[Congressional Record Volume 143, Number 111 (Thursday, July 31, 1997)]
[Senate]
[Pages S8535-S8547]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERREY (for himself and Mr. Grassley):
  S. 1096. A bill to restructure the Internal Revenue Service, and for 
other purposes; to the Committee on Finance.


   the internal revenue service restructuring and reform act of 1997

  Mr. KERREY. Madam President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1096

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

[[Page S8536]]

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

       (a) Short Title.--This Act may be cited as the ``Internal 
     Revenue Service Restructuring and Reform Act of 1997''.
       (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.
Sec. 2. Congressional findings and declaration of purposes.

   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

Sec. 101. Internal Revenue Service Oversight Board.
Sec. 102. Commissioner of Internal Revenue; Chief Counsel; other 
              officials.
Sec. 103. Other personnel.

                  Subtitle B--Personnel Flexibilities

Sec. 111. Personnel flexibilities.

                      TITLE II--ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Extension of time to file for electronic filers.
Sec. 203. Paperless electronic filing.
Sec. 204. Regulation of preparers.
Sec. 205. Paperless payment.
Sec. 206. Return-free tax system.
Sec. 207. Access to account information.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 301. Expansion of authority to issue taxpayer assistance orders.
Sec. 302. Expansion of authority to award costs and certain fees.
Sec. 303. Civil damages for negligence in collection actions.
Sec. 304. Disclosure of criteria for examination selection.
Sec. 305. Archival of records of Internal Revenue Service.
Sec. 306. Tax return information.
Sec. 307. Freedom of information.
Sec. 308. Offers-in-compromise.
Sec. 309. Elimination of interest differential on overpayments and 
              underpayments.
Sec. 310. Elimination of application of failure to pay penalty during 
              period of installment agreement.
Sec. 311. Safe harbor for qualification for installment agreements.
Sec. 312. Payment of taxes.
Sec. 313. Low income taxpayer clinics.
Sec. 314. Jurisdiction of the Tax Court.
Sec. 315. Cataloging complaints.
Sec. 316. Procedures involving taxpayer interviews.
Sec. 317. Explanation of joint and several liability.
Sec. 318. Procedures relating to extensions of statute of limitations 
              by agreement.
Sec. 319. Review of penalty administration.
Sec. 320. Study of treatment of all taxpayers as separate filing units.
Sec. 321. Study of burden of proof.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

Sec. 401. Expansion of powers of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.

                           Subtitle B--Budget

Sec. 411. Budget discretion.
Sec. 412. Funding for century date change.
Sec. 413. Financial management advisory group.

                     Subtitle C--Tax Law Complexity

Sec. 421. Role of Internal Revenue Service.
Sec. 422. Tax complexity analysis.
Sec. 423. Simplified tax and wage reporting system.
Sec. 424. Compliance burden estimates.

     SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

       (a) The Congress finds the following:
       (1) The structure of the Internal Revenue Service should be 
     strengthened to ensure focus and better target its budgeting, 
     staffing, and technology to serve the American taxpayer and 
     collect the Federal revenue.
       (2) The American public expects timely, accurate, and 
     respectful service from the Internal Revenue Service.
       (3) The job of the Internal Revenue Service is to operate 
     as an efficient financial management organization.
       (4) The bulk of the Federal revenue is generated through 
     voluntary compliance. Taxpayer service and education, as well 
     as targeted compliance and enforcement initiatives, increase 
     voluntary compliance.
       (5) While the Internal Revenue Service must maintain a 
     strong enforcement presence, its core and the core of the 
     Federal revenue stream lie in a revamped, modern, 
     technologically advanced organization that can track 
     finances, send out clear notices, and assist taxpayers 
     promptly and efficiently.
       (6) The Internal Revenue Service governance, management, 
     and oversight structures must: develop and maintain a shared 
     vision with continuity; set and maintain priorities and 
     strategic direction; impose accountability on senior 
     management; provide oversight through a credible board, 
     including members who bring private sector expertise to the 
     Internal Revenue Service; develop appropriate measures of 
     success; align budget and technology with priorities and 
     strategic direction; and coordinate oversight and identify 
     problems at an early stage.
       (7) The Internal Revenue Service must use information 
     technology as an enabler of its strategic objectives.
       (8) Electronic filing can increase cost savings and 
     compliance.
       (9) In order to ensure that fewer taxpayers are subject to 
     improper treatment by the Internal Revenue Service, Congress 
     and the agency need to focus on preventing problems before 
     they occur.
       (10) There currently is no mechanism in place to ensure 
     that Members of Congress have a complete understanding of how 
     tax legislation will affect taxpayers and the Internal 
     Revenue Service and to create incentives to simplify the tax 
     law, and to ensure that Congress hears directly from the 
     Internal Revenue Service during the legislative process.
       (b) The purposes of this Act are as follows:
       (1) To restructure the Internal Revenue Service, 
     transforming it into a world class service organization.
       (2) To establish taxpayer satisfaction as the goal of the 
     Internal Revenue Service, such that the Internal Revenue 
     Service should only initiate contact with a taxpayer if the 
     agency is prepared to devote the resources necessary for a 
     proper and timely resolution of the matter.
       (3) To provide for direct accountability to the President 
     for tax administration, an Internal Revenue Service Oversight 
     Board, a strengthened Commissioner of Internal Revenue, and 
     coordinated congressional oversight to ensure that there are 
     clear lines of accountability and that the leadership of the 
     Internal Revenue Service has the continuity and expertise to 
     guide the agency.
       (4) To enable the Internal Revenue Service to recruit and 
     train a first-class workforce that will be rewarded for 
     performance and held accountable for working with taxpayers 
     to solve problems.
       (5) To establish paperless filing as the preferred and most 
     convenient means of filing tax returns for the vast majority 
     of taxpayers within 10 years of enactment of this Act.
       (6) To provide additional taxpayer protections and rights 
     and to ensure that taxpayers receive fair, impartial, timely, 
     and courteous treatment from the Internal Revenue Service.
       (7) To establish the resolution of the century date change 
     problem as the highest technology priority of the Internal 
     Revenue Service.
       (8) To establish procedures to minimize complexity in the 
     tax law and simplify tax administration, and provide Congress 
     with an independent view of tax administration from the 
     Internal Revenue Service.
   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE
     Subtitle A--Executive Branch Governance and Senior Management

     SEC. 101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

       (a) In General.--Section 7802 (relating to the Commissioner 
     of Internal Revenue) is amended to read as follows:

     ``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

       ``(a) Establishment.--There is established within the 
     Department of the Treasury the Internal Revenue Service 
     Oversight Board (in this subchapter referred to as the 
     `Board').
       ``(b) Membership.--
       ``(1) Composition.--The Board shall be composed of 9 
     members, of whom--
       ``(A) 7 shall be individuals who are not full-time Federal 
     officers or employees, who are appointed by the President, by 
     and with the advice and consent of the Senate, and who shall 
     be considered special government employees pursuant to 
     paragraph (2),
       ``(B) 1 shall be the Secretary of the Treasury or, if the 
     Secretary so designates, the Deputy Secretary of the 
     Treasury, and
       ``(C) 1 shall be a representative of an organization that 
     represents a substantial number of Internal Revenue Service 
     employees who is appointed by the President, by and with the 
     advice and consent of the Senate.
       ``(2) Special government employees.--
       ``(A) Qualifications.--Members of the Board described in 
     paragraph (1)(A) shall be appointed solely on the basis of 
     their professional experience and expertise in the following 
     areas:
       ``(i) Management of large service organizations.
       ``(ii) Customer service.
       ``(iii) Compliance.
       ``(iv) Information technology.
       ``(v) Organization development.
       ``(vi) The needs and concerns of taxpayers.

     In the aggregate, the members of the Board described in 
     paragraph (1)(A) should collectively bring to bear expertise 
     in these enumerated areas.
       ``(B) Terms.--Each member who is described in paragraph 
     (1)(A) shall be appointed for a term of 5 years, except that 
     of the members first appointed--
       ``(i) 1 member shall be appointed for a term of 1 year,
       ``(ii) 1 member shall be appointed for a term of 2 years,
       ``(iii) 2 members shall be appointed for a term of 3 years, 
     and
       ``(iv) 1 member shall be appointed for a term of 4 years.

[[Page S8537]]

       ``(C) Reappointment.--An individual who is described in 
     paragraph (1)(A) may be appointed to no more than two 5-year 
     terms on the Board.
       ``(D) Special government employees.--During such periods as 
     they are performing services for the Board, members who are 
     not Federal officers or employees shall be treated as special 
     government employees (as defined in section 202 of title 18, 
     United States Code).
       ``(E) Claims.--
       ``(i) In general.--Members of the Board who are described 
     in paragraph (1)(A) shall have no personal liability under 
     Federal law with respect to any claim arising out of or 
     resulting from an act or omission by such member within the 
     scope of service as a member. The preceding sentence shall 
     not be construed to limit personal liability for criminal 
     acts or omissions, willful or malicious conduct, acts or 
     omissions for private gain, or any other act or omission 
     outside the scope of the service of such member on the Board.
       ``(ii) Effect on other law.--This subparagraph shall not be 
     construed--

       ``(I) to affect any other immunities and protections that 
     may be available to such member under applicable law with 
     respect to such transactions,
       ``(II) to affect any other right or remedy against the 
     United States under applicable law, or
       ``(III) to limit or alter in any way the immunities that 
     are available under applicable law for Federal officers and 
     employees not described in this subparagraph.

       ``(3) Vacancy.--Any vacancy on the Board--
       ``(A) shall not affect the powers of the Board, and
       ``(B) shall be filled in the same manner as the original 
     appointment.
       ``(4) Removal.--
       ``(A) In general.--A member of the Board may be removed at 
     the will of the President.
       ``(B) Secretary or delegate.--An individual described in 
     subsection (b)(1)(B) shall be removed upon termination of 
     employment.
       ``(C) Representative of internal revenue service 
     employees.--A member who is from an organization that 
     represents a substantial number of Internal Revenue Service 
     employees shall be removed upon termination of employment, 
     membership, or other affiliation with such organization.
       ``(c) General Responsibilities.--
       ``(1) In general.--The Board shall oversee the Internal 
     Revenue Service in the administration, management, conduct, 
     direction, and supervision of the execution and application 
     of the internal revenue laws or related statutes and tax 
     conventions to which the United States is a party.
       ``(2) Exceptions.--The Board shall have no responsibilities 
     or authority with respect to--
       ``(A) the development and formulation of Federal tax policy 
     relating to existing or proposed internal revenue laws, 
     related statutes, and tax conventions,
       ``(B) specific law enforcement activities of the Internal 
     Revenue Service, including compliance activities such as 
     criminal investigations, examinations, and collection 
     activities, or
       ``(C) specific activities of the Internal Revenue Service 
     delegated to employees of the Internal Revenue Service 
     pursuant to delegation orders in effect as of the date of the 
     enactment of this subsection, including delegation order 106 
     relating to procurement authority, except to the extent that 
     such delegation orders are modified subsequently by the 
     Secretary.
       ``(3) Restriction on disclosure of return information to 
     board members.--No return, return information, or taxpayer 
     return information (as defined in section 6103(b)) may be 
     disclosed to any member of the Board described in subsection 
     (b)(1)(A) or (C). Any request for information not permitted 
     to be disclosed under the preceding sentence, and any contact 
     relating to a specific taxpayer, made by a member of the 
     Board to an officer or employee of the Internal Revenue 
     Service shall be reported by such officer or employee to the 
     Secretary and the Joint Committee on Taxation.
       ``(d) Specific Responsibilities.--The Board shall have the 
     following specific responsibilities:
       ``(1) Strategic plans.--To review and approve strategic 
     plans of the Internal Revenue Service, including the 
     establishment of--
       ``(A) mission and objectives, and standards of performance 
     relative to either, and
       ``(B) annual and long-range strategic plans.
       ``(2) Operational plans.--To review the operational 
     functions of the Internal Revenue Service, including--
       ``(A) plans for modernization of the tax system,
       ``(B) plans for outsourcing or managed competition, and
       ``(C) plans for training and education.
       ``(3) Management.--To provide for--
       ``(A) the selection and appointment, evaluation, and 
     removal of the Commissioner of Internal Revenue,
       ``(B) the review of the Commissioner's selection, 
     evaluation, and compensation of senior managers, and
       ``(C) the review of the Commissioner's plans for 
     reorganization of the Internal Revenue Service.
       ``(4) Budget.--To--
       ``(A) review and approve the budget request of the Internal 
     Revenue Service prepared by the Commissioner,
       ``(B) submit such budget request to the Secretary of the 
     Treasury,
       ``(C) ensure that the budget request supports the annual 
     and long-range strategic plans, and
       ``(D) ensure appropriate financial audits of the Internal 
     Revenue Service.

     The Secretary shall submit the budget request referred to in 
     subparagraph (B) for any fiscal year to the President who 
     shall submit such request, without revision, to Congress 
     together with the President's annual budget request for the 
     Internal Revenue Service for such fiscal year.
       ``(e) Board Personnel Matters.--
       ``(1) Compensation of members.--
       ``(A) In general.--Each member of the Board who is 
     described in subsection (b)(1)(A) shall be compensated at a 
     rate of $30,000 per year. All other members of the Board 
     shall serve without compensation for such service.
       ``(B) Chairperson.--In lieu of the amount specified in 
     subparagraph (A), the Chairperson of the Board shall be 
     compensated at a rate of $50,000 per year if such Chairperson 
     is described in subsection (b)(1)(A).
       ``(2) Travel expenses.--The members of the Board shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Board.
       ``(3) Staff.--On the request of the Chairperson of the 
     Board, the Commissioner shall detail to the Board such 
     personnel as may be necessary to enable the Board to perform 
     its duties. Such detail shall be without interruption or loss 
     of civil service status or privilege.
       ``(4) Procurement of temporary and intermittent services.--
     The Chairperson of the Board may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       ``(f) Administrative Matters.--
       ``(1) Chair.--The members of the Board shall elect a 
     chairperson for a 2-year term.
       ``(2) Committees.--The Board may establish such committees 
     as the Board determines appropriate.
       ``(3) Meetings.--The Board shall meet at least once each 
     month and at such other times as the Board determines 
     appropriate.
       ``(4) Reports.--The Board shall each year report to the 
     President and the Congress with respect to the conduct of its 
     responsibilities under this title.''.
       (b) Conforming Amendments.--
       (1) Section 4946(c) (relating to definitions and special 
     rules for chapter 42) is amended--
       (A) by striking ``or'' at the end of paragraph (5),
       (B) by striking the period at the end of paragraph (6) and 
     inserting ``, or'', and
       (C) by adding at the end the following new paragraph:
       ``(7) a member of the Internal Revenue Service Oversight 
     Board.''.
       (2) 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. Internal Revenue Service Oversight Board.''

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

     SEC. 102. COMMISSIONER OF INTERNAL REVENUE; CHIEF COUNSEL; 
                   OTHER OFFICIALS.

       (a) In General.--Section 7803 (relating to other personnel) 
     is amended to read as follows:

     ``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; CHIEF COUNSEL; 
                   OTHER OFFICIALS.

       ``(a) Commissioner of Internal Revenue.--
       ``(1) Appointment.--There shall be in the Department of the 
     Treasury a Commissioner of Internal Revenue who shall be 
     appointed by the Internal Revenue Service Oversight Board to 
     a 5-year term and compensated without regard to chapters 33, 
     51, and 53 of title 5, United States Code. The appointment 
     shall be made on the basis of demonstrated ability in 
     management and without regard to political affiliation or 
     activity. The Board may reappoint the Commissioner to 
     subsequent terms so long as performance is satisfactory or 
     better.
       ``(2) Duties.--The Commissioner shall--
       ``(A) administer, manage, conduct, direct, and supervise 
     the execution and application of the internal revenue laws or 
     related statutes and tax conventions to which the United 
     States is a party; and
       ``(B) when a vacancy occurs, recommend a candidate for 
     appointment as Chief Counsel for the Internal Revenue Service 
     to the President, and may recommend the removal of such Chief 
     Counsel to the President.
       ``(3) Consultation with board.--The Commissioner shall 
     consult with the Board on all matters set forth in paragraphs 
     (2) and (3) (other than subparagraph (A)) of section 
     7802(d)(2).
       ``(4) Pay.--The Commissioner is authorized to be paid at an 
     annual rate of basic pay not to exceed the maximum rate of 
     basic pay of level II of the Executive Schedule under section 
     5311 of title 5, United States Code, including any applicable 
     locality-based comparability payment that may be authorized 
     under section 5304 of such title 5.
       ``(b) Chief Counsel for the Internal Revenue Service.--
       ``(1) Appointment.--There shall be in the Department of the 
     Treasury a Chief Counsel

[[Page S8538]]

     for the Internal Revenue Service who shall be appointed by 
     the President, by and with the advice and consent of the 
     Senate.
       ``(2) Duties.--The Chief Counsel shall be the chief law 
     officer for the Internal Revenue Service and shall perform 
     such duties as may be prescribed by the Secretary of the 
     Treasury. To the extent that the Chief Counsel performs 
     duties relating to the development of rules and regulations 
     promulgated under this title, final decision making authority 
     shall remain with the Secretary.
       ``(3) Pay.--The Chief Counsel is authorized to be paid at 
     an annual rate of basic pay not to exceed the maximum rate of 
     basic pay of level III of the Executive Schedule under 
     section 5311 of title 5, United States Code, including any 
     applicable locality-based comparability payment that may be 
     authorized under section 5304 of such title 5.
       ``(c) Assistant Commissioner for Employee Plans and Exempt 
     Organizations.--
       ``(1) Establishment of office.--There is established within 
     the Internal Revenue Service an office to be known as the 
     `Office of Employee Plans and Exempt Organizations' to be 
     under the supervision and direction of an Assistant 
     Commissioner of Internal Revenue. As head of the Office, the 
     Assistant Commissioner shall be responsible for carrying out 
     such functions as the Secretary may prescribe with respect to 
     organizations exempt from tax under section 501(a) and with 
     respect to plans to which part I of subchapter D of chapter 1 
     applies (and with respect to organizations designed to be 
     exempt under such section and plans designed to be plans to 
     which such part applies) and other nonqualified deferred 
     compensation arrangements. The Assistant Commissioner shall 
     report annually to the Commissioner with respect to the 
     Assistant Commissioner's responsibilities under this section.
       ``(2) Authorization of appropriations.--There is authorized 
     to be apxpropriated to the Internal Revenue Service solely to 
     carry out the functions of the Office an amount equal to the 
     sum of--
       ``(A) so much of the collection from taxes under section 
     4940 (relating to excise tax based on investment income) as 
     would have been collected if the rate of tax under such 
     section was 2 percent during the second preceding fiscal 
     year, and
       ``(B) the greater of--
       ``(i) an amount equal to the amount described in 
     subparagraph (A), or
       ``(ii) $30,000,000.
       ``(3) User fees.--All user fees collected by the Office 
     shall be dedicated to carry out the functions of the Office.
       ``(d) Office of Taxpayer Advocate.--
       ``(1) In general.--
       ``(A) 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, with the approval of 
     the Internal Revenue Service Oversight Board. The Taxpayer 
     Advocate shall be entitled to compensation at the same rate 
     as the highest level official reporting directly to the 
     Commissioner of Internal Revenue.
       ``(B) As a qualification for appointment as the Taxpayer 
     Advocate, an individual must have substantial experience 
     representing taxpayers before the Internal Revenue Service or 
     with taxpayer rights issues.
       ``(C) An individual who, before being appointed as the 
     Taxpayer Advocate, was an officer or employee of the Internal 
     Revenue Service may be so appointed only if such individual 
     agrees not to accept any employment with the Internal Revenue 
     Service for at least 5 years after ceasing to be the Taxpayer 
     Advocate.
       ``(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 (I), (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,
       ``(X) identify areas of the tax law that impose significant 
     compliance burdens on taxpayers or the Internal Revenue 
     Service, including specific recommendations for remedying 
     these problems,
       ``(XI) in conjunction with the National Director of 
     Appeals, identify the 10 most litigated issues for each 
     category of taxpayers (e.g., individuals, self-employed 
     individuals, and small businesses), including recommendations 
     for mitigating such disputes, and
       ``(XII) 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 described in clauses (i) and (ii) without 
     any prior review or comment from the Commissioner, the 
     Internal Revenue Service Oversight Board, the Secretary of 
     the Treasury, any other officer or employee of the Department 
     of the Treasury, or the Office of Management and Budget.
       ``(C) Other responsibilities.--The Taxpayer Advocate 
     shall--
       ``(i) monitor the coverage and geographic allocation of 
     problem resolution officers,
       ``(ii) develop guidance to be distributed to all Internal 
     Revenue Service officers and employees outlining the criteria 
     for referral of taxpayer inquiries to problem resolution 
     officers,
       ``(iii) ensure that the local telephone numbers for the 
     problem resolution officer in each internal revenue district 
     is published and available to taxpayers, and
       ``(iv) in conjunction with the Commissioner, develop career 
     paths for problem resolution officers choosing to make a 
     career in the Office of the Taxpayer Advocate.
       ``(3) Responsibilities of commissioner.--The Commissioner 
     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) Amendment of President's Authority To Appoint Chief 
     Counsel for Internal Revenue Service.--
       (1) Paragraph (2) of section 7801(b) (relating to the 
     office of General Counsel for the Department) is amended to 
     read as follows:
       ``(2) Assistant general counsels.--The Secretary of the 
     Treasury may appoint, without regard to the provisions of the 
     civil service laws, and fix the duties of not to exceed five 
     assistant General Counsels.''.
       (2)(A) Subsection (f)(2) of section 301 of title 31, United 
     States Code, is amended by striking ``an Assistant General 
     Counsel who shall be the'' and inserting ``a''.
       (B) Section 301 of such title 31 is amended by adding at 
     the end the following new subsection:
       ``(h) Cross Reference.--For provisions relating to the 
     appointment of officers and employees of the Internal Revenue 
     Service, see subchapter A of chapter 80 of the Internal 
     Revenue Code of 1986.''.
       (c) Conforming Amendments.--
       (1) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7803 and 
     inserting the following new item:

``Sec. 7803. Commissioner of Internal Revenue; Chief Counsel; other 
              officials.''

       (2) Subsection (b) of section 5109 of title 5, United 
     States Code, is amended by striking ``7802(b)'' and inserting 
     ``7803(c)''.
       (d) Effective date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 103. OTHER PERSONNEL.

       (a) In General.--Section 7804 (relating to the effect of 
     reorganization plans) is amended to read as follows:

     ``SEC. 7804. OTHER PERSONNEL.

       ``(a) Appointment and Supervision.--The Commissioner of 
     Internal Revenue is authorized to employ such number of 
     persons as the Commissioner deems proper for the 
     administration and enforcement of the internal revenue laws, 
     and the Commissioner shall issue

[[Page S8539]]

     all necessary directions, instructions, orders, and rules 
     applicable to such persons.
       ``(b) Posts of Duty of Employees in Field Service or 
     Traveling.--
       ``(1) Designation of post of duty.--The Commissioner shall 
     determine and designate the posts of duty of all such persons 
     engaged in field work or traveling on official business 
     outside of the District of Columbia.
       ``(2) Detail of personnel from field service.--The 
     Commissioner may order any such person engaged in field work 
     to duty in the District of Columbia, for such periods as the 
     Commissioner may prescribe, and to any designated post of 
     duty outside the District of Columbia upon the completion of 
     such duty.
       ``(c) Delinquent Internal Revenue Officers and Employees.--
     If any officer or employee of the Treasury Department acting 
     in connection with the internal revenue laws fails to account 
     for and pay over any amount of money or property collected or 
     received by him in connection with the internal revenue laws, 
     the Secretary shall issue notice and demand to such officer 
     or employee for payment of the amount which he failed to 
     account for and pay over, and, upon failure to pay the amount 
     demanded within the time specified in such notice, the amount 
     so demanded shall be deemed imposed upon such officer or 
     employee and assessed upon the date of such notice and 
     demand, and the provisions of chapter 64 and all other 
     provisions of law relating to the collection of assessed 
     taxes shall be applicable in respect of such amount.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 6344 is amended by striking 
     ``section 7803(d)'' and inserting ``section 7804(c)''.
       (2) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7804 and 
     inserting the following new item:

``Sec. 7804. Other personnel.''

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

     SEC. 111. PERSONNEL FLEXIBILITIES.

       (a) In General.--Part III of title 5, United States Code, 
     is amended by adding at the end the following new subpart:

                       ``Subpart I--Miscellaneous

``CHAPTER 93--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                SERVICE

``Sec.
``9301. General requirements.
``9302. Flexibilities relating to performance management.
``9303. Classification and pay flexibilities.
``9304. Staffing flexibilities.
``9305. Flexibilities relating to demonstration projects.

     ``Sec. 9301. General requirements

       ``(a) Conformance With Merit System Principles, Etc.--Any 
     flexibilities under this chapter shall be exercised in a 
     manner consistent with--
       ``(1) chapter 23, relating to merit system principles and 
     prohibited personnel practices; and
       ``(2) provisions of this title (outside of this subpart) 
     relating to preference eligibles.
       ``(b) Requirement Relating to Units Represented by Labor 
     Organizations.--
       ``(1) Written agreement required.--Employees within a unit 
     with respect to which a labor organization is accorded 
     exclusive recognition under chapter 71 shall not be subject 
     to the exercise of any flexibility under section 9302, 9303, 
     9304, or 9305, unless there is a written agreement between 
     the Internal Revenue Service and the organization permitting 
     such exercise.
       ``(2) Definition of a written agreement.--In order to 
     satisfy paragraph (1), a written agreement--
       ``(A) need not be a collective bargaining agreement within 
     the meaning of section 7103(8); and
       ``(B) may not be an agreement imposed by the Federal 
     Service Impasses Panel under section 7119.
       ``(c) Flexibilities for Which OPM Approval Is Required.--
       ``(1) In general.--Except as provided in paragraph (2), 
     flexibilities under this chapter may be exercised by the 
     Internal Revenue Service without prior approval of the Office 
     of Personnel Management.
       ``(2) Exceptions.--The flexibilities under subsections (c) 
     through (e) of section 9303 may be exercised by the Internal 
     Revenue Service only after a specific plan describing how 
     those flexibilities are to be exercised has been submitted to 
     and approved, in writing, by the Director of the Office of 
     Personnel Management.

     ``Sec. 9302. Flexibilities relating to performance management

       ``(a) In General.--The Commissioner of Internal Revenue 
     shall, within 180 days after the date of the enactment of 
     this chapter, establish a performance management system 
     which--
       ``(1) subject to section 9301(b), shall cover all employees 
     of the Internal Revenue Service other than--
       ``(A) the members of the Internal Revenue Service Oversight 
     Board;
       ``(B) the Commissioner of Internal Revenue; and
       ``(C) the Chief Counsel for the Internal Revenue Service;
       ``(2) shall maintain individual accountability by--
       ``(A) establishing retention standards which--
       ``(i) shall permit the accurate evaluation of each 
     employee's performance on the basis of criteria relating to 
     the duties and responsibilities of the position held by such 
     employee; and
       ``(ii) shall be communicated to an employee before the 
     start of any period with respect to which the performance of 
     such employee is to be evaluated using such standards;
       ``(B) providing for periodic performance evaluations to 
     determine whether retention standards are being met; and
       ``(C) with respect to any employee whose performance does 
     not meet retention standards, using the results of such 
     employee's performance evaluation as a basis for--
       ``(i) denying increases in basic pay, promotions, and 
     credit for performance under section 3502; and
       ``(ii) the taking of other appropriate action, such as a 
     reassignment or an action under chapter 43; and
       ``(3) shall provide for--
       ``(A) establishing goals or objectives for individual, 
     group, or organizational performance (or any combination 
     thereof), consistent with Internal Revenue Service 
     performance planning procedures, including those established 
     under the Government Performance and Results Act of 1993, the 
     Information Technology Management Reform Act of 1996, Revenue 
     Procedure 64-22 (as in effect on July 30, 1997), and taxpayer 
     service surveys, and communicating such goals or objectives 
     to employees;
       ``(B) using such goals and objectives to make performance 
     distinctions among employees or groups of employees; and
       ``(C) using assessments under this paragraph, in 
     combination with performance evaluations under paragraph (2), 
     as a basis for granting employee awards, adjusting an 
     employee's rate of basic pay, and taking such other personnel 
     action as may be appropriate.

     For purposes of this title, performance of an employee during 
     any period in which such employee is subject to retention 
     standards under paragraph (2) shall be considered to be 
     `unacceptable' if the performance of such employee during 
     such period fails to meet any of those standards.
       ``(b) Awards.--
       ``(1) For superior accomplishments.--In the case of an 
     employee of the Internal Revenue Service, section 4502(b) 
     shall be applied by substituting `with the approval of the 
     Commissioner of Internal Revenue' for `with the approval of 
     the Office'.
       ``(2) For employees who report directly to the 
     commissioner.--
       ``(A) In general.--In the case of an employee of the 
     Internal Revenue Service who reports directly to the 
     Commissioner of Internal Revenue, a cash award in an amount 
     up to 50 percent of such employee's annual rate of basic pay 
     may be made if the Commissioner finds such an award to be 
     warranted based on such employee's performance.
       ``(B) Nature of an award.--A cash award under this 
     paragraph shall not be considered to be part of basic pay.
       ``(C) Tax enforcement results.--A cash award under this 
     paragraph may not be based solely on tax enforcement results.
       ``(D) Eligible employees.--Whether or not an employee is an 
     employee who reports directly to the Commissioner of Internal 
     Revenue shall, for purposes of this paragraph, be determined 
     under regulations which the Commissioner shall prescribe.
       ``(E) Limitation on compensation.--For purposes of applying 
     section 5307 to an employee in connection with any calendar 
     year to which an award made under this paragraph to such 
     employee is attributable, subsection (a)(1) of such section 
     shall be applied by substituting `to equal or exceed the 
     annual rate of compensation for the President for such 
     calendar year' for `to exceed the annual rate of basic pay 
     payable for level I of the Executive Schedule, as of the end 
     of such calendar year'.
       ``(3) Based on savings.--
       ``(A) In general.--The Commissioner of Internal Revenue may 
     authorize the payment of cash awards to employees based on 
     documented financial savings achieved by a group or 
     organization which such employees comprise, if such payments 
     are made pursuant to a plan which--
       ``(i) specifies minimum levels of service and quality to be 
     maintained while achieving such financial savings; and
       ``(ii) is in conformance with criteria prescribed by the 
     Office of Personnel Management.
       ``(B) Funding.--A cash award under this paragraph may be 
     paid from the fund or appropriation available to the activity 
     primarily benefiting or the various activities benefiting.
       ``(C) Tax enforcement results.--A cash award under this 
     paragraph may not be based solely on tax enforcement results.
       ``(c) Other Provisions.--
       ``(1) Notice provisions.--In applying sections 
     4303(b)(1)(A) and 7513(b)(1) to employees of the Internal 
     Revenue Service, `15 days' shall be substituted for `30 
     days'.
       ``(2) Appeals.--Notwithstanding the second sentence of 
     section 5335(c), an employee of the Internal Revenue Service 
     shall not have a right to appeal the denial of a periodic 
     step increase under section 5335 to the Merit Systems 
     Protection Board.

[[Page S8540]]

     ``Sec. 9303. Classification and pay flexibilities

       ``(a) Broad-Banded Systems.--
       ``(1) Definitions.--For purposes of this subsection--
       ``(A) the term `broad-banded system' means a system under 
     which positions are classified and pay for service in any 
     such position is fixed through the use of pay bands, rather 
     than under--
       ``(i) chapter 51 and subchapter III of chapter 53; or
       ``(ii) subchapter IV of chapter 53; and
       ``(B) the term `pay band' means, with respect to positions 
     in 1 or more occupational series, a pay range--
       ``(i) consisting of--

       ``(I) 2 or more consecutive grades of the General Schedule; 
     or
       ``(II) 2 or more consecutive pay ranges of such other pay 
     or wage schedule as would otherwise apply (but for this 
     section); and

       ``(ii) the minimum rate for which is the minimum rate for 
     the lower (or lowest) grade or range in the pay band and the 
     maximum rate for which is the maximum rate for the higher (or 
     highest) grade or range in the pay band, including any 
     locality-based and other similar comparability payments.
       ``(2) Authority.--The Commissioner of Internal Revenue may, 
     subject to criteria to be prescribed by the Office of 
     Personnel Management, establish one or more broad-banded 
     systems covering all or any portion of its workforce which 
     would otherwise be subject to the provisions of law cited in 
     clause (i) or (ii) of subsection (a)(1)(A), except for any 
     position classified by statute.
       ``(3) Criteria.--The criteria to be prescribed by the 
     Office shall, at a minimum--
       ``(A) ensure that the structure of any broad-banded system 
     maintains the principle of equal pay for substantially equal 
     work;
       ``(B) establish the minimum (but not less than 2) and 
     maximum number of grades or pay ranges that may be combined 
     into pay bands;
       ``(C) establish requirements for adjusting the pay of an 
     employee within a pay band;
       ``(D) establish requirements for setting the pay of a 
     supervisory employee whose position is in a pay band or who 
     supervises employees whose positions are in pay bands; and
       ``(E) establish requirements and methodologies for setting 
     the pay of an employee upon conversion to a broad-banded 
     system, initial appointment, change of position or type of 
     appointment (including promotion, demotion, transfer, 
     reassignment, reinstatement, placement in another pay band, 
     or movement to a different geographic location), and movement 
     between a broad-banded system and another pay system.
       ``(4) Information.--The Commissioner of Internal Revenue 
     shall submit to the Office such information relating to its 
     broad-banded systems as the Office may require.
       ``(5) Review and revocation authority.--The Office may, 
     with respect to any broad-banded system under this 
     subsection, and in accordance with regulations which it shall 
     prescribe, exercise with respect to any broad-banded system 
     under this subsection authorities similar to those available 
     to it under sections 5110 and 5111 with respect to 
     classifications under chapter 51.
       ``(b) Single Pay-Band System.--
       ``(1) In general.--The Commissioner of Internal Revenue 
     may, with respect to employees who remain subject to chapter 
     51 and subchapter III of chapter 53 (or subchapter IV of 
     chapter 53), fix rates of pay under a single pay-band system.
       ``(2) Definition.--For purposes of this subsection, the 
     term `single pay-band system' means, for pay-setting 
     purposes, a system similar to the pay-setting aspects of a 
     broad-banded system under subsection (a), but consisting of 
     only a single grade or pay range, under which pay may be 
     fixed at any rate not less than the minimum and not more than 
     the maximum rate which (but for this section) would otherwise 
     apply with respect to the grade or pay range involved, 
     including any locality-based and other similar comparability 
     payments.
       ``(3) Special rules.--
       ``(A) Promotion or transfer.--An employee under this 
     subsection who is promoted or transferred to a position in a 
     higher grade shall be entitled to basic pay at a rate 
     determined under criteria prescribed by the Office of 
     Personnel Management based on section 5334(b).
       ``(B) Performance increases.--In lieu of periodic step-
     increases under section 5335, an employees under this 
     subsection who meets retention standards under section 
     9302(a)(2)(A) shall be entitled to performance increases 
     under criteria prescribed by the Office. An increase under 
     this subparagraph shall be equal to one-ninth of the 
     difference between the minimum and maximum rates of pay for 
     the applicable grade or pay range
       ``(C) Increases for exceptional performance.--In lieu of 
     additional step-increases under section 5336, an employee 
     under this subsection who has demonstrated exceptional 
     performance shall be eligible for a pay increase under this 
     subparagraph under criteria prescribed by the Office. An 
     increase under this subparagraph may not exceed the amount of 
     an increase under subparagraph (B).
       ``(c) Alternative Classification Systems.--
       ``(1) In general.--Subject to section 9301(c), the 
     Commissioner of Internal Revenue may establish 1 or more 
     alternative classification systems that include any positions 
     or groups of positions that the Commissioner determines, for 
     reasons of effective administration--
       ``(A) should not be classified under chapter 51 or paid 
     under the General Schedule;
       ``(B) should not be classified or paid under subchapter IV 
     of chapter 53; or
       ``(C) should not be paid under section 5376.
       ``(2) Limitations.--An alternative classification system 
     under this subsection may not--
       ``(A) with respect to any position that (but for this 
     section) would otherwise be subject to the provisions of law 
     cited in subparagraph (A) or (B) of paragraph (1), establish 
     a rate of basic pay in excess of the maximum rate for grade 
     GS-15 of the General Schedule, including any locality-based 
     and other similar comparability payments; and
       ``(B) with respect to any position that (but for this 
     section) would otherwise be subject to the provision of law 
     cited in paragraph (1)(C), establish a rate of basic pay in 
     excess of the annual rate of basic pay of the Commissioner of 
     Internal Revenue.
       ``(d) Grade and Pay Retention.--Subject to section 9301(c), 
     the Commissioner of Internal Revenue may, with respect to 
     employees who are covered by a broad-banded system under 
     subsection (a) or an alternative classification system under 
     subsection (c), provide for variations from the provisions of 
     subchapter VI of chapter 53.
       ``(e) Recruitment and Retention Bonuses; Retention 
     Allowances.--Subject to section 9301(c), the Commissioner of 
     Internal Revenue may, with respect to its employees, provide 
     for variations from the provisions of sections 5753 and 5754.

     ``Sec. 9304. Staffing flexibilities

       ``(a) In General.--
       ``(1) Permanent appointment in the competitive service.--
     Except as otherwise provided by this subsection, an employee 
     of the Internal Revenue Service may be selected for a 
     permanent appointment in the competitive service in the 
     Internal Revenue Service through internal competitive 
     promotion procedures when the following conditions are met:
       ``(A) The employee has completed 2 years of current 
     continuous service in the competitive service under a term 
     appointment or any combination of term appointments.
       ``(B) Such term appointment or appointments were made under 
     competitive procedures prescribed for permanent appointments.
       ``(C) The employee's performance under such term 
     appointment or appointments met established retention 
     standards.
       ``(D) The vacancy announcement for the term appointment 
     from which the conversion is made stated that there was a 
     potential for subsequent conversion to a permanent 
     appointment.
       ``(2) Condition.--An appointment under this subsection may 
     be made only to a position the duties and responsibilities of 
     which are similar to those of the position held by the 
     employee at the time of conversion (referred to in paragraph 
     (1)(D)).
       ``(b) Rating Systems.--
       ``(1) In general.--Notwithstanding subchapter I of chapter 
     33, the Commissioner of Internal Revenue may establish 
     category rating systems for evaluating job applicants for 
     positions in the competitive service, under which qualified 
     candidates are divided into 2 or more quality categories on 
     the basis of relative degrees of merit, rather than assigned 
     individual numerical ratings. Each applicant who meets the 
     minimum qualification requirements for the position to be 
     filled shall be assigned to an appropriate category based on 
     an evaluation of the applicant's knowledge, skills, and 
     abilities relative to those needed for successful performance 
     in the job to be filled.
       ``(2) Treatment of preference eligibles.--Within each 
     quality category established under paragraph (1), preference 
     eligibles shall be listed ahead of individuals who are not 
     preference eligibles. For other than scientific and 
     professional positions at or higher than GS-9 (or 
     equivalent), preference eligibles who have a compensable 
     service-connected disability of 10 percent or more, and who 
     meet the minimum qualification standards, shall be listed in 
     the highest quality category.
       ``(3) Selection process.--An appointing authority may 
     select any applicant from the highest quality category or, if 
     fewer than 3 candidates have been assigned to the highest 
     quality category, from a merged category consisting of the 
     highest and second highest quality categories. 
     Notwithstanding the preceding sentence, the appointing 
     authority may not pass over a preference eligible in the same 
     or a higher category from which selection is made, unless the 
     requirements of section 3317(b) or 3318(b), as applicable, 
     are satisfied, except that in no event may certification of a 
     preference eligible under this subsection be discontinued by 
     the Internal Revenue Service under section 3317(b) before the 
     end of the 6-month period beginning on the date of such 
     employee's first certification.
       ``(c) Maximum Period for Which Employee May Be Detailed.--
     The 120-day limitation under section 3341(b)(1) for details 
     and renewals of details shall not apply with respect to the 
     Internal Revenue Service.
       ``(d) Involuntary Reassignments and Removals of Career 
     Appointees in the Senior Executive Service.--Neither section 
     3395(e)(1) nor section 3592(b)(1) shall apply with respect to 
     the Internal Revenue Service.

[[Page S8541]]

       ``(e) Probationary Periods.--Notwithstanding any other 
     provision of law or regulation, the Commissioner of Internal 
     Revenue may establish a period of probation under section 
     3321 of up to 3 years for any position if, as determined by 
     the Commissioner, a shorter period would be insufficient for 
     the incumbent to demonstrate complete proficiency in such 
     position.
       ``(f) Provisions That Remain Applicable.--No provision of 
     this section exempts the Internal Revenue Service from--
       ``(1) any employment priorities established under direction 
     of the President for the placement of surplus or displaced 
     employees; or
       ``(2) its obligations under any court order or decree 
     relating to the employment practices of the Internal Revenue 
     Service.

     ``Sec. 9305. Flexibilities relating to demonstration projects

       ``(a) In General.--For purposes of applying section 4703 
     with respect to the Internal Revenue Service--
       ``(1) paragraph (1) of subsection (b) of such section shall 
     be deemed to read as follows:
       `` `(1) develop a plan for such project which describes its 
     purpose, the employees to be covered, the project itself, its 
     anticipated outcomes, and the method of evaluating the 
     project;';
       ``(2) paragraph (3) of subsection (b) of such section shall 
     be disregarded;
       ``(3) paragraph (4) of subsection (b) of such section shall 
     be applied by substituting `30 days' for `180 days';
       ``(4) paragraph (6) of subsection (b) of such section shall 
     be deemed to read as follows:
       `` `(6) provide each House of the Congress with the final 
     version of the plan.';
       ``(5) paragraph (1) of subsection (c) of such section shall 
     be deemed to read as follows:
       `` `(1) subchapter V of chapter 63 or subpart G of part 
     III;'; and
       ``(6) subsection (d)(1) of such section shall be 
     disregarded.
       ``(b) Numerical Limitation.--For purposes of applying the 
     numerical limitation under subsection (d)(2) of section 4703, 
     a demonstration project shall not be counted if or to the 
     extent that it involves the Internal Revenue Service.''
       (b) Clerical Amendment.--The analysis for part III of title 
     5, United States Code, is amended by adding at the end the 
     following:

                       ``Subpart I--Miscellaneous

``93. Personnel Flexibilities Relating to the Internal Revenue 
  Service.......................................................9301''.

       (c) Effective Date.--This section shall take effect on the 
     date of the enactment of this Act.
                      TITLE II--ELECTRONIC FILING

     SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

       (a) In General.--It is the policy of the Congress that 
     paperless filing should be the preferred and most convenient 
     means of filing tax and information returns, and that by the 
     year 2007, no more than 20 percent of all tax returns should 
     be filed on paper.
       (b) Strategic Plan.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary of the Treasury or 
     the Secretary's delegate (hereafter in this section referred 
     to as the ``Secretary'') shall implement a plan to eliminate 
     barriers, provide incentives, and use competitive market 
     forces to increase electronic filing gradually over the next 
     10 years while maintaining processing times for paper returns 
     at 40 days.
       (2) Electronic commerce advisory group.--To ensure that the 
     Secretary receives input from the private sector in the 
     development and implementation of the plan required by 
     paragraph (1), the Secretary shall convene an electronic 
     commerce advisory group to include representatives from the 
     tax practitioner, preparer, and computerized tax processor 
     communities and other representatives from the electronic 
     filing industry.
       (c) Incentives.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary shall implement 
     procedures to provide for the payment of incentives to 
     transmitters of qualified electronically filed returns, based 
     on the fair market value of costs to transmit returns 
     electronically.
       (2) Qualified electronically filed returns.--For purposes 
     of this section, the term ``qualified electronically filed 
     return'' means a return that--
       (A) is transmitted electronically to the Internal Revenue 
     Service,
       (B) for which the taxpayer was not charged for the cost of 
     such transmission, and
       (C) in the case of returns transmitted after December 31, 
     2004, was prepared by a paid preparer who does not submit any 
     return after such date to the Internal Revenue Service on 
     paper.
       (d) Annual Reports.--Not later than June 30 of each 
     calendar year after 1997, the Chairperson of the Internal 
     Revenue Service Oversight Board, the Secretary, and the 
     Chairperson of the electronic commerce advisory group 
     established under subsection (b)(2) shall report to the 
     Committees on Ways and Means, Appropriations, and Government 
     Reform and Oversight of the House of Representatives, the 
     Committees on Finance, Appropriations, and Government Affairs 
     of the Senate, and the Joint Committee on Taxation, on--
       (1) the progress of the Internal Revenue Service in meeting 
     the policy set forth in subsection (a);
       (2) the status of the plan required by subsection (b); and
       (3) the necessity of action by the Congress to assist the 
     Internal Revenue Service to satisfy the policy set forth in 
     subsection (a).

     SEC. 202. EXTENSION OF TIME TO FILE FOR ELECTRONIC FILERS.

       (a) In General.--Subsection (a) of section 6072 (relating 
     to the time for filing income tax returns) is amended--
       (1) by striking ``(a) General Rule.--In the case of'' and 
     inserting the following:
       ``(a) General Rules.--
       ``(1) Paper returns.--Except as provided in paragraph (2), 
     in the case of'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Electronically filed returns.--In the case of returns 
     filed electronically, returns made on the basis of the 
     calendar year shall be filed on or before the 15th day of May 
     following the close of the calendar year and returns made on 
     the basis of a fiscal year shall be filed on or before the 
     15th day of the fifth month following the close of the fiscal 
     year.''
       (b) Returns of Corporations.--Subsection (b) of section 
     6072 (relating to the time for filing income tax returns) is 
     amended--
       (1) by moving the text 2 ems to the right, and
       (2) by adding at the end the following new paragraph:
       ``(2) Electronically filed returns.--In the case of returns 
     filed electronically, returns made on the basis of the 
     calendar year shall be filed on or before the 15th day of 
     April following the close of the calendar year and returns 
     made on the basis of a fiscal year shall be filed on or 
     before the 15th day of the 4th month following the close of 
     the fiscal year.''
       (c) Information Returns.--Part V of chapter 61 (relating to 
     information and returns) is amended by adding the following 
     new section:

     ``SEC. 6073. TIME FOR FILING CERTAIN INFORMATION RETURNS.

       ``(a) Electronically Filed Returns.--In the case of returns 
     made under subparts B and C of part III of this chapter that 
     are filed electronically, such returns shall be filed on or 
     before March 31 of the year following the calendar year to 
     which such returns relate.
       ``(b) Notice to Recipients.--Notwithstanding subsection 
     (a), receipts for employees required under section 6051 and 
     any statements otherwise required to be furnished to persons 
     with respect to whom information is required, shall be 
     furnished to such persons on or before January 31 of the 
     calendar year in which the return under subsection (a) is 
     required to be filed.
       ``(c) Effective Date.--The amendments made by this section 
     shall apply to returns required to be filed after December 
     31, 1999.''
       (d) Returns of Partnerships.--Part V of chapter 61 
     (relating to information and returns) is amended by adding 
     the following new section:

     ``SEC. 6074. TIME FOR FILING PARTNERSHIP RETURNS.

       ``(a) In General.--Except as provided in subsection (b), 
     returns made under section 6031 shall be filed on or before 
     the 15th day of the 3d month following the close of the 
     taxable year of the partnership, except that the return of a 
     partnership consisting entirely of nonresident aliens shall 
     be filed on or before the 15th day of the 6th month following 
     the close of the taxable year of the partnership.
       ``(b) Electronically Filed Returns.--In the case of returns 
     filed electronically, returns shall be filed on or before the 
     15th day of the 4th month following the close of the taxable 
     year of the partnership.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to returns for taxable years beginning after 
     December 31, 1998.

     SEC. 203. PAPERLESS ELECTRONIC FILING.

       (a) In General.--Section 6061 (relating to signing of 
     returns and other documents) is amended--
       (1) by striking ``Except as otherwise provided by'' and 
     inserting the following:
       ``(a) General Rule.--Except as otherwise provided by 
     subsection (b) and'', and
       (2) by adding at the end the following new subsection:
       ``(b) Electronic Signatures.--The Secretary shall develop 
     procedures for the acceptance of signatures in digital or 
     other electronic form. Until such time as such procedures are 
     in place, the Secretary shall accept electronically filed 
     returns and other documents on which the required 
     signature(s) appears in typewritten form, but filers of such 
     documents shall be required to retain a signed paper original 
     of all such filings, to be made available to the Secretary 
     for inspection, until the expiration of the applicable period 
     of limitations set forth in chapter 66.''.
       (b) Deadline for Establishing Procedures.--Not later than 
     December 31, 1998, the Secretary of the Treasury or the 
     Secretary's delegate shall establish procedures to accept, in 
     electronic form, any other information, statements, 
     elections, or schedules, from taxpayers filing returns 
     electronically, so that such taxpayers will not be required 
     to file any paper.
       (c) Procedures for Communications Between IRS and Preparer 
     of Electronically-Filed Returns.--Such Secretary shall 
     establish procedures for taxpayers to authorize, on 
     electronically filed returns, the preparer of such returns to 
     communicate with

[[Page S8542]]

     the Internal Revenue Service on matters included on such 
     returns.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 204. REGULATION OF PREPARERS.

       (a) In General.--Subsection (a) of section 330 of title 31, 
     United States Code, is amended--
       (1) by striking ``Treasury; and'' in paragraph (1) and 
     inserting ``Treasury and all other persons engaged in the 
     business of preparing returns or otherwise accepting 
     compensation for advising in the preparation of returns,'',
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``, and'', and
       (3) by adding at the end the following:
       ``(3) establish uniform procedures for regulating preparers 
     of paper and electronic tax and information returns.

     No demonstration shall be required under paragraph (2) for 
     persons solely engaged in the business of preparing returns 
     or otherwise accepting compensation for advising in the 
     preparation of returns.''
       (b) Director of Practice.--Such section 330 is amended by 
     adding at the end the following new subsection:
       ``(d) Director of Practice.--There is established within 
     the Department of the Treasury an office to be known as the 
     `Office of the Director of Practice' to be under the 
     supervision and direction of an official to be known as the 
     `Director of Practice'. The Director of Practice shall be 
     responsible for regulation of all practice before the 
     Department of the Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 205. PAPERLESS PAYMENT.

       (a) In General.--Section 6311 (relating to payment by check 
     or money order) is amended to read as follows:

     ``SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPTABLE MEANS.

       ``(a) Authority To Receive.--It shall be lawful for the 
     Secretary to receive for internal revenue taxes (or in 
     payment of internal revenue stamps) any commercially 
     acceptable means that the Secretary deems appropriate to the 
     extent and under the conditions provided in regulations 
     prescribed by the Secretary.
       ``(b) Ultimate Liability.--If a check, money order, or 
     other method of payment, including payment by credit card, 
     debit card, charge card, or electronic funds transfer so 
     received is not duly paid, or is paid and subsequently 
     charged back to the Secretary, the person by whom such check, 
     money order, or other method of payment has been tendered 
     shall remain liable for the payment of the tax or for the 
     stamps, and for all legal penalties and additions, to the 
     same extent as if such check, money order, or other method of 
     payment had not been tendered.
       ``(c) Liability of Banks and Others.--If any certified, 
     treasurer's, or cashier's check (or other guaranteed draft), 
     or any money order, or any means of payment that has been 
     guaranteed by a financial institution (such as a credit card, 
     debit card, charge card, or electronic funds transfer 
     transaction which has been guaranteed expressly by a 
     financial institution) so received is not duly paid, the 
     United States shall, in addition to its right to exact 
     payment from the party originally indebted therefor, have a 
     lien for--
       ``(1) the amount of such check (or draft) upon all assets 
     of the financial institution on which drawn,
       ``(2) the amount of such money order upon all the assets of 
     the issuer therefor,
       ``(3) the guaranteed amount of any other transaction upon 
     all the assets of the institution making such guarantee,
     and such amount shall be paid out of such assets in 
     preference to any other claims whatsoever against such 
     financial institution, issuer, or guaranteeing institution, 
     except the necessary costs and expenses of administration and 
     the reimbursement of the United States for the amount 
     expended in the redemption of the circulating notes of such 
     financial institution.
       ``(d) Payment by Other Means.--
       ``(1) Authority to prescribe regulations.--The Secretary 
     shall prescribe such regulations as the Secretary deems 
     necessary to receive payment by commercially acceptable 
     means, including regulations that--
       ``(A) specify which methods of payment by commercially 
     acceptable means will be acceptable;
       ``(B) specify when payment by such means will be considered 
     received;
       ``(C) identify types of nontax matters related to payment 
     by such means that are to be resolved by persons ultimately 
     liable for payment and financial intermediaries, without the 
     involvement of the Secretary; and
       ``(D) ensure that tax matters will be resolved by the 
     Secretary, without the involvement of financial 
     intermediaries.
       ``(2) Authority to enter into contracts.--Notwithstanding 
     section 3718(f) of title 31, United States Code, the 
     Secretary is authorized to enter into contracts to obtain 
     services relating to receiving payment by other means when 
     cost beneficial to the Government.
       ``(3) Special provisions for use of credit cards.--If use 
     of credit cards is accepted as a method of payment of taxes 
     pursuant to subsection (a)--
       ``(A) a payment of internal revenue taxes (or a payment for 
     internal revenue stamps) by a person by use of a credit card 
     shall not be subject to section 161 of the Truth-in-Lending 
     Act (15 U.S.C 1666), or to any similar provisions of State 
     law, if the error alleged by the person is an error relating 
     to the underlying tax liability, rather than an error 
     relating to the credit card account such as a computational 
     error or numerical transposition in the credit card 
     transaction or an issue as to whether the person authorized 
     payment by use of the credit card;
       ``(B) a payment of internal revenue taxes (or a payment for 
     internal revenue stamps) shall not be subject to section 170 
     of the Truth in Lending Act (15 U.S.C 1666i), or to any 
     similar provisions of State law;
       ``(C) a payment of internal revenue taxes (or a payment for 
     internal revenue stamps) by a person by use of a debit card 
     shall not be subject to section 908 of the Electronic Fund 
     Transfer Act (15 U.S.C 1693f), or to any similar provisions 
     of State law, if the error alleged by the person is an error 
     relating to the underlying tax liability, rather than an 
     error relating to the debit card account such as a 
     computational error or numerical transposition in the debit 
     card transaction or an issue as to whether the person 
     authorized payment by use of the debit card;
       ``(D) the term `creditor' under section 103(f) of the Truth 
     in Lending Act (15 U.S.C 1602(f)) shall not include the 
     Secretary with respect to credit card transactions in payment 
     of internal revenue taxes (or payment for internal revenue 
     stamps); and
       ``(E) notwithstanding any other provision of law to the 
     contrary, in the case of payment made by credit card or debit 
     card transaction in an amount owed to a person as a result of 
     the correction of an error under section 161 of the Truth in 
     Lending Act (15 U.S.C 1666) or section 908 of the Electronic 
     Fund Transfer Act (15 U.S.C 1693(f)), the Secretary is 
     authorized to provide such amount to such person as a credit 
     to that person's credit card or debit card account through 
     the applicable credit card or debit card system.
       ``(e) Confidentiality of Information.--
       ``(1) In general.--Except as otherwise authorized by this 
     subsection, no person may use or disclose any information 
     relating to credit or debit card transactions obtained 
     pursuant to section 6103(k)(8) other than for purposes 
     directly related to the processing of such transactions, or 
     the billing or collection of amounts charged or debited 
     pursuant thereto.
       ``(2) Exceptions.--
       ``(A) Debit or credit card issuers or others acting on 
     behalf of such issuers may also use and disclose such 
     information for purposes directly related to servicing an 
     issuer's accounts.
       ``(B) Debit or credit card issuers or others directly 
     involved in the processing of credit or debit card 
     transactions or the billing or collection of amounts charged 
     or debited thereto may also use and disclose such information 
     for purposes directly related to--
       ``(i) statistical risk and profitability assessment,
       ``(ii) transferring receivables, accounts, or interest 
     therein,
       ``(iii) auditing the account information,
       ``(iv) complying with Federal, State, or local law, and
       ``(v) properly authorized civil, criminal, or regulatory 
     investigation by Federal, State, or local authorities.
       ``(3) Procedures.--Use and disclosure of information under 
     this paragraph shall be made only to the extent authorized by 
     written procedures promulgated by the Secretary.
       ``(4) Cross reference.--

  ``For provision providing for civil damages for violation of 
paragraph (1), see section 7431.''

       (b) Separate Appropriation Required for Payment of Credit 
     Card Fees.--No amount may be paid by the United States to a 
     credit card issuer for the right to receive payments of 
     internal revenue taxes by credit card without a separate 
     appropriation therefor.
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 64 is amended by striking the item 
     relating to section 6311 and inserting the following:

``Sec. 6311. Payment of tax by commercially acceptable means.''

       (d) Amendments to Section 6103 and 7431 With Respect to 
     Disclosure Authorization.--
       (1) Subsection (k) of section 6103 (relating to 
     confidentiality and disclosure of returns and return 
     information) is amended by adding at the end the following 
     new paragraph--
       ``(8) Disclosure of information to administer section 
     6311.--The Secretary may disclose returns or return 
     information to financial institutions and others to the 
     extent the Secretary deems necessary for the administration 
     of section 6311. Disclosures of information for purposes 
     other than to accept payments by check or money orders shall 
     be made only to the extent authorized by written procedures 
     promulgated by the Secretary.''.
       (2) Section 7431 (relating to civil damages for 
     unauthorized disclosure of returns and return information) is 
     amended by adding at the end the following new subsection:
       ``(g) Special Rule for Information Obtained Under Section 
     6103(k)(8).--For purposes of this section, any reference to 
     section 6103 shall be treated as including a reference to 
     section 6311(e).''.
       (3) Section 6103(p)(3)(A) is amended by striking ``or (6)'' 
     and inserting ``(6), or (8)''.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on the

[[Page S8543]]

     day which is 9 months after the date of the enactment of this 
     Act.

     SEC. 206. RETURN-FREE TAX SYSTEM.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall develop procedures for the 
     implementation of a return-free tax system under which 
     individuals would be permitted to comply with the Internal 
     Revenue Code of 1986 without making the return required under 
     section 6012 of such Code for taxable years beginning after 
     2007.
       (b) Report.--Not later than June 30 of each calendar year 
     after 1999, such Secretary shall report to the Committee on 
     Ways and Means of the House of Representatives, the Committee 
     on Finance of the Senate, and the Joint Committee on Taxation 
     on--
       (1) the procedures developed pursuant to subsection (a),
       (2) the number and classes of taxpayers that would be 
     permitted to use the procedures developed pursuant to 
     subsection (a),
       (3) the changes to the Internal Revenue Code of 1986 that 
     could enhance the use of such a system, and
       (4) what additional resources the Internal Revenue Service 
     would need to implement such a system.

     SEC. 207. ACCESS TO ACCOUNT INFORMATION.

       Not later than December 31, 2006, the Secretary of the 
     Treasury or the Secretary's delegate shall develop procedures 
     under which a taxpayer filing returns electronically would be 
     able to review the taxpayer's account electronically, 
     including all necessary safeguards to ensure the privacy of 
     such account information.
               TITLE III--TAXPAYER PROTECTION AND RIGHTS

     SEC. 301. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       (a) In General.--Section 7811(a) (relating to taxpayer 
     assistance orders) is amended--
       (1) by striking ``Upon application'' and inserting the 
     following:
       ``(1) In general.--Upon application'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Determination of hardship.--For purposes of 
     determining whether a taxpayer is suffering or about to 
     suffer a significant hardship, the Taxpayer Advocate should 
     consider--
       ``(A) whether the Internal Revenue Service employee to 
     which such order would issue is following applicable 
     published administrative guidance, including the Internal 
     Revenue Manual,
       ``(B) whether there is an immediate threat of adverse 
     action,
       ``(C) whether there has been a delay of more than 30 days 
     in resolving taxpayer account problems, and
       ``(D) the prospect that the taxpayer will have to pay 
     significant professional fees for representation.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 302. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN 
                   FEES.

       (a) Authority to Award Higher Attorney's Fees Based on 
     Complexity of Issues.--Clause (iii) of section 7430(c)(1)(B) 
     (relating to the award of costs and certain fees) is amended 
     by inserting ``, or the difficulty of the issues presented in 
     the case or the local availability of tax expertise,'' before 
     ``justifies a higher rate''.
       (b) Award of Administrative Costs Incurred After 30-Day 
     Letter.--
       (1) Paragraph (2) of section 7430(c) is amended by striking 
     the last sentence and insert the following:

     ``Such term shall only include costs incurred on or after 
     whichever of the following is the earliest: (i) the date of 
     the receipt by the taxpayer of the notice of the decision of 
     the Internal Revenue Service Office of Appeals, (ii) the date 
     of the notice of deficiency, or (iii) the date on which the 
     1st letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals is sent.''
       (2) Subparagraph (B) of section 7430(c)(7) is amended by 
     striking ``or'' and the end of clause (i), by striking the 
     period at the end of clause (ii) and inserting ``, or'', and 
     by adding at the end the following new clause:
       ``(iii) the date on which the 1st letter of proposed 
     deficiency which allows the taxpayer an opportunity for 
     administrative review in the Internal Revenue Service Office 
     of Appeals is sent.''
       (c) Award of Fees for Certain Additional Services.--
     Paragraph (3) of section 7430(c) is amended by adding at the 
     end the following new sentence: ``Such term also includes 
     such amounts as the court calculates, based on hours worked 
     and costs expended, for services of an individual (whether or 
     not an attorney) who is authorized to practice before the Tax 
     Court or before the Internal Revenue Service and who 
     represents the taxpayer for no more than a nominal fee.''
       (d) Determination of Prevailing Party.--Paragraph (4) of 
     section 7430(c) is amended--
       (A) by inserting at the end of subparagraph (A) the 
     following new flush sentence:
     ``For purposes of this section, such section 2412(d)(2)(B) 
     shall be applied by substituting `$5,000,000' for the amount 
     otherwise applicable to individuals, and `$35,000,000' for 
     the amount otherwise applicable to businesses.'', and
       (B) by adding at the end the following new subparagraph:
       ``(D) Safe Harbor.--The position of the United States was 
     not substantially justified if the United States has not 
     prevailed on the same issue in at least 3 United States 
     Courts of Appeal.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to proceedings beginning after the date of the 
     enactment of this Act.

     SEC. 303. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.

       (a) In General.--Section 7433 (relating to civil damages 
     for certain unauthorized collection actions) is amended--
       (1) in subsection (a), by inserting ``, or by reason of 
     negligence,'' after ``recklessly or intentionally'', and
       (2) in subsection (b)--
       (A) in the matter preceding paragraph (1), by inserting 
     ``($100,000, in the case of negligence)'' after 
     ``$1,000,000'', and
       (B) in paragraph (1), by inserting ``or negligent'' after 
     ``reckless or intentional''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to actions of officers or employees of the 
     Internal Revenue Service after the date of the enactment of 
     this Act.

     SEC. 304. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, incorporate into the statement required by section 6227 
     of the Omnibus Taxpayer Bill of Rights (Internal Revenue 
     Service Publication No. 1) a statement which sets forth in 
     simple and nontechnical terms the criteria and procedures for 
     selecting taxpayers for examination. Such statement shall not 
     include any information the disclosure of which would be 
     detrimental to law enforcement, but shall specify the general 
     procedures used by the Internal Revenue Service, including 
     the extent to which taxpayers are selected for examination on 
     the basis of information available in the media or on the 
     basis of information provided to the Internal Revenue Service 
     by informants.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the statement required under 
     subsection (a) (or proposed revisions to any such statement) 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation on the same day.

     SEC. 305. ARCHIVAL OF RECORDS OF INTERNAL REVENUE SERVICE.

       (a) In General.--Subsection (l) of section 6103 (relating 
     to confidentiality and disclosure of returns and return 
     information) is amended by adding at the end the following 
     new paragraph:
       ``(16) Disclosure to national archives and records 
     administration.--The Secretary shall, upon written request 
     from the Archivist of the United States, disclose to the 
     Archivist all records of the Internal Revenue Service for 
     purposes of scheduling such records for destruction or for 
     retention in the National Archives. Any such information that 
     is retained in the National Archives shall not be disclosed 
     without the express written approval of the Secretary.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made by the Archivist after the date 
     of the enactment of this Act.

     SEC. 306. TAX RETURN INFORMATION.

       The Joint Committee on Taxation shall convene a study of 
     the scope and use of provisions regarding taxpayer 
     confidentiality, and shall report the findings of such study, 
     together with such recommendations as it deems appropriate, 
     to the Congress no later than one year after the date of the 
     enactment of this Act. Such study shall be led by a panel of 
     experts, to be appointed by the Joint Committee on Taxation, 
     which shall examine the present protections for taxpayer 
     privacy, the need for third parties to use tax return 
     information, and the ability to achieve greater levels of 
     voluntary compliance by allowing the public to know who is 
     legally required to do so, but does not file tax returns.

     SEC. 307. FREEDOM OF INFORMATION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, develop procedures under which expedited access will be 
     granted to requests under section 551 of title 5, United 
     States Code, when--
       (1) there exists widespread and exceptional media interest 
     in the requested information, and
       (2) expedited processing is warranted because the 
     information sought involves possible questions about the 
     government's integrity which affect public confidence.

     In addition, such procedures shall require the Internal 
     Revenue Service to provide an explanation to the person 
     making the request if the request is not satisfied within 30 
     days, including a summary of actions taken to date and the 
     expected completion date. Finally, to the extent that any 
     such request is not satisfied in full within 60 days, such 
     person may seek a determination of whether such request 
     should be granted by the appropriate Federal district court.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the procedures required under 
     subsection (a) (or proposed revisions to any such procedures) 
     to the Committee on Ways and Means

[[Page S8544]]

     of the House of Representatives, the Committee on Finance of 
     the Senate, and the Joint Committee on Taxation on the same 
     day.

     SEC. 308. OFFERS-IN-COMPROMISE.

       (a) In General.--Section 7122 (relating to offers-in-
     compromise) is amended by adding at the end the following new 
     subsection:
       ``(c) Allowances.--The Secretary shall develop and publish 
     schedules of national and local allowances to ensure that 
     taxpayers entering into a compromise have an adequate means 
     to provide for basic living expenses.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 309. ELIMINATION OF INTEREST DIFFERENTIAL ON 
                   OVERPAYMENTS AND UNDERPAYMENTS.

       (a) In General.--Subsection (a) of section 6621 (relating 
     to the determination of rate of interest) is amended to read 
     as follows:
       ``(a) General Rule.--
       ``(1) Rate.--The rate established under this section shall 
     be the sum of--
       ``(A) the Federal short-term rate determined under 
     subsection (b), plus
       ``(B) the number of percentage points specified by the 
     Secretary.
       ``(2) Determination of percentage points.--The number of 
     percentage points specified by the Secretary for purposes of 
     paragraph (1)(B) shall be the number which the Secretary 
     estimates will result in the same net revenue to the Treasury 
     as would have resulted without regard to the amendments made 
     by section 309 of the Internal Revenue Service Restructuring 
     and Reform Act of 1997.''
       (b) Conforming Amendments.--
       (1) Section 6621 is amended by striking subsection (c).
       (2) The following provisions are each amended by striking 
     ``overpayment rate'' and inserting ``rate'': Sections 
     42(j)(2)(B), 167(g)(2)(C), 460(b)(2)(C), 6343(c), 
     6427(i)(3)(B), 6611(a), and 7426(g).
       (3) The following provisions are each amended by striking 
     ``underpayment rate'' and inserting ``rate'': Sections 
     42(k)(4)(A)(ii), 148(f)(4)(C)(x)(II), 148(f)(7)(C)(ii), 
     453A(c)(2)(B), 644(a)(2)(B), 852(e)(3)(A), 4497(c)(2), 
     6332(d)(1), 6601(a), 6602, 6654(a)(1), 6655(a)(1), and 
     6655(h)(1).
       (c) Effective Date.--The amendments made by this section 
     shall apply for purposes of determining interests for periods 
     after the date of the enactment of this Act.

     SEC. 310. ELIMINATION OF APPLICATION OF FAILURE TO PAY 
                   PENALTY DURING PERIOD OF INSTALLMENT AGREEMENT.

       (a) In General.--Subsection (c) of section 6651 (relating 
     to the penalty for failure to file tax return or to pay tax) 
     is amended by adding at the end the following new paragraph:
       ``(3) Tolling during period of installment agreement.--If 
     the amount required to be paid is the subject of an agreement 
     for payment of tax liability in installments made pursuant to 
     section 6159, the additions imposed under subsection (a) 
     shall not apply so long as such agreement remains in 
     effect.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to agreements entered into after the date of the 
     enactment of this Act.

     SEC. 311. SAFE HARBOR FOR QUALIFICATION FOR INSTALLMENT 
                   AGREEMENTS.

       (a) In General.--Subsection (a) of section 6159 (relating 
     to agreements for payment of tax liability in installments) 
     is amended--
       (1) by striking ``The Secretary is'' and inserting the 
     following:
       ``(1) In general.--The Secretary is'',
       (2) by moving the test 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Safe harbor.--The Secretary shall enter into an 
     agreement to accept the payment of a tax liability in 
     installments if--
       ``(A) the amount of such liability does not exceed $10,000,
       ``(B) the taxpayer has not failed to file any tax return or 
     pay any tax required to be shown thereon during the 
     immediately preceding 5 years, and
       ``(C) the taxpayer has not entered into any prior 
     installment agreement under this paragraph.''
       (b) Effective date.--The amendments made by this section 
     shall apply to agreements entered into after the date of the 
     enactment of this Act.

     SEC. 312. PAYMENT OF TAXES.

       (a) In General.--The Secretary of the Treasury or his 
     delegate shall establish such rules, regulations, and 
     procedures as are necessary to require payment of taxes by 
     check or money order to be made payable to the Treasurer, 
     United States of America.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 313. LOW INCOME TAXPAYER CLINICS.

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

     ``SEC. 7525. LOW INCOME TAXPAYER CLINICS.

       ``(a) In General.--The Secretary shall make grants to 
     provide matching funds for the development, expansion, or 
     continuation of qualified low income taxpayer clinics.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified low income taxpayer clinic.--
       ``(A) In general.--The term `qualified low income taxpayer 
     clinic' means a clinic that--
       ``(i) represents low income taxpayers in controversies with 
     the Internal Revenue Service,
       ``(ii) operates programs to inform individuals for whom 
     English is a second language about their rights and 
     responsibilities under this title, and
       ``(iii) does not charge more than a nominal fee for its 
     services, except for reimbursement of actual costs incurred.
       ``(B) Representation of low income taxpayers.--A clinic 
     meets the requirements of subparagraph (A)(i) if--
       ``(i) at least 90 percent of the taxpayers represented by 
     the clinic have income which does not exceed 250 percent of 
     the poverty level, as determined in accordance with criteria 
     established by the Director of the Office of Management and 
     Budget, and
       ``(ii) the amount in controversy for any taxable year 
     generally does not exceed the amount specified in section 
     7463.
       ``(2) Clinic.--The term `clinic' includes--
       ``(A) a clinical program at an accredited law school in 
     which students represent low income taxpayers in 
     controversies arising under this title, and
       ``(B) an organization exempt from tax under section 501(c) 
     which satisfies the requirements of paragraph (1) through 
     representation of taxpayers or referral of taxpayers to 
     qualified representatives.
       ``(3) Qualified representative.--The term `qualified 
     representative' means any individual (whether or not an 
     attorney) who is authorized to practice before the Internal 
     Revenue Service or the applicable court.
       ``(c) Special Rules and Limitations.--
       ``(1) Aggregate limitation.--Unless otherwise provided by 
     specific appropriation, the Secretary shall not allocate more 
     than $3,000,000 per year (exclusive of costs of administering 
     the program) to grants under this section.
       ``(2) Limitation on individual grants.--A grant under this 
     section shall not exceed $100,000 per year.
       ``(3) Multi-year grants.--Upon application of a qualified 
     low income taxpayer clinic, the Secretary is authorized to 
     award a multi-year grant not to exceed 3 years.
       ``(4) Criteria for awards.--In determining whether to make 
     a grant under this section, the Secretary shall consider--
       ``(A) the numbers of taxpayers who will be served by the 
     clinic, including the number of taxpayers in the geographical 
     area for whom English is a second language,
       ``(B) the existence of other low income taxpayer clinics 
     serving the same population,
       ``(C) the quality of the program offered by the low income 
     taxpayer clinic, including the qualifications of its 
     administrators and qualified representatives, and its track 
     record, if any, in providing service to low income taxpayers, 
     and
       ``(D) alternative funding sources available to the clinic, 
     including amounts received from other grants and 
     contributions, and the endowment and resources of the 
     educational institution sponsoring the clinic.
       ``(5) Requirement of matching funds.--A low income taxpayer 
     clinic must provide matching funds on a dollar for dollar 
     basis for all grants provided under this section. Matching 
     funds may include--
       ``(A) the salary (including fringe benefits) of a faculty 
     member at an educational institution who is teaching in the 
     clinic;
       ``(B) the salaries of administrative personnel employed in 
     the clinic; and
       ``(C) the cost of equipment used in the clinic.

     Indirect expenses, including general overhead of the 
     educational institution sponsoring the clinic, shall not be 
     counted as matching funds.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new section:

``Sec. 7525. Low income taxpayer clinics.''

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

     SEC. 314. JURISDICTION OF THE TAX COURT.

       (a) Interest Determinations.--Subsection (c) of section 
     7481 (relating to the date when Tax Court decisions become 
     final) is amended--
       (1) by inserting ``or underpayment'' after ``overpayment'' 
     each place it appears, and
       (2) by striking ``petition'' in paragraph (3) and inserting 
     ``motion''.
       (b) Extension of Time for Payment of Estate Tax.--Section 
     6166 (relating to the extension of time for payment of estate 
     tax) is amended--
       (1) by redesignating subsection (k) as subsection (l), and
       (2) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Judicial Review.--The Tax Court shall have 
     jurisdiction to review disputes regarding initial or 
     continuing eligibility for extensions of time for payment 
     under this section, including disputes regarding the proper 
     amount of installment payments required herein.''
       (c) Small Case Calendar.--
       (1) Subsection (a) of section 7463 (relating to disputes 
     involving $10,000 or less) is amended by striking ``$10,000'' 
     each place it appears and inserting ``$25,000''.
       (2) The section heading for section 7463 is amended by 
     striking ``$10,000'' and inserting ``$25,000''.

[[Page S8545]]

       (3) The item relating to section 7463 in the table of 
     sections for part II of subchapter C of chapter 76 is amended 
     by striking ``$10,000'' and inserting ``$25,000''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to proceedings commencing after the date of the 
     enactment of this Act.

     SEC. 315. CATALOGING COMPLAINTS.

       (a) In General.--The Commissioner of Internal Revenue 
     shall, as soon as practicable, but not later than 180 days 
     after the date of the enactment of this Act, develop 
     procedures to catalog and review taxpayer complaints of 
     misconduct by Internal Revenue Service employees. Such 
     procedures should include guidelines for internal review and 
     discipline of employees, as warranted by the scope of such 
     complaints.
       (b) Hotline.-- The Commissioner of Internal Revenue shall, 
     as soon as practicable, but not later than 180 days after the 
     date of the enactment of this Act, establish a toll-free 
     telephone number for taxpayers to register complaints of 
     misconduct by Internal Revenue Service employees, and shall 
     publish such number in Publication 1.

     SEC. 316. PROCEDURES INVOLVING TAXPAYER INTERVIEWS.

       (a) In General.--Paragraph (1) of section 7521(b) (relating 
     to procedures involving taxpayer interviews) is amended to 
     read as follows:
       ``(1) Explanations of processes.--An officer or employee of 
     the Internal Revenue Service shall--
       ``(A) before or at an initial interview, provide to the 
     taxpayer--
       ``(i) in the case of an in-person interview with the 
     taxpayer relating to the determination of any tax, an 
     explanation of the audit process and the taxpayer's rights 
     under such process, or
       ``(ii) in the case of an in-person interview with the 
     taxpayer relating to the collection of any tax, an 
     explanation of the collection process and the taxpayer's 
     rights under such process, and
       ``(B) before an in-person initial interview with the 
     taxpayer relating to the determination of any tax--
       ``(i) inquire whether the taxpayer is represented by an 
     individual described in subsection (c),
       ``(ii) explain that the taxpayer has the right to have the 
     interview take place in a reasonable place and that such 
     place does not have to be the taxpayer's home,
       ``(iii) explain the reasons for the selection of the 
     taxpayer's return for examination, and
       ``(iv) provide the taxpayer with a written explanation of 
     the applicable burdens of proof on taxpayers and the Internal 
     Revenue Service.

     If the taxpayer is represented by an individual described in 
     subsection (c), the interview may not proceed without the 
     presence of such individual unless the taxpayer consents.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to interviews and examinations taking place after 
     the date of the enactment of this Act.

     SEC. 317. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, establish procedures to clearly alert taxpayers of their 
     joint and several liabilities on all tax forms, publications, 
     and instructions. Such procedures shall include explanations 
     of the possible consequences of joint and several liability.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the procedures required under 
     subsection (a) (or proposed revisions to any such procedures) 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation on the same day.

     SEC. 318. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF 
                   LIMITATIONS BY AGREEMENT.

       (a) In General.--Paragraph (4) of section 6501(c) (relating 
     to the period for limitations on assessment and collection) 
     is amended--
       (1) by striking ``Where'' and inserting the following:
       ``(A) In general.--Where'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new subparagraph:
       ``(B) Notice to taxpayer of right to refuse or limit 
     extension.--The Secretary shall notify the taxpayer of the 
     taxpayer's right to refuse to extend the period of 
     limitations, or to limit such extension to particular issues, 
     on each occasion when the taxpayer is requested to provide 
     such consent.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to requests to extend the period of limitations 
     made after the date of the enactment of this Act.

     SEC. 319. REVIEW OF PENALTY ADMINISTRATION.

       The Taxpayer Advocate shall prepare a study and provide an 
     independent report to the Committee on Ways and Means of the 
     House of Representatives, the Committee on Finance of the 
     Senate, and the Joint Committee on Taxation, no later than 
     July 30, 1998, reviewing the administration and 
     implementation by the Internal Revenue Service of the penalty 
     reform recommendations made in the Omnibus Budget 
     Reconciliation Act of 1989, including legislative and 
     administrative recommendations to simplify penalty 
     administration and reduce taxpayer burden.

     SEC. 320. STUDY OF TREATMENT OF ALL TAXPAYERS AS SEPARATE 
                   FILING UNITS.

       The Secretary of the Treasury or his delegate and the 
     Comptroller General of the United States shall each conduct 
     separate studies on the feasibility of treating each 
     individual separately for purposes of the Internal Revenue 
     Code of 1986, including recommendations for eliminating the 
     marriage penalty, addressing community property issues, and 
     reducing burden for divorced and separated taxpayers. The 
     reports of each study shall be delivered to the Committee on 
     Ways and Means of the House of Representatives, the Committee 
     on Finance of the Senate, and the Joint Committee on Taxation 
     no later than 180 days after the date of the enactment of 
     this Act.

     SEC. 321. STUDY OF BURDEN OF PROOF.

       The Comptroller General of the United States shall prepare 
     a report on the burdens of proof for taxpayers and the 
     Internal Revenue Service for controversies arising under the 
     Internal Revenue Code of 1986, which shall be delivered to 
     the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation no later than 180 days after 
     the date of the enactment of this Act. Such report shall 
     highlight the differences between these burdens and the 
     burdens imposed in other disputes with the Federal 
     Government, and should comment on the impact of changing 
     these burdens on tax administration and taxpayer rights.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE
                         Subtitle A--Oversight

     SEC. 401. EXPANSION OF POWERS OF THE JOINT COMMITTEE ON 
                   TAXATION.

       (a) In General.--Section 8021 (relating to the powers of 
     the Joint Committee on Taxation) is amended by adding at the 
     end the following new subsections:
       ``(e) Consultant Services.--The Joint Committee is 
     authorized to procure the services of experts and consultants 
     in accordance with section 3109(b) of title 5, United States 
     Code.
       ``(f) Investigations.--The Joint Committee shall review all 
     requests (other than requests by a Committee or Subcommittee) 
     for investigations of the Internal Revenue Service by the 
     General Accounting Office, and approve such requests when 
     appropriate, with a view towards eliminating overlapping 
     investigations, ensuring that the General Accounting Office 
     has the capacity to handle the investigation, and ensuring 
     that investigations focus on areas of primary importance to 
     tax administration.
       ``(g) Relating to Joint Hearings.--
       ``(1) In general.--The Chief of Staff, and such other staff 
     as are appointed pursuant to section 8004, shall provide such 
     assistance as is required for joint hearings described in 
     paragraph (2).
       ``(2) Joint hearings.--On or before April 1 of each 
     calendar year after 1997, there shall be a joint hearing of 
     two members of the majority and one member of the minority 
     from each of the Committees on Finance, Appropriations, and 
     Government Affairs of the Senate, and the Committees on Ways 
     and Means, Appropriations, and Government Reform and 
     Oversight of the House of Representatives, to review the 
     strategic plans and budget for the Internal Revenue Service. 
     After the conclusion of the annual filing season, there shall 
     be a second annual joint hearing to review other matters 
     outlined in section 8022(3)(C).''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 402. COORDINATED OVERSIGHT REPORTS.

       (a) In General.--Paragraph (3) of section 8022 (relating to 
     the duties of the Joint Committee on Taxation) is amended to 
     read as follows:
       ``(3) Reports.--
       ``(A) To report, from time to time, to the Committee on 
     Finance and the Committee on Ways and Means, and, in its 
     discretion, to the Senate or House of Representatives, or 
     both, the results of its investigations, together with such 
     recommendations as it may deem advisable.
       ``(B) To report, annually, to the Committee on Finance and 
     the Committee on Ways and Means on the overall state of the 
     Federal tax system, together with recommendations with 
     respect to possible simplification proposals and other 
     matters relating to the administration of the Federal tax 
     system as it may deem advisable.
       ``(C) To report, annually, to the Committees on Finance, 
     Appropriations, and Government Affairs of the Senate, and to 
     the Committees on Ways and Means, Appropriations, and 
     Government Reform and Oversight of the House of 
     Representatives, with respect to--
       ``(i) strategic and business plans for the Internal Revenue 
     Service;
       ``(ii) progress of the Internal Revenue Service in meeting 
     its objectives;
       ``(iii) the budget for the Internal Revenue Service and 
     whether it supports its objectives;

[[Page S8546]]

       ``(iv) progress of the Internal Revenue Service in 
     improving taxpayer service and compliance;
       ``(v) progress of the Internal Revenue Service on 
     technology modernization; and
       ``(vi) the annual filing season.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.
                           Subtitle B--Budget

     SEC. 411. BUDGET DISCRETION.

       (a) In General.--
       (1) Adjustments.--For purposes of the Congressional Budget 
     Act of 1974 and the Balanced Budget and Emergency Deficit 
     Control Act of 1985--
       (A) the discretionary spending limits under section 
     601(a)(2) of the Congressional Budget Act of 1974 (and those 
     limits as cumulatively adjusted) for the current fiscal year 
     and each outyear;
       (B) the allocations to the Committees on Appropriations 
     under sections 302(a) and 602(a) of the Congressional Budget 
     Act of 1974; and
       (C) the levels for major functional category 800 (General 
     Government) and the appropriate budgetary aggregates in the 
     most recently agreed to concurrent resolution on the budget,

     shall be adjusted to reflect the amounts of additional new 
     budget authority or additional outlays reported by the 
     Committee on Appropriations in appropriations legislation (or 
     by the committee of conference on such legislation) for the 
     Internal Revenue Service.
       (2) Limitation.--Any adjustments made pursuant to paragraph 
     (1) may be made for new initiatives on an annual basis only 
     for--
       (A) improvements in taxpayer services, including building 
     an integrated database of taxpayer information accessible to 
     front-line Internal Revenue Service personnel; or
       (B) other improvements that the Director of the 
     Congressional Budget Office certifies to the Chairpersons of 
     the Committees on Budget of the Senate and the House of 
     Representatives that such budget authority will not increase 
     the Federal budget deficit,
     except that funding for ongoing programs shall be provided 
     through the normal appropriations process.
       (b) Revised Limits, Allocations, Levels, and Aggregates.--
     Upon the reporting of legislation pursuant to subsection (a), 
     and again upon the submission of a conference report on such 
     legislation in either House (if a conference report is 
     submitted), the Chairpersons of the Committees on the Budget 
     of the Senate and the House of Representatives shall file 
     with their respective Houses appropriately revised--
       (1) discretionary spending limits under section 601(a)(2) 
     of the Congressional Budget Act of 1974 (and those limits as 
     cumulatively adjusted) for the current fiscal year and each 
     outyear;
       (2) allocations to the Committee on Appropriations under 
     sections 302(a) and 602(a) of that Act; and
       (3) levels for major functional category 800 (General 
     Government) and the appropriate budgetary aggregates in the 
     most recently agreed to concurrent resolution on the budget, 
     to carry out this subsection.

     These revised discretionary spending limits, allocations, 
     functional levels, and aggregates shall be considered for 
     purposes of congressional enforcement of that Act as the 
     discretionary spending limits, allocations, functional 
     levels, and aggregates.
       (c) Reporting Revised Allocations.--The Committees on 
     Appropriations of the Senate and the House of Representatives 
     may report appropriately revised allocations pursuant to 
     sections 302(b) and 602(b) of the Congressional Budget Act of 
     1974 to carry out this section.
       (d) Contingencies.--This section shall not apply to any 
     additional new budget authority or additional outlays unless 
     the Director of the Congressional Budget Office certifies to 
     the Chairpersons of the Committees on Appropriation of the 
     Senate and the House of Representatives that the Director or 
     any other outside authority has verified that--
       (1) the Internal Revenue Service has provided them with 
     reasonably accurate cost and revenue information;
       (2) the Internal Revenue Service has implemented adequate 
     quality service measures consistent with taxpayer rights;
       (3) the Internal Revenue Service has obtained a clean 
     opinion on its financial audit of appropriated accounts; and
       (4) the Internal Revenue Service has made significant 
     progress towards receiving a clean opinion on its financial 
     audit of custodial accounts.

     SEC. 412. FUNDING FOR CENTURY DATE CHANGE.

       It is the sense of Congress that funding for the Internal 
     Revenue Service efforts to resolve the century date change 
     computing problems should be funded fully to provide for 
     certain resolution of such problems.

     SEC. 413. FINANCIAL MANAGEMENT ADVISORY GROUP.

       The Commissioner shall convene a financial management 
     advisory group consisting of individuals with expertise in 
     governmental accounting and auditing from both the private 
     sector and the Government to advise the Commissioner on 
     financial management issues, including--
       (1) the continued partnership between the Internal Revenue 
     Service and the General Accounting Office;
       (2) the financial accounting aspects of the Internal 
     Revenue Service's system modernization;
       (3) the necessity and utility of year-round auditing; and
       (4) the Commissioner's plans for improving its financial 
     management system.
                     Subtitle C--Tax Law Complexity

     SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.

       It is the sense of Congress that the Internal Revenue 
     Service should provide the Congress with an independent view 
     of tax administration, and that during the legislative 
     process, the tax writing committees of the Congress should 
     hear from front-line technical experts at the Internal 
     Revenue Service with respect to the administrability of 
     pending amendments to the Internal Revenue Code of 1986.

     SEC. 422. TAX COMPLEXITY ANALYSIS.

       (a) In General.--Chapter 92 (relating to powers and duties 
     of the Joint Committee on Taxation) is amended by adding at 
     the end the following new section:

     ``SEC. 8024. TAX COMPLEXITY ANALYSIS.

       ``(a) In General.--
       ``(1) Reported bills and resolutions.--When a committee of 
     the Senate or House of Representatives reports a bill or 
     joint resolution that includes any provision amending the 
     Internal Revenue Code of 1986, the report for such bill or 
     joint resolution shall contain a Tax Complexity Analysis 
     prepared by the Joint Committee on Taxation for each 
     provision therein.
       ``(2) Amended bills and joint resolutions; conference 
     reports.--If a bill or joint resolution is passed in an 
     amended form (including if passed by one House as an 
     amendment in the nature of a substitute for the text of a 
     bill or joint resolution from the other House) or is reported 
     by a committee of conference in amended form, and the amended 
     form contains an amendment to the Internal Revenue Code of 
     1986 not previously considered by either House, then the 
     committee of conference shall ensure that the Joint Committee 
     on Taxation prepares a Tax Complexity Analysis for each 
     provision therein.
       ``(b) Content of Complexity Analysis.--Each Tax Complexity 
     Analysis must address--
       ``(1) whether the provision is new, modifies or replaces 
     existing law, and whether hearings were held to discuss the 
     proposal and whether the Internal Revenue Service provided 
     input as to its administrability;
       ``(2) when the provision becomes effective, and 
     corresponding compliance requirements on taxpayers (e.g., 
     effective on date of enactment, phased in, or retroactive);
       ``(3) whether new Internal Revenue Service forms or 
     worksheets are needed, whether existing forms or worksheets 
     must be modified, and whether the effective date allows 
     sufficient time for the Internal Revenue Service to prepare 
     such forms and educate taxpayers;
       ``(4) necessity of additional interpretive guidance (e.g., 
     regulations, rulings, and notices);
       ``(5) the extent to which the proposal relies on concepts 
     contained in existing law, including definitions;
       ``(6) effect on existing record keeping requirements and 
     the activities of taxpayers, complexity of calculations and 
     likely behavioral responses, and standard business practices 
     and resource requirements;
       ``(7) number, type, and sophistication of affected 
     taxpayers; and
       ``(8) whether the proposal requires the Internal Revenue 
     Service to assume responsibilities not directly related to 
     raising revenue which could be handled through another 
     Federal agency.
       ``(c) Legislation Subject to Point of Order.--
       ``(1) In general.--It shall not be in order in the Senate 
     or the House of Representatives to consider any bill, joint 
     resolution, amendment, motion, or conference report that is 
     not accompanied by a Tax Complexity Analysis for each 
     provision therein.
       ``(2) In the senate.--Upon a point of order being made by 
     any Senator against any provision under this section, and the 
     point of order being sustained by the Chair, such specific 
     provision shall be deemed stricken from the bill, resolution, 
     amendment, amendment in disagreement, or conference report, 
     and may not be offered as an amendment from the floor.
       ``(3) In the house of representatives.--
       ``(A) It shall not be in order in the House of 
     Representatives to consider a rule or order that waives the 
     application of paragraph (1).
       ``(B) In order to be cognizable by the Chair, a point of 
     order under this section must specify the precise language on 
     which it is premised.
       ``(C) As disposition of points of order under this section, 
     the Chair shall put the question of consideration with 
     respect to the proposition that is the subject of the points 
     of order.
       ``(D) A question of consideration under this section shall 
     be debatable for 10 minutes by each Member initiating a point 
     of order and for 10 minutes by an opponent on each point of 
     order, but shall otherwise by decided without intervening 
     motion except one that the House adjourn or that the 
     Committee of the Whole rise, as the case may be.
       ``(E) The disposition of the question of consideration 
     under this subsection with respect to a bill or joint 
     resolution shall be considered also to determine the question 
     of consideration under this subsection with respect to an 
     amendment made in order as original text.

[[Page S8547]]

       ``(d) Responsibilities of the Commissioner.--The 
     Commissioner shall provide the Joint Committee on Taxation 
     with such information as is necessary to prepare a Tax 
     Complexity Analysis on each instance in which such an 
     analysis is required.''
       (b) Clerical Amendment.--The table of sections for chapter 
     92 is amended by adding at the end the following new item:

``Sec. 8024. Tax complexity analysis.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to legislation considered on or after the earlier 
     of January 1, 1998, or the 90th day after the date of the 
     enactment of an additional appropriation to carry out section 
     8024 of the Internal Revenue Code of 1986, as added by this 
     section.

     SEC. 423. SIMPLIFIED TAX AND WAGE REPORTING SYSTEM.

       (a) Policy.--It is the policy of the Congress that 
     employers should have a single point of filing tax and wage 
     reporting information.
       (b) Electronic Filing of Information Returns.--The Social 
     Security Administration shall establish procedures no later 
     than December 31, 1998, to accept electronic submissions of 
     tax and wage reporting information from employers, and to 
     forward such information to the Internal Revenue Service, and 
     to the tax administrators of the States, upon request and 
     reimbursement of expenses. For purposes of this paragraph, 
     recipients of tax and wage reporting information from the 
     Social Security Administration shall reimburse the Social 
     Security Administration for its incremental expenses 
     associated with accepting and furnishing such information.

     SEC. 424. COMPLIANCE BURDEN ESTIMATES.

       The Joint Committee on Taxation shall prepare a study of 
     the feasibility of developing a baseline estimate of 
     taxpayers' compliance burdens against which future 
     legislative proposals could be measured.
                                 ______