable years beginning after the 
     date of the enactment of this Act.

     SEC. 1313. EXEMPT ORGANIZATIONS REQUIRED TO PROVIDE COPY OF 
                   RETURN.

       (a) Requirement To Provide Copy.--
       (1) Subparagraph (A) of section 6104(e)(1) (relating to 
     public inspection of annual returns) is amended to read as 
     follows:
       ``(A) In general.--During the 3-year period beginning on 
     the filing date--
       ``(i) a copy of the annual return filed under section 6033 
     (relating to returns by exempt organizations) by any 
     organization to which this paragraph applies shall be made 
     available by such organization for inspection during regular 
     business hours by any individual at the principal office of 
     such organization and, if such organization regularly 
     maintains 1 or more regional or district offices having 3 or 
     more employees, at each such regional or district office, and
       ``(ii) upon request of an individual made at such principal 
     office or such a regional or district office, a copy of such 
     annual return shall be provided to such individual without 
     charge other than a reasonable fee for any reproduction and 
     mailing costs.

     The request described in clause (ii) must be made in person 
     or in writing. If the request under clause (ii) is made in 
     person, such copy shall be provided immediately and, if made 
     in writing, shall be provided within 30 days.''
       (2) Clause (ii) of section 6104(e)(2)(A) is amended by 
     inserting before the period at the end the following: ``(and, 
     upon request of an individual made at such principal office 
     or such a regional or district office, a copy of the material 
     requested to be available for inspection under this 
     subparagraph shall be provided (in accordance with the last 
     sentence of paragraph (1)(A)) to such individual without 
     charge other than reasonable fee for any reproduction and 
     mailing costs)''.
       (3) Subsection (e) of section 6104 is amended by adding at 
     the end the following new paragraph:
       ``(3) Limitation.--Paragraph (1)(A)(ii) (and the 
     corresponding provision of paragraph (2)) shall not apply to 
     any request if, in accordance with regulations promulgated by 
     the Secretary, the organization has made the requested 
     documents widely available, or, the Secretary determines, 
     upon application by an organization, that such request is 
     part of a harassment campaign and that compliance with 
     such request is not in the public interest.''
       (b) Increase in Penalty for Willful Failure To Allow Public 
     Inspection of Certain Returns, Etc.--Section 6685 is amended 
     by striking ``$1,000'' and inserting ``$5,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made on or after the 60th day after 
     the Secretary of the Treasury first issues the regulations 
     referred to section 6104(e)(3) of the Internal Revenue Code 
     of 1986 (as added by subsection (a)(3)).

     SEC. 1314. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR 
                   FAILURE TO FILE COMPLETE AND TIMELY ANNUAL 
                   RETURNS.

       (a) In General.--Subparagraph (A) of section 6652(c)(1) 
     (relating to annual returns under section 6033) is amended by 
     striking ``$10'' and inserting ``$20'' and by striking 
     ``$5,000'' and inserting ``$10,000''.
       (b) Larger Penalty on Organizations Having Gross Receipts 
     in Excess of $1,000,000.--Subparagraph (A) of section 
     6652(c)(1) is amended by adding at the end the following new 
     sentence: ``In the case of an organization having gross 
     receipts exceeding $1,000,000 for any year, with respect to 
     the return required under section 6033 for such year, the 
     first sentence of this subparagraph shall be applied by 
     substituting `$100' for `$20' and, in lieu of applying the 
     second sentence of this subparagraph, the maximum penalty 
     under this subparagraph shall not exceed $50,000.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns for taxable years ending on or after 
     the date of the enactment of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
Connecticut [Mrs. Johnson] and the gentleman from California [Mr. 
Matsui] will each be recognized for 20 minutes.
  The Chair recognizes the gentlewoman from Connecticut [Mrs. Johnson].


                             General Leave

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I ask unanimous consent 
that all Members may have 5 legislative days within which to revise and 
extend their remarks and include extraneous remarks on H.R. 2337.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from Connecticut?
  There was no objection.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself such time as 
I may consume.
  Mr. Speaker, the House already has acted favorably on the contents of 
H.R. 2337 when it passed the 7-year Balanced Budget Act on October 26, 
1995. The Taxpayer Bill of Rights II was part of the Committee on Ways 
and Means title of H.R. 2491.
  The freestanding bill which the Committee on Ways and Means approved 
on March 21, 1996, is substantially the same as the provisions which 
passed the House last October as part of the 7-year Balanced Budget 
Act, with only minor technical changes and adjustments to some of the 
bill's effective dates. Upon the President's veto of that bill, Mr. 
Speaker, Commissioner Richardson implemented a number of our 
recommendations by administrative action, and for that I thank her.
  I commend her as well and appreciate her concern with our point of 
view by enclosing my remarks in which I expressed great concern for the 
IRS's use of economic reality audits with the distribution of her 
guidance to her staff in the use of these extensive audits for the 
purpose of assuring that people do pay their fair share.
  I have enjoyed working with Commissioner Richardson and her staff, 
and my colleague the gentleman from California [Mr. Matsui] and I 
believe that the bill we bring before you today will move us forward in 
assuring taxpayers' rights in dealing with the IRS, but also will do so 
in a way that is harmonious with our underlying law and the 
responsibilities of the IRS.
  Yesterday was April 15, the deadline for American citizens to file 
their income tax returns for 1995. Most citizens filed their tax 
returns, will receive their refunds, and never hear from the IRS again. 
They are the lucky ones.
  The Taxpayer Bill of Rights aims to expand the protections for the 
unlucky taxpayers who become involved in a tax dispute with the IRS. 
These taxpayers often feel as if they are engaged in a David versus 
Goliath contest.
  H.R. 2337 gives taxpayers some important procedural tools in 
defending themselves in controversies with the Goliath of the IRS. 
While procedural tax rules may not seem glamorous, they can be 
extremely important in deciding the outcome of a tax dispute.
  For example, TV viewers who followed the O.J. Simpson trial last year 
learned that procedural rules can have a major impact on the outcome of 
a legal controversy. In a similar way, the procedural tax rule changes 
and the Taxpayer Bill of Rights II will have a significant effect on 
the outcome of tax disputes with the IRS.
  For example, the committee learned of cases where the IRS began 
auditing a taxpayer's return, and then the IRS employee conducting the 
audit was transferred to a new division and the return sat for another 
year or two before the audit was completed. Under current law, the IRS 
has no authority to abate the interest which ran up during this period. 
H.R. 2337 addresses this problem by giving the IRS expanded authority 
to abate interest charges that occur as a result of unreasonable delays 
caused by the IRS's own process.
  The bill will also make it easier for taxpayers who win their cases 
against the IRS in Tax Court to collect attorneys' fees. Under current 
law, not only does a taxpayer have to prevail on the merits against the 
IRS to collect attorneys fees, he must also prove that the IRS was not 
justified in pressing the case against him. H.R. 2337 would switch the 
burden to the IRS of proving that its position was substantially 
justified. This is consistent with the judicial principle that the 
party in control of the facts should bear the burden of proof.
  Another provision would help taxpayers who enter into installment 
payment agreements with the IRS. Under current law the IRS does not 
have to give notice to the taxpayer before it revokes an installment 
payment plan. This can result in a hardship when the IRS revokes an 
installment agreement based on faulty information. H.R. 2337 would 
require the IRS to give 30 days advance notice before it revokes an 
installment agreement in order to give the affected taxpayer an 
opportunity to challenge this action.
  Further, in the extreme cases where the IRS damages the taxpayer 
because its employees act recklessly in collecting taxes, the bill 
would raise the ceiling for damage claims by taxpayers against the IRS 
to $1 million. The current ceiling is $100,000.
  Finally, for the first time, the experience of the IRS ombudsman as 
to the most common problems experienced by taxpayers will be relayed 
directly to the Committee on Ways and Means,

[[Page H3408]]

without passing through the many layers of administrative filters of 
the IRS and then the Department of the Treasury.
  This will enable us here in Congress to respond in a far more timely 
fashion to the problems, indeed the snares, taxpayers get caught in as 
they deal with the IRS. That will allow us to deal with the legitimate 
problems, while assuring that the IRS can collect the legitimately owed 
taxes.
  Mr. Speaker, the Nation's taxpayers probably will never enjoy paying 
taxes, but they should not feel powerless in their dealings with the 
IRS. The Taxpayer Bill of Rights II will establish many new procedural 
protections for taxpayers. Like the David in Biblical history, the 
average taxpayer may be smaller than the rival IRS, but we are giving 
him some significant weapons with which to defend himself.
  I support the passage of H.R. 2337, urge my colleagues to do 
likewise, and I thank the gentleman from California [Mr. Matsui], and 
his able staff, for their work with us on this matter over the last 
many months.
  Mr. Speaker, I reserve the balance of my time.
  Mr. MATSUI. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I also rise in strong support of H.R. 2337. This 
legislation has been adopted numerous times by the Committee on Ways 
and Means on a bipartisan basis, and certainly on the floor of the 
House it has been adopted as well, and the enactment is certainly long 
overdue. This legislation is supported by the administration and will 
result in a much needed protection for taxpayers in their dealings with 
the Internal Revenue Service.
  Mr. Speaker, I would like to first of all take this opportunity to 
commend the gentlewoman from Connecticut, Chairwoman Nancy Johnson, who 
has done a tremendous job on making sure that we have a bipartisan 
approach to this piece of legislation. All through the drafting and the 
putting together of this legislation, we have worked very 
cooperatively, and she and her staff have kept us informed, and I just 
want to take this opportunity to personally thank her for her efforts.
  Certainly it goes also to the majority's fine staff, Donna Steele, 
and the members of our staff, Beth Vance, as well; all have played a 
significant role in making sure this legislation is in the form that it 
is today.
  I want to also thank Secretary Rubin, and particularly Les Samuels, 
the assistant to Mr. Rubin, who has been very helpful with his input in 
the drafting of this legislation. Of course, the Internal Revenue 
Commissioner, Margaret Richardson, who has made, as Chairwoman Johnson 
stated in her opening statement, numerous reforms in this particular 
area.
  This legislation, Mr. Speaker, is the second comprehensive taxpayers' 
bill of rights that have been adopted by the Congress and signed, 
hopefully signed, by the President. this bill will establish, as the 
gentlewoman from Connecticut [Mrs. Johnson] has said, a taxpayer 
advocate which will replace the ombudsman.
  The advocate will have four main responsibilities. One to assist the 
taxpayer in resolving problems with the Internal Revenue Service; two, 
to identify problem areas within the Internal Revenue Service; three, a 
proposed change in the practice of the Internal Revenue Service to 
solve these problems; and, four, identify legislative solutions to 
these problems as well.
  The second area in this bill in terms of making major changes, it 
will switch the burden of proof in cases in which attorneys' fees will 
be awarded. Currently taxpayers must show that the position of the IRS 
was not substantially justified in order to recover his or her attorney 
fees. Under the bill, a taxpayer who wins a suit can recover his or her 
fees unless the Internal Revenue Service can show that it was 
substantially justified in pursuing the action against the taxpayer in 
the first instance.
  Three, the bill includes a number of provisions in which the IRS has 
greater flexibility in waiving certain penalties and will require that 
the Internal Revenue Service notify taxpayers before taking actions 
that would adversely affect them.
  Fourth, the bill does address a problem that has been in the news 
over the last few years, and this deals with divorced spouses. There 
have been several cases where divorced spouses have signed returns not 
knowing what is in these returns, and before collection will occur now 
the Internal Revenue Service must give advance notice to the former 
spouse before any collection efforts will be taken.
  In addition, the Service will do a study that will be due back in 6 
months on how to deal with the issue of joint and several liability, 
undoubtedly which will affect many people in the middle of a divorce or 
are divorced when the filing occurs.
  Again, I would like to thank the gentlewoman from Connecticut [Mrs. 
Johnson] and members of the majority staff for all their help in this 
effort. I know that this is only the second step. We intend I believe 
to have a taxpayers' bill of rights III during the next Congress, and I 
look forward to working with the members of this committee and 
certainly the Members of the House and the administration.
  Mr. Speaker, I reserve the balance of my time.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Texas [Mr. Archer], the chairman of the Committee on 
Ways and Means, and I thank him for his participation.
  Mr. ARCHER. Mr. Speaker, I thank the gentlewoman for yielding me 
time, and also commend her on the outstanding work she has done on this 
bill.
  Mr. Speaker, I rise in strong support of the Taxpayer Bill of Rights 
II, which will establish many new protections for the Nation's 
taxpayers in their dealings with the IRS. The campaign to safeguard 
taxpayer rights has a long history. The original Taxpayer Bill of 
Rights was enacted in 1988. While this legislation was a good first 
step, the continuing course of constituent complaints against the IRS 
has convinced us of the need to enact additional taxpayer protections.
  Under this bill, taxpayers who are involved in a dispute with the IRS 
will be armed with additional rights and protections. In the David 
against Goliath fight between the taxpayer and the IRS, this bill is 
the slingshot the taxpayer can now use to win his or her fight.
  I compliment the gentlewoman from Connecticut, [Mrs. Johnson], 
chairwoman of the Subcommittee on Oversight, and the gentleman from 
California [Mr. Matsui], the ranking Democrat, for their dedication to 
championing the cause of the Nation's taxpayers.
  Mr. Speaker, the IRS is the agency tasked with the responsibility of 
enforcing our Nation's tax laws and collecting the taxes that are 
legally due. It is an important job, because the functioning of the 
Federal Government depends on the public's willingness to voluntarily 
pay the taxes they owe. However, it is also a very difficult 
responsibility because the complicated structure of our current income 
tax system necessarily interjects the IRS into the private lives of the 
American people.
  There is no question the IRS has grown too powerful and too 
intrusive. However, this has come in direct response to the growing 
complexity of our current tax system. The ultimate solution to this 
problem is to tear the income tax out by its roots and eliminate the 
need for an agency which must delve into our private lives in order to 
enforce the tax system. But until Congress fundamentally reforms the 
tax laws, the next best approach is to make the current tax system 
operate in a way which treats taxpayers more fairly.

                              {time}  1230

  Mr. MATSUI. Mr. Speaker, I reserve the balance of my time.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from California [Mr. Cox].
  Mr. COX of California. Mr. Speaker, I thank the gentlewoman for 
yielding me this time.
  Mr. Speaker, too often the taxpayer is at the mercy of the IRS, and 
the whole purpose of this bill is to try to set that right, at least a 
little bit.
  Included in this Taxpayer Bill of Rights II is the Fast and Efficient 
Tax Filing Act, and I want to thank the Members that worked on Ways and 
Means, in particular my colleague the gentlewoman from Connecticut, 
Nancy Johnson, and my colleague from California for including this in 
the legislation, so thank you, Mr. Matsui, as well.

[[Page H3409]]

  The Fast and Efficient Tax Filing Act is going to make at least one 
area of the Internal Revenue Code a little more user friendly. Many of 
you may have at one time in your lives stood in line for an IRS Postal 
Service postmark to mail your tax return on April 15.
  Turns out that in order to use this rule, the Postal Service must be 
the form of delivery. If on the morning of April 15 you send it Federal 
Express, UPS, or some overnight delivery, and it gets there the next 
day, that is not good enough. If you put it in the mailbox and it gets 
postmarked, or if you stand in line and get that receipt from the 
Postal Service, even though the IRS does not get it for a week, then 
you can use the rule.
  Both taxpayers and the IRS are being cheated under the current 
system. As a result of the Fast and Efficient Tax Filing Act, no more 
midnight waits at the post office; send it Fed Ex, call 1-800 pickup or 
DHL, or any of the competitors that we have that operate in America to 
deliver things efficiently throughout the rest of our economy. Next 
year you will be able to do that as a result of the passage of this 
bill.
  So I want to congratulate once again my colleagues, the gentleman 
from California [Mr. Matsui] and the gentlewoman from Connecticut [Mrs. 
Johnson], for including this in a wonderful bill. The IRS is going to 
get returns faster. Our constituents will not stand in line. At least 
this one area of our onerous Tax Code will have a modicum of common 
sense.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself such time as 
I may consume to thank the gentleman from California for his good work. 
He did contribute to this bill very substantially, and I thank him for 
his comments today.
  Mr. Speaker, I would now like to recognize the gentleman from Ohio 
[Mr. Traficant], and in so doing I want to recognize his tireless 
efforts to promote the rights of taxpayers in their dealings with the 
IRS. He has long been one of this body's most steadfast champions for 
the Nation's taxpayers, and he deserves much of the credit for 
provision in this bill relating to burden-of-proof issues, including 
the provision relating to the award of attorneys fees and costs, which 
shifts the burden to the IRS to prove that it was justified in bringing 
its case against the taxpayer.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Ohio [Mr. Traficant].
  Mr. TRAFICANT. Mr. Speaker, I appreciate that from the distinguished 
chairwoman, and I think the gentlewoman from Connecticut, Mrs. Johnson 
was tired of having me run her down on the floor, and the gentleman 
from Texas, Bill Archer. I want to thank Speaker Gingrich, the 
gentleman from Texas, Dick Armey, the gentlewoman from Connecticut, 
Nancy Johnson, the gentleman from Texas, Bill Archer, the gentleman 
from Florida, Sam Gibbons, and the gentleman from California, Bob 
Matsui.
  Yes, I have been aggressive on some of these issues, and the 
gentlewoman from Connecticut has accommodated me under a powerful 
strain of opposition at times from the Internal Revenue Service.
  Two provisions I worked hard for, as cited by the gentlewoman from 
Connecticut [Mrs. Johnson]. No. 1, after a matter has been adjudicated, 
a taxpayer can in fact go after those attorney fees and costs and, in 
fact the burden of proof after adjudication is thus switched to the IRS 
to justify and maintain their position for going after the taxpayer in 
the first place.
  That is a good first step, my colleagues. I have no complaints with 
that, and I commend you and thank you for doing something I could not 
get a Congress to do over the last four terms.
  The second one says that right now there is a cap of $100,000 when an 
IRS agent violates the rights of a taxpayer. In my provision in here it 
increases that cap to $1 million, and I think $1 million will get their 
attention.
  This is a great first step, but I want to just make a few points 
today, and I want to ask the Committee on Ways and Means to consider 
what I say very seriously. More than 97 percent of the American people 
support the change in the burden of proof in a civil tax case. No one 
has helped me more than the gentlewoman from Connecticut [Mrs. Johnson] 
and the gentleman from Texas [Mr. Archer]. As a Democrat, I want to 
commend the Republican leadership for giving me an opportunity on this.
  Right now, under current existing law, in a civil tax case a taxpayer 
goes into court with the burden of proof. They have to prove they are 
innocent. There is no other provision in law. I do not know how this 
evolution has come about, where all of a sudden we have a law that 
places an American guilty in the eyes of the court and under the 
statutory law and they must prove themselves innocent.
  Some of the arguments we are getting from the IRS are that deadbeats 
might get over. I do not believe that. I think the IRS is now saying 
that this would be a big revenue loser. I would say to all leaders, if 
we scored the Bill of Rights and let the IRS score the Bill of Rights, 
would we enjoy the freedoms of the Bill of Rights? Money is not an 
argument here.
  I think when the IRS says, ``Look, Mr. Traficant, don't confuse us 
with the Constitution,'' I cannot buy the argument.
  I am asking the Committee on Ways and Means to look at offsets. My 
new bill, H.R. 2450, handles this matter differently. It breaks it down 
to administrative and judicial.
  When a taxpayer gets notice of an administrative audit, in that 
administrative procedure they have the burden of proof. They must 
substantiate those representations they make on their tax forms. But in 
good faith, having made those representations and the IRS then choosing 
to take the matter to court, the Traficant bill says at that point the 
burden of proof shifts to the IRS and the IRS shall be able to justify 
their case, prove evidence, submit evidence, and prove that matter.
  Let me say this. That is something that we here in Congress should 
do. I would even be willing to have a provision in that bill that says 
that in the administrative procedure where the burden of proof is on 
the taxpayer, they must comply, if they are not compliant and deemed to 
have not complied in the eyes of the court, that the court can maintain 
the burden of proof on the taxpayer.
  It would force the administrative process to be up front. We could 
expedite these cases. I do not think we would have as big a revenue 
problem as we have, and I would urge the committee to look at the 
scoring of it, but not only look at the scoring but to look at the 
offsets for funds to right this wrong.
  But for me to stand up here today and to say because this total 
burden of proof is not enacted makes this bill weaker would not be 
fair. The gentlewoman from Connecticut [Mrs. Johnson] has done a fine 
job. I thank her for putting up with me.
  The gentleman from California [Mr. Matsui] and the gentleman from 
Texas [Mr. Archer] are going to have to put up more with me, and their 
staff, because I will not be satisfied until we right the wrong. A 
taxpayer in America pays the freight on this train coming down the 
track and, by God, they should at least be considered like everyone 
else in a court of law, innocent until proven guilty.
  I am asking for their help, and I appreciate the time the gentlewoman 
has given me.
  Mr. MATSUI. Mr. Speaker, I yield myself such time as I may consume.
  First, I want to commend the gentleman from Ohio [Mr. Traficant]. As 
the gentlewoman from Connecticut [Mrs. Johnson] has said, he really has 
been very helpful providing information to us, both in terms of the 
burden of proof issue and, second, in terms of lifting the $100,000 cap 
to $1 million in terms of the damage issue. We want to thank him very, 
very much for that.
  We both look forward to working with the gentleman in the future on 
the third tax bill of rights legislation when we bring it before the 
House. Again, we thank him.
  Second, I would like to just thank the gentleman from California [Mr. 
Cox] for his very helpful information and piece of legislation, as 
well, in terms of the alternative uses besides the Postal Service in 
terms of filing returns.
  I might also add the name of this legislation is the Pickle-Johnson 
legislation, and that is not two Texans, that

[[Page H3410]]

is not President Johnson, but that is the gentlewoman from Connecticut, 
Nancy Johnson, and of course Jake Pickle, who was really one of the 
leaders for the last 10 years working on the tax bill of rights. This 
is the Pickle-Johnson legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, I would like to comment that my colleague, the gentleman 
from California [Mr. Matsui], and I and our staff have worked very 
hard, not only together and with Members and with constituents who have 
testified, but also with the IRS. These provisions are going to front-
load those defenses that taxpayers need so that we should not be 
getting into the kinds of problems that the gentleman from Ohio [Mr. 
Traficant] describes.
  By assuring taxpayers better information, more open communication and 
better procedures, we believe their rights will be defended long before 
they get into the level of controversy that has concerned the 
gentleman, and rightly so.
  Mr. Speaker, I yield 2 minutes to the gentleman from Texas, Mr. Sam 
Johnson.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I too would like to commend 
the gentlewoman from Connecticut, Nancy Johnson, and the gentleman from 
California, Mr. Matsui, for doing a good job and for getting this bill 
back to the floor, this bill of rights back to the floor for a second 
time.
  As you know, the President vetoed it back in December, along with a 
bunch of other stuff. But this bill is important because the powers of 
the IRS to investigate and examine taxpayers are greater than any other 
Government agency. They are intrusive. They are into our lives, and it 
seems that the constitutional rights of taxpayers are always trampled 
upon but nothing is ever done.
  This bill makes important commonsense changes to current law that 
will strengthen the rights of American taxpayers. It establishes a 
taxpayer advocate to prevent the IRS from treating taxpayers like 
second class citizens. It increases the amount people may sue the IRS 
from $100,000 to $1 million. And for the first time, it allows the 
Federal courts to determined IRS failure and abuse of discretion.
  While this bill makes important progress to rein in the IRS and its 
115,000 IRS agents, I believe America is demanding that the entire 
system should be replaced, and I think we must insist that any new 
system must empower individuals and not the Government; provide 
opportunities, not dead ends, and, most importantly, it must offer the 
hard-working people of this country the freedom to achieve the American 
dream.
  I commend the gentlewoman again for bringing this bill to the floor 
again, and I hope we can get it through in good shape this time.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1\1/2\ minutes to 
the gentleman from Florida [Mr. Shaw].
  Mr. SHAW. Mr. Speaker, I thank the gentlewoman for yielding this time 
to me, and I stand up in vigorous support of a commonsense change in 
the law as it affects the taxpayers' rights in balancing it out with 
the rights and duties of the Internal Revenue Service.
  The Internal Revenue Service is a needed agency which looks over the 
collection of taxes in this country. There is no question about it. But 
there are some things that need to be balanced out which this 
legislation does.
  To give just a few examples of what is in this bill that needs to be 
done: One of the provisions in here would allow the IRS to release 
property on which there are liens when it is to the advantage of the 
Government to do so. Right now they cannot do that.
  You have situations where businesses are closed down, where if the 
IRS would simply allow them to continue to exist for a short period of 
time, the Federal Government could make up some of the dollars that it 
is losing. And, of course, also, there is a question of jobs being 
lost. This is just plain common sense.
  When we have a situation where a spouse is charged with liability 
because of signing a joint return and the secrecy law comes into play, 
it is only common sense, if we are going to go after using the female 
spouse, that we would be able to share certain information, which now 
the IRS is prohibited from doing.
  These are just a couple of examples of just pure common sense that we 
are putting into the law.
  I compliment my fellow Members of the Committee on Ways and Means. It 
was a good meeting, and I think it shows that we have great bipartisan 
support, and I am sure that each Member of the Congress, every Member 
of the Congress is going to be proud to vote for and support this 
legislation.
  Mr. MATSUI. Mr. Speaker, I yield myself such time as I may consume to 
say that I do not believe we have any further speakers.
  I might just add, in closing on my side, that we hope that the 
Members support this bill. I urge support of this legislation. The 
President supports this legislation and will sign this bill and, again, 
I look forward to continuing working with the gentlewoman from 
Connecticut.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Camp). The gentlewoman from Connecticut 
has three-fourth of a minute remaining.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield the balance of my 
time to the gentleman from Colorado [Mr. Hefley].
  Mr. HEFLEY. Mr. Speaker, I rise today in support of the Taxpayer Bill 
of Rights. I think it is a step we need to take.
  There are a couple of things I wish had been in it that are not 
there. One of them, the item that the gentleman from Ohio [Mr. 
Traficant] has worked so hard on, and some of the rest of us, and that 
is to change the burden of proof. The other is that the IRS should pay 
back at the same interest rate that we have to pay if they overcharge 
us.

                              {time}  1245

  But Congress, I think, has finally realized what taxpayers have known 
for years, that the IRS has too much power over the lives of ordinary 
citizens. This bill contains some much-needed reforms which make so 
much sense. I have to shake my head and wonder that these protections 
do not already exist.
  This bill creates the position of taxpayer advocate. It expands the 
authority of the IRS to abate interest and penalties, extend the length 
of time which the taxpayer may fulfill his obligation to the IRS 
without accrual of excessive penalties and interest. It allows the 
taxpayer, when they are right, to collect the money in fees and costs 
from the IRS. I hope we can pass this bill.
  Mr. NEAL. Mr. Speaker, yesterday the House was involved in a 
publicity stunt because of it being tax day. Today, we are debating tax 
legislation that will truly help the American people. Before us today 
is the Taxpayer Bill of Rights. The purpose of this legislation is to 
help those taxpayers who find themselves in dispute with the Internal 
Revenue Service [IRS].
  This legislation will reduce the anxiety that surrounds April 15 each 
year. Taxpayers will have some extra assistance when they are faced 
with the IRS. This legislation is based on an extensive bipartisan 
effort of the Ways and Means Committee to assist the taxpayer. Mr. 
Pickle, the former chairman of the Subcommittee on Oversight, worked 
long and hard on this issue. The legislation before us today is 
substantially the same as legislation developed by Mr. Pickle. Also, 
Senator Pryor has spent many years working on this legislation.
  One of the key provisions of this legislation is the creation of an 
independent taxpayer advocate. The taxpayer advocate will work to 
improve taxpayer services and IRS responsiveness. The taxpayer advocate 
will report to the tax writing committees of Congress on the progress 
in this area. Another key provision requires the IRS to report to the 
tax writing committees on the misconduct of IRS employees. This report 
will give Congress the chance to study the misconduct of IRS employees 
and the punishment for misconduct.
  Taxpayers will receive assistance for taxpayers who experienced 
difficulty with the IRS. This legislation would allow taxpayers who 
have been the victim of reckless collection actions by the IRS to sue 
the Government for $1 million up from the current cap of $100,000.
  The bottom line is this legislation will make it easier for taxpayers 
to work with the IRS. Currently, the United States has an 86-percent 
rate of compliance for Federal taxes. Hopefully, this legislation will 
help improve compliance which is already the envy of other countries. 
This legislation will improve the working relationship between 
taxpayers and the IRS.

[[Page H3411]]

  I am pleased this legislation is before us today. This legislation is 
a concrete way to help make April 15 a less stressful day for all 
Americans.
  Mr. PORTMAN. Mr. Speaker, first of all, I would like to thank 
Chairman Johnson for her excellent leadership in crafting this bill. 
She and her Oversight Subcommittee staff have worked tirelessly on 
behalf of the American taxpayer.
  Mr. Speaker, yesterday's deadline to file income tax returns reminds 
us of how much power the Internal Revenue Service has over the honest 
taxpayers of this country. We must ensure that the IRS isn't heavy-
handed in enforcing regulations and that the taxpayer has adequate 
protections.
  One of my constituents learned the hard way about how the IRS 
sometimes does business. While she was married, she and her self-
employed husband filed a joint tax return. But after her divorce was 
finalized, the IRS determined that she was responsible for paying off 
almost all of the $30,000 in taxes her ex-husband owed the Federal 
Government.
  The IRS rejected her plea for relief under the innocent spouse 
provision in the Tax Code because she had signed the joint tax returns. 
Her ex-husband is now off the hook, having settled with the IRS for 
about $5,000. Meanwhile, this divorcee currently owes the IRS $20,000, 
a burden that could affect her for the rest of her life. She says she 
feels like she's being punished for being a good citizen and for 
working hard. It certainly looks that way to me, too.
  We owe it to the hardworking citizens of our country to prevent the 
IRS from unfairly pushing them around. Most people come away from a 
confrontation with the IRS feeling bruised and battered. This 
legislation at least will give them a fighting chance--it includes more 
than 30 items that give the taxpayers rights and powers in dealing with 
the IRS. Some of these provisions will help ensure that divorced filers 
are not victimized.
  I urge my colleagues in the House to vote in favor of passage of this 
Taxpayer Bill of Rights--it will guard against unreasonable IRS 
positions and protect the rights of taxpayers.
  Mr. PACKARD. Mr. Speaker, few things are scarier than getting into a 
dispute with the IRS. They truly believe that they are above the law 
and all too often taxpayers have no recourse.
  During April, working Americans struggle to fill out complicated U.S. 
tax forms, enduring great anxiety and paying out large sums of money to 
accountants, just to guarantee that they are giving Uncle Sam the 
appropriate and expected amount. And when there is a dispute or audit, 
taxpayers--right or wrong--always end up paying the price. Ironically 
the IRS' own annual reports admit a high rate of errors and the IRS 
telephone information service gives out wrong answers as much as one-
third of the time.
  My Republican colleagues and I are committed to changing that. The 
taxpayer bill of rights that we consider today makes it harder for the 
IRS to demand America's hard-working families pay for the IRS' own 
mistakes. The more than 30 protections in this bill will waive interest 
charges when the IRS is at fault for tax underpayment. It extends time 
for taxpayers to pay delinquent taxes without being subject to interest 
and penalties. It allows taxpayers to sue the IRS for reckless 
collection actions and there are dozens of other taxpayer protections 
included in this measure.
  Mr. Speaker, our tax system has veered out of control. My Republican 
colleagues and I know America needs tax reform and the debate will 
begin in earnest this week. Because, it will not happen overnight, we 
must provide tax relief now to America's families. The taxpayer bill of 
rights does that and more. It proves to our taxpayers that the 
Republican-led Congress is committed to returning fiscal responsibility 
to Washington.
  Mrs. MINK of Hawaii. Mr. Speaker, I rise in support of H.R. 2337, the 
Taxpayer Bill of Rights Act, which represents significant advancement 
toward fair treatment of taxpayers under the Internal Revenue Code by 
the Internal Revenue Service.
  I am particularly in favor of a section that embodies the intent of a 
bill that I introduced last year, H.R. 331, which would require the 
Federal Government to consider as having arrived on time any sealed bid 
for the procurement of goods or services, if the bid was sent by an 
overnight message delivery service at least 2 business days before the 
date specified for receipt of bids.
  Current procurement law states that late bids cannot be considered 
for awards unless they were one, sent by registered or certified mail 
no later than 5 days before the bids receipt deadline, two, proven to 
have been delivered late due to mishandling by the receiving Government 
agency, or three, sent by U.S. Postal Service Express Mail Next Day 
Service no later than 2 business days prior to bid receipt deadline. 
This provision excludes from this portion of the procurement process 
the use of private delivery services, such as United Postal Service and 
Federal Express, despite the fact that these companies have proven 
trustworthy and reliable in overnight package delivery, not only 
meeting but in many cases exceeding the abilities of the U.S. Postal 
Service.
  Similarly, Internal Revenue Code Sec. 7502 was recently interpreted 
by the Ninth Circuit U.S. Court of Appeals (V.L. Correia, 58 F.3d 468 
(1995)) that only the date of actual delivery to the IRS or Tax Court 
by private delivery service is applicable, rather than the date of 
mailing as in cases of delivery by the U.S. Postal Service. Section 
1210 of the bill before us would allow the Secretary of the Treasury to 
expand this timely mailing as timely-filing section to the use of 
private delivery companies that meet specified criteria. A significant 
number of American taxpayers every year attempt to submit their income 
tax returns to the IRS through a private delivery service, only to find 
this inadequate to demonstrate timely filing of their returns.
  I urge my colleagues full support of this provision, as well as my 
bill, H.R. 331.
  Mr. KLECZKA. Mr. Speaker, 8 years ago, the first ``Taxpayer Bill of 
Rights'' passed which created a more level playing field between 
citizens and the IRS with safeguards to protect taxpayers. The 
legislation gave taxpayers the right to sue the IRS for actions taken 
by its agents, provided financially troubled taxpayers the right to 
seek an installment tax payment plan, and enabled taxpayers who prevail 
over the IRS in court to seek reimbursement for part of their attorney 
fees in some circumstances.
  Although this 1988 legislation was a step in the right direction, 
more can be done to help taxpayers. The ``Taxpayer Bill of Rights II,'' 
which I strongly supported in the Ways and Means Committee, contains 
over two dozen provisions to give taxpayers further protection. This 
bill will expand the power of the IRS Taxpayer Ombudsman to issue 
protective orders to help taxpayers, mandate that the IRS take 
reasonable steps to corroborate third-party information disputed by a 
taxpayer, and give the IRS the authority to waive the interest on late 
tax payments in cases where there is a valid reason for such payment. 
Additionally, the bill would increase to $1 million the civil damages 
for which a taxpayer could sue the IRS in cases of unauthorized 
collections.
  The vast majority of citizens are responsible taxpayers who deserve 
the additional rights and safeguards that the Taxpayer Bill of Rights 
II will provide. I hope that Congress will quickly pass, and the 
President sign this meaningful bill. I urge a ``yea'' vote.
  Ms. DUNN of Washington. Mr. Speaker, I rise in strong support of H.R. 
2337, the Taxpayer Bill of Rights II and urge its adoption.
  All too often ``tax fairness'' usually refers almost solely to 
whether Government is seizing the right amount of money from different 
economic classes--not how the tax collectors are treating the 
individual citizen.
  Under U.S. law, Americans are innocent until proven guilty. Yet, when 
an individual taxpayer deals with the IRS, the taxpayer is guilty until 
he or she proves their innocence.
  Over the past few months, I have heard from literally hundreds of 
constituents who have described to me numerous problems they see with 
our system of taxation. A common theme has been the intrusive nature of 
the Internal Revenue Service [IRS] and the enormous compliance burdens 
imposed on individuals.
  This measure gives taxpayers a helping hand if they find themselves 
at odds with the IRS. The American taxpayer will be empowered with more 
than 30 protections in dealing with the IRS.
  In addition to these protections, I will continue to work for the 
inclusion of an additional provision in the final version of this 
legislation that I have been working on within the Ways and Means 
Committee.
  Specifically, the bipartisan provision, which I am sponsoring along 
with my colleague, Mr. Matsui, would permit ``equitable tolling'' 
application in tax refund cases.
  My interest in this area was precipitated by a highly publicized 
court case in which a 93-year-old senile man, Stanley McGill, overpaid 
his taxes in 1984. After Mr. McGill's death in 1988, Marian Brockamp 
found her late father's canceled check to the IRS in a pile of 
receipts. In fact, Mr. McGill owed the IRS $700--not $7,000. Mrs. 
Brockamp asked the IRS for a refund.
  Although the agency acknowledged the mistake, it refused to return 
the money, claiming the 3-year statue of limitations on refund claims 
had expired.
  But Brockamp's attorney argued that the time set aside for suing the 
Government should be extended under the legal doctrine known as 
equitable tolling--which is invoked in cases where a taxpayer is 
disabled.
  A Federal judge in Los Angeles rejected that argument in 1993, but 
the 9th U.S. Circuit Court of Appeals overruled the lower court in June 
1995, calling the IRS refusal unconscionable.

[[Page H3412]]

  The Justice Department has appealed the decision to the Supreme 
Court.
  This is just one example of an outrageous injustice that my 
commonsense change of law is intended to end.
  H.R. 2337, the Taxpayer Bill of Rights II, will help the average 
American, who might have made an honest mistake in underestimating his 
taxes due by providing him a little more time to prove it was an honest 
mistake.
  The new majority in this Congress is working on commonsense ways to 
give taxpayers a break. In fact, the Taxpayers Bill of Rights II itself 
is simply a long overdue exercise in common sense. Will Rogers once 
said, ``Common sense ain't that common.'' Well, like everything else, 
common sense is making a comeback.
  The SPEAKER pro tempore (Mr. Camp). The question is on the motion 
offered by the gentlewoman from Connecticut [Mrs. Johnson] that the 
House suspend the rules and pass the bill, H.R. 2337, as amended.
  The question was taken.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I object to the vote on the 
ground that a quorum is not present and make the point of order that a 
quorum is not present.
  The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.
  The point of no quorum is considered withdrawn.

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