[Congressional Record Volume 143, Number 153 (Wednesday, November 5, 1997)]
[House]
[Pages H10001-H10040]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1997

  Mr. DREIER. Mr. Speaker, by direction of the Committee on Rules, I 
call up House Resolution 303 and ask for its immediate consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 303

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     to consider in the House the bill (H.R. 2676) to amend the 
     Internal Revenue Code of 1986 to restructure and reform the 
     Internal Revenue Service, and for other purposes. The bill 
     shall be considered as read for amendment. The amendment in 
     the nature of a substitute recommended by the Committee on 
     Ways and Means now printed in the bill, modified by the 
     amendments printed in the report of the Committee on Rules 
     accompanying this resolution, shall be considered as adopted. 
     All points of order against the bill, as amended, are waived. 
     The previous question shall be considered as ordered on the 
     bill, as amended, to final passage without intervening motion 
     except: (1) two hours of debate on the bill, as amended, 
     which shall be equally divided and controlled by the chairman 
     and ranking minority member of the Committee on Ways and 
     Means; and (2) one motion to recommit with or without 
     instructions.

  The SPEAKER pro tempore (Mr. Sununu). The gentleman from California 
[Mr. Dreier] is recognized for 1 hour.
  Mr. DREIER. Mr. Speaker, for the purpose of debate only, I yield the 
customary 30 minutes to the gentleman from Texas [Mr. Frost], pending 
which I yield myself such time as I may consume. During consideration 
of this resolution, all time yielded is for the purpose of debate only.
  (Mr. DREIER asked and was given permission to revise and extend his 
remarks and include extraneous material.)
  Mr. DREIER. Mr. Speaker, this rule makes in order H.R. 2676, the IRS 
Restructuring and Reform Act of 1997, under a closed rule providing for 
2 hours of debate in the House equally divided and controlled by the 
chairman and ranking minority member of the Committee on Ways and 
Means.
  The rule provides that the amendment in the nature of a substitute 
recommended by the House Committee on Ways and Means, as modified by 
the noncontroversial amendments printed in the report to accompany this 
rule, be considered as adopted.
  The first amendment simply clarifies the authorization for low-income 
taxpayer clinics and the salaries of members of the IRS Oversight Board 
to address Budget Act violations.
  The second amendment clarifies that IRS management and employees may 
address any flexibility issues in a demonstration project.
  The third amendment is a Rules Committee substitute making a number 
of clarifying and technical changes to section 422 relating to the 
Joint Committee on Taxation's preparation of a tax complexity analysis.
  The fourth amendment adds the text of H.R. 2645, the Tax Technical 
Corrections Act of 1997, which makes bipartisan and noncontroversial 
corrections to reflect the intent of the Taxpayer Relief Act of 1997.
  Mr. Speaker, I want to applaud the gentleman from Texas [Mr. Archer] 
and the original sponsors of this bipartisan IRS reform bill, the 
gentleman from Ohio [Mr. Portman] and the gentleman from Maryland [Mr. 
Cardin]. Thanks to their tremendous skill and determination in moving 
this historic bill forward, we are about to end once and for all some 
of the most egregious and abusive practices of the Internal Revenue 
Service.
  I also want to commend the gentleman from Ohio [Mr. Portman] for his 
efforts as cochairman of the bipartisan National Commission on 
Restructuring the Internal Revenue Service. The Commission conducted a 
yearlong audit of the IRS and found a troubled agency that wastes 
billions of dollars in resources and lacks a culture of customer 
service. The audit also revealed an agency that is fraught with 
management, governance and oversight problems and is unaccountable to 
Congress and the American people.
  These problems were further illustrated during 3 days of Senate 
Finance Committee hearings in September, which revealed an out-of-
control agency that intentionally engages in unnecessary and sometimes 
illegal tactics to harass middle-income taxpayers who have limited due 
process rights.
  If enacted, H.R. 2676 will bring about the first comprehensive reform 
of the IRS in four decades. It will make the IRS more user-friendly, 
among other things, establishing an independent governing board and 
shifting the burden of proof from the taxpayer to the IRS in disputes 
that reach Tax Court.
  These reforms will make the IRS more accountable to the American 
people. They will enhance the fairness of the tax collection process by 
giving the taxpayer the benefit of the doubt when he or she has 
cooperated with the IRS and has documented evidence of compliance.
  These reforms will not solve the more intractable problems brought on 
by a complicated and inefficient Tax Code itself. The solutions to 
those problems require comprehensive reform of the Internal Revenue 
Code, which I hope very much the House will address next year. But the 
reforms contained in H.R. 2676 will go a long way toward protecting the 
rights of taxpayers, making the IRS more accountable, and restoring 
public confidence in the way the IRS enforces our tax laws.
  Mr. Speaker, I urge my colleagues to support this very fair and 
balanced rule, and I urge strong support, bipartisan support, of this 
bill.
  Mr. Speaker, I include the following extraneous material for the 
Record:

 Explanation of Rules Committee Substitute to Section 422 of H.R. 2676

       As reported by the House Committee on Ways and Means, 
     Section 422 of H.R. 2676 requires the Joint Committee on 
     Taxation to provide a ``Tax Complexity Analysis'' for 
     legislation reported by the House Committee on Ways and Means 
     and the Senate Committee on Finance and all conference 
     reports that would amend the Internal Revenue Code. The 
     analysis would identify those provisions in a bill or 
     conference report that the staff of the Joint Committee on 
     Taxation determines would add significant complexity or 
     simplification to the tax laws. If the report accompanying 
     such legislation does not include a Tax Complexity Analysis, 
     the legislation would be subject to a point of order in the 
     House and Senate.
       The Rules Committee substitute makes a number of clarifying 
     and technical changes to Section 422.
       For purposes of the requirement that the Joint Committee on 
     Taxation provide a ``Tax Complexity Analysis,'' the term 
     ``legislation'' is further defined as ``bills or joint 
     resolutions'' reported by the House Committee on Ways and 
     Means, the Senate Committee on Finance or a committee of 
     conference.
       For purposes of compliance with Section 422, the Committee 
     involved shall either include the Tax Complexity Analysis in 
     the

[[Page H10002]]

     committee report or cause it to be printed in the 
     Congressional Record prior to consideration of the 
     legislation in the House and Senate.
       References to ``the staff'' of the Joint Committee on 
     Taxation are removed.
       Tax Complexity Analysis is defined as ``a report which is 
     prepared by the Joint Committee on Taxation and which 
     identifies the provisions of the legislation adding 
     significant complexity or providing significant 
     simplification (as determined by the Joint Committee on 
     Taxation) and includes the basis for such determination.''
       Language containing the point of order in the House of 
     Representatives with respect to legislation reported by the 
     Committee on Ways and Means and by a committee of conference 
     is stricken from Section 8024 of the Internal Revenue Code 
     and inserted in the rules of the House of Representatives. 
     Specifically:
       Clause 2(l) of House rule XI is amended to require the 
     report of the Committee on Ways and Means on any bill or 
     joint resolution containing any provision amending the 
     Internal Revenue Code of 1986 to contain a Tax Complexity 
     Analysis unless the Committee causes to have such Analysis 
     printed in the Congressional Record prior to the 
     consideration of the bill or joint resolution; and
       House rule XXVIII is amended to prohibit consideration of a 
     conference report which contains any provision amending the 
     Internal Revenue Code unless the accompanying joint statement 
     of managers contains a Tax Complexity Analysis, unless such 
     Analysis is printed in the Congressional Record prior to the 
     consideration of the report.
                                                                    ____

                                               Committee on Rules,


                                     House of Representatives,

                                 Washington, DC, October 28, 1997.
     Hon. Bill Archer,
     Chairman, Committee on Ways and Means, Longworth House Office 
         Building, Washington, DC.
       Dear Mr. Chairman: I am writing concerning H.R. 2676, The 
     Internal Revenue Service Restructuring and Reform Act of 
     1997, which your committee ordered reported on October 22 by 
     a vote of 33-4.
       This legislation contains provisions in Title IV, 
     Congressional Accountability for the Internal Revenue 
     Service, which fall within the jurisdiction of the Committee 
     on Rules.
       The Committee on Rules does not intend to consider this 
     bill as a matter of original jurisdiction. It is the 
     intention of the Committee to address several concerns with 
     the proposed language in Title IV during the Rules 
     Committee's consideration of an appropriate rule for this 
     legislation.
       I reserve jurisdiction of the Committee on Rules over all 
     bills relating to the rules, joint rules, and the order of 
     business of the House. It would also be my intention to be 
     represented on the conference committee on this bill. Thank 
     you for your consideration.
           Sincerely,
                                                Gerald B. Solomon,
                                                         Chairman.

  Mr. Speaker, I reserve the balance of my time.
  Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2676, the Internal Revenue 
Service Restructuring and Reform Act of 1997, and this rule which 
provides for its consideration. The rule is closed, but because this is 
vitally important legislation and is supported by both Democrats and 
Republicans, liberals, moderates and conservatives, I believe the House 
should proceed with the consideration of this legislation in order to 
speed it on its way to the President's desk.
  Mr. Speaker, in my nearly 19 years in Congress, I have received many, 
many complaints from my constituents regarding their difficulties in 
resolving disputes with the Internal Revenue Service. The report of the 
Portman-Kerrey Commission, which detailed abuses and mismanagement 
within the agency coupled with recent congressional hearings which 
revealed very publicly a number of disturbing abuses perpetuated--
perpetrated by the IRS against taxpayers have provided ample evidence 
that the many complaints we have all heard are based on real problems 
for real people.
  Mr. Speaker, while the IRS must fulfill its mission of administering 
our tax laws and enforcing collection, the IRS cannot be permitted to 
abuse the rights of American taxpayers. H.R. 2676 will go a long way 
toward correcting abuses and ensuring that the agency is restructured 
in such a way that honest taxpayers need not fear undue harassment and 
reprisals from the IRS.
  This legislation contains several provisions which will substantially 
strengthen taxpayers' rights in dealing with the IRS. This bill makes 
it more difficult for the IRS to hold a spouse responsible for mistakes 
made on taxpayer returns by the other spouse. It allows taxpayers to 
sue the Federal Government for up to $100,000 in civil damages caused 
by IRS employees who negligently disregard tax laws, and in those cases 
which come before the U.S. Tax Court, places the burden of proof on the 
IRS rather than on the taxpayer.

                              {time}  1115

  These are but a small part of this bill but important reforms that 
will help all honest and law-abiding taxpayers.
  Mr. Speaker, the bill also establishes an oversight board for the IRS 
which will bring private sector expertise to the management and 
administration of the agency. The board will not have any 
responsibility for or authority over the development and formulation of 
Federal tax policy but would, instead, work to ensure that the agency 
works for the benefit of taxpayers and the country as a whole.
  I am disappointed, however, that the Committee on Rules did not 
provide for the consideration of an amendment that I, along with my 
colleague from Pennsylvania, Mr. Gekas, sought to have made part of 
H.R. 2676.
  Our amendment seeks to correct a provision in current law which 
requires that local governments file W-2 forms for poll workers in 
spite of the fact that these workers are, for the most part, retired 
persons who earn only a hundred dollars or so for their work on 
election day. This requirement places a heavy financial and 
administrative burden on localities. I would hope that in the not too 
distant future the Congress will fix what is an onerous burden for 
local government.
  Mr. Speaker, as a cosponsor of H.R. 2676, I am delighted that the 
Congress is taking action on this matter prior to our adjournment for 
the year. I encourage my colleagues to support the rule in order to 
move quickly to the consideration of this landmark legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Sanibel, FL [Mr. Goss], my very good friend and the distinguished 
chairman of the Subcommittee on Budget and Legislative Process and the 
Permanent Select Committee on Intelligence.
  (Mr. GOSS asked and was given permission to revise and extend his 
remarks.)
  Mr. GOSS. Mr. Speaker, I thank my distinguished friend from the 
greater metropolitan downtown area of Claremont, CA, the vice chairman 
of the Committee on Rules and leader of many good causes in this House, 
for yielding me this time, and I rise in support of his rule. It is a 
closed rule, but it is a good rule; it is time tested for debating tax-
related bills under the jurisdiction of the Committee on Ways and 
Means.
  For years, millions of Americans have known what we are today finally 
acknowledging here on the floor of the House, that the IRS is 
inefficient, it is unaccountable, and it is often downright abusive for 
the very people who pay the salaries, the American taxpayer. Even the 
most routine audit can strike fear in the hearts of Americans, and even 
more disturbing is the belief by many Americans that the IRS targets 
based on partisan political motive.
  The facts serve to underscore their anxiety. In 1993, the IRS gave 
the wrong answer to taxpayer questions millions of times. Last year, 
only one in five calls to the IRS customer hotline apparently got 
through, and even then we were not sure the answer was right.
  Today we are taking the first concrete steps to clean up this agency. 
Congressional hearings have demonstrated clearly and poignantly the 
need for structural reform at the IRS, and we are acting. Built on the 
recommendations of the bipartisan commission chaired by the gentleman 
from Ohio [Mr. Portman] and the gentleman from Maryland [Mr. Cardin], 
H.R. 2676 will create mechanisms to ensure that the IRS serves 
Americans with the respect and dignity that we all deserve.
  For starters, the bill creates an independent oversight board 
composed of private citizens. The board will place a needed check on 
the excesses of the agency as well as restore accountability for the 
American taxpayer. By changing the burden of proof in tax court 
proceedings, H.R. 2676 will make sure that law-abiding taxpayers are 
guaranteed the same basic rights offered in other judicial proceedings. 
They are still innocent until proven guilty, which is our way.

[[Page H10003]]

  After weeks of stops and starts, hesitation, rhetoric, the Clinton 
administration has finally decided to join our effort in these first 
steps. They recognize this is a good effort. I welcome the President's 
conversion, and I urge my colleagues to support this fair rule and this 
important bipartisan bill.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from 
Maryland [Mr. Cardin].
  Mr. CARDIN. Mr. Speaker, I want to thank my friend from Texas [Mr. 
Frost] for yielding me this time.
  I want to compliment the Committee on Rules for bringing out this 
rule, and I hope that it will receive strong support by both sides of 
the aisle.
  During the consideration of the underlying bill by the Committee on 
Ways and Means, there was only one amendment that was not approved by 
the committee that was offered. I want to thank the Committee on Rules 
for dealing with that amendment by the gentleman from California [Mr. 
Stark] in the self-executing rule that adopts the amendment. So we have 
really taken care of all the concerns of Members that have offered 
changes.
  The reason why this rule and the underlying bill will receive strong 
bipartisan support is that it was developed by the National Commission 
on Restructuring the IRS, and it was adopted in a bipartisan manner in 
that commission.
  I particularly want to compliment our colleague, the gentleman from 
Ohio [Mr. Portman], for the work that he did in leading that commission 
and keeping us focused on dealing with the problems of the IRS so that 
we could bring the bill to the floor in a way that it could receive 
strong support by all Members of this House.
  I also want to compliment the gentleman from Texas [Mr. Archer], the 
chairman of the Committee on Ways and Means, and the gentleman from New 
York [Mr. Rangel], the ranking member. The Committee on Ways and Means 
took a good bill and made it better, and we worked in a bipartisan way 
to do that.
  By adopting this rule, this House has the opportunity to pass today a 
bill that will deal with the problems at the IRS before the next tax 
season. I hope that what we are doing here in this House, the other 
body will follow suit so that we can pass meaningful reform of the IRS 
now to help our taxpayers before April of next year.
  Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Morris, IL [Mr. Weller], my very good friend, a member of the Committee 
on Ways and Means.
  (Mr. WELLER asked and was given permission to revise and extend his 
remarks.)
  Mr. WELLER. Mr. Speaker, let me begin as I rise in support of this 
rule and this bill to commend the chairman of the Committee on Ways and 
Means, the gentleman from Texas [Mr. Archer], and the ranking member, 
the gentleman from New York [Mr. Rangel], for management of this bill, 
but particularly I want to commend the gentleman from Ohio [Mr. 
Portman] and the gentleman from Maryland [Mr. Cardin] for their 
leadership on managing this bill as well because this legislation is 
such an important victory for middle class taxpayers.
  There is no agency in more need of reform than the Internal Revenue 
Service, and that is why we all stand here today in support of very 
important legislation, legislation that is really a long time coming, 
but legislation that is a big victory for the middle class.
  There are two very, very important changes, fundamental changes, that 
are included in this legislation I would like to note, and probably the 
most important one is the one which shifts the burden of proof off the 
backs of the taxpayer and on to the IRS. There is no greater complaint 
that I hear back home in Illinois than, when someone is audited by the 
IRS, they are treated as guilty until proven innocent, whereas if 
someone is in a criminal court, they are innocent until proven guilty. 
This legislation gives the taxpayers, those who play by the rules, work 
hard, and pay their taxes on time, the same protections with the IRS 
that one enjoys in the courtroom. That is a big victory for the middle 
class.
  And during this process, we also learned about some of the impact of 
what the IRS has done in the past and how they treat human beings. One 
of the issues that we also address in this is a particularly important 
issue to those that we call the unlucky and innocent spouse.
  We discovered in many cases that someone who is a deadbeat parent is 
also a deadbeat taxpayer. In a case where you have a deadbeat dad who 
is not paying his child support and not paying his taxes, who do my 
colleagues think the IRS went after? That poor, unlucky, innocent 
working mom with the kids whose husband is not paying the child 
support. And the IRS showed up wanting to collect his taxes from her. 
This legislation puts in place more protections to protect the unlucky, 
innocent spouse.
  These are two important victories, shifting the burden of proof so 
that someone is innocent until proven guilty with the IRS, and also 
another important victory is protecting the unlucky and innocent 
spouse.
  My colleagues, this legislation deserves bipartisan support, and it 
is a big victory.
  Mr. FROST. Mr. Speaker, I yield 4 minutes to the gentleman from Ohio 
[Mr. Traficant].
  (Mr. TRAFICANT asked and was given permission to revise and extend 
his remarks.)
  Mr. TRAFICANT. Mr. Speaker, today is a day that I am very glad to see 
come, and in a way I am also sad. For 10 years I have worked to shift 
the burden of proof in the civil tax case, and I guess I am glad 
because today we finally get a chance to see that on the House floor.
  What I am sad about, to be quite honest, is I have offered this bill 
for 10 years and could never get a hearing from my Democrat colleagues. 
I believe today's legislation will probably continue to keep a majority 
in this House for Republicans. And I know Democrats are saying, why 
does Mr. Traficant say that? I think the Democrat Party is going to 
have to deal with the substantive issues and problems of our country if 
we want to take the House back.
  I want to thank the Republican Party for including the Traficant 
provision. I want to thank the gentleman from Texas [Mr. Archer] and 
the gentleman from Ohio [Mr. Portman], and I want to thank the 
gentleman from New York [Mr. Rangel] and the gentleman from Maryland 
[Mr. Cardin]. In all fairness, they were not in that position to make 
those decisions years ago, and maybe we would have had more success had 
we had it.
  But I think there are some other people that have to be thanked. My 
strategy was to get the American people to support that legislation. 
The White House never wanted it. Quite frankly, no one wanted it. And 
now 98 percent of the American people support the burden of proof shift 
in a civil tax case, the No. 1 supported bill in the Congress. I want 
to thank Rush Limbaugh, I want to thank Michael Reagan, I want to thank 
Mary Matalin, I want to thank Blanquita Cullum, I want to thank Jane 
Wallace and Bay Buchanan and Pat Buchanan. I want to thank Ron Verb and 
Ron Novak. I want to thank Jeff and Flash Talk Show out of Cleveland 
and the great work they did in the Midwest. I want to thank Jack 
Anderson, George Will, the gentleman from New York [Mr. Solomon], 
Joseph Sobran. I want to thank everyone in America who helped to bring 
this day about. And I want to again commend the Republican Party; they 
have done the right thing.
  Now just let me say this, that I do not know how much time I have 
left, but years ago a family in North Carolina by the name of Counsel 
had a problem, and Alex Counsel actually took his life, and when he did 
so, he left a message in the form of a suicide note to his wife. He 
said, Kay, I have taken my life in order to provide money for you and 
our family to fight the IRS, which is out of control and has taken 
liens against our property illegally. I have made the only decision I 
can, Kay. Take the insurance money and save our good name.
  My colleagues, what has happened to us? How did we allow the greatest 
tenet of America's freedom, innocent until proven guilty, the accuser 
carries the burden, to be shifted like this in a court of law? I mean, 
what has happened to us?
  Then you have IRS agents testifying behind screens with voice 
scramblers

[[Page H10004]]

because they, too, are afraid of the IRS.
  Now I see some of the Democrat staffers laughing. Man, we have 
laughed on this one for sure.
  It is the right thing to do. I support this rule, I support this 
bill, and I want to compliment Chairman Bill Archer, because without 
the gentleman from Texas [Mr. Archer] standing up to both the White 
House and the other body, my provision still is not free and clear, and 
I predict the other body will challenge it, and I predict the White 
House will come out against it, and now the IRS is putting the spin: It 
is not really going to do that much.
  Well, just years ago they said it was going to bust the bank and it 
was going to make tax protesters and tax cheats win out. I think the 
IRS has given us a lot of lies over the years, and I believe this bill 
will help to straighten that out.
  So I am sad to see that it is not the Democrat Party that has brought 
the bill, but I commend the Republicans.
  Mr. DREIER. Mr. Speaker, I yield myself such time as I may consume.
  Let me first say that I want to congratulate my friend from Ohio. I 
remember very well when he took me to the well and had me sign a 
discharge petition to release this burden of proof legislation, and it 
has taken a long time getting to this point. I remember he told me that 
I might be in trouble for signing that discharge petition when he stood 
over me as I did it, but I still followed his directive.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Glens Falls, NY [Mr. Solomon], my friend and the chairman of the 
Committee on Rules.

                              {time}  1130

  Mr. SOLOMON. I thank the gentleman from Claremont, CA [Mr. Dreier], 
the vice chairman of the Committee on Rules, for giving me the time to 
request unanimous consent to revise and extend my remarks and to praise 
the gentleman from Texas [Mr. Archer]; the gentleman from Ohio [Mr. 
Portman]; the gentleman from California [Mr. Dreier]; and especially 
the gentleman from Ohio [Mr. Traficant]. Without him, this legislation 
never would have reached this floor, and I commend him for it.
  Mr. Speaker, I thank the gentleman from California for yielding me 
the time.
  Mr. Speaker, a Washington Post magazine spoof in December of 1991 on 
the role of the IRS succinctly characterizes many Americans view of the 
IRS today. It read, ``In a sweeping post-coup reform move, Gorbachev 
abolished the Communist Party and fired thousands of entrenched hard-
line Kremlin bureaucrats, all of whom were immediately hired by the 
Internal Revenue Service.''
  Now we know that IRS employees are not former Kremlin agents but the 
characterization of IRS agents as part of an American Gestapo 
contingent strikes a nerve among the American people.
  Many taxpayers are forced to live in fear that making a minor error 
in the myriad tax forms and requirements they are faced with each year 
will result in a demanding visit by an IRS agent or even a severe 
punishment. Today the IRS is a bureaucracy out of control because of 
the lack of proper checks and balances, which are pillars of the 
American system of government.
  In recognition of this out of control bureaucracy and the growing 
cries for fundamental reform by the American people, the National 
Commission on Restructuring the IRS, chaired by Representative Portman 
and Senator Kerrey of Nebraska was established. Its year-long mission 
was to make recommendations for modernizing and improving its 
efficiency and taxpayer services. On June 25, 1997, the Commission 
issued a comprehensive report making recommendations relating to the 
executive branch governance and management of the IRS, congressional 
oversight of the IRS, personnel flexibility, customer service and 
compliance, technology modernization, electronic filing, tax law 
simplification, taxpayer rights, and financial accountability.
  These extensive recommendations provided the foundation for the 
legislation this House will be considering today.
  H.R. 2676, the IRS Restructuring and Reform Act, introduced by 
Representatives Archer, Portman, and Cardin, builds on the commission's 
recommendations to form a comprehensive IRS reform package.
  For example, the bill establishes the Internal Revenue Service 
Oversight Board, within the Treasury Department, whose general 
responsibilities are to oversee the Internal Revenue Service in its 
administration, management, conduct, direction and supervision of the 
execution and application of our country's internal revenue laws.
  The bill also makes it unlawful for the President, Vice President, 
their employees and all Cabinet heads to request that any officer or 
employee of the IRS conduct or terminate an audit or begin or terminate 
an investigation with respect to any particular taxpayers.
  Perhaps even more important, this reform package shifts the burden of 
proof in any court tax proceeding from the taxpayer to the Secretary of 
the Treasury. This bill will greatly increase the accountability and 
efficiency of the IRS and will help to restore the confidence and faith 
of the American people in its government.
  Mr. Speaker, I would also be remiss if I did not commend our 
colleagues Chairman Bill Archer and Representative Rob Portman of the 
Ways and Means Committee for their steadfast and thorough efforts in 
producing this legislation.
  The bipartisan work of the commission combined with the bipartisan 
efforts of the Ways and Means Committee have produced meaningful reform 
that will be to the benefit of every American taxpayer.
  Mr. Speaker, the Constitution grants this Congress the authority to 
raise the revenue necessary to run the Federal Government. While I 
would contend that this Congress has a long way to go toward reforming 
our overall tax system, this first reform effort in four decades of the 
agency charged with collecting that revenue, is a giant leap in 
responsibility fulfilling this constitutional duty.
  For these reasons, I urge all of my colleagues to support this fair 
rule and to support this historic legislation.
  Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Omaha, NE [Mr. Christensen], the future Governor.
  Mr. CHRISTENSEN. Mr. Speaker, I thank my friend for yielding me this 
time.
  Mr. Speaker, this is a great day. It is a great day for all of us, 
but it is a great day for the gentleman from Ohio [Mr. Traficant]. 
There has not been anybody who has been in the well fighting for this 
day longer, more arduously, than he. It is hard to believe why some 
staffers over there on the Democrat side are scowling at the gentleman 
and have their arms crossed. They just do not get it. They do not 
understand what the IRS has done to the taxpayer.
  The gentleman's provision on taking the burden of proof off the 
taxpayer is going to turn what has been a lopsided situation for a 
number of years and turn it back in favor of the taxpayer.
  In America, we have always known the principle that one is presumed 
innocent until proven guilty. But in the IRS, as long as I have known 
about it and as long as I have heard the gentleman from Ohio [Mr. 
Traficant] talking about it, one is guilty, and one has to prove one's 
innocence. His provision is going to change that.
  So I thank the gentleman from Ohio for his fight, and I thank him for 
everything that he is doing. Nebraskans thank the gentleman, and 
western Nebraskans thank the gentleman. As I have talked to them a 
number of times, they wanted the gentleman from Ohio [Mr. Traficant] to 
come out to Nebraska and talk about IRS reform and talk about changing 
the way things are done in Washington.
  Mr. Speaker, the Department of Treasury could have fixed this, but 
they never got it done, they never attempted it. But the gentleman from 
Ohio [Mr. Portman] and the gentleman from Nebraska [Mr. Kerrey], on the 
Senate side, put this legislation together with the help of my 
chairman, the gentleman from Texas [Mr. Archer].
  This provision also as an authority called the oversight board that 
is going to be having some real citizens that are nongovernmental 
citizens putting their expertise to work. I believe that this board 
will provide some commonsense oversight that is much needed in this 
area.
  The IRS has got to do a better job of providing fair tax treatment 
that it has been commissioned to do. This bill is a small step in the 
right direction until we pull out the IRS by its roots, as my chairman 
has hoped to do for a very long time, and move to either a sales tax or 
a flat tax approach. This is an intermediary step; it is a step in the 
right direction. I thank the gentleman from New York for assisting us 
with this. He has been a great support and we thank him for his help.
  Mr. Speaker. I rise in strong support today for H.R. 2676, the 
Internal Revenue Service Restructuring and Reform Act of 1997.
  Some say the three most frightening letters of the alphabet are IRS--
and for good reason.

[[Page H10005]]

  The IRS is one of the most bureaucratic, outdated, and inefficient 
government agencies and it touches every hard-working, tax-paying 
American.
  The IRS Restructuring and Reform Act would help fix what ails the 
IRS.
  In America, people are presumed innocent until proven guilty. In the 
IRS, it is the other way around--the taxpayer bears the burden of 
proving himself or herself innocent.
  This bill shifts the burden of proof in court proceedings from the 
taxpayer to the IRS.
  This bill also creates an Independent Oversight Board that includes 
non-governmental experts who can bring new thinking and a more tax-
payer oriented culture to the IRS.
  If the Department of Treasury could have fixed the IRS, they would 
have done so already.
  This oversight board will have real power and authority--it won't 
just be another governmental advisory board.
  Those of us committed to easing the burden on taxpayers will continue 
to work to replace the income tax with a more simple and fair Tax Code.
  But as long as we have an income tax, the IRS must do a better job of 
providing fair treatment and efficient customer service to the Nation's 
taxpayers. This bill is a step in that direction.
  I urge my fellow colleagues to cast their vote for a more fair and 
efficient IRS for America's taxpayers. Thank you Mr. Speaker, I yield 
back the balance of my time.
  Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from Texas 
[Mr. Green].
  Mr. GREEN. Mr. Speaker, I would like to thank my colleague from Texas 
and a member of the Committee on Rules for allowing me to speak in 
support of not only the rule today, but also the IRS reform bill.
  As a cosponsor of the bill of the gentleman from Ohio [Mr. Traficant] 
earlier, I support one of the issues particularly that is in this bill, 
where the reform would allow for the burden of proof to be placed on 
the IRS instead of on the taxpayer, but I also want to compliment both 
the Democratic Members and the Republican Members and my colleague the 
gentleman from Houston, Texas [Mr. Archer], on the bill. I know from 
the Republican side, we hear this is a small step, but let me tell my 
colleagues, this is a much bigger step than it may be considered, 
because in my two terms here before, we did not get to this point, even 
during the last session of Congress, to get to the point where we can 
really talk about an IRS reform bill.
  Mr. Speaker, it is a bipartisan bill. I am glad the President decided 
to support it, but there are a number of Democrats who supported the 
issue long before the Committee on Ways and Means brought it up. If one 
is mistreated by a government agency, whether it be the IRS or HUD or 
anyone else, or EPA, it is not a Democratic or Republican problem, it 
is a problem that we all need to address, and that is why I think it is 
important that this bill is a bipartisan bill today. Again, I 
congratulate the people who put it together on the Committee on Ways 
and Means.
  I support the change that puts the burden of proof on the IRS, in tax 
disputes that come before the IRS tax court. People's lives have been 
turned into a living hell by a system that assumed they were guilty as 
charged and before they actually knew what they were guilty of. Again, 
I think we understand that that burden of proof is so important because 
if a person accused of a criminal crime in our country is innocent 
until proven guilty, we need to do that at least in the tax courts of 
our land.
  I am also pleased that the President will continue to appoint the IRS 
Commissioner and to remove the Commissioner at will. As we increase the 
power and the influence of the Independent Advisory Board, it is 
important to make sure the final authority rests with an elected 
office; and whether on the Republican side one agrees with this 
President or not, it is important that an elected official have that 
authority, because the buck stops there.
  Taxpayers also receive other rights in the bill, such as innocent 
spouses will no longer be held responsible by mistakes made by the 
other spouse on tax returns. That is why I encourage my colleagues to 
vote for the bill and the rule.
  Mr. Speaker, I rise in support of the IRS reform bill.
  Mr. Speaker, I believe the bill we have before us will bring much-
needed reform to the Internal Revenue Service and Relief to those 
Americans who are audited to be treated fairly.
  As a long-time sponsor of the bill by Mr. Traficant, I support the 
change that will place the burden of proof on the IRS in most tax 
disputes that will come before the IRS Tax Court. As the recent 
congressional hearings demonstrated, people's lives have turned into a 
living hell by a system that assumed they were guilty as charged.
  I am also pleased the President will retain the ability to appoint 
the IRS Commissioner and to remove the Commissioner at will. As we 
increase the power and influence of the independent advisory board, it 
is important to place the final authority over the performance of the 
Commissioner with the President. The buck stops there.
  Taxpayers will also receive other rights on this bill: innocent 
spouses will no longer be held responsible for mistakes made by the 
other spouse on a tax return. And taxpayers will be able to sue the 
Government for civil damages caused by IRS employees who negligently 
disregard laws.
  I urge support for this bill.
  Mr. FROST. Mr. Speaker, if the gentleman has no other speakers, then 
we urge adoption of the rule and adoption of the bill, and yield back 
the balance of our time.
  Mr. DREIER. Mr. Speaker, I yield myself such time as I may consume to 
say that this is our great opportunity to finally deal with this issue 
of the burden of proof, which has been a long time in coming. The 
leadership of the gentleman from Texas [Mr. Archer] and the gentleman 
from Ohio [Mr. Portman] and others have made this day possible, and I 
am very happy that we have seen our colleagues on the other side of the 
aisle come, not quite kicking and screaming, but they have now come 
enthusiastically in support of what I think is very good public policy.
  With that, I urge support of the previous question, support of the 
rule and support of the bill that will come from my friends on the 
Committee on Ways and Means.
  Mr. Speaker, I yield back the balance of my time, and I move the 
previous question on the resolution.
  The previous question was ordered.
  The SPEAKER pro tempore. The question is on the resolution.
  The resolution was agreed to.
  A motion to reconsider was laid on the table.

                              {time}  1145

  Mr. BUNNING. Mr. Speaker, pursuant to House Resolution 303, I call up 
the bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to 
restructure and reform the Internal Revenue Service, and for other 
purposes, and ask for its immediate consideration in the House.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Sununu). Pursuant to House Resolution 
303, the amendment in the nature of a substitute printed in the bill, 
modified by the amendments printed in House Report 105-380, is adopted.
  The text of the committee amendment in the nature of a substitute, as 
modified by the amendments printed in House Report 105-380, is as 
follows:

                               H.R. 2676

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

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

       (a) Short Title.--This Act may be cited as the ``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; table of contents.

   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; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer 
              audits and other investigations.

                  Subtitle B--Personnel Flexibilities

Sec. 111. Personnel flexibilities.

                      TITLE II--ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.

[[Page H10006]]

Sec. 202. Due date for certain information returns filed 
              electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 300. Short title.

                      Subtitle A--Burden of Proof

Sec. 301. Burden of proof.

                  Subtitle B--Proceedings by Taxpayers

Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 321. Spouse relieved in whole or in part of liability in certain 
              cases.
Sec. 322. Suspension of statute of limitations on filing refund claims 
              during periods of disability.

              Subtitle D--Provisions Relating to Interest

Sec. 331. Elimination of interest rate differential on overlapping 
              periods of interest on income tax overpayments and 
              underpayments.
Sec. 332. Increase in overpayment rate payable to taxpayers other than 
              corporations.

 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

Sec. 341. Privilege of confidentiality extended to taxpayer's dealings 
              with non-attorneys authorized to practice before Internal 
              Revenue Service.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer 
              source code.
Sec. 345. Procedures relating to extensions of statute of limitations 
              by agreement.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax 
              Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting 
              Alternative Commitment Agreements.

                  Subtitle F--Disclosures to Taxpayers

Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers' rights in interviews with the 
              Internal Revenue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Explanations of appeals and collection process.

                Subtitle G--Low Income Taxpayer Clinics

Sec. 361. Low income taxpayer clinics.

                       Subtitle H--Other Matters

Sec. 371. Actions for refund with respect to certain estates which have 
              elected the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.
Sec. 375. Clarification of authority of Secretary relating to the 
              making of elections.
Sec. 376. Limitation on penalty on individual's failure to pay for 
              months during period of installment agreement.

                          Subtitle I--Studies

Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

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

                           Subtitle B--Budget

Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.

                     Subtitle C--Tax Law Complexity

Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.

     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

Sec. 501. Clarification of deduction for deferred compensation.
   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 (hereafter in this subchapter referred to as 
     the `Oversight Board').
       ``(b) Membership.--
       ``(1) Composition.--The Oversight Board shall be composed 
     of 11 members, as follows:
       ``(A) 8 members shall be individuals who are not Federal 
     officers or employees and who are appointed by the President, 
     by and with the advice and consent of the Senate.
       ``(B) 1 member shall be the Secretary of the Treasury or, 
     if the Secretary so designates, the Deputy Secretary of the 
     Treasury.
       ``(C) 1 member shall be the Commissioner of Internal 
     Revenue.
       ``(D) 1 member shall be an individual who is a 
     representative of an organization that represents a 
     substantial number of Internal Revenue Service employees and 
     who is appointed by the President, by and with the advice and 
     consent of the Senate.
       ``(2) Qualifications and terms.--
       ``(A) Qualifications.--Members of the Oversight Board 
     described in paragraph (1)(A) shall be appointed solely on 
     the basis of their professional experience and expertise in 1 
     or more of the following areas:
       ``(i) Management of large service organizations.
       ``(ii) Customer service.
       ``(iii) Federal tax laws, including tax administration and 
     compliance.
       ``(iv) Information technology.
       ``(v) Organization development.
       ``(vi) The needs and concerns of taxpayers.
     In the aggregate, the members of the Oversight Board 
     described in paragraph (1)(A) should collectively bring to 
     bear expertise in all of the areas described in the preceding 
     sentence.
       ``(B) Terms.--Each member who is described in paragraph 
     (1)(A) or (D) shall be appointed for a term of 5 years, 
     except that of the members first appointed under paragraph 
     (1)(A)--
       ``(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) 2 members shall be appointed for a term of 4 years.

     Such terms shall begin on the date of appointment.
       ``(C) Reappointment.--An individual who is described in 
     paragraph (1)(A) may be appointed to no more than two 5-year 
     terms on the Oversight Board.
       ``(D) Vacancy.--Any vacancy on the Oversight Board shall be 
     filled in the same manner as the original appointment. Any 
     member appointed to fill a vacancy occurring before the 
     expiration of the term for which the member's predecessor was 
     appointed shall be appointed for the remainder of that term.
       ``(E) Special government employees.--During the entire 
     period that an individual appointed under paragraph (1)(A) is 
     a member of the Oversight Board, such individual shall be 
     treated as--
       ``(i) serving as a special government employee (as defined 
     in section 202 of title 18, United States Code) and as 
     described in section 207(c)(2) of such title 18, and
       ``(ii) serving as an officer or employee referred to in 
     section 101(f) of the Ethics in Government Act of 1978 for 
     purposes of title I of such Act.
       ``(3) Quorum.--6 members of the Oversight Board shall 
     constitute a quorum. A majority of members present and voting 
     shall be required for the Oversight Board to take action.
       ``(4) Removal.--
       ``(A) In general.--Any member of the Oversight Board may be 
     removed at the will of the President.
       ``(B) Secretary and commissioner.--An individual described 
     in subparagraph (B) or (C) of paragraph (1) shall be removed 
     upon termination of employment.
       ``(C) Representative of internal revenue service 
     employees.--The member described in paragraph (1)(D) shall be 
     removed upon termination of employment, membership, or other 
     affiliation with the organization described in such 
     paragraph.
       ``(5) Claims.--
       ``(A) In general.--Members of the Oversight Board who are 
     described in paragraph (1)(A) or (D) 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 Oversight Board.
       ``(B) Effect on other law.--This paragraph 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.
       ``(c) General Responsibilities.--
       ``(1) In general.--The Oversight Board shall oversee the 
     Internal Revenue Service in its 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 Oversight 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) law enforcement activities of the Internal Revenue 
     Service, including compliance activities

[[Page H10007]]

     such as criminal investigations, examinations, and collection 
     activities, or
       ``(C) specific procurement activities of the Internal 
     Revenue Service.
       ``(3) Restriction on disclosure of return information to 
     oversight board members.--No return, return information, or 
     taxpayer return information (as defined in section 6103(b)) 
     may be disclosed to any member of the Oversight Board 
     described in subsection (b)(1)(A) or (D). 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 Oversight Board so described 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 Oversight 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--
       ``(A) recommend to the President candidates for appointment 
     as the Commissioner of Internal Revenue and recommend to the 
     President the removal of the Commissioner,
       ``(B) review the Commissioner's selection, evaluation, and 
     compensation of senior managers, and
       ``(C) review and approve the Commissioner's plans for any 
     major 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, and
       ``(C) ensure that the budget request supports the annual 
     and long-range strategic plans.

     The Secretary shall submit the budget request referred to in 
     paragraph (4)(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 Oversight Board who 
     is described in subsection (b)(1)(A) shall be compensated at 
     a rate not to exceed $30,000 per year. All other members of 
     the Oversight Board shall serve without compensation for such 
     service.
       ``(B) Chairperson.--In lieu of the amount specified in 
     subparagraph (A), the Chairperson of the Oversight Board 
     shall be compensated at a rate not to exceed $50,000.
       ``(2) Travel expenses.--The members of the Oversight 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 for purposes of attending meetings of the Oversight 
     Board.
       ``(3) Staff.--At the request of the Chairperson of the 
     Oversight Board, the Commissioner shall detail to the 
     Oversight Board such personnel as may be necessary to enable 
     the Oversight 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 Oversight 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 Oversight Board shall 
     elect for a 2-year term a chairperson from among the members 
     appointed under subsection (b)(1)(A).
       ``(2) Committees.--The Oversight Board may establish such 
     committees as the Oversight Board determines appropriate.
       ``(3) Meetings.--The Oversight Board shall meet at least 
     once each month and at such other times as the Oversight 
     Board determines appropriate.
       ``(4) Reports.--The Oversight 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.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Nominations to internal revenue service oversight 
     board.--The President shall submit nominations under section 
     7802 of the Internal Revenue Code of 1986, as added by this 
     section, to the Senate not later than 6 months after the date 
     of the enactment of this Act.

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

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

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

       ``(a) Commissioner of Internal Revenue.--
       ``(1) Appointment.--
       ``(A) In general.--There shall be in the Department of the 
     Treasury a Commissioner of Internal Revenue who shall be 
     appointed by the President, by and with the advice and 
     consent of the Senate, to a 5-year term. The appointment 
     shall be made without regard to political affiliation or 
     activity.
       ``(B) Vacancy.--Any individual appointed to fill a vacancy 
     in the position of Commissioner occurring before the 
     expiration of the term for which such individual's 
     predecessor was appointed shall be appointed only for the 
     remainder of that term.
       ``(C) Removal.--The Commissioner may be removed at the will 
     of the President.
       ``(2) Duties.--The Commissioner shall have such duties and 
     powers as the Secretary may prescribe, including the power 
     to--
       ``(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) recommend to the President a candidate for 
     appointment as Chief Counsel for the Internal Revenue Service 
     when a vacancy occurs, and recommend to the President the 
     removal of such Chief Counsel.

     If the Secretary determines not to delegate a power specified 
     in subparagraph (A) or (B), such determination may not take 
     effect until 30 days after the Secretary notifies the 
     Committees on Ways and Means, Government Reform and 
     Oversight, and Appropriations of the House of 
     Representatives, the Committees on Finance, Government 
     Operations, and Appropriations of the Senate, and the Joint 
     Committee on Taxation.
       ``(3) Consultation with board.--The Commissioner shall 
     consult with the Oversight Board on all matters set forth in 
     paragraphs (2) and (3) (other than paragraph (3)(A)) of 
     section 7802(d).
       ``(b) Assistant Commissioner for Employee Plans and Exempt 
     Organizations.--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.
       ``(c) Office of Taxpayer Advocate.--
       ``(1) In general.--
       ``(A) Establishment.--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 with the approval 
     of the Oversight Board by the Commissioner of Internal 
     Revenue and shall report directly to the Commissioner. 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) Restriction on subsequent employment.--An individual 
     who is an officer or employee of the Internal Revenue Service 
     may be appointed as Taxpayer Advocate 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, 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, 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

[[Page H10008]]

     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) 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,
       ``(X) in conjunction with the National Director of Appeals, 
     identify the 10 most litigated issues for each category of 
     taxpayers, including recommendations for mitigating such 
     disputes, and
       ``(XI) 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 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, and
       ``(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.
       ``(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) 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; other officials.''

       (2) Subsection (b) of section 5109 of title 5, United 
     States Code, is amended by striking ``7802(b)'' and inserting 
     ``7803(b)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Current officers.--
       (A) In the case of an individual serving as Commissioner of 
     Internal Revenue on the date of the enactment of this Act who 
     was appointed to such position before such date, the 5-year 
     term required by section 7803(a)(1) of the Internal Revenue 
     Code of 1986, as added by this section, shall begin as of the 
     date of such appointment.
       (B) Section 7803(c)(1)(B) of such Code, as added by this 
     section, shall not apply to the individual serving as 
     Taxpayer Advocate 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.--Unless otherwise 
     prescribed by the Secretary, 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 all necessary directions, 
     instructions, orders, and rules applicable to such persons.
       ``(b) Posts of Duty of Employees in Field Service or 
     Traveling.--Unless otherwise prescribed by the Secretary--
       ``(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.

     SEC. 104. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER 
                   TAXPAYER AUDITS AND OTHER INVESTIGATIONS.

       (a) In General.--Part I of subchapter A of chapter 75 
     (relating to crimes, other offenses, and forfeitures) is 
     amended by adding after section 7216 the following new 
     section:

     ``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER 
                   TAXPAYER AUDITS AND OTHER INVESTIGATIONS.

       ``(a) Prohibition.--It shall be unlawful for any applicable 
     person to request any officer or employee of the Internal 
     Revenue Service to conduct or terminate an audit or other 
     investigation of any particular taxpayer with respect to the 
     tax liability of such taxpayer.
       ``(b) Reporting Requirement.--Any officer or employee of 
     the Internal Revenue Service receiving any request prohibited 
     by subsection (a) shall report the receipt of such request to 
     the Chief Inspector of the Internal Revenue Service.
       ``(c) Exceptions.--Subsection (a) shall not apply to--
       ``(1) any request made to an applicable person by the 
     taxpayer or a representative of the taxpayer and forwarded by 
     such applicable person to the Internal Revenue Service,
       ``(2) any request by an applicable person for disclosure of 
     return or return information under section 6103 if such 
     request is made in accordance with the requirements of such 
     section, or
       ``(3) any request by the Secretary of the Treasury as a 
     consequence of the implementation of a change in tax policy.
       ``(d) Penalty.--Any person who willfully violates 
     subsection (a) or fails to report under subsection (b) shall 
     be punished upon conviction by a fine in any amount not 
     exceeding $5,000, or imprisonment of not more than 5 years, 
     or both, together with the costs of prosecution.
       ``(e) Applicable Person.--For purposes of this section, the 
     term `applicable person' means--
       ``(1) the President, the Vice President, any employee of 
     the executive office of the President, and any employee of 
     the executive office of the Vice President, and
       ``(2) any individual (other than the Attorney General of 
     the United States) serving in a position specified in section 
     5312 of title 5, United States Code.''
       (b) Clerical Amendment.--The table of sections for part I 
     of subchapter A of chapter 75 is amended by adding after the 
     item relating to section 7216 the following new item:

``Sec. 7217. Prohibition on executive branch influence over taxpayer 
              audits and other investigations.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made after 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. Staffing flexibilities.
``9304. 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, 
     or 9304, 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

[[Page H10009]]

       ``(B) may not be an agreement imposed by the Federal 
     Service Impasses Panel under section 7119.
       ``(3) Includible matters.--The written agreement may 
     address any flexibilities under section 9302, 9303, or 9304, 
     including any matter proposed to be included in a 
     demonstration project under section 9304.

     ``Sec. 9302. Flexibilities relating to performance management

       ``(a) In General.--The Commissioner of Internal Revenue 
     shall, within a year 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 standards of performance which--
       ``(i) shall permit the accurate evaluation of each 
     employee's performance on the basis of the individual and 
     organizational performance requirements applicable with 
     respect to the evaluation period involved, taking into 
     account individual contributions toward the attainment of any 
     goals or objectives under paragraph (3);
       ``(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; and
       ``(iii) shall include at least 2 standards of performance, 
     the lowest of which shall denote the retention standard and 
     shall be equivalent to fully successful performance;
       ``(B) providing for periodic performance evaluations to 
     determine whether employees are meeting all applicable 
     retention standards; and
       ``(C) using the results of such employee's performance 
     evaluation as a basis for adjustments in pay and other 
     appropriate personnel actions; 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, (B) 
     communicating such goals or objectives to employees, and 
     (C) using such goals or objectives to make performance 
     distinctions among employees or groups of employees.
     For purposes of this title, performance of an employee during 
     any period in which such employee is subject to standards of 
     performance under paragraph (2) shall be considered to be 
     `unacceptable' if the performance of such employee during 
     such period fails to meet any retention standard.
       ``(b) Awards.--
       ``(1) For superior accomplishments.--In the case of a 
     proposed award based on the efforts of an employee or former 
     employee of the Internal Revenue Service, any approval 
     required under the provisions of section 4502(b) shall be 
     considered to have been granted if the Office of Personnel 
     Management does not disapprove the proposed award within 60 
     days after receiving the appropriate certification described 
     in such provisions.
       ``(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, 
     except that in no event shall more than 8 employees be 
     eligible for a cash award under this paragraph in any 
     calendar year.
       ``(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 Vice 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'.
       ``(F) Approval required.--An award under this paragraph may 
     not be made unless--
       ``(i) the Commissioner of Internal Revenue certifies to the 
     Office of Personnel Management that such award is warranted; 
     and
       ``(ii) the Office approves, or does not disapprove, the 
     proposed award within 60 days after the date on which it is 
     so certified.
       ``(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.

     ``Sec. 9303. Staffing flexibilities

       ``(a) Eligibility To Compete for A Permanent Appointment in 
     the Competitive Service.--
       ``(1) Eligibility of qualified veterans.--
       ``(A) In general.--No veteran described in subparagraph (B) 
     shall be denied the opportunity to compete for an announced 
     vacant competitive service position within the Internal 
     Revenue Service by reason of--
       ``(i) not having acquired competitive status; or
       ``(ii) not being an employee of that agency.
       ``(B) Description.--An individual shall, for purposes of a 
     position for which such individual is applying, be considered 
     a veteran described in this subparagraph if such individual--
       ``(i) is either a preference eligible, or an individual 
     (other than a preference eligible) who has been separated 
     from the armed forces under honorable conditions after at 
     least 3 years of active service; and
       ``(ii) meets the minimum qualification requirements for the 
     position sought.
       ``(2) Eligibility of certain temporary employees.--
       ``(A) In general.--No temporary employee described in 
     subparagraph (B) shall be denied the opportunity to compete 
     for an announced vacant competitive service position within 
     the Internal Revenue Service by reason of not having acquired 
     competitive status.
       ``(B) Description.--An individual shall, for purposes of a 
     position for which such individual is applying, be considered 
     a temporary employee described in this subparagraph if--
       ``(i) such individual is then currently serving as a 
     temporary employee in the Internal Revenue Service;
       ``(ii) such individual has completed at least 2 years of 
     current continuous service in the competitive service under 1 
     or more term appointments, each of which was made under 
     competitive procedures prescribed for permanent appointments;
       ``(iii) such individual's performance under each term 
     appointment referred to in clause (ii) met all applicable 
     retention standards; and
       ``(iv) such individual meets the minimum qualification 
     requirements for the position sought.
       ``(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) 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.
       ``(d) 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.
       ``(e) Provisions That Remain Applicable.--No provision of 
     this section exempts the Internal Revenue Service from--

[[Page H10010]]

       ``(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. 9304. Flexibilities relating to demonstration projects

       ``(a) Authority To Conduct.--The Commissioner of Internal 
     Revenue may, in accordance with this section, conduct 1 or 
     more demonstration projects to improve personnel management; 
     provide increased individual accountability; eliminate 
     obstacles to the removal of or imposing any disciplinary 
     action with respect to poor performers, subject to the 
     requirements of due process; expedite appeals from adverse 
     actions or performance-based actions; and promote pay based 
     on performance.
       ``(b) General Requirements.--Except as provided in 
     subsection (c), each demonstration project under this section 
     shall comply with the provisions of section 4703.
       ``(c) Special Rules.--For purposes of any demonstration 
     project under this section--
       ``(1) Authority of commissioner.--The Commissioner of 
     Internal Revenue shall exercise the authority provided to the 
     Office of Personnel Management under section 4703.
       ``(2) Provisions not applicable.--The following provisions 
     of section 4703 shall not apply:
       ``(A) Paragraphs (3) through (6) of subsection (b).
       ``(B) Paragraphs (1), (2)(B)(ii), and (4) of subsection 
     (c).
       ``(C) Subsections (d) through (g).
       ``(d) Notification Required To Be Given.--
       ``(1) To employees.--The Commissioner of Internal Revenue 
     shall notify employees likely to be affected by a project 
     proposed under this section at least 90 days in advance of 
     the date such project is to take effect.
       ``(2) To congress and opm.--The Commissioner of Internal 
     Revenue shall, with respect to each demonstration project 
     under this section, provide each House of Congress and the 
     Office of Personnel Management with a report, at least 30 
     days in advance of the date such project is to take effect, 
     setting forth the final version of the plan for such project. 
     Such report shall, with respect to the project to which it 
     relates, include the information specified in section 
     4703(b)(1).
       ``(e) Limitations.--No demonstration project under this 
     section may--
       ``(1) provide for a waiver of any regulation prescribed 
     under any provision of law referred to in paragraph (2)(B)(i) 
     or (3) of section 4703(c);
       ``(2) provide for a waiver of subchapter V of chapter 63 or 
     subpart G of part III (or any regulations prescribed under 
     such subchapter or subpart);
       ``(3) provide for a waiver of any law or regulation 
     relating to preference eligibles as defined in section 2108 
     or subchapter II or III of chapter 73 (or any regulations 
     prescribed thereunder);
       ``(4) permit collective bargaining over pay or benefits, or 
     require collective bargaining over any matter which would not 
     be required under section 7106; or
       ``(5) include a system for measuring performance that 
     provides for only 1 level of performance at or above the 
     level of fully successful or better.
       ``(f) Permissible Projects.--Notwithstanding any other 
     provision of law, a demonstration project under this 
     section--
       ``(1) may establish alternative means of resolving any 
     dispute within the jurisdiction of the Equal Employment 
     Opportunity Commission, the Merit Systems Protection Board, 
     the Federal Labor Relations Authority, or the Federal Service 
     Impasses Panel; and
       ``(2) may permit the Internal Revenue Service to adopt any 
     alternative dispute resolution procedure that a private 
     entity may lawfully adopt.
       ``(g) Consultation and Coordination.--The Commissioner of 
     Internal Revenue shall consult with the Director of the 
     Office of Personnel Management in the development and 
     implementation of each demonstration project under this 
     section and shall submit such reports to the Director as the 
     Director may require. The Director or the Commissioner of 
     Internal Revenue may terminate a demonstration project under 
     this section if either of them determines that the project 
     creates a substantial hardship on, or is not in the best 
     interests of, the public, the Federal Government, employees, 
     or qualified applicants for employment with the Internal 
     Revenue Service.
       ``(h) Termination.--Each demonstration project under this 
     section shall terminate before the end of the 5-year period 
     beginning on the date on which the project takes effect, 
     except that any such project may continue beyond the end of 
     such period, for not to exceed 2 years, if the Commissioner 
     of Internal Revenue, with the concurrence of the Director, 
     determines such extension is necessary to validate the 
     results of the project. Not later than 6 months before the 
     end of the 5-year period and any extension under the 
     preceding sentence, the Commissioner of Internal Revenue 
     shall, with respect to the demonstration project involved, 
     submit a legislative proposal to the Congress if the 
     Commissioner determines that such project should be made 
     permanent, in whole or in part.''
       (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 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 such 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 establish 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. To the extent practicable, such plan shall 
     provide that all returns prepared electronically for taxable 
     years beginning after 2001 shall be filed electronically.
       (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 
     small business community and from the tax practitioner, 
     preparer, and computerized tax processor communities and 
     other representatives from the electronic filing industry.
       (c) Promotion of Electronic Filing and Incentives.--Section 
     6011 is amended by redesignating subsection (f) as subsection 
     (g) and by inserting after subsection (e) the following new 
     subsection:
       ``(f) Promotion of Electronic Filing.--
       ``(1) In general.--The Secretary is authorized to promote 
     the benefits of and encourage the use of electronic tax 
     administration programs, as they become available, through 
     the use of mass communications and other means.
       ``(2) Incentives.--The Secretary may implement procedures 
     to provide for the payment of appropriate incentives for 
     electronically filed returns.''
       (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 goal of receiving electronically 80 percent of tax and 
     information returns by 2007;
       (2) the status of the plan required by subsection (b); and
       (3) the legislative changes necessary to assist the 
     Internal Revenue Service in meeting such goal.

     SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS FILED 
                   ELECTRONICALLY.

       (a) In General.--Section 6071 (relating to time for filing 
     returns and other documents) is amended by redesignating 
     subsection (b) as subsection (c) and by inserting after 
     subsection (a) the following new subsection:
       ``(b) Electronically Filed Information Returns.--Returns 
     made under subparts B and C of part III of this subchapter 
     which are filed electronically shall be filed on or before 
     March 31 of the year following the calendar year to which 
     such returns relate.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to returns required to be filed after December 
     31, 1999.

     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.--
       ``(1) In general.--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 may waive the requirement of a signature 
     for all returns or classes of returns, or may provide for 
     alternative methods of subscribing all returns, declarations, 
     statements, or other documents required or permitted to be 
     made or written under internal revenue laws and regulations.
       ``(2) Treatment of alternative methods.--Notwithstanding 
     any other provision of law, any return, declaration, 
     statement or other document filed without signature under the 
     authority of this subsection or verified, signed or 
     subscribed under any method adopted under paragraph (1) shall 
     be treated for all purposes (both civil and criminal, 
     including penalties for perjury) in the same manner as though 
     signed and subscribed. Any such return, declaration, 
     statement or other document shall be presumed to have been 
     actually submitted and subscribed by the person on whose 
     behalf it was submitted.
       ``(3) Published guidance.--The Secretary shall publish 
     guidance as appropriate to define and implement any waiver of 
     the signature requirements.''
       (b) Acknowledgment of Electronic Filing.--Section 7502(c) 
     is amended to read as follows:
       ``(c) Registered and Certified Mailing; Electronic 
     Filing.--
       ``(1) Registered mail.--For purposes of this section, if 
     any return, claim, statement, or other document, or payment, 
     is sent by United States registered mail--
       ``(A) such registration shall be prima facie evidence that 
     the return, claim, statement, or other

[[Page H10011]]

     document was delivered to the agency, officer, or office to 
     which addressed, and
       ``(B) the date of registration shall be deemed the postmark 
     date.
       ``(2) Certified mail; electronic filing.--The Secretary is 
     authorized to provide by regulations the extent to which the 
     provisions of paragraph (1) with respect to prima facie 
     evidence of delivery and the postmark date shall apply to 
     certified mail and electronic filing.''.
       (c) Establishment of Procedures for Other Information.--In 
     the case of taxable periods beginning after December 31, 
     1998, the Secretary of the Treasury or the Secretary's 
     delegate shall, to the extent practicable, 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.
       (d) Procedures for Communications Between IRS and Preparer 
     of Electronically Filed Returns.--The Secretary shall 
     establish procedures for taxpayers to authorize, on 
     electronically filed returns, the preparer of such returns to 
     communicate with the Internal Revenue Service on matters 
     included on such returns.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 204. 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 
     appropriate 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) what additional resources the Internal Revenue Service 
     would need to implement such a system,
       (2) the changes to the Internal Revenue Code of 1986 that 
     could enhance the use of such a system,
       (3) the procedures developed pursuant to subsection (a), 
     and
       (4) the number and classes of taxpayers that would be 
     permitted to use the procedures developed pursuant to 
     subsection (a).

     SEC. 205. 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, but 
     only if all necessary safeguards to ensure the privacy of 
     such account information are in place.
               TITLE III--TAXPAYER PROTECTION AND RIGHTS

     SEC. 300. SHORT TITLE.

       This title may be cited as the ``Taxpayer Bill of Rights 
     3''.
                      Subtitle A--Burden of Proof

     SEC. 301. BURDEN OF PROOF.

       (a) In General.--Chapter 76 (relating to judicial 
     proceedings) is amended by adding at the end the following 
     new subchapter:

                    ``Subchapter E--Burden of Proof

``Sec. 7491. Burden of proof.

     ``SEC. 7491. BURDEN OF PROOF.

       ``(a) General Rule.--The Secretary shall have the burden of 
     proof in any court proceeding with respect to any factual 
     issue relevant to ascertaining the income tax liability of a 
     taxpayer.
       ``(b) Limitations.--Subsection (a) shall only apply with 
     respect to an issue if--
       ``(1) the taxpayer asserts a reasonable dispute with 
     respect to such issue,
       ``(2) the taxpayer has fully cooperated with the Secretary 
     with respect to such issue, including providing, within a 
     reasonable period of time, access to and inspection of all 
     witnesses, information, and documents within the control of 
     the taxpayer, as reasonably requested by the Secretary, 
     and
       ``(3) in the case of a partnership, corporation, or trust, 
     the taxpayer is described in section 7430(c)(4)(A)(ii).
       ``(c) Substantiation.--Nothing in this section shall be 
     construed to override any requirement of this title to 
     substantiate any item.''
       (b) Conforming Amendments.--
       (1) Section 6201 is amended by striking subsection (d) and 
     redesignating subsection (e) as subsection (d).
       (2) The table of subchapters for chapter 76 is amended by 
     adding at the end the following new item:

``Subchapter E. Burden of proof.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to court proceedings arising in connection with 
     examinations commencing after the date of the enactment of 
     this Act.
                  Subtitle B--Proceedings by Taxpayers

     SEC. 311. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN 
                   FEES.

       (a) Award of 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 
     ``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.--Paragraph (2) of section 7430(c) is amended by 
     striking the last sentence and inserting 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.''.
       (c) Award of Fees for Certain Additional Services.--
     Paragraph (3) of section 7430(c) is amended to read as 
     follows:
       ``(3) Attorney's fees.--
       ``(A) In general.--For purposes of paragraphs (1) and (2), 
     fees for the services of an individual (whether or not an 
     attorney) who is authorized to practice before the Tax Court 
     or before the Internal Revenue Service shall be treated as 
     fees for the services of an attorney.
       ``(B) Pro bono services.--In any case in which the court 
     could have awarded attorney's fees under subsection (a) but 
     for the fact that an individual is representing the 
     prevailing party for no fee or for a fee which (taking into 
     account all the facts and circumstances) is no more than a 
     nominal fee, the court may also award a judgment or 
     settlement for such amounts as the court determines to be 
     appropriate (based on hours worked and costs expended) for 
     services of such individual but only if such award is paid to 
     such individual or such individual's employer.''
       (d) Determination of Whether Position of United States is 
     Substantially Justified.--Subparagraph (B) of section 
     7430(c)(4) is amended by redesignating clause (iii) as clause 
     (iv) and by inserting after clause (ii) the following new 
     clause:
       ``(iii) Effect of losing on substantially similar issues.--
     In determining for purposes of clause (i) whether the 
     position of the United States was substantially justified, 
     the court shall take into account whether the United States 
     has lost in courts of appeal for other circuits on 
     substantially similar issues.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to costs incurred (and, in the case of the 
     amendment made by subsection (c), services performed) more 
     than 180 days after the date of the enactment of this Act.

     SEC. 312. 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) Requirement That Administrative Remedies Be 
     Exhausted.--Paragraph (1) of section 7433(d) is amended to 
     read as follows:
       ``(1) Requirement that administrative remedies be 
     exhausted.--A judgment for damages shall not be awarded under 
     subsection (b) unless the court determines that the plaintiff 
     has exhausted the administrative remedies available to such 
     plaintiff within the Internal Revenue Service.''
       (c) 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. 313. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE 
                   CALENDAR.

       (a) In General.--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''.
       (b) Conforming Amendments.--
       (1) The section heading for section 7463 is amended by 
     striking ``$10,000'' and inserting ``$25,000''.
       (2) 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''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to proceedings commencing after the date of the 
     enactment of this Act.
  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

     SEC. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LIABILITY IN 
                   CERTAIN CASES.

       (a) In General.--Subpart B of part II of subchapter A of 
     chapter 61 is amended by inserting after section 6014 the 
     following new section:

     ``SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.

       ``(a) Spouse Relieved of Liability in Certain Cases.--
       ``(1) In general.--Under procedures prescribed by the 
     Secretary, if--
       ``(A) a joint return has been made under section 6013 for a 
     taxable year,
       ``(B) on such return there is an understatement of tax 
     attributable to erroneous items of 1 spouse,
       ``(C) the other spouse establishes that in signing the 
     return he or she did not know, and had no reason to know, 
     that there was such understatement,
       ``(D) taking into account all the facts and circumstances, 
     it is inequitable to hold the other spouse liable for the 
     deficiency in tax for such taxable year attributable to such 
     understatement, and
       ``(E) the other spouse claims (in such form as the 
     Secretary may prescribe) the benefits of this subsection not 
     later than the date which is 2 years after the date of the 
     assessment of such deficiency,


[[Page H10012]]


     then the other spouse shall be relieved of liability for tax 
     (including interest, penalties, and other amounts) for such 
     taxable year to the extent such liability is attributable to 
     such understatement.
       ``(2) Apportionment of relief.--If a spouse who, but for 
     paragraph (1)(C), would be relieved of liability under 
     paragraph (1), establishes that in signing the return such 
     spouse did not know, and had no reason to know, the extent of 
     such understatement, then such spouse shall be relieved of 
     liability for tax (including interest, penalties, and other 
     amounts) for such taxable year to the extent that such 
     liability is attributable to the portion of such 
     understatement of which such spouse did not know and had no 
     reason to know.
       ``(3) Understatement.--For purposes of this subsection, the 
     term `understatement' has the meaning given to such term by 
     section 6662(d)(2)(A).
       ``(4) Special rule for community property income.--For 
     purposes of this subsection, the determination of the spouse 
     to whom items of gross income (other than gross income from 
     property) are attributable shall be made without regard to 
     community property laws.
       ``(b) Petition for Review By Tax Court.--In the case of an 
     individual who has filed a claim under subsection (a) within 
     the period specified in subsection (a)(1)(E)--
       ``(1) In general.--Such individual may petition the Tax 
     Court (and the Tax Court shall have jurisdiction) to 
     determine such claim if such petition is filed during the 90-
     day period beginning on the earlier of--
       ``(A) the date which is 6 months after the date such claim 
     is filed with the Secretary, or
       ``(B) the date on which the Secretary mails by certified or 
     registered mail a notice to such individual denying such 
     claim.

     Such 90-day period shall be determined by not counting 
     Saturday, Sunday, or a legal holiday in the District of 
     Columbia as the last day of such period.
       ``(2) Restrictions applicable to collection of 
     assessment.--
       ``(A) In general.--Except as otherwise provided in section 
     6851 or 6861, no levy or proceeding in court for collection 
     of any assessment to which such claim relates shall be made, 
     begun, or prosecuted, until the expiration of the 90-day 
     period described in paragraph (1), nor, if a petition has 
     been filed with the Tax Court, until the decision of the Tax 
     Court has become final. Rules similar to the rules of section 
     7485 shall apply with respect to the collection of such 
     assessment.
       ``(B) Authority to enjoin collection actions.--
     Notwithstanding the provisions of section 7421(a), the 
     beginning of such proceeding or levy during the time the 
     prohibition under subparagraph (A) is in force may be 
     enjoined by a proceeding in the proper court, including the 
     Tax Court. The Tax Court shall have no jurisdiction under 
     this paragraph to enjoin any action or proceeding unless a 
     timely petition for a determination of such claim has been 
     filed and then only in respect of the amount of the 
     assessment to which such claim relates.
       ``(C) Jeopardy collection.--If the Secretary makes a 
     finding that the collection of the tax is in jeopardy, 
     nothing in this subsection shall prevent the immediate 
     collection of such tax.
       ``(c) Suspension of Running of Period of Limitations.--The 
     running of the period of limitations in section 6502 on the 
     collection of the assessment to which the petition under 
     subsection (b) relates shall be suspended for the period 
     during which the Secretary is prohibited by subsection (b) 
     from collecting by levy or a proceeding in court and for 60 
     days thereafter.
       ``(d) Applicable Rules.--
       ``(1) Allowance of application.--Except as provided in 
     paragraph (2), notwithstanding any other law or rule of law 
     (other than section 6512(b), 7121, or 7122), credit or refund 
     shall be allowed or made to the extent attributable to the 
     application of this section.
       ``(2) Res judicata.--In the case of any claim under 
     subsection (a), the determination of the Tax Court in any 
     prior proceeding for the same taxable periods in which the 
     decision has become final, shall be conclusive except with 
     respect to the qualification of the spouse for relief which 
     was not an issue in such proceeding. The preceding sentence 
     shall not apply if the Tax Court determines that the spouse 
     participated meaningfully in such prior proceeding.
       ``(3) Limitation on tax court jurisdiction.--If a suit for 
     refund is begun by either spouse pursuant to section 6532, 
     the Tax Court shall lose jurisdiction of the spouse's action 
     under this section to whatever extent jurisdiction is 
     acquired by the district court or the United States Court of 
     Federal Claims over the taxable years that are the subject of 
     the suit for refund.''
       (b) Separate Form For Applying For Spousal Relief.--Not 
     later than 180 days after the date of the enactment of this 
     Act, the Secretary of the Treasury shall develop a separate 
     form with instructions for use by taxpayers in applying for 
     relief under section 6015(a) of the Internal Revenue Code of 
     1986, as added by this section.
       (c) Conforming Amendments.--
       (1) Section 6013 is amended by striking subsection (e).
       (2) Subparagraph (A) of section 6230(c)(5) is amended by 
     striking ``section 6013(e)'' and inserting ``section 6015''.
       (d) Clerical Amendment.--The table of sections for subpart 
     B of part II of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6014 the 
     following new item:

``Sec. 6015. Innocent spouse relief; petition to Tax Court.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to understatements for taxable years beginning 
     after the date of the enactment of this Act.

     SEC. 322. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING 
                   REFUND CLAIMS DURING PERIODS OF DISABILITY.

       (a) In General.--Section 6511 (relating to limitations on 
     credit or refund) is amended by redesignating subsection (h) 
     as subsection (i) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Running of Periods of Limitation Suspended While 
     Taxpayer Is Unable To Manage Financial Affairs Due to 
     Disability.--
       ``(1) In general.--In the case of an individual, the 
     running of the periods specified in subsections (a), (b), and 
     (c) shall be suspended during any period of such individual's 
     life that such individual is financially disabled.
       ``(2) Financially disabled.--
       ``(A) In general.--For purposes of paragraph (1), an 
     individual is financially disabled if such individual is 
     unable to manage his financial affairs by reason of his 
     medically determinable physical or mental impairment which 
     can be expected to result in death or which has lasted or can 
     be expected to last for a continuous period of not less than 
     12 months. An individual shall not be considered to have such 
     an impairment unless proof of the existence thereof is 
     furnished in such form and manner as the Secretary may 
     require.
       ``(B) Exception where individual has guardian, etc.--An 
     individual shall not be treated as financially disabled 
     during any period that such individual's spouse or any other 
     person is authorized to act on behalf of such individual in 
     financial matters.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to periods of disability before, on, or after the 
     date of the enactment of this Act but shall not apply to any 
     claim for credit or refund which (without regard to such 
     amendment) is barred by the operation of any law or rule of 
     law (including res judicata) as of January 1, 1998.
              Subtitle D--Provisions Relating to Interest

     SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON 
                   OVERLAPPING PERIODS OF INTEREST ON INCOME TAX 
                   OVERPAYMENTS AND UNDERPAYMENTS.

       (a) In General.--Section 6621 (relating to determination of 
     rate of interest) is amended by adding at the end the 
     following new subsection:
       ``(d) Elimination of Interest on Overlapping Periods of 
     Income Tax Overpayments and Underpayments.--To the extent 
     that, for any period, interest is payable under subchapter A 
     and allowable under subchapter B on equivalent underpayments 
     and overpayments by the same taxpayer of tax imposed by 
     chapters 1 and 2, the net rate of interest under this section 
     on such amounts shall be zero for such period.''
       (b) Conforming Amendment.--Subsection (f) of section 6601 
     (relating to satisfaction by credits) is amended by adding at 
     the end the following new sentence: ``The preceding sentence 
     shall not apply to the extent that section 6621(d) applies.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to interest for calendar quarters beginning after 
     the date of the enactment of this Act.

     SEC. 332. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS 
                   OTHER THAN CORPORATIONS.

       (a) In General.--Subparagraph (B) of section 6621(a)(1) 
     (defining overpayment rate) is amended to read as follows:
       ``(B) 3 percentage points (2 percentage points in the case 
     of a corporation).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to interest for calendar quarters beginning after 
     the date of the enactment of this Act.
 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

     SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S 
                   DEALINGS WITH NON-ATTORNEYS AUTHORIZED TO 
                   PRACTICE BEFORE INTERNAL REVENUE SERVICE.

       Section 7602 (relating to examination of books and 
     witnesses) is amended by adding at the end the following new 
     subsection:
       ``(d) Privilege of Confidentiality Extended to Taxpayer's 
     Dealings with Non-Attorneys Authorized to Practice Before 
     Internal Revenue Service.--
       ``(1) In general.--In any noncriminal proceeding before the 
     Internal Revenue Service, the taxpayer shall be entitled to 
     the same common law protections of confidentiality with 
     respect to tax advice furnished by any qualified 
     individual (in a manner consistent with State law for such 
     individual's profession) as the taxpayer would have if 
     such individual were an attorney.
       ``(2) Qualified individual.--For purposes of paragraph (1), 
     the term `qualified individual' means any individual (other 
     than an attorney) who is authorized to practice before the 
     Internal Revenue Service.''

     SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       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 paragraphs:
       ``(2) Issuance of taxpayer assistance orders.--For purposes 
     of determining whether to issue a taxpayer assistance order, 
     the Taxpayer Advocate shall consider the following factors, 
     among others:
       ``(A) Whether there is an immediate threat of adverse 
     action.
       ``(B) Whether there has been an unreasonable delay in 
     resolving taxpayer account problems.
       ``(C) Whether the taxpayer will have to pay significant 
     costs (including fees for professional representation) if 
     relief is not granted.

[[Page H10013]]

       ``(D) Whether the taxpayer will suffer irreparable injury, 
     or a long-term adverse impact, if relief is not granted.
       ``(3) Standard where administrative guidance not 
     followed.--In cases where any Internal Revenue Service 
     employee is not following applicable published administrative 
     guidance (including the Internal Revenue Manual), the 
     Taxpayer Advocate shall construe the factors taken into 
     account in determining whether to issue a taxpayer assistance 
     order in the manner most favorable to the taxpayer.''

     SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

       Section 7602 is amended by adding at the end the following 
     new subsection:
       ``(e) Limitation on Examination on Unreported Income.--The 
     Secretary shall not use financial status or economic reality 
     examination techniques to determine the existence of 
     unreported income of any taxpayer unless the Secretary has a 
     reasonable indication that there is a likelihood of such 
     unreported income.''

     SEC. 344. LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF 
                   COMPUTER SOURCE CODE.

       (a) In General.--Section 7602 is amended by adding at the 
     end the following new subsection:
       ``(f) Limitation on Authority To Require Production of 
     Computer Source Code.--
       ``(1) In general.--No summons may be issued under this 
     title, and the Secretary may not begin any action under 
     section 7604 to enforce any summons, to produce or examine 
     any tax-related computer source code.
       ``(2) Exception where information not otherwise available 
     to verify correctness of item on return.--Paragraph (1) shall 
     not apply to any portion of a tax-related computer source 
     code if--
       ``(A) the Secretary is unable to otherwise reasonably 
     ascertain the correctness of any item on a return from--
       ``(i) the taxpayer's books, papers, records, or other data, 
     or
       ``(ii) the computer software program and the associated 
     data which, when executed, produces the output to prepare the 
     return for the period involved, and
       ``(B) the Secretary identifies with reasonable specificity 
     such portion as to be used to verify the correctness of such 
     item.

     The Secretary shall be treated as meeting the requirements of 
     subparagraphs (A) and (B) after the 90th day after the 
     Secretary makes a formal request to the taxpayer and the 
     owner or developer of the computer software program for the 
     material described in subparagraph (A)(ii) if such material 
     is not provided before the close of such 90th day.
       ``(3) Other exceptions.--Paragraph (1) shall not apply to--
       ``(A) any inquiry into any offense connected with the 
     administration or enforcement of the internal revenue laws, 
     and
       ``(B) any tax-related computer source code developed by (or 
     primarily for the benefit of) the taxpayer or a related 
     person (within the meaning of section 267 or 707(b)) for 
     internal use by the taxpayer or such person and not for 
     commercial distribution.
       ``(4) Tax-related computer source code.--For purposes of 
     this subsection, the term `tax-related computer source code' 
     means--
       ``(A) the computer source code for any computer software 
     program for accounting, tax return preparation or compliance, 
     or tax planning, or
       ``(B) design and development materials related to such a 
     software program (including program notes and memoranda).
       ``(5) Right to contest summons.--The determination of 
     whether the requirements of subparagraphs (A) and (B) of 
     paragraph (2) are met or whether any exception under 
     paragraph (3) applies may be contested in any proceeding 
     under section 7604.
       ``(6) Protection of trade secrets and other confidential 
     information.--In any court proceeding to enforce a summons 
     for any portion of a tax-related computer source code, the 
     court may issue any order necessary to prevent the disclosure 
     of trade secrets or other confidential information with 
     respect to such source code, including providing that any 
     information be placed under seal to be opened only as 
     directed by the court.''
       (b) Application of Special Procedures for Third-Party 
     Summonses.--Paragraph (3) of section 7609(a) (defining third-
     party recordkeeper) is amended by striking ``and'' at the end 
     of subparagraph (H), by striking a period at the end of 
     subparagraph (I) and inserting ``, and'', and by adding at 
     the end the following:
       ``(J) any owner or developer of a tax-related computer 
     source code (as defined in section 7602(f)(4)).

     Subparagraph (J) shall apply only with respect to a summons 
     requiring the production of the source code referred to in 
     subparagraph (J) or the program and data described in section 
     7602(f)(2)(A)(ii) to which such source code relates.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to summonses issued more than 90 days after the 
     date of the enactment of this Act.

     SEC. 345. 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. 346. OFFERS-IN-COMPROMISE.

       (a) Allowances For Basic Living Expenses.--Section 7122 
     (relating to offers-in-compromise) is amended by adding at 
     the end the following new subsection:
       ``(c) Allowances For Basic Living Expenses.--The Secretary 
     shall develop and publish schedules of national and local 
     allowances designed to provide that taxpayers entering into a 
     compromise have an adequate means to provide for basic living 
     expenses.''
       (b) Preparation of Statement Relating to Offers-in-
     Compromise.--The Secretary of the Treasury shall prepare a 
     statement which sets forth in simple, nontechnical terms the 
     rights of a taxpayer and the obligations of the Internal 
     Revenue Service relating to offers-in-compromise. Such 
     statement shall--
       (1) advise taxpayers who have entered into a compromise 
     agreement of the advantages of promptly notifying the 
     Internal Revenue Service of any change of address or marital 
     status, and
       (2) provide notice to taxpayers that in the case of a 
     compromise agreement terminated due to the actions of 1 
     spouse or former spouse, the Internal Revenue Service will, 
     upon application, reinstate such agreement with the spouse or 
     former spouse who remains in compliance with such agreement.

     SEC. 347. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR 
                   FILING TAX COURT PETITION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall include on each notice of 
     deficiency under section 6212 of the Internal Revenue Code of 
     1986 the date determined by such Secretary (or delegate) as 
     the last day on which the taxpayer may file a petition with 
     the Tax Court.
       (b) Later Filing Deadlines Specified on Notice of 
     Deficiency To Be Binding.--Subsection (a) of section 6213 
     (relating to restrictions applicable to deficiencies; 
     petition to Tax Court) is amended by adding at the end 
     the following new sentence: ``Any petition filed with the 
     Tax Court on or before the last date specified for filing 
     such petition by the Secretary in the notice of deficiency 
     shall be treated as timely filed.''
       (c) Effective Date.--Subsection (a) and the amendment made 
     by subsection (b) shall apply to notices mailed after 
     December 31, 1998.

     SEC. 348. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL 
                   DETERMINATION.

       (a) Tax Court Proceedings.--Subsection (a) of section 6213 
     is amended--
       (1) by striking ``, including the Tax Court.'' and 
     inserting ``, including the Tax Court, and a refund may be 
     ordered by such court of any amount collected within the 
     period during which the Secretary is prohibited from 
     collecting by levy or through a proceeding in court under the 
     provisions of this subsection.'', and
       (2) by striking ``to enjoin any action or proceeding'' and 
     inserting ``to enjoin any action or proceeding or order any 
     refund''.
       (b) Other Proceedings.--Subsection (a) of section 6512 is 
     amended by striking the period at the end of paragraph (4) 
     and inserting ``, and'', and by inserting after paragraph (4) 
     the following new paragraphs:
       ``(5) As to any amount collected within the period during 
     which the Secretary is prohibited from making the assessment 
     or from collecting by levy or through a proceeding in court 
     under the provisions of section 6213(a), and
       ``(6) As to overpayments the Secretary is authorized to 
     refund or credit pending appeal as provided in subsection 
     (b).''
       (c) Refund or Credit Pending Appeal.--Paragraph (1) of 
     section 6512(b) is amended by adding at the end the following 
     new sentence: ``If a notice of appeal in respect of the 
     decision of the Tax Court is filed under section 7483, the 
     Secretary is authorized to refund or credit the overpayment 
     determined by the Tax Court to the extent the overpayment is 
     not contested on appeal.''
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 349. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING 
                   ALTERNATIVE COMMITMENT AGREEMENTS.

       The Secretary of the Treasury or the Secretary's delegate 
     shall instruct employees of the Internal Revenue Service that 
     they may not threaten to audit any taxpayer in an attempt to 
     coerce the taxpayer into entering into a Tip Reporting 
     Alternative Commitment Agreement.
                  Subtitle F--Disclosures to Taxpayers

     SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

       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 married taxpayers of their joint 
     and several liabilities on all appropriate publications and 
     instructions.

     SEC. 352. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH 
                   THE INTERNAL REVENUE SERVICE.

       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, revise the 
     statement required by section 6227 of the Omnibus Taxpayer 
     Bill of Rights (Internal Revenue Service Publication No. 1) 
     to more clearly inform taxpayers of their rights--

[[Page H10014]]

       (1) to be represented at interviews with the Internal 
     Revenue Service by any person authorized to practice before 
     the Internal Revenue Service, and
       (2) to suspend an interview pursuant to section 7521(b)(2) 
     of the Internal Revenue Code of 1986.

     SEC. 353. 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 
     whether 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.--The 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. 354. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

       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, include with any 
     1st letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals an explanation of the 
     appeals process and the collection process with respect to 
     such proposed deficiency.
                Subtitle G--Low Income Taxpayer Clinics

     SEC. 361. LOW INCOME TAXPAYER CLINICS.

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

     ``SEC. 7525. LOW INCOME TAXPAYER CLINICS.

       ``(a) In General.--The Secretary may, subject to the 
     availability of appropriated funds, 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) does not charge more than a nominal fee for its 
     services (except for reimbursement of actual costs incurred), 
     and
       ``(ii)(I) represents low income taxpayers in controversies 
     with the Internal Revenue Service, or
       ``(II) operates programs to inform individuals for whom 
     English is a second language about their rights and 
     responsibilities under this title.
       ``(B) Representation of low income taxpayers.--A clinic 
     meets the requirements of subparagraph (A)(ii)(I) if--
       ``(i) at least 90 percent of the taxpayers represented by 
     the clinic have incomes which do 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 described in section 501(c) and 
     exempt from tax under section 501(a) 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 annual grants to a clinic.--The 
     aggregate amount of grants which may be made under this 
     section to a clinic for a year shall not exceed $100,000.
       ``(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 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 
     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 individuals 
     performing services for the clinic, and
       ``(B) the cost of equipment used in the clinic.

     Indirect expenses, including general overhead of the 
     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.
                       Subtitle H--Other Matters

     SEC. 371. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES 
                   WHICH HAVE ELECTED THE INSTALLMENT METHOD OF 
                   PAYMENT.

       (a) In General.--Section 7422 is amended by redesignating 
     subsection (j) as subsection (k) and by inserting after 
     subsection (i) the following new subsection:
       ``(j) Special Rule for Actions With Respect to Estates for 
     Which An Election Under Section 6166 Is Made.--
       ``(1) In general.--The district courts of the United States 
     and the United States Court of Federal Claims shall have 
     jurisdiction over any action brought by the representative of 
     an estate to which this subsection applies to determine the 
     correct amount of the estate tax liability of such estate (or 
     for any refund with respect thereto) even if the full amount 
     of such liability has not been paid.
       ``(2) Estates to which subsection applies.--This subsection 
     shall apply to any estate if, as of the date the action is 
     filed--
       ``(A) an election under section 6166 is in effect with 
     respect to such estate,
       ``(B) no portion of the installments payable under such 
     section have been accelerated, and
       ``(C) all installments the due date for which is on or 
     before the date the action is filed have been paid.
       ``(3) Prohibition on collection of disallowed liability.--
     If the court redetermines under paragraph (1) the estate tax 
     liability of an estate, no part of such liability which is 
     disallowed by a decision of such court which has become final 
     may be collected by the Secretary, and amounts paid in excess 
     of the installments determined by the court as currently due 
     and payable shall be refunded.''
       (b) Extension of Time To File Refund Suit.--Section 7479 
     (relating to declaratory judgments relating to eligibility of 
     estate with respect to installment payments under section 
     6166) is amended by adding at the end the following new 
     subsection:
       ``(c) Extension of Time To File Refund Suit.--The 2-year 
     period in section 6532(a)(1) for filing suit for refund after 
     disallowance of a claim shall be suspended during the 90-day 
     period after the mailing of the notice referred to in 
     subsection (b)(3) and, if a pleading has been filed with the 
     Tax Court under this section, until the decision of the Tax 
     Court has become final.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to any claim for refund filed after the date of 
     the enactment of this Act.

     SEC. 372. CATALOGING COMPLAINTS.

       In collecting data for the report required under section 
     1211 of Taxpayer Bill of Rights 2 (Public Law 104-168), the 
     Secretary of the Treasury or the Secretary's delegate shall 
     maintain records of taxpayer complaints of misconduct by 
     Internal Revenue Service employees on an individual employee 
     basis.

     SEC. 373. ARCHIVE 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:
       ``(17) Disclosure to national archives and records 
     administration.--The Secretary shall, upon written request 
     from the Archivist of the United States, disclose or 
     authorize the disclosure of returns and return information to 
     officers and employees of the National Archives and Records 
     Administration for purposes of, and only to the extent 
     necessary in, the appraisal of records for destruction or 
     retention. No such officer or employee shall, except to the 
     extent authorized by subsections (f), (i)(7), or (p), 
     disclose any return or return information disclosed under the 
     preceding sentence to any person other than to the Secretary, 
     or to another officer or employee of the National Archives 
     and Records Administration whose official duties require such 
     disclosure for purposes of such appraisal.''
       (b) Conforming Amendments.--Section 6103(p) is amended--
       (1) in paragraph (3)(A), by striking ``or (16)'' and 
     inserting ``(16), or (17)'',
       (2) in paragraph (4), by striking ``or (14)'' and inserting 
     ``, (14), or (17)'' in the matter preceding subparagraph (A), 
     and
       (3) in paragraph (4)(F)(ii), by striking ``or (15)'' and 
     inserting ``, (15), or (17)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made by the Archivist of the United 
     States after the date of the enactment of this Act.

     SEC. 374. PAYMENT OF TAXES.

       The Secretary of the Treasury or the Secretary's delegate 
     shall establish such rules, regulations, and procedures as 
     are necessary to allow payment of taxes by check or money 
     order made payable to the United States Treasury.

[[Page H10015]]

     SEC. 375. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO 
                   THE MAKING OF ELECTIONS.

       Subsection (d) of section 7805 is amended by striking ``by 
     regulations or forms''.

     SEC. 376. LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO 
                   PAY FOR MONTHS DURING PERIOD OF INSTALLMENT 
                   AGREEMENT.

       (a) In General.--Section 6651 (relating to failure to file 
     tax return or to pay tax) is amended by adding at the end the 
     following new subsection:
       ``(h) Limitation on Penalty on Individual's Failure To Pay 
     for Months During Period of Installment Agreement.--No 
     addition to the tax shall be imposed under paragraph (2) or 
     (3) of subsection (a) with respect to the tax liability of an 
     individual for any month during which an installment 
     agreement under section 6159 is in effect for the payment of 
     such tax to the extent that imposing an addition to the tax 
     under such paragraph for such month would result in the 
     aggregate number of percentage points of such addition to the 
     tax exceeding 9.5.''
       (b) Effective Date.--The amendment made by this section 
     shall apply for purposes of determining additions to the tax 
     for months beginning after the date of the enactment of this 
     Act.
                          Subtitle I--Studies

     SEC. 381. PENALTY ADMINISTRATION.

       The Joint Committee on Taxation shall conduct a study--
       (1) reviewing the administration and implementation by the 
     Internal Revenue Service of the penalty reform provisions of 
     the Omnibus Budget Reconciliation Act of 1989, and
       (2) making any legislative and administrative 
     recommendations it deems appropriate to simplify penalty 
     administration and reduce taxpayer burden.

     Such study shall be submitted to the Committee on Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate not later than 9 months after the date 
     of enactment of this Act.

     SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMATION.

       The Joint Committee on Taxation shall conduct 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 not later than one year after the date of the 
     enactment of this Act. Such study 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 file tax returns, but does 
     not file tax returns.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE
                         Subtitle A--Oversight

     SEC. 401. EXPANSION OF DUTIES 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) Investigations.--The Joint Committee shall review all 
     requests (other than requests by the chairman or ranking 
     member of 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.
       ``(f) 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 the other matters 
     outlined in section 8022(3)(C).''
       (b) Effective Dates.--
       (1) Subsection (e) of section 8021 of the Internal Revenue 
     Code of 1986, as added by subsection (a) of this section, 
     shall apply to requests made after the date of enactment of 
     this Act.
       (2) Subsection (f) of section 8021 of the Internal Revenue 
     Code of 1986, as added by subsection (a) of 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;
       ``(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 amendment made by this section 
     shall take effect on the date of the enactment of this Act.
                           Subtitle B--Budget

     SEC. 411. FUNDING FOR CENTURY DATE CHANGE.

       It is the sense of Congress that 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. 412. 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) Requiring Analysis to Accompany Certain Legislation.--
       (1) 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.--If--
       ``(1) a bill or joint resolution is reported by the 
     Committee on Finance of the Senate, the Committee on Ways and 
     Means of the House of Representatives, or any committee of 
     conference, and
       ``(2) such legislation includes any provision amending the 
     Internal Revenue Code of 1986,

     the report for such legislation shall contain a Tax 
     Complexity Analysis unless the committee involved causes to 
     have the Tax Complexity Analysis printed in the Congressional 
     Record prior to the consideration of the legislation in the 
     House of Representatives or the Senate (as the case may be).
       ``(b) Legislation Subject to Point of Order.--It shall not 
     be in order in the Senate to consider any bill or joint 
     resolution described in subsection (a) required to be 
     accompanied by a Tax Complexity Analysis that does not 
     contain a Tax Complexity Analysis.
       ``(c) Responsibilities of the Commissioner.--The 
     Commissioner shall provide the Joint Committee on Taxation 
     with such information as is necessary to prepare Tax 
     Complexity Analyses.
       ``(d) Tax Complexity Analysis Defined.--For purposes of 
     this section, the term `Tax Complexity Analysis' means, with 
     respect to a bill or joint resolution, a report which is 
     prepared by the Joint Committee on Taxation and which 
     identifies the provisions of the legislation adding 
     significant complexity or providing significant 
     simplification (as determined by the Joint Committee) and 
     includes the basis for such determination.''
       (2) 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.''

       (b) Legislation Subject to Point of Order in House of 
     Representatives.--
       (1) Legislation reported by committee on ways and means.--
     Clause 2(l) of rule XI of the Rules of the House of 
     Representatives is amended by adding at the end the following 
     new subparagraph:
       ``(8) The report of the Committee on Ways and Means on any 
     bill or joint resolution containing any provision amending 
     the Internal Revenue Code of 1986 shall include a Tax 
     Complexity Analysis prepared by the Joint Committee on 
     Taxation in accordance with section 8024 of the Internal 
     Revenue Code of 1986 unless the Committee on Ways and Means 
     causes to have such Analysis printed in the Congressional 
     Record prior to the consideration of the bill or joint 
     resolution.''.
       (2) Conference reports.--Rule XXVIII of the Rules of the 
     House of Representatives is amended by adding at the end the 
     following new clause:

[[Page H10016]]

       ``7. It shall not be in order to consider the report of a 
     committee of conference which contains any provision amending 
     the Internal Revenue Code of 1986 unless--
       ``(a) the accompanying joint explanatory statement contains 
     a Tax Complexity Analysis prepared by the Joint Committee on 
     Taxation in accordance with section 8024 of the Internal 
     Revenue Code of 1986, or
       ``(b) such Analysis is printed in the Congressional Record 
     prior to the consideration of the report.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to legislation considered on or after January 1, 
     1998.
     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

     SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED 
                   COMPENSATION.

       (a) In General.--Subsection (a) of section 404 is amended 
     by adding at the end the following new paragraph:
       ``(11) Determinations relating to deferred compensation.--
       ``(A) In general.--For purposes of determining under this 
     section--
       ``(i) whether compensation of an employee is deferred 
     compensation, and
       ``(ii) when deferred compensation is paid,

     no amount shall be treated as received by the employee, or 
     paid, until it is actually received by the employee.
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     severance pay.''
       (b) Sick Leave Pay Treated Like Vacation Pay.--Paragraph 
     (5) of section 404(a) is amended by inserting ``or sick leave 
     pay'' after ``vacation pay''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after October 8, 1997.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by this section to change its method of 
     accounting for its first taxable year ending after October 8, 
     1997--
       (A) such change shall be treated as initiated by the 
     taxpayer,
       (B) such change shall be treated as made with the consent 
     of the Secretary of the Treasury, and
       (C) the net amount of the adjustments required to be taken 
     into account by the taxpayer under section 481 of the 
     Internal Revenue Code of 1986 shall be taken into account in 
     such first taxable year.
            TITLE VI--TAX TECHNICAL CORRECTIONS ACT OF 1997

     SEC. 601. SHORT TITLE.

       This title may be cited as the ``Tax Technical Corrections 
     Act of 1997''.

     SEC. 602. DEFINITIONS.

       For purposes of this title--
       (1) 1986 code.--The term ``1986 Code'' means the Internal 
     Revenue Code of 1986.
       (2) 1997 act.--The term ``1997 Act'' means the Taxpayer 
     Relief Act of 1997.

     SEC. 603. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.

       (a) Amendments Related to Section 101(a) of 1997 Act.--
       (1) Subsection (d) of section 24 of the 1986 Code is 
     amended--
       (A) by striking paragraphs (3) and (4),
       (B) by redesignating paragraph (5) as paragraph (3), and
       (C) by striking paragraphs (1) and (2) and inserting the 
     following new paragraphs:
       ``(1) In general.--In the case of a taxpayer with 3 or more 
     qualifying children for any taxable year, the aggregate 
     credits allowed under subpart C shall be increased by the 
     lesser of--
       ``(A) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     section 26(a), or
       ``(B) the amount by which the aggregate amount of credits 
     allowed by this subpart (without regard to this subsection) 
     would increase if the limitation imposed by section 26(a) 
     were increased by the excess (if any) of--
       ``(i) the taxpayer's social security taxes for the taxable 
     year, over
       ``(ii) the credit allowed under section 32 (determined 
     without regard to subsection (n)) for the taxable year.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to section 26(a).
       ``(2) Reduction of credit to taxpayer subject to 
     alternative minimum tax.--The credit determined under this 
     subsection for the taxable year shall be reduced by the 
     excess (if any) of--
       ``(A) the amount of tax imposed by section 55 (relating to 
     alternative minimum tax) with respect to such taxpayer for 
     such taxable year, over
       ``(B) the amount of the reduction under section 32(h) with 
     respect to such taxpayer for such taxable year.''
       (2) Paragraph (3) of section 24(d) of the 1986 Code (as 
     redesignated by paragraph (1)) is amended by striking 
     ``paragraph (3)'' and inserting ``paragraph (1)''.
       (b) Amendments Related to Section 101(b) of 1997 Act.--
       (1) The subsection (m) of section 32 of the 1986 Code added 
     by section 101(b) of the 1997 Act is amended to read as 
     follows:
       ``(n) Supplemental Child Credit.--
       ``(1) In general.--In the case of a taxpayer with respect 
     to whom a credit is allowed under section 24 for the taxable 
     year, the credit otherwise allowable under this section shall 
     be increased by the lesser of--
       ``(A) the credit which would be allowed under section 24 
     without regard to this subsection and the limitation under 
     section 26(a), or
       ``(B) the amount by which the aggregate amount of credits 
     allowed by subpart A (without regard to this subsection) 
     would be reduced if the limitation imposed by section 26(a) 
     were reduced by the excess (if any) of--
       ``(i) the credit allowed by this section (without regard to 
     this subsection) for the taxable year, over
       ``(ii) the taxpayer's social security taxes (as defined in 
     section 24(d)) for the taxable year.

     The credit determined under this subsection shall be allowed 
     without regard to any other provision of this section, 
     including subsection (d).
       ``(2) Coordination with other credits.--
       ``(A) In general.--The amount of the credit under this 
     subsection shall reduce the amount of the credit otherwise 
     allowable under section 24, but the amount of the credit 
     under this subsection (and such reduction) shall not 
     otherwise be taken into account in determining the amount of 
     any other credit allowable under this part.
       ``(B) Treatment of credit under section 24(d).--For 
     purposes of this subsection, the credit determined under 
     section 24(d) shall be treated as not allowed under section 
     24.''

     SEC. 604. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.

       (a) Amendments Related to Section 201 of 1997 Act.--
       (1) The item relating to section 25A in the table of 
     sections for subpart A of part IV of subchapter A of chapter 
     1 of the 1986 Code is amended to read as follows:

``Sec. 25A. Hope and Lifetime Learning credits.''

       (2) Subsection (a) of section 6050S of the 1986 Code is 
     amended to read as follows:
       ``(a) In General.--Any person--
       ``(1) which is an eligible educational institution--
       ``(A) which receives payments for qualified tuition and 
     related expenses with respect to any individual for any 
     calendar year, or
       ``(B) which makes reimbursements or refunds (or similar 
     amounts) to any individual of qualified tuition and related 
     expenses,
       ``(2) which is engaged in a trade or business of making 
     payments to any individual under an insurance arrangement as 
     reimbursements or refunds (or similar amounts) of qualified 
     tuition and related expenses, or
       ``(3) except as provided in regulations, any person which 
     is engaged in a trade or business and, in the course of 
     which, receives from any individual interest aggregating $600 
     or more for any calendar year on 1 or more qualified 
     education loans,

     shall make the return described in subsection (b) with 
     respect to the individual at such time as the Secretary may 
     by regulations prescribe.''
       (3) Subparagraph (A) of section 201(c)(2) of the 1997 Act 
     is amended to read as follows:
       ``(A) Subparagraph (B) of section 6724(d)(1) (relating to 
     definitions) is amended by redesignating clauses (x) through 
     (xv) as clauses (xi) through (xvi), respectively, and by 
     inserting after clause (ix) the following new clause:
       `` `(x) section 6050S (relating to returns relating to 
     payments for qualified tuition and related expenses),' ''.
       (b) Amendments Related to Section 211 of 1997 Act.--
       (1) Paragraph (3) of section 135(c) of the 1986 Code is 
     amended to read as follows:
       ``(3) Eligible educational institution.--The term `eligible 
     educational institution' has the meaning given such term by 
     section 529(e)(5).''.
       (2) Subparagraph (A) of section 529(c)(3) of the 1986 Code 
     is amended by striking ``section 72(b)'' and inserting 
     ``section 72''.
       (c) Amendments Related to Section 213 of 1997 Act.--
       (1)(A) Section 530(b)(1)(E) of the 1986 Code (defining 
     education individual retirement account) is amended to read 
     as follows:
       ``(E) Any balance to the credit of the designated 
     beneficiary on the date on which the beneficiary attains age 
     30 shall be distributed within 30 days after such date to the 
     beneficiary or, if the beneficiary dies before attaining age 
     30, shall be distributed within 30 days after the date of 
     death to the estate of such beneficiary.''
       (B) Subsection (d) of section 530 of the 1986 Code is 
     amended by adding at the end the following new paragraph:
       ``(8) Deemed distribution on required distribution date.--
     In any case in which a distribution is required under 
     subsection (b)(1)(E), any balance to the credit of a 
     designated beneficiary as of the close of the 30-day period 
     referred to in such subsection for making such distribution 
     shall be deemed distributed at the close of such period.''
       (2)(A) Paragraph (1) of section 530(d) of the 1986 Code is 
     amended by striking ``section 72(b)'' and inserting ``section 
     72''.
       (B) Subsection (e) of section 72 of the 1986 Code is 
     amended by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Extension of paragraph (2)(b) to qualified state 
     tuition programs and educational individual retirement 
     accounts.--Notwithstanding any other provision of this 
     subsection, paragraph (2)(B) shall apply to amounts received 
     under a qualified State tuition program (as defined in 
     section 529(b)) or under an education individual retirement 
     account (as defined in section 530(b)). The rule of paragraph 
     (8)(B) shall apply for purposes of this paragraph.''
       (3) So much of section 530(d)(4)(C) of the 1986 Code as 
     precedes clause (ii) thereof is amended to read as follows:
       ``(C) Contributions returned before due date of return.--
     Subparagraph (A) shall not apply to the distribution of any 
     contribution made during a taxable year on behalf of the 
     designated beneficiary if--
       ``(i) such distribution is made on or before the day 
     prescribed by law (including extensions of

[[Page H10017]]

     time) for filing the beneficiary's return of tax for the 
     taxable year or, if the beneficiary is not required to file 
     such a return, the 15th day of the 4th month of the taxable 
     year following the taxable year, and''.
       (4) Subparagraph (C) of section 135(c)(2) of the 1986 Code 
     is amended--
       (A) by inserting ``and education individual retirement 
     accounts'' in the heading after ``program'', and
       (B) by striking ``section 529(c)(3)(A)'' and inserting 
     ``section 72''.
       (5) Subparagraph (A) of section 4973(e)(1) of the 1986 Code 
     is amended by inserting before the comma ``(or, if less, the 
     sum of the maximum amounts permitted to be contributed under 
     section 530(c) by the contributors to such accounts for such 
     year)''.
       (d) Amendment Related to Section 224 of 1997 Act.--Section 
     170(e)(6)(F) of the 1986 Code (relating to termination) is 
     amended by striking ``1999'' and inserting ``2000''.
       (e) Amendments Related to Section 225 of 1997 Act.--
       (1) The last sentence of section 108(f)(2) of the 1986 Code 
     is amended to read as follows:
     ``The term `student loan' includes any loan made by an 
     educational organization described in section 
     170(b)(1)(A)(ii) or by an organization exempt from tax under 
     section 501(a) to refinance a loan to an individual to assist 
     the individual in attending any such educational organization 
     but only if the refinancing loan is pursuant to a program of 
     the refinancing organization which is designed as described 
     in subparagraph (D)(ii).''
       (2) Section 108(f)(3) of the 1986 Code is amended by 
     striking ``(or by an organization described in paragraph 
     (2)(E) from funds provided by an organization described in 
     paragraph (2)(D))''.
       (f) Amendments Related to Section 226 of 1997 Act.--
       (1) Section 226(a) of the 1997 Act is amended by striking 
     ``section 1397E'' and inserting ``section 1397D''.
       (2) Section 1397E(d)(4)(B) of the 1986 Code is amended by 
     striking ``local education agency as defined'' and inserting 
     ``local educational agency as defined''.

     SEC. 605. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.

       (a) Amendments Related to Section 301 of 1997 Act.--Section 
     219(g) of the 1986 Code is amended--
       (1) by inserting ``or the individual's spouse'' after 
     ``individual'' in paragraph (1), and
       (2) by striking paragraph (7) and inserting:
       ``(7) Special rule for spouses who are not active 
     participants.--If this subsection applies to an individual 
     for any taxable year solely because their spouse is an active 
     participant, then, in applying this subsection to the 
     individual (but not their spouse)--
       ``(A) the applicable dollar amount under paragraph 
     (3)(B)(i) shall be $150,000, and
       ``(B) the amount applicable under paragraph (2)(A)(ii) 
     shall be $10,000.''
       (b) Amendments Related to Section 302 of 1997 Act.--
       (1) Section 408A(c)(3)(A) of the 1986 Code is amended by 
     striking ``shall be reduced'' and inserting ``shall not 
     exceed an amount equal to the amount determined under 
     paragraph (2)(A) for such taxable year, reduced''.
       (2) Section 408A(c)(3) of the 1986 Code (relating to limits 
     based on modified adjusted gross income) is amended--
       (A) by inserting ``or a married individual filing a 
     separate return'' after ``joint return'' in subparagraph 
     (A)(ii), and
       (B) by striking ``and the deduction under section 219 shall 
     be taken into account'' in subparagraph (C)(i).
       (3) Section 408A(d)(2) of the 1986 Code (defining qualified 
     distribution) is amended by striking subparagraph (B) and 
     inserting the following:
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a Roth IRA shall not be treated as a 
     qualified distribution under subparagraph (A) if such payment 
     or distribution is made before the exclusion date for the 
     Roth IRA.
       ``(C) Exclusion date.--For purposes of this section, the 
     exclusion date for any Roth IRA is the first day of the 
     taxable year immediately following the 5-taxable year period 
     beginning with--
       ``(i) the first taxable year for which a contribution to 
     any Roth IRA maintained for the benefit of the individual was 
     made, or
       ``(ii) in the case of a Roth IRA to which 1 or more 
     qualified rollover contributions were made--

       ``(I) from an individual retirement plan other than a Roth 
     IRA, or
       ``(II) from another Roth IRA to the extent such 
     contributions are properly allocable to contributions 
     described in subclause (I),

     the most recent taxable year for which any such qualified 
     rollover contribution was made.''
       (4) Section 408A(d)(3) of the 1986 Code (relating to 
     rollovers from IRAs other than Roth IRAs) is amended by 
     adding at the end the following:
       ``(F) Special rule for applying section 72.--
       ``(i) In general.--If--

       ``(I) any distribution from a Roth IRA is made before the 
     exclusion date, and
       ``(II) any portion of such distribution is properly 
     allocable to a qualified rollover contribution described in 
     paragraph (2)(C)(ii),

     then section 72(t) shall be applied as if such portion were 
     includible in gross income.
       ``(ii) Limitation.--Clause (i) shall apply only to the 
     extent of the amount includible in gross income under 
     subparagraph (A)(i) by reason of the qualified rollover 
     contribution.
       ``(G) Special rules for contributions to which 4-year 
     averaging applies.--In the case of a qualified rollover 
     contribution to a Roth IRA of a distribution to which 
     subparagraph (A)(iii) applied, the following rules shall 
     apply:
       ``(i) Death of distributee.--

       ``(I) In general.--If the individual required to include 
     amounts in gross income under such subparagraph dies before 
     all of such amounts are included, all remaining amounts shall 
     be included in gross income for the taxable year which 
     includes the date of death.
       ``(II) Special rule for surviving spouse.--If the spouse of 
     the individual described in subclause (I) acquires the Roth 
     IRA to which such qualified rollover contribution is properly 
     allocable, the spouse may elect to include the remaining 
     amounts described in subclause (I) in the spouse's gross 
     income in the taxable years of the spouse ending with or 
     within the taxable years of such individual in which such 
     amounts would otherwise have been includible.

       ``(ii) Additional tax for early distribution.--

       ``(I) In general.--If any distribution from a Roth IRA is 
     made before the exclusion date, and any portion of such 
     distribution is properly allocable to such qualified rollover 
     contribution, the distributee's tax under this chapter for 
     the taxable year in which the amount is received shall be 
     increased by 10 percent of the amount of such portion not in 
     excess of the amount includible in gross income under 
     subparagraph (A)(i) by reason of such qualified rollover 
     contribution.
       ``(II) Treatment of tax.--For purposes of this title, any 
     tax imposed by subclause (I) shall be treated as a tax 
     imposed by section 72(t) and shall be in addition to any 
     other tax imposed by such section.''

       (5)(A) Section 408A(d)(4) of the 1986 Code is amended to 
     read as follows:
       ``(4) Aggregation and ordering rules.--
       ``(A) Aggregation rules.--Section 408(d)(2) shall be 
     applied separately with respect to--
       ``(i) Roth IRAs and other individual retirement plans,
       ``(ii) Roth IRAs described in paragraph (2)(C)(ii) and Roth 
     IRAs not so described, and
       ``(iii) Roth IRAs described in paragraph (2)(C)(ii) with 
     different exclusion dates.
       ``(B) Ordering rules.--For purposes of applying section 72 
     to any distribution from a Roth IRA which is not a qualified 
     distribution, such distribution shall be treated as made--
       ``(i) from contributions to the extent that the amount of 
     such distribution, when added to all previous distributions 
     from the Roth IRA, does not exceed the aggregate 
     contributions to the Roth IRA, and
       ``(ii) from such contributions in the following order:

       ``(I) Qualified rollover contributions to the extent 
     includible in gross income in the manner described in 
     paragraph (3)(A)(iii).
       ``(II) Qualified rollover contributions not described in 
     subclause (I) to the extent includible in gross income under 
     paragraph (3)(A).
       ``(III) Contributions not described in subclause (I) or 
     (II).

     Such rules shall also apply in determining the character of 
     qualified rollover contributions from one Roth IRA to another 
     Roth IRA.''
       (B) Section 408A(d)(1) of the 1986 Code is amended to read 
     as follows:
       ``(1) Exclusion.--Any qualified distribution from a Roth 
     IRA shall not be includible in gross income.''
       (6)(A) Section 408A(d) of the 1986 Code (relating to 
     distribution rules) is amended by adding at the end the 
     following:
       ``(6) Taxpayer may make adjustments before due date.--
       ``(A) In general.--Except as provided by the Secretary, if, 
     on or before the due date for any taxable year, a taxpayer 
     transfers in a trustee-to-trustee transfer any contribution 
     to an individual retirement plan made during such taxable 
     year from such plan to any other individual retirement plan, 
     then, for purposes of this chapter, such contribution shall 
     be treated as having been made to the transferee plan (and 
     not the transferor plan).
       ``(B) Special rules.--
       ``(i) Transfer of earnings.--Subparagraph (A) shall not 
     apply to the transfer of any contribution unless such 
     transfer is accompanied by any net income allocable to such 
     contribution.
       ``(ii) No deduction.--Subparagraph (A) shall apply to the 
     transfer of any contribution only to the extent no deduction 
     was allowed with respect to the contribution to the 
     transferor plan.
       ``(C) Due date.--For purposes of this paragraph, the due 
     date for any taxable year is the last date for filing the 
     return of tax for such taxable year (including extensions).''
       (B) Section 408A(d)(3) of the 1986 Code, as amended by this 
     subsection, is amended by striking subparagraph (D) and by 
     redesignating subparagraphs (E), (F), and (G) as 
     subparagraphs (D), (E), and (F), respectively.
       (7) Section 302(b) of the 1997 Act is amended by striking 
     ``Section 4973(b)'' and inserting ``Section 4973''.
       (8) Section 408A of the 1986 Code is amended by adding at 
     the end the following new subsection:
       ``(f) Individual Retirement Plan.--For purposes of this 
     section, except as provided by the Secretary, the term 
     `individual retirement plan' shall not include a simplified 
     employee pension or a simple retirement account.''

[[Page H10018]]

       (c) Amendments Related to Section 303 of 1997 Act.--
       (1) Section 72(t)(8)(E) of the 1986 Code is amended--
       (A) by striking ``120 days'' and inserting ``120th day'', 
     and
       (B) by striking ``60 days'' and inserting ``60th day''.
       (2)(A) Section 402(c) of the 1986 Code is amended by adding 
     at the end the following:
       ``(11) Denial of rollover treatment for transfers of 
     hardship distributions to individual retirement plans.--This 
     subsection shall not apply to the transfer of any hardship 
     distribution described in section 401(k)(2)(B)(i)(IV) from a 
     qualified cash or deferred arrangement to an eligible 
     retirement plan described in clause (i) or (ii) of paragraph 
     (8)(B).''
       (B) The amendment made by this paragraph shall apply to 
     distributions made after December 31, 1997.
       (d) Amendments Related to Section 311 of 1997 Act.--
       (1) Subsection (h) of section 1 of the 1986 Code (relating 
     to maximum capital gains rate) is amended to read as follows:
       ``(h) Maximum Capital Gains Rate.--
       ``(1) In general.--If a taxpayer has a net capital gain for 
     any taxable year, the tax imposed by this section for such 
     taxable year shall not exceed the sum of--
       ``(A) a tax computed at the rates and in the same manner as 
     if this subsection had not been enacted on the greater of--
       ``(i) taxable income reduced by the net capital gain, or
       ``(ii) the lesser of--

       ``(I) the amount of taxable income taxed at a rate below 28 
     percent, or
       ``(II) taxable income reduced by the adjusted net capital 
     gain,

       ``(B) 10 percent of so much of the adjusted net capital 
     gain (or, if less, taxable income) as does not exceed the 
     excess (if any) of--
       ``(i) the amount of taxable income which would (without 
     regard to this paragraph) be taxed at a rate below 28 
     percent, over
       ``(ii) the taxable income reduced by the adjusted net 
     capital gain,
       ``(C) 20 percent of the adjusted net capital gain (or, if 
     less, taxable income) in excess of the amount on which a tax 
     is determined under subparagraph (B),
       ``(D) 25 percent of the excess (if any) of--
       ``(i) the unrecaptured section 1250 gain (or, if less, the 
     net capital gain), over
       ``(ii) the excess (if any) of--

       ``(I) the sum of the amount on which tax is determined 
     under subparagraph (A) plus the net capital gain, over
       ``(II) taxable income, and

       ``(E) 28 percent of the amount of taxable income in excess 
     of the sum of the amounts on which tax is determined under 
     the preceding subparagraphs of this paragraph.
       ``(2) Reduced capital gain rates for qualified 5-year 
     gain.--
       ``(A) Reduction in 10-percent rate.--In the case of any 
     taxable year beginning after December 31, 2000, the rate 
     under paragraph (1)(B) shall be 8 percent with respect to so 
     much of the amount to which the 10-percent rate would 
     otherwise apply as does not exceed qualified 5-year gain, and 
     10 percent with respect to the remainder of such amount.
       ``(B) Reduction in 20-percent rate.--The rate under 
     paragraph (1)(C) shall be 18 percent with respect to so much 
     of the amount to which the 20-percent rate would otherwise 
     apply as does not exceed the lesser of--
       ``(i) the excess of qualified 5-year gain over the amount 
     of such gain taken into account under subparagraph (A) of 
     this paragraph, or
       ``(ii) the amount of qualified 5-year gain (determined by 
     taking into account only property the holding period for 
     which begins after December 31, 2000),

     and 20 percent with respect to the remainder of such amount. 
     For purposes of determining under the preceding sentence 
     whether the holding period of property begins after December 
     31, 2000, the holding period of property acquired pursuant to 
     the exercise of an option (or other right or obligation to 
     acquire property) shall include the period such option (or 
     other right or obligation) was held.
       ``(3) Net capital gain taken into account as investment 
     income.--For purposes of this subsection, the net capital 
     gain for any taxable year shall be reduced (but not below 
     zero) by the amount which the taxpayer takes into account as 
     investment income under section 163(d)(4)(B)(iii).
       ``(4) Adjusted net capital gain.--For purposes of this 
     subsection, the term `adjusted net capital gain' means net 
     capital gain reduced (but not below zero) by the sum of--
       ``(A) unrecaptured section 1250 gain, and
       ``(B) 28 percent rate gain.
       ``(5) 28 percent rate gain.--For purposes of this 
     subsection--
       ``(A) In general.--The term `28 percent rate gain' means 
     the excess (if any) of--
       ``(i) the sum of--

       ``(I) the aggregate long-term capital gain from property 
     held for more than 1 year but not more than 18 months,
       ``(II) collectibles gain, and
       ``(III) section 1202 gain, over

       ``(ii) the sum of--

       ``(I) the aggregate long-term capital loss (not described 
     in subclause (IV)) from property referred to in clause 
     (i)(I),
       ``(II) collectibles loss,
       ``(III) the net short-term capital loss, and
       ``(IV) the amount of long-term capital loss carried under 
     section 1212(b)(1)(B) to the taxable year.

       ``(B) Special rules.--
       ``(i) Short sales and options.--Rules similar to the rules 
     of subsections (b) and (d) of section 1233 shall apply to 
     substantially identical property, and section 1092(f) with 
     respect to stock, held for more than 1 year but not more than 
     18 months.
       ``(ii) Section 1256 contracts.--Amounts treated as long-
     term capital gain or loss under section 1256(a)(3) shall be 
     treated as attributable to property held for more than 18 
     months.
       ``(6) Collectibles gain and loss.--For purposes of this 
     subsection--
       ``(A) In general.--The terms `collectibles gain' and 
     `collectibles loss' mean gain or loss (respectively) from the 
     sale or exchange of a collectible (as defined in section 
     408(m) without regard to paragraph (3) thereof) which is a 
     capital asset held for more than 18 months but only to the 
     extent such gain is taken into account in computing gross 
     income and such loss is taken into account in computing 
     taxable income.
       ``(B) Partnerships, etc.--For purposes of subparagraph (A), 
     any gain from the sale of an interest in a partnership, S 
     corporation, or trust which is attributable to unrealized 
     appreciation in the value of collectibles shall be treated as 
     gain from the sale or exchange of a collectible. Rules 
     similar to the rules of section 751 shall apply for purposes 
     of the preceding sentence.
       ``(7) Unrecaptured section 1250 gain.--For purposes of this 
     subsection--
       ``(A) In general.--The term `unrecaptured section 1250 
     gain' means the excess (if any) of--
       ``(i) the amount of long-term capital gain (not otherwise 
     treated as ordinary income) which would be treated as 
     ordinary income if--

       ``(I) section 1250(b)(1) included all depreciation and the 
     applicable percentage under section 1250(a) were 100 percent, 
     and
       ``(II) only gain from property held for more than 18 months 
     were taken into account, over

       ``(ii) the excess (if any) of--

       ``(I) the amount described in paragraph (5)(A)(ii), over
       ``(II) the amount described in paragraph (5)(A)(i).

       ``(B) Limitation with respect to section 1231 property.--
     The amount described in subparagraph (A)(i) from sales, 
     exchanges, and conversions described in section 1231(a)(3)(A) 
     for any taxable year shall not exceed the net section 1231 
     gain (as defined in section 1231(c)(3)) for such year.
       ``(8) Section 1202 gain.--For purposes of this subsection, 
     the term `section 1202 gain' means an amount equal to the 
     gain excluded from gross income under section 1202(a).
       ``(9) Qualified 5-year gain.--For purposes of this 
     subsection, the term `qualified 5-year gain' means the amount 
     of long-term capital gain which would be computed for the 
     taxable year if only gains from the sale or exchange of 
     property held by the taxpayer for more than 5 years were 
     taken into account. The determination under the preceding 
     sentence shall be made without regard to collectibles gain, 
     gain described in paragraph (7)(A)(i), and section 1202 gain.
       ``(10) Coordination with recapture of net ordinary losses 
     under section 1231.--If any amount is treated as ordinary 
     income under section 1231(c), such amount shall be allocated 
     among the separate categories of net section 1231 gain (as 
     defined in section 1231(c)(3)) in such manner as the 
     Secretary may by forms or regulations prescribe.
       ``(11) Regulations.--The Secretary may prescribe such 
     regulations as are appropriate (including regulations 
     requiring reporting) to apply this subsection in the case of 
     sales and exchanges by pass-thru entities and of interests in 
     such entities.
       ``(12) Pass-thru entity defined.--For purposes of this 
     subsection, the term `pass-thru entity' means--
       ``(A) a regulated investment company,
       ``(B) a real estate investment trust,
       ``(C) an S corporation,
       ``(D) a partnership,
       ``(E) an estate or trust,
       ``(F) a common trust fund,
       ``(G) a foreign investment company which is described in 
     section 1246(b)(1) and for which an election is in effect 
     under section 1247, and
       ``(H) a qualified electing fund (as defined in section 
     1295).
       ``(13) Special rules for periods during 1997.--
       ``(A) Determination of 28 percent rate gain.--In applying 
     paragraph (5)--
       ``(i) the amount determined under subclause (I) of 
     paragraph (5)(A)(i) shall include long-term capital gain (not 
     otherwise described in paragraph (5)(A)(i)) which is properly 
     taken into account for the portion of the taxable year before 
     May 7, 1997,
       ``(ii) the amounts determined under subclause (I) of 
     paragraph (5)(A)(ii) shall include long-term capital loss 
     (not otherwise described in paragraph (5)(A)(ii)) which is 
     properly taken into account for the portion of the taxable 
     year before May 7, 1997, and
       ``(iii) clauses (i)(I) and (ii)(I) of paragraph (5)(A) 
     shall be applied by not taking into account any gain and loss 
     on property held for more than 1 year but not more than 18 
     months which is properly taken into account for the portion 
     of the taxable year after May 6, 1997, and before July 29, 
     1997.
       ``(B) Other special rules.--
       ``(i) Determination of unrecaptured section 1250 gain not 
     to include pre-may 7, 1997

[[Page H10019]]

     gain.--The amount determined under paragraph (7)(A)(i) shall 
     not include gain properly taken into account for the portion 
     of the taxable year before May 7, 1997.
       ``(ii) Other transitional rules for 18-month holding 
     period.--Paragraphs (6)(A) and (7)(A)(i)(II) shall be applied 
     by substituting `1 year' for `18 months' with respect to gain 
     properly taken into account for the portion of the taxable 
     year after May 6, 1997, and before July 29, 1997.
       ``(C) Special rules for pass-thru entities.--In applying 
     this paragraph with respect to any pass-thru entity, the 
     determination of when gains and loss are properly taken into 
     account shall be made at the entity level.''
       (2) In general.--Paragraph (3) of section 55(b) of the 1986 
     Code is amended to read as follows:
       ``(3) Maximum rate of tax on net capital gain of 
     noncorporate taxpayers.--The amount determined under the 
     first sentence of paragraph (1)(A)(i) shall not exceed the 
     sum of--
       ``(A) the amount determined under such first sentence 
     computed at the rates and in the same manner as if this 
     paragraph had not been enacted on the taxable excess reduced 
     by the lesser of--
       ``(i) the net capital gain, or
       ``(ii) the sum of--

       ``(I) the adjusted net capital gain, plus
       ``(II) the unrecaptured section 1250 gain, plus

       ``(B) 10 percent of so much of the adjusted net capital 
     gain (or, if less, taxable excess) as does not exceed the 
     amount on which a tax is determined under section 1(h)(1)(B), 
     plus
       ``(C) 20 percent of the adjusted net capital gain (or, if 
     less, taxable excess) in excess of the amount on which tax is 
     determined under subparagraph (B), plus
       ``(D) 25 percent of the amount of taxable excess in excess 
     of the sum of the amounts on which tax is determined under 
     the preceding subparagraphs of this paragraph.

     In the case of taxable years beginning after December 31, 
     2000, rules similar to the rules of section 1(h)(2) shall 
     apply for purposes of subparagraphs (B) and (C). Terms used 
     in this paragraph which are also used in section 1(h) shall 
     have the respective meanings given such terms by section 1(h) 
     but computed with the adjustments under this part.''.
       (3) Section 57(a)(7) of the 1986 Code is amended by adding 
     at the end the following new sentence: ``In the case of stock 
     the holding period of which begins after December 31, 2000 
     (determined with the application of the last sentence of 
     section 1(h)(2)(B)), the preceding sentence shall be applied 
     by substituting `28 percent' for `42 percent'.''.
       (4) Paragraphs (11) and (12) of section 1223, and section 
     1235(a), of the 1986 Code are each amended by striking ``1 
     year'' each place it appears and inserting ``18 months''.
       (e) Amendments Related to Section 312 of 1997 Act.--
       (1) Section 121(c)(1) of the 1986 Code is amended to read 
     as follows:
       ``(1) In general.--In the case of a sale or exchange to 
     which this subsection applies, the ownership and use 
     requirements of subsection (a), and subsection (b)(3), shall 
     not apply; but the dollar limitation under paragraph (1) or 
     (2) of subsection (b), whichever is applicable, shall be 
     equal to--
       ``(A) the amount which bears the same ratio to such 
     limitation (determined without regard to this paragraph) as
       ``(B)(i) the shorter of--
       ``(I) the aggregate periods, during the 5-year period 
     ending on the date of such sale or exchange, such property 
     has been owned and used by the taxpayer as the taxpayer's 
     principal residence, or
       ``(II) the period after the date of the most recent prior 
     sale or exchange by the taxpayer to which subsection (a) 
     applied and before the date of such sale or exchange, bears 
     to
       ``(ii) 2 years.''.
       (2) Section 312(d)(2) of the 1997 Act (relating to sales 
     before date of enactment) is amended by inserting ``on or'' 
     before ``before'' each place it appears in the text and 
     heading.
       (f) Amendment Related to Section 313 of 1997 Act.--Section 
     1045 of the 1986 Code is amended by adding at the end the 
     following new subsection:
       ``(c) Limitation on Application to Partnerships and S 
     Corporations.--Subsection (a) shall apply to a partnership or 
     S corporation for a taxable year only if at all times during 
     such taxable year all of the partners in the partnership, or 
     all of the shareholders of the S corporation, are natural 
     persons or estates.''

     SEC. 606. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.

       (a) Amendments Related to Section 501 of 1997 Act.--
       (1) Subsection (c) of section 2631 of the 1986 Code is 
     amended by striking ``an individual who dies'' and inserting 
     ``a generation-skipping transfer''.
       (2) Subsection (f) of section 501 of the 1997 Act is 
     amended by inserting ``(other than the amendment made by 
     subsection (d))'' after ``this section''.
       (b) Amendments Related to Section 502 of 1997 Act.--
       (1) Subsection (a) of section 2033A of the 1986 Code is 
     amended to read as follows:
       ``(a) Exclusion.--
       ``(1) In general.--In the case of an estate of a decedent 
     to which this section applies, the value of the gross estate 
     shall not include the lesser of--
       ``(A) the adjusted value of the qualified family-owned 
     business interests of the decedent otherwise includible in 
     the estate, or
       ``(B) the exclusion limitation with respect to such estate.
       ``(2) Exclusion limitation.--
       ``(A) In general.--The exclusion limitation with respect to 
     any estate is the amount of reduction in the tentative tax 
     base with respect to such estate which would be required in 
     order to reduce the tax imposed by section 2001(b) 
     (determined without regard to this section) by an amount 
     equal to the maximum credit equivalent benefit.
       ``(B) Maximum credit equivalent benefit.--For purposes of 
     subparagraph (A), the term `maximum credit equivalent 
     benefit' means the excess of--
       ``(i) the amount by which the tentative tax imposed by 
     section 2001(b) (determined without regard to this section) 
     would be reduced if the tentative tax base were reduced by 
     $675,000, over
       ``(ii) the amount by which the applicable credit amount 
     under section 2010(c) with respect to such estate exceeds 
     such applicable credit amount in effect for 1998.
       ``(C) Tentative tax base.--For purposes of this paragraph, 
     the term `tentative tax base' means the amount with respect 
     to which the tax imposed by section 2001(b) would be computed 
     without regard to this section.''
       (2) Section 2033A(b)(3) of the 1986 Code is amended to read 
     as follows:
       ``(3) Includible gifts of interests.--The amount of the 
     gifts of qualified family-owned business interests determined 
     under this paragraph is the sum of--
       ``(A) the amount of such gifts from the decedent to members 
     of the decedent's family taken into account under section 
     2001(b)(1)(B), plus
       ``(B) the amount of such gifts otherwise excluded under 
     section 2503(b),

     to the extent such interests are continuously held by members 
     of such family (other than the decedent's spouse) between the 
     date of the gift and the date of the decedent's death.''
       (c) Amendments Related to Section 503 of the 1997 Act.--
       (1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code 
     is amended to read as follows:
       ``(iii) for purposes of applying section 6601(j), the 2-
     percent portion (as defined in such section) shall be treated 
     as being zero.''
       (2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code 
     is amended to read as follows:
       ``(iii) 2-percent interest rate not to apply.--For purposes 
     of applying section 6601(j), the 2-percent portion (as 
     defined in such section) shall be treated as being zero.''
       (d) Amendment Related to Section 505 of the 1997 Act.--
     Paragraphs (1) and (2) of section 7479(a) of the 1986 Code 
     are each amended by striking ``an estate,'' and inserting 
     ``an estate (or with respect to any property included 
     therein),''.
       (e) Amendments Related to Section 506 of the 1997 Act.--
       (1) Subsection (c) of section 2504 of the 1986 Code is 
     amended by striking ``was assessed or paid'' and inserting 
     ``was finally determined for purposes of this chapter''.
       (2) Paragraph (1) of section 506(e) of the 1997 Act is 
     amended by striking ``and (c)'' and inserting ``, (c), and 
     (d)''.

     SEC. 607. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT.

       (a) Amendment Related to Section 1400 of 1986 Code.--
     Section 1400(b)(2)(B) of the 1986 Code is amended by 
     inserting ``as determined on the basis of the 1990 census'' 
     after ``percent''.
       (b) Amendments Related to Section 1400B of 1986 Code.--
       (1) Section 1400B(d)(2) of the 1986 Code is amended by 
     inserting ``as determined on the basis of the 1990 census'' 
     after ``percent''.
       (2) Section 1400B(b) of the 1986 Code is amended by 
     redesignating paragraphs (6) and (7) as paragraphs (5) and 
     (6), respectively.
       (c) Amendments Related to Section 1400C of 1986 Code.--
       (1) Paragraph (1) of section 1400C(c) of the 1986 Code is 
     amended to read as follows:
       ``(1) In general.--The term `first-time homebuyer' means 
     any individual if such individual (and if married, such 
     individual's spouse) had no present ownership interest in a 
     principal residence in the District of Columbia during the 1-
     year period ending on the date of the purchase of the 
     principal residence to which this section applies.''
       (2) Subparagraph (B) of section 1400C(e)(2) of the 1986 
     Code is amended by inserting before the period ``on the date 
     the taxpayer first occupies such residence''.
       (3) Paragraph (3) of section 1400C(e) of the 1986 Code is 
     amended by striking all that follows ``principal residence'' 
     and inserting ``on the date such residence is purchased.''
       (4) Subsection (i) of section 1400C of the 1986 Code is 
     amended to read as follows:
       ``(i) Application of Section.--This section shall apply to 
     property purchased after August 4, 1997, and before January 
     1, 2001.''
       (5) Subsection (c) of section 23 of the 1986 Code is 
     amended by inserting ``and section 1400C'' after ``other than 
     this section''.
       (6) Subparagraph (C) of section 25(e)(1) of the 1986 Code 
     is amended by striking ``section 23'' and inserting 
     ``sections 23 and 1400C''.

     SEC. 608. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.

       (a) Amendment Related to Section 901 of 1997 Act.--Section 
     9503(c)(7) of the 1986 Code is amended--
       (1) by striking ``resulting from the amendments made by'' 
     and inserting ``(and transfers to the Mass Transit Account) 
     resulting

[[Page H10020]]

     from the amendments made by subsections (a) and (b) of 
     section 901 of'', and
       (2) by inserting before the period ``and deposits in the 
     Highway Trust Fund (and transfers to the Mass Transit 
     Account) shall be treated as made when they would have been 
     required to be made without regard to section 901(e) of the 
     Taxpayer Relief Act of 1997''.
       (b) Amendment Related to Section 907 of 1997 Act.--
     Paragraph (2) of section 9503(e) of the 1986 Code is amended 
     by striking the last sentence and inserting the following new 
     sentence: ``For purposes of the preceding sentence, the term 
     `mass transit portion' means, for any fuel with respect to 
     which tax was imposed under section 4041 or 4081 and 
     otherwise deposited into the Highway Trust Fund, the amount 
     determined at the rate of--
       ``(A) except as otherwise provided in this sentence, 2.86 
     cents per gallon,
       ``(B) 1.77 cents per gallon in the case of any partially 
     exempt methanol or ethanol fuel (as defined in section 
     4041(m)) none of the alcohol in which consists of ethanol,
       ``(C) 1.86 cents per gallon in the case of liquefied 
     natural gas,
       ``(D) 2.13 cents per gallon in the case of liquefied 
     petroleum gas, and
       ``(E) 9.71 cents per MCF (determined at standard 
     temperature and pressure) in the case of compressed natural 
     gas.''
       (c) Amendment Related to Section 976 of 1997 Act.--Section 
     6103(d)(5) of the 1986 Code is amended by striking ``section 
     967 of the Taxpayer Relief Act of 1997.'' and inserting 
     ``section 976 of the Taxpayer Relief Act of 1997. Subsections 
     (a)(2) and (p)(4) and sections 7213 and 7213A shall not apply 
     with respect to disclosures or inspections made pursuant to 
     this paragraph.''

     SEC. 609. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.

       (a) Amendments Related to Section 1001 of 1997 Act.--
       (1) Paragraph (2) of section 1259(b) of the 1986 Code is 
     amended--
       (A) by striking ``debt'' each place it appears in clauses 
     (i) and (ii) of subparagraph (A) and inserting ``position'',
       (B) by striking ``and'' at the end of subparagraph (A), and
       (C) by redesignating subparagraph (B) as subparagraph (C) 
     and by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) any hedge with respect to a position described in 
     subparagraph (A), and''.
       (2) Section 1259(d)(1) of the 1986 Code is amended by 
     inserting ``(including cash)'' after ``property''.
       (3) Subparagraph (D) of section 475(f)(1) of the 1986 Code 
     is amended by adding at the end the following new sentence: 
     ``Subsection (d)(3) shall not apply under the preceding 
     sentence for purposes of applying sections 1402 and 7704.''
       (4) Subparagraph (C) of section 1001(d)(3) of the 1997 Act 
     is amended by striking ``within the 30-day period beginning 
     on'' and inserting ``before the close of the 30th day 
     after''.
       (b) Amendments Related to Section 1012 of 1997 Act.--
       (1) Paragraph (1) of section 1012(d) of the 1997 Act is 
     amended by striking ``1997, pursuant'' and inserting ``1997; 
     except that the amendment made by subsection (a) shall apply 
     to such distributions only if pursuant''.
       (2) Subparagraph (A) of section 355(e)(3) of the 1986 Code 
     is amended--
       (A) by striking ``shall not be treated as described in'' 
     and inserting ``shall not be taken into account in 
     applying'', and
       (B) by striking clause (iv) and inserting the following new 
     clause:
       ``(iv) The acquisition of stock in the distributing 
     corporation or any controlled corporation to the extent that 
     the percentage of stock owned directly or indirectly in such 
     corporation by each person owning stock in such corporation 
     immediately before the acquisition does not decrease.''
       (c) Amendments Related to Section 1014 of 1997 Act.--
       (1) Paragraph (1) of section 351(g) of the 1986 Code is 
     amended by adding ``and'' at the end of subparagraph (A) and 
     by striking subparagraphs (B) and (C) and inserting the 
     following new subparagraph:
       ``(B) if (and only if) the transferor receives stock other 
     than nonqualified preferred stock--
       ``(i) subsection (b) shall apply to such transferor, and
       ``(ii) such nonqualified preferred stock shall be treated 
     as other property for purposes of applying subsection (b).''
       (2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is 
     amended by adding at the end the following new subclause:

       ``(III) Extension of statute of limitations.--The statutory 
     period for the assessment of any deficiency attributable to a 
     corporation failing to be a family-owned corporation shall 
     not expire before the expiration of 3 years after the date 
     the Secretary is notified by the corporation (in such manner 
     as the Secretary may prescribe) of such failure, and such 
     deficiency may be assessed before the expiration of such 3-
     year period notwithstanding the provisions of any other law 
     or rule of law which would otherwise prevent such 
     assessment.''

       (d) Amendment Related to Section 1024 of 1997 Act.--Section 
     6331(h)(1) of the 1986 Code is amended by striking ``The 
     effect of a levy'' and inserting ``If the Secretary approves 
     a levy under this subsection, the effect of such levy''.
       (e) Amendments Related to Section 1031 of 1997 Act.--
       (1) Subsection (l) of section 4041 of the 1986 Code is 
     amended by striking ``subsection (e) or (f)'' and inserting 
     ``subsection (f) or (g)''.
       (2) Subsection (b) of section 9502 of the 1986 Code is 
     amended by moving the sentence added at the end of paragraph 
     (1) to the end of such subsection.
       (3) Subsection (c) of section 6421 of the 1986 Code is 
     amended--
       (A) by striking ``(2)(A)'' and inserting ``(2)'', and
       (B) by adding at the end the following sentence: 
     ``Subsection (a) shall not apply to gasoline to which this 
     subsection applies.''
       (f) Amendments Related to Section 1032 of 1997 Act.--
       (1) Section 1032(a) of the 1997 Act is amended by striking 
     ``Subsection (a) of section 4083'' and inserting ``Paragraph 
     (1) of section 4083(a)''.
       (2) Section 1032(e)(12)(A) of the 1997 Act shall be applied 
     as if ``gasoline, diesel fuel,'' were the material proposed 
     to be stricken.
       (3) Paragraph (1) of section 4101(e) of the 1986 Code is 
     amended by striking ``dyed diesel fuel and kerosene'' and 
     inserting ``such fuel in a dyed form''.
       (g) Amendment Related to Section 1055 of 1997 Act.--Section 
     6611(g)(1) of the 1986 Code is amended by striking ``(e), and 
     (h)'' and inserting ``and (e)''.
       (h) Amendment Related to Section 1083 of 1997 Act.--Section 
     1083(a)(2) of the 1997 Act is amended--
       (1) by striking ``21'' and inserting ``20'', and
       (2) by striking ``22'' and inserting ``21''.
       (i) Amendment Related to Section 1084 of 1997 Act.--
       (1) Paragraph (3) of section 264(a) of the 1986 Code is 
     amended by striking ``subsection (c)'' and inserting 
     ``subsection (d)''.
       (2) Paragraph (4) of section 264(a) of the 1986 Code is 
     amended by striking ``subsection (d)'' and inserting 
     ``subsection (e)''.
       (3) Paragraph (4) of section 264(f) of the 1986 Code is 
     amended by adding at the end the following new subparagraph:
       ``(E) Master contracts.--If coverage for each insured under 
     a master contract is treated as a separate contract for 
     purposes of sections 817(h), 7702, and 7702A, coverage for 
     each such insured shall be treated as a separate contract for 
     purposes of subparagraph (A). For purposes of the preceding 
     sentence, the term `master contract' shall not include any 
     group life insurance contract (as defined in section 
     848(e)(2)).''
       (4)(A) Clause (iv) of section 264(f)(5)(A) of the 1986 Code 
     is amended by striking the second sentence.
       (B) Subparagraph (B) of section 6724(d)(1) of the 1986 Code 
     is amended by striking ``or'' at the end of clause (xv), by 
     striking the period at the end of clause (xvi) and inserting 
     ``, or'', and by adding at the end the following new clause:
       ``(xvii) section 264(f)(5)(A)(iv) (relating to reporting 
     with respect to certain life insurance and annuity 
     contracts).''
       (C) Paragraph (2) of section 6724(d) of the 1986 Code is 
     amended by striking ``or'' at the end of subparagraph (Y), by 
     striking the period at the end of subparagraph (Z) and 
     inserting ``or'', and by adding at the end the following new 
     subparagraph:
       ``(AA) section 264(f)(5)(A)(iv) (relating to reporting with 
     respect to certain life insurance and annuity contracts).''
       (j) Amendment Related to Section 1085 of 1997 Act.--
     Paragraph (5) of section 32(c) of the 1986 Code is amended--
       (1) by inserting before the period at the end of 
     subparagraph (A) ``and increased by the amounts described in 
     subparagraph (C)'',
       (2) by adding ``or'' at the end of clause (iii) of 
     subparagraph (B), and
       (3) by striking all that follows subclause (II) of 
     subparagraph (B)(iv) and inserting the following:

       ``(III) other trades or businesses.

     For purposes of clause (iv), there shall not be taken into 
     account items which are attributable to a trade or business 
     which consists of the performance of services by the taxpayer 
     as an employee.
       ``(C) Certain amounts included.--An amount is described in 
     this subparagraph if it is--
       ``(i) interest received or accrued during the taxable year 
     which is exempt from tax imposed by this chapter, or
       ``(ii) amounts received as a pension or annuity, and any 
     distributions or payments received from an individual 
     retirement plan, by the taxpayer during the taxable year to 
     the extent not included in gross income.

     Clause (ii) shall not include any amount which is not 
     includible in gross income by reason of section 402(c), 
     403(a)(4), 403(b), 408(d) (3), (4), or (5), or 457(e)(10).''
       (k) Amendment Related to Section 1088 of 1997 Act.--Section 
     1088(b)(2)(C) of the 1997 Act is amended by inserting ``more 
     than 1 year'' before ``after''.
       (l) Amendment Related to Section 1089 of 1997 Act.--
     Paragraphs (1)(C) and (2)(C) of section 664(d) of the 1986 
     Code are each amended by adding ``, and'' at the end.

     SEC. 610. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.

       (a) Amendment Related to Section 1103 of 1997 Act.--The 
     paragraph (3) of section 59(a) added by section 1103 of the 
     1997 Act is redesignated as paragraph (4).
       (b) Amendment Related to Section 1121 of 1997 Act.--Section 
     1298(a)(2)(B) of the 1986 Code is amended by adding at the 
     end the following new sentence: ``Section 1297(e)

[[Page H10021]]

     shall not apply in determining whether a corporation is a 
     passive foreign investment company for purposes of this 
     subparagraph.''
       (c) Amendment Related to Section 1122 of 1997 Act.--Section 
     672(f)(3)(B) of the 1986 Code is amended by striking 
     ``section 1296'' and inserting ``section 1297''.
       (d) Amendment Related to Section 1123 of 1997 Act.--The 
     subsection (e) of section 1297 of the 1986 Code added by 
     section 1123 of the 1997 Act is redesignated as subsection 
     (f).
       (e) Amendment Related to Section 1144 of 1997 Act.--
     Paragraphs (1) and (2) of section 1144(c) of the 1997 Act are 
     each amended by striking ``6038B(b)'' and inserting 
     ``6038B(c) (as redesignated by subsection (b))''.

     SEC. 611. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT.

       (a) Amendment Related to Section 1204 of 1997 Act.--The 
     last sentence of section 162(a) of the 1986 Code is amended 
     by striking ``investigate'' and all that follows and 
     inserting ``investigate or prosecute, or provide support 
     services for the investigation or prosecution of, a Federal 
     crime.''
       (b) Amendments Related to Section 1205 of 1997 Act.--
       (1) Section 6311(e)(1) of the 1986 Code is amended by 
     striking ``section 6103(k)(8)'' and inserting ``section 
     6103(k)(9)''.
       (2) Paragraph (8) of section 6103(k) of the 1986 Code (as 
     added by section 1205(c)(1) of the 1997 Act) is redesignated 
     as paragraph (9).
       (3) The heading for section 7431(g) of the 1986 Code is 
     amended by striking ``(8)'' and inserting ``(9)''.
       (4) Section 1205(c)(3) of the 1997 Act shall be applied as 
     if it read as follows:
       ``(3) Section 6103(p)(3)(A), as amended by section 
     1026(b)(1)(A), is amended by striking ``or (8)'' and 
     inserting ``(8), or (9)''.
       (5) Section 1213(b) of the 1997 Act is amended by striking 
     ``section 6724(d)(1)(A)'' and inserting ``section 
     6724(d)(1)''.
       (c) Amendment Related to Section 1226 of 1997 Act.--Section 
     1226 of the 1997 Act is amended by striking ``ending on or'' 
     and inserting ``beginning''.
       (d) Amendment Related to Section 1285 of 1997 Act.--Section 
     7430(b) of the 1986 Code is amended by redesignating 
     paragraph (5) as paragraph (4).

     SEC. 612. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.

       (a) Section 646 of the 1986 Code is redesignated as section 
     645.
       (b) The item relating to section 646 in the table of 
     sections for subpart A of part I of subchapter J of chapter 1 
     of the 1986 Code is amended by striking ``Sec. 646'' and 
     inserting ``Sec. 645''.
       (c) Paragraph (1) of section 2652(b) of the 1986 Code is 
     amended by striking ``section 646'' and inserting ``section 
     645''.
       (d) Paragraph (3) of section 1(g) of the 1986 Code is 
     amended by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (e) Section 641 of the 1986 Code is amended by striking 
     subsection (c) and by redesignating subsection (d) as 
     subsection (c).
       (f) Paragraph (4) of section 1361(e) of the 1986 Code is 
     amended by striking ``section 641(d)'' and inserting 
     ``section 641(c)''.
       (g) Subparagraph (A) of section 6103(e)(1) of the 1986 Code 
     is amended by striking clause (ii) and by redesignating 
     clauses (iii) and (iv) as clauses (ii) and (iii), 
     respectively.

     SEC. 613. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.

       (a) Amendment Related to Section 1434 of 1997 Act.--
     Paragraph (2) of section 4052(f) of the 1986 Code is amended 
     by striking ``this section'' and inserting ``such 
     section''.
       (b) Amendment Related to Section 1436 of 1997 Act.--
     Paragraph (2) of section 4091(a) of the 1986 Code is amended 
     by inserting ``or on which tax has been credited or 
     refunded'' after ``such paragraph''.

     SEC. 614. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT.

       (a) Amendment Related to Section 1501 of 1997 Act.--The 
     paragraph (8) of section 408(p) of the 1986 Code added by 
     section 1501(b) of the 1997 Act is redesignated as paragraph 
     (9).
       (b) Amendment Related to Section 1505 of 1997 Act.--Section 
     1505(d)(2) of the 1997 Act is amended by striking ``(b)(12)'' 
     and inserting ``(b)(12)(A)(i)''.
       (c) Amendment Related to Section 1531 of 1997 Act.--
     Subsection (f) of section 9811 of the 1986 Code (as added by 
     section 1531 of the 1997 Act) is redesignated as subsection 
     (e).

     SEC. 615. AMENDMENTS RELATED TO TITLE XVI.

       (a) Amendments Related to Section 1601(d) of 1997 Act.--
       (1) Amendments related to section 1601(d)(1)--
       (A) Section 408(p)(2)(D)(i) of the 1986 Code is amended by 
     striking ``or (B)'' in the last sentence.
       (B) Section 408(p) of the 1986 Code is amended by adding at 
     the end the following:
       ``(10) Special rules for acquisitions, dispositions, and 
     similar transactions.--
       ``(A) In general.--An employer which fails to meet any 
     applicable requirement by reason of an acquisition, 
     disposition, or similar transaction shall not be treated as 
     failing to meet such requirement during the transition period 
     if--
       ``(i) the employer satisfies requirements similar to the 
     requirements of section 410(b)(6)(C)(i)(II), and
       ``(ii) the qualified salary reduction arrangement 
     maintained by the employer would satisfy the requirements of 
     this subsection after the transaction if the employer which 
     maintained the arrangement before the transaction had 
     remained a separate employer.
       ``(B) Applicable requirement.--For purposes of this 
     paragraph, the term `applicable requirement' means--
       ``(i) the requirement under paragraph (2)(A)(i) that an 
     employer be an eligible employer,
       ``(ii) the requirement under paragraph (2)(D) that an 
     arrangement be the only plan of an employer, and
       ``(iii) the participation requirements under paragraph (4).
       ``(C) Transition period.--For purposes of this paragraph, 
     the term `transition period' means the period beginning on 
     the date of any transaction described in subparagraph (A) and 
     ending on the last day of the second calendar year following 
     the calendar year in which such transaction occurs.''
       (C) Section 408(p)(2) of the 1986 Code is amended--
       (i) by striking ``the preceding sentence shall apply only 
     in accordance with rules similar to the rules of section 
     410(b)(6)(C)(i)'' in the last sentence of subparagraph 
     (C)(i)(II) and inserting ``the preceding sentence shall not 
     apply'', and
       (ii) by striking clause (iii) of subparagraph (D).
       (2) Amendment to section 1601(d)(4).--Section 1601(d)(4)(A) 
     of the 1997 Act is amended--
       (A) by striking ``Section 403(b)(11)'' and inserting 
     ``Paragraphs (7)(A)(ii) and (11) of section 403(b)'', and
       (B) by striking ``403(b)(1)'' in clause (ii) and inserting 
     ``403(b)(10)''.
       (b) Amendment Related to Section 1601(f)(4) of 1997 Act.--
     Subsection (d) of section 6427 of the 1986 Code is amended--
       (1) by striking ``Helicopters'' in the heading and 
     inserting ``Other Aircraft Uses'', and
       (2) by inserting ``or a fixed-wing aircraft'' after 
     ``helicopter''.

     SEC. 616. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCILIATION 
                   ACT OF 1993.

       (a) In General.--Section 196(c) of the 1986 Code is amended 
     by striking ``and'' at the end of paragraph (6), by striking 
     the period at the end of paragraph (7), and insert ``, and'', 
     and by adding at the end the following new paragraph:
       ``(8) the employer social security credit determined under 
     section 45B(a).''
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the amendments made by 
     section 13443 of the Revenue Reconciliation Act of 1993.

     SEC. 617. AMENDMENT RELATED TO TAX REFORM ACT OF 1984.

       (a) In General.--Paragraph (3) of section 136(c) of the Tax 
     Reform Act of 1984 is amended by adding at the end the 
     following flush sentence:

     ``The treatment under the preceding sentence shall apply to 
     each period after June 30, 1983, during which such members 
     are stapled entities, whether or not such members are stapled 
     entities for all periods after June 30, 1983.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the Tax Reform Act of 
     1984 as of the date of the enactment of such Act.

     SEC. 618. AMENDMENT RELATED TO TAX REFORM ACT OF 1986.

       (a) In General.--Section 6401(b)(1) of the 1986 Code is 
     amended by striking ``and D'' and inserting ``D, and G''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 701(b) of the Tax Reform Act of 1986.

     SEC. 619. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.

       (a)(1) Section 6421 of the 1986 Code is amended by 
     redesignating subsections (j) and (k) as subsections (i) and 
     (j), respectively.
       (2) Subsection (b) of section 34 of the 1986 Code is 
     amended by striking ``section 6421(j)'' and inserting 
     ``section 6421(i)''.
       (3) Subsections (a) and (b) of section 6421 of the 1986 
     Code are each amended by striking ``subsection (j)'' and 
     inserting ``subsection (i)''.
       (b) Sections 4092(b) and 6427(q)(2) of the 1986 Code are 
     each amended by striking ``section 4041(c)(4)'' and inserting 
     ``section 4041(c)(2)''.
       (c) Sections 4221(c) and 4222(d) of the 1986 Code are each 
     amended by striking ``4053(a)(6)'' and inserting ``4053(6)''.
       (d) Paragraph (5) of section 6416(b) of the 1986 Code is 
     amended by striking ``section 4216(e)(1)'' each place it 
     appears and inserting ``section 4216(d)(1)''.
       (e) Paragraph (3) of section 6427(f) of the 1986 Code is 
     amended by striking ``, (e),''.
       (f)(1) Section 6427 of the 1986 Code, as amended by 
     paragraph (2), is amended by redesignating subsections (n), 
     (p), (q), and (r) as subsections (m), (n), (o), and (p), 
     respectively.
       (2) Paragraphs (1) and (2)(A) of section 6427(i) of the 
     1986 Code are each amended by striking ``(q)'' and inserting 
     ``(o)''.
       (g) Subsection (e) of section 9502 of the 1986 Code is 
     amended to read as follows:
       ``(e) Certain Taxes on Alcohol Mixtures To Remain in 
     General Fund.--For purposes of this section, the amounts 
     which would (but for this subsection) be required to be 
     appropriated under subparagraphs (A), (C), and (D) of 
     subsection (b)(1) shall be reduced by--
       ``(1) 0.6 cent per gallon in the case of taxes imposed on 
     any mixture at least 10 percent of which is alcohol (as 
     defined in section 4081(c)(3)) if any portion of such alcohol 
     is ethanol, and

[[Page H10022]]

       ``(2) 0.67 cent per gallon in the case of fuel used in 
     producing a mixture described in paragraph (1).''
       (h)(1) Clause (i) of section 9503(c)(2)(A) of the 1986 Code 
     is amended by adding ``and'' at the end of subclause (II), by 
     striking subclause (III), and by redesignating subclause (IV) 
     as subclause (III).
       (2) Clause (ii) of such section is amended by striking 
     ``gasoline, special fuels, and lubricating oil'' each place 
     it appears and inserting ``fuel''.
       (i) The amendments made by this section shall take effect 
     on the date of the enactment of this Act.

     SEC. 620. EFFECTIVE DATE.

       Except as otherwise provided in this title, the amendments 
     made by this title shall take effect as if included in the 
     provisions of the Taxpayer Relief Act of 1997 to which they 
     relate.

  The SPEAKER pro tempore. The gentleman from Kentucky [Mr. Bunning] 
and the gentleman from New York [Mr. Rangel] each will control 1 hour.
  The Chair recognizes the gentleman from Kentucky [Mr. Bunning].


                             General Leave

  Mr. BUNNING. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks and include extraneous material on H.R. 2676.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Kentucky?
  There was no objection.
  Mr. BUNNING. Mr. Speaker, I yield myself 2 minutes.
  Mr. Speaker, I rise in support of the IRS reform bill. It is no 
secret the IRS is out of control. When agents testified before Congress 
in hoods out of fear of reprisal, and when honest taxpayers are hounded 
into bankruptcy, it is time for the Congress to step in and say, enough 
is enough.
  The bill before us today puts some commonsense boundaries around the 
IRS. By setting up an oversight board of private sector experts, we 
force this service to move forward into the 21st century. Considering 
how the IRS has wasted billions on modernizing its computers, and that 
the year 2000 computer disaster creeps closer every day, the oversight 
board is incredibly important.
  By forcing the IRS, and not the taxpayer, to carry the burden of 
proof in disputes, we protect legal, law-abiding citizens and end 
harassing and frivolous claims by maverick agents. By strengthening the 
confidentiality rules, we make it easier for taxpayers to get 
professional advice about their returns without having to worry about 
being tripped up by legal tricks.
  Mr. Speaker, I think many people have forgotten that the ``S'' in IRS 
stands for ``service,'' government servicing the taxpayers, not the 
other way around. By passing this bill today, we remind the IRS of its 
proper role, and about just who is in charge in America: The taxpayer.
  Mr. Speaker, I urge support of the bill, and I reserve the balance of 
my time.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2676. I rise in strong support 
because of the bipartisan nature of the solution of a very serious 
problem that our Nation faces with the Internal Revenue Service. I do 
not think anyone can deny that we are basically dealing with a group of 
dedicated people that do a very difficult job, but a very complex Tax 
Code that we have given to them. Yet, out of all of this, for whatever 
reasons, we were able to see vividly during the Senate hearings how 
certain people in that Service, probably because of lack of direction 
and governance, were abusing American taxpayers.
  Prior to this time there is no question that people in the tax-
writing committee, which has the responsibility for oversight, was 
moving towards reform. But it was the restructuring commission that the 
gentleman from California [Mr. Matsui] and the gentleman from Maryland 
[Mr. Cardin] and the gentleman from Ohio [Mr. Portman] sat on that 
actually wrestled with it, took testimony, and came up with ways in 
which we could enjoy the expertise of the private sector and bring some 
balance, not only in terms of technology, but in terms of better 
protecting the taxpayer.
  Mr. Speaker, the gentleman from California [Mr. Matsui] was replaced 
by Congressman Cohen, and they were able to work together with the 
administration and come up with a bill. There are some that have said 
that the administration came to this reform position screaming and 
scratching and crying, but the truth of the matter is there were many 
objections in the bill, and these corrections were made by Republicans 
and Democrats. We come forth with a bill that is not only workable, but 
desired today.
  Let me say on this House floor, which I have said about the chairman, 
the gentleman from Texas [Mr. Archer] before, that Chairman Archer had 
the opportunity to bring that same type of a show to the House of 
Representatives, to bring a response to an emotional situation, which 
indeed Members of Congress and the whole country saw.
  Instead of doing that, he allowed Members working on this bill to 
work their will in a bipartisan way and made contributions to perfect 
the bill, and worked to bring together Democrats and Republicans, not 
with a workable bill, but with a desired bill. I think it is not only a 
credit to him, but a credit to the full committee, that we send notice 
to the Internal Revenue Service that we expect better performance, we 
expect to provide the oversight, but we do not expect to do it at the 
expense of the individual workers who are dedicated.
  So I support this, and I particularly want to pay tribute to the 
gentleman from Maryland [Mr. Cardin] and the gentleman from Ohio [Mr. 
Portman], who worked with the administration and the leadership in the 
House, as well as the Committee on Ways and Means, to bring a bill to 
the floor that hardly has controversy.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, the bill we vote on today will give David, the taxpayer, 
a bigger slingshot to use against the IRS Goliath. But as proud as I am 
of this bill, it is just the beginning. Reforming the IRS is a very 
important first step, but the real culprit behind the scenes is the 
complexities of the current Internal Revenue Code.
  What America needs is a new tax system, one that is fairer, simpler, 
less intrusive, less costly, and one that creates more economic growth 
for the American people, because that is what determines the size of 
the paychecks that families receive in this country. That is the 
American dream.
  Actually, I should say, not just less intrusive. We should have a Tax 
Code that gets the IRS completely and totally out of the lives of every 
individual American. I believe we must rip the income tax out by its 
roots and throw it away, so it can never grow back.
  As helpful as this legislation will be to taxpayers struggling with 
the IRS, I personally will not be satisfied until the tax system itself 
is repealed. But until that great day comes, this bill will be a 
valuable helping hand to millions of taxpayers who need and deserve a 
stronger slingshot.
  This bill does three things to protect taxpayers in their dealings 
with the IRS: No. 1, in America, criminals are innocent until proven 
guilty, but taxpayers do not receive the same benefit of the doubt. 
This legislation shifts the burden of proof in court proceedings from 
the taxpayer to the IRS. No longer will taxpayers have to prove beyond 
the burden of credible evidence that they are innocent. As a result, 
taxpayers will benefit from more favorable settlements, even before 
they ever get to court.
  The gentleman from Ohio [Mr. Traficant], like Paul Revere riding in 
the night, he was the one to first sound the alarm about the burden of 
proof. Now change is coming, and the gentleman from Ohio [Mr. 
Traficant] deserves our thanks.
  No. 2, we create 28 new taxpayer rights, including the right to sue 
the IRS for damages caused by negligence of the IRS employees in the 
collection process. We make it easier for a taxpayer to recover legal 
fees and costs when the IRS is wrong. We pay 4 million taxpayers higher 
refunds when the IRS holds up their check, plus we protect thousands of 
innocent spouses, often divorced women, so they are less likely to be 
punished by the IRS for mistakes made on their joint returns by their 
former spouses.
  We, for the first time, make the IRS responsible for any rules that 
they give in writing to taxpayers. Taxpayers now

[[Page H10023]]

will be able to rely on anything in writing that they receive from the 
IRS.
  We remove any suspicion that politics will be allowed to enter audit 
decisions, because we make it a felony for any Cabinet-level official, 
including the President and the Vice President, to direct the IRS to 
audit or terminate an audit for any particular taxpayer.
  No. 3, if the Department of the Treasury could have fixed the IRS, 
they would have done so a long time ago. So our bill creates an 
independent oversight board that includes nongovernmental experts who 
can bring new thinking and a more taxpayer-oriented culture to the IRS. 
Like a breath of fresh air, this board will have real power and 
authority to change the direction of the IRS. No more will we be told, 
you appropriated $4 billion for a new computer system, but it does not 
work. That is intolerable.
  Mr. Speaker, the protections provided in this bill go a long way to 
helping solve peoples' worst problems with the IRS, but as long as our 
Nation taxes its citizens on the basis of income, it will be impossible 
to completely fix the IRS. This bill is a strong helping hand, and it 
is long overdue, but the mission will not be complete until the 
taxpayers are protected and the IRS becomes nonexistent in the 
individual lives of all Americans. I look forward to that day.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield 5 minutes to the gentleman from 
Maryland [Mr. Cardin].
  Mr. CARDIN. Mr. Speaker, I rise in strong support of H.R. 2676, the 
Internal Revenue Service Restructuring Act of 1997. This bipartisan 
legislation to reform the IRS builds on work of the National Commission 
on Restructuring the IRS, which was chaired by our colleague, the 
gentleman from Ohio, [Mr. Rob Portman], and Senator Kerrey.
  I particularly want to congratulate the gentleman from Ohio, [Mr. Rob 
Portman], for the leadership he has shown throughout this period in 
keeping us focused on our objective to bring about a bill that could 
not only pass, but be signed into law. He did a great job, and I 
congratulate him on that effort. I am very proud to have joined the 
gentleman from Ohio in cosponsoring H.R. 2292, which has a strong 
bipartisan support in this House.
  Chairman Archer and the Committee on Ways and Means took a very good 
bill and made it better. With the strong support in this House and from 
the President, this bill should be quickly enacted.
  I also want to acknowledge the work the gentleman from New York [Mr. 
Rangel] and the gentleman from Pennsylvania [Mr. Coyne] did on our side 
of the aisle, keeping us focused on getting a bill that could enjoy 
bipartisan support.
  I thank the gentlewoman from Connecticut [Mrs. Johnson], the chairman 
of the Oversight Committee, for the role that she played. I appreciate 
the role Mr. Kies in the staff did in keeping us focused on getting our 
job done. There is a lot of credit that should be shared in this 
legislation.
  The legislation before us marks the first fundamental reform in the 
IRS in nearly a half a century. The problems of the IRS are familiar: 
billions of dollars squandered on a bungled computer modernization 
effort, telephones unanswered, taxpayers too often treated with 
disrespect or suspicion.
  These problems have not emerged recently. They are not the legacy of 
one administration, but of decades. These are not the problems of 
individual employees. In fact, the employees of the IRS have come 
forward to help us understand the problem, and they have helped us 
craft a solution today.
  This administration, and particularly Secretary Rubin, have been more 
attentive to the problems of the IRS and more dedicated to seeking 
solutions than any in recent years. Secretary Rubin has made important 
changes in the management of the IRS, and those efforts have begun to 
show results. But much more remains to be done.
  Congressional action is needed in order to ensure that the reforms of 
the IRS do not depend on any particular individual or administration. 
The solution proposed in this bill is the creation of an oversight 
board that will bring private sector expertise in the areas where the 
IRS needs it the most. The creation of this board, with a real role in 
the planning and oversight of the strategic plans for major 
reorganizations in the budget of the IRS, is the most important element 
in bringing reform to this troubled agency. The board is a permanent 
entity that will provide continuing oversight for the IRS.

                              {time}  1200

  IRS reform requires not just a new management structure involving a 
partnership between the board, the Secretary, and the Commissioner, it 
will also require improved performance by those of us in Congress. Over 
the long run, we cannot build an IRS that serves the American people 
unless we write a Tax Code that the IRS can explain and the people can 
understand.
  This bill takes the first step toward tax reform. The bill does not 
reform our Tax Code but reforms the way we collect revenues. Reform of 
the practices of the IRS will make it easier for us to concentrate on 
the underlying problems in the Tax Code itself.
  Our tax system is based on voluntary compliance. More than 80 percent 
of Americans pay their taxes without dispute. An IRS that can answer 
taxpayer phone calls and provide accurate, reliable information will 
help us increase voluntary compliance. For the overwhelming majority of 
Americans who abide by the law and pay their taxes, the IRS should 
stand for information, respect, and service. Abuse of collection 
practices must become a thing of the past. At the same time, the IRS 
must become a more efficient agency in enforcing laws against those who 
seek to escape their legal obligations.
  Mr. Speaker, the IRS is charged with the vital task of collecting 
revenues needed to fund the basic and essential operations of 
Government. When the IRS is mismanaged in the way that it creates fear 
and anxiety among taxpayers, the result is to undermine the confidence 
of the American people in their Government. The purpose of this 
legislation is to reform the IRS so that we can begin to restore that 
badly damaged confidence.
  Today, this body will act in time for the next tax season. The 
legislation has the support of the administration. I hope the other 
body will follow the leadership of this House and enact meaningful IRS 
reform in order to help the taxpayers of this Nation.
  Mr. Speaker, I rise in strong support of H.R. 2676, the Internal 
Revenue Service Restructuring Act of 1997. This bipartisan legislation 
to reform the Internal Revenue Service builds on the recommendations of 
the National Commission on Restructuring the IRS, which was chaired by 
our colleague, Representative Portman and Senator Kerrey.
  I am very proud to have joined Representative Portman in cosponsoring 
H.R. 2292, which has had strong bipartisan support in this House. 
Chairman Archer and the Ways and Means Committee took that very good 
bill and made it better. With strong support in this House and from the 
President, this bill should move quickly to enactment.
  The legislation before us marks the first fundamental reform of the 
IRS in nearly half a century. It will bring a new structure to the IRS, 
a structure that is designed to change the way the IRS treats its 
customers, the American taxpayers.
  The problems at the IRS are familiar--billions of dollars squandered 
on a bungled computer modernization effort, telephones unanswered, 
taxpayers too often treated with disrespect or suspicion. These 
problems have not emerged recently--they are not the legacy of one 
administration, but of decades. These are not the problems of 
individual employees. In fact, the employees of the IRS have come 
forward to help us understand the problem, and they have helped us 
craft the solution today.
  This administration, and particularly Secretary Rubin, has been more 
attentive to the problems of the IRS and more dedicated in seeking 
solutions than any in recent years. Secretary Rubin has made important 
changes in the management of the IRS, and those efforts have begun to 
show results.
  But much more remains to be done. Congressional action is needed in 
order to ensure that reform at the IRS does not depend on any 
particular individual or administration.
  The solution proposed in this bill is the creation of an oversight 
board that will bring private sector expertise in the areas where the 
IRS needs it most. The creation of this board, with a real role in the 
planning and oversight of the strategic plans, major reorganizations, 
and the budgets of the IRS, is a most important element in bringing 
reform to this troubled agency. The board is a permanent entity that 
will provide continuing oversight of the IRS.

[[Page H10024]]

  IRS reform requires not just a new management structure, involving a 
partnership between the board, the Secretary, and the Commissioner. It 
will also require improved performance by those of us in Congress.
  Legislative oversight of the IRS is too unfocused, with too many 
masters and not enough coordination among committees. The bill attempts 
to bring some order and structure to the current system. Over the long 
run, we can't build an IRS that serves the American people unless we 
write a Tax Code that the IRS can explain and the people can 
understand.
  This bill takes the first step toward tax reform. The bill does not 
reform our Tax Code, but it reforms the way we collect revenues. Reform 
of the practices of the IRS will make it easier for us to concentrate 
on the underlying problems in the Tax Code itself.
  A big part of the problem with the IRS is the agency's inability to 
provide taxpayers with accurate information regarding their tax status. 
This simply has to stop, and this bill will help.
  Our tax system is based on voluntary compliance. More than 80 percent 
of Americans pay their taxes without dispute. An IRS that can answer 
taxpayer's phone calls, and provide accurate, reliable information, 
will help increase voluntary compliance.
  For the overwhelming majority of Americans, who abide by the law and 
pay their taxes, the IRS should stand for ``Information, Respect, and 
Service.'' Abusive collection practices must become a thing of the 
past. At the same time, the IRS must become a more effective agency at 
enforcing the law against those who seek to escape their legal 
obligations.
  In addition to the governance and oversight provisions, the bill 
contains a new set of provisions to be added to the Taxpayer Bill of 
Rights. The provisions address many problems that taxpayers have 
encountered in dealing with the IRS, and their enactment will help 
solve those problems.
  I would add, however, that the broader objective of this bill must be 
to change the culture of the IRS to make it a taxpayer-friendly 
organization so that future Taxpayer Bills of Rights will not be 
necessary.
  Mr. Speaker, the Internal Revenue Service is charged with the vital 
task of collecting the revenue needed to fund the basic and essential 
operations of Government. When the IRS is mismanaged in ways that 
create fear and anxiety among taxpayers, the result is to undermine the 
confidence of the American people in their Government. The purpose of 
this legislation is to reform the IRS so that we can begin to restore 
that badly damaged confidence.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Ohio [Ms. Pryce].
  Ms. PRYCE of Ohio. Mr. Speaker, I thank the chairman for yielding me 
this time.
  I rise in strong support of this bill. I congratulate the chairman, 
and I congratulate also my colleague, the gentleman from Ohio [Mr. 
Portman], for all the hard work and dedication that he has brought to 
this issue and, with him, the gentleman from Ohio [Mr. Traficant] who 
has long championed this cause and kept our feet to the fire.
  It should not be difficult to convince any of my colleagues in this 
body that the IRS needs to be reformed. Each and every one of us 
provides case work to our constituents, and we have all heard the 
numerous, tragic horror stories about how the IRS has unfairly treated 
honest, hard-working taxpayers. I could go on and on and enumerate 
those stories, but I do not have to; we have all heard the same ones.
  Mr. Speaker, no one here is claiming that H.R. 2676 is a panacea for 
our ailing tax system. It does not abolish the IRS or scrap the Tax 
Code, as many of our constituents would like. But until we do that, and 
we will do that, this bill takes a step toward installing a modicum of 
fairness into a system for those who are simply forced to comply with 
the Tax Code's painful provisions.
  Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Michigan [Mr. Camp].
  (Mr. CAMP asked and was given permission to revise and extend his 
remarks.)
  Mr. CAMP. Mr. Speaker, I rise in strong support of H.R. 2676, the 
Internal Revenue Service Restructuring and Reform Act of 1997. Our bill 
boils down to one simple fact--the taxpayer should be treated like a 
customer, not a criminal. Shouldn't a customer be able to expect an 
answer from a telephone hotline? Well, the General Accounting Office 
found that in 1996, only 21 percent of calls to the IRS were even 
answered. One-half of the 22 percent error rate on paper 1040 forms is 
due to IRS employee error--IRS employees inputting the wrong numbers 
and data. If the IRS were a private company, it would have gone 
bankrupt years ago. H.R. 2676 is an important first step in reforming 
our tax system. It focuses on three things: first, we shift the burden 
of proof to the IRS. In the United States, you're considered innocent 
until proven guilty. But not with the IRS--the taxpayer bears the 
burden of proving himself innocent. Our bill changes that.
  Second, we give taxpayers the right to sue the IRS for damages caused 
by negligence, and other important rights like protections for an 
innocent spouse whose ex-husband or ex-wife engaged in tax abuse. 
Finally, we bring new thinking and a more customer-oriented culture to 
the IRS, with a private board to give direction and leadership to the 
IRS.
  The bill we are debating today is the first step. The bigger problem 
is a tax code gone wild, full of complexity and ambiguity. That tax 
code, with over 17,000 pages of IRS laws and regulations, leads to many 
of the problems the IRS faces today. With 480 tax forms and 280 forms 
to explain the forms, its no wonder the taxpayer is often confused. 
Businesses spend on average each year 3.6 billion manhours filling out 
and complying with tax forms. American individuals spend 1.8 billion 
hours filling out tax forms. That is simply unacceptable. I look 
forward to continuing our work of reforming our tax system.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Texas [Ms. Granger].
  Ms. GRANGER. Mr. Speaker, I rise today in strong support of the IRS 
Restructuring and Reform Act of 1997. This simple proposal will help 
make the IRS more efficient in its operations and more accountable to 
its boss, the people.
  Recent hearings in the Senate have only confirmed what millions of 
Americans have always known, the IRS is outdated, out of touch, and out 
of control. Today we can bring to a vote two simple changes to the way 
the IRS does business. These are not radical changes. They are 
reasonable steps toward accountability and fairness.
  First, this bill will put an oversight board of citizens in charge of 
reviewing the IRS. In our system of checks and balances, this is a much 
needed and long overdue check on the IRS.
  Second, this bill will bring the IRS into the American way of dealing 
with the American people. We all know that our criminal justice system 
tries to ensure fairness by represuming that the accused are innocent 
until proven guilty, so why is it the IRS files charges against you or 
your company, you are considered guilty until proven innocent? In other 
words, a common criminal is presumed innocent until proven guilty when 
he has his day in court but the rest of us are guilty until proven 
innocent in Tax Court. Today we can change this, Mr. Speaker. Let us 
give the taxpayers the benefit of the doubt and the tax collectors the 
burden of proof.
  Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Pennsylvania [Mr. English], a respected member of the Committee on Ways 
and Means.
  Mr. ENGLISH of Pennsylvania. Mr. Speaker, I thank the chairman for 
yielding me the time.
  It is stunning, but the IRS is the only place in the American system 
of law where a citizen is guilty until proven innocent. Traditionally, 
the taxpayer, when notified by the IRS that his tax payments failed, in 
their view, to satisfy his tax obligation, carried the burden of proof 
in demonstrating that his tax payment is accurate. The presumption is 
for the IRS and against the taxpayer. In my view, this is just plain 
wrong.
  This legislation addresses that issue. This legislation, which is 
based on the recommendations of the Committee on Ways and Means, 
Subcommittee on Oversight, creates 28 new taxpayer rights essential to 
restoring to the individuals a sense of fairness in their dealings with 
the IRS. In my view, the most important of these is a shift in the 
burden of proof from the taxpayer to the IRS in any court proceedings 
where factual information is disputed.
  Let me be clear about this. The taxpayer is still required to 
cooperate. The taxpayer is still required to provide the information 
which is in the taxpayer's control. But those taxpayers who do 
cooperate and who provide all the necessary information see a shift 
back in an appropriate way in the burden of proof. From my standpoint, 
this will dramatically restore fairness in this situation.
  Also, H.R. 2676 creates an independent citizen board to hold the IRS 
accountable for change. The IRS sees a

[[Page H10025]]

variety of new taxpayer rights, including a right to sue the IRS for 
negligence, a right to know when you are being audited and why, and 
expanded rights for citizen spouses.
  This legislation is so important to move us forward to change the 
system, to change the IRS in a way that I think is very fundamental. I 
support this legislation. I am excited about it. I appreciate the 
chance, Mr. Speaker, to rise in support of it.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas [Mr. Green].
  (Mr. GREEN asked and was given permission to revise and extend his 
remarks.)
  Mr. GREEN. Mr. Speaker, I thank my ranking member of the Committee on 
Ways and Means, not only for the time this morning but also for the 
effort on this piece of legislation. I know it is a very bipartisan 
piece of legislation because about 2 weeks ago the President agreed to 
sign onto it. Even before that, there were a lot of Democrats who were 
interested in the issue, particularly shifting of the burden of proof, 
cosponsors of a bill by a Democratic Member, our colleague, the 
gentleman from Ohio [Mr. Traficant].
  The bill is a good effort because, one, it transfers the burden of 
proof to the IRS and again makes it fair for the taxpayer that they 
would know, going into the Tax Court, that the IRS has to show that 
someone is actually violating the law on taxes.
  Also, I think it is important because the President will continue the 
appointment of the commissioner. Even though we have an advisory board 
with some authority, we need to have an elected official. With the 
President being the one that does it with authority over the IRS, we do 
not need to delegate that to an appointed board because so often in any 
level of government, whether it be Federal, State, or even local 
government, the elected official needs to have the final version, the 
buck stops at the office of the President. And I think this is good 
because it leaves that authority in appointing the IRS commissioner 
with the White House and with the person, whoever the President may be. 
That is important.
  I think because of the hearings in the Senate last week or over the 
last 2 weeks, again, it is not something new. I know the gentleman from 
Texas [Mr. Archer] knows it, a long time member of the Committee on 
Ways and Means, knows that this issue will, if we address it today, 2 
years from now we may have to do it again. That is the way Government 
works. We try and correct problems now, and we will fix them again if 
we have to, whether it be next year or the year after.
  That is why Congress is in session, to correct problems for the 
people that we represent. That is why I think this bill is a good bill. 
I hope we can pass it both through the House and Senate and get it 
signed by the President.
  Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from 
South Dakota [Mr. Thune].
  Mr. THUNE. Mr. Speaker, I want to thank the chairman of the full 
committee and the gentleman from Ohio [Mr. Portman] for the hard work 
that they have done on this important issue.
  When this first started being debated, a lot of the liberal cynics 
out there said that it is just one of those things that the Republican 
leadership is doing to drum up support among their base. Then they 
started hearing the stories, and as more and more of the stories 
unfolded, people started believing we have a problem in this country 
with respect to the IRS.
  This is a first bold, dramatic step, I think, in what I hope will be 
a long journey that will end up with reforming the Tax Code, which is 
at the crux of what our problem is in this country. But this proposal 
today makes important reforms that, for the first time in 45 years, we 
are doing something to reform the IRS and giving citizens, the people 
who have to pay the taxes, more input into this process.
  I think it is an important, as I said, first step which allows for 
more input at the grass roots level for the people who have to abide by 
the tax laws that we make in this country. I hope it will be the first 
step in what will be a long journey toward reforming the Tax Code in 
this country. I am delighted to see the bipartisan support for this. I 
think that we will pass it with a huge vote and hopefully get on with 
the business of reforming the Tax Code.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Rhode Island [Mr. Weygand].
  (Mr. WEYGAND asked and was given permission to revise and extend his 
remarks.)
  Mr. WEYGAND. Mr. Speaker, I want to thank our ranking member, the 
gentleman from New York [Mr. Rangel], and the gentleman from Ohio [Mr. 
Portman], and the chairman of the Committee on Ways and Means for 
bringing this before us.
  As a Democrat and as a former small business owner, I can tell my 
colleagues, the people that are out there for this kind of reform are 
begging for this reform. This is a wonderful, very prospective, very 
proactive kind of legislation that will help many people.
  I remember many of my colleagues in the small business community 
talking about the problems they had with the IRS. These are people that 
are solid citizens, people that are paying their taxes and that, when 
an IRS agent walks into their office, all of a sudden they become 
guilty without ever having a chance to prove their innocence. They have 
to go out there and actually reverse what we have considered for many 
years the basics of the United States justice system, and that is, you 
are innocent until proven guilty.
  One small business owner came to me and said, an agent came into my 
office one day unannounced, requested of me to write out a check for 
$2,000, wanted a copy of the form that I filed with the IRS. And I 
grabbed all my papers, I put them all together, and I felt awkward in 
front of all my employees, he said, I had to go down to the IRS office.
  When I got down there, I showed them a copy of the form that I had 
filed on time, I showed them a copy of the check that I had paid with 
their stamp on the back side, yet they went through that entire record. 
I felt like a criminal when I was simply just trying to do business the 
proper way and pay my taxes on time.
  This bill will change that. This will make sure that the honest 
citizen, the citizen that is out there, is going to have a fair chance. 
It will not give up any of the rights that they presently have under 
the present jurist system, and it will give them the kind of reform 
that we need, not because we are Democrats or Republicans but because 
we are honest people that believe in paying our taxes, but we also 
believe we should have a fair shake.
  I applaud the ranking member. I applaud the chairman. This is long 
overdue. This is something we all should support. I encourage the 
support of all my colleagues.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia [Mr. Collins], a colleague of mine on the Committee on Ways and 
Means.

                              {time}  1215

  Mr. COLLINS. Mr. Speaker, I thank my colleague the gentleman from 
Ohio [Mr. Portman] for yielding me this time and for his hard work in 
this area of restructuring the IRS.
  Since being in Congress for the last 5 years, I have had a lot of 
inquiries from constituencies about problems they have had and told me 
about experiences they have had with IRS. Just recently, I held a 
townhall meeting in Columbus, GA, where we invited in some of the 
constituency to talk about some of their personal experiences and also 
to have some input and ideas as to how they felt like the IRS could 
better handle their situation.
  It was a very enlightening townhall meeting, one of the best we ever 
held. But it was also one that did not come to bash the IRS, it just 
came with ideas and experiences and some suggestions. We even had an 
accountant in that talked about the IRS, and not in a bad way, but in a 
way that he felt would be constructive as we put together this bill to 
restructure the IRS.
  Also, he mentioned the complexity of tax codes and how the complexity 
of the tax codes also is causing a lot of problems, not only for our 
constituency, but also for the Service itself that has to administer 
the collection of funds that we use to operate this Government.
  We are taking this from the top down, looking at the management of 
the IRS and how the management is structured. Hopefully, that will have 
a

[[Page H10026]]

change in attitude all the way through the Service, all the way down to 
those who answer the telephone, oftentimes after going through long 
steps of different types of answering services to get to a real live 
person to talk to.
  But we have hopes that that attitude will change and that our 
constituency will be better handled and better served through our 
representatives at the IRS. Also, as mentioned by several people who 
were not at the meeting but have spoken to me personally about the IRS 
and about the employee and the attitude and structure comes the 
suggestion that we also need to look at how we hire, the hiring 
practices at the IRS, as well as other areas of the Government, and 
that we hire people who are competent, who are dedicated to serving the 
individuals in the constituency and not just hiring people to fill 
slots.
  I fully support restructuring the IRS.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Pennsylvania [Mr. Coyne], who served on the IRS restructuring 
committee. He has made such a great contribution to getting this bill 
to the floor.
  (Mr. COYNE asked and was given permission to revise and extend his 
remarks.)
  Mr. COYNE. Mr. Speaker, I rise today in support of this legislation, 
which will make important reforms in the operation and management of 
the Internal Revenue Service.
  There is broad consensus on the need for significant changes in the 
IRS operation and management. The vast majority of the provisions of 
the McCrery-Portman-Cardin bill are noncontroversial. There has been 
disagreement, however, about one provision in an earlier version of 
this bill, and that is whether an oversight board composed primarily of 
private sector appointees should be given substantial control over the 
agency and the IRS Commissioner, himself or herself.
  Negotiations between the administration and Congress over the past 
few months produced a compromise in which the President retained the 
authority to appoint and fire the IRS Commissioner and in which the 
oversight board and the administration would each submit an IRS budget 
to Congress.
  As a result of these changes, H.R. 2676 was reported out of the 
Committee on Ways and Means with broad bipartisan support. I want to 
commend Secretary Rubin and the members of the Committee on Ways and 
Means for all of their hard work on legislation over the past few 
months.
  I believe that this bill, if enacted, taxpayers will experience a 
fairer, more efficient and more responsive IRS in the coming years. I 
urge support for H.R. 2676.
  Mr. Speaker, I rise today in support of this legislation, which will 
make important reforms in the operation and management of the Internal 
Revenue Service.
  When I was appointed to the National Commission on Restructuring the 
IRS, I was well aware of the problems at this agency. As a member of 
the House and Ways and Means Committee, I had sat through many hearings 
on IRS reform over the years. There was, in fact, a very broad 
consensus among Ways and Means Committee members and members of the IRS 
Restructuring Commission on the need for significant changes in IRS 
operations and management.
  We all agreed on the need for greater flexibility linked with greater 
accountability, as well as greater reliance on outside sources of 
expertise and technological know-how. The vast majority of the 
Commission's recommendations reflected this broad consensus.
  There was disagreement among Commission members, however, about one 
recommendation in particular--whether an oversight board composed 
primarily of private sector appointees should be given substantial 
control over the agency and the IRS Commissioner. The majority of 
Commission members supported creating a board of directors that would 
have the authority to hire and fire the IRS Commissioner, and which 
would approve the agency's budget and strategic plans. A number of 
Commission members, myself included, thought that such a change would 
have the unintended effect of actually reducing the accountability of 
the IRS. We also believed that investing the authority over the IRS 
budget and strategic planning in a board dominated by private sector 
individuals could raise serious questions about conflicts of interest 
between board members public responsibilities and their private sector 
employers' interests.
  As the legislation introduced by Senator Kerrey and Representative 
Portman, which reflected the Commission's recommendations, was 
considered by the Ways and Means Committee, public discussion of this 
bill focused on this one controversial provision in the bill--the issue 
of what authority the oversight board should have. The vast majority of 
the provisions in the Kerrey-Portman bill were noncontroversial.
  Negotiations between the administration and Congress on the powers of 
the oversight board continued almost until the Ways and Means Committee 
markup of this bill began, but these negotiations eventually produced a 
compromise in which the President retained the authority to appoint and 
fire the IRS Commissioner, and in which the oversight board and the 
administration would each submit an IRS budget to Congress. As a result 
of these changes, H.R. 2676 was reported out of the Ways and Means 
Committee with broad bipartisan support.
  I believe that enactment of this legislation will improve IRS 
operations and management significantly. The bill contains a number of 
important provisions, including language expanding congressional 
oversight and measures intended to promote electronic filing of tax 
returns over the next 10 years. The bill also includes a taxpayers' 
bill of rights section which contains a number of provisions to prevent 
or discourage abusive behavior by IRS employees, to clarify and codify 
the protections available to taxpayers in proceedings with the IRS, and 
to provide relief for innocent spouses of tax cheats.
  In closing I want to make one additional point. In the course of 
debate over this legislation, many Members have succumbed to the 
temptation to bash the IRS. I think that such attacks are unfair, 
inappropriate, and irresponsible. Clearly, there have been problems at 
this agency, but it is important to point out that the IRS 
Restructuring Commission found no evidence suggesting that those 
abusive practices were widespread--or even very common.
  The IRS is responsible for enforcing the compliance of more than 100 
million taxpayers with a complex Tax Code. The agency processes over 
200 million forms a year and administers gross receipts of roughly 
$1\1/2\ trillion. The congressional hearings on IRS abuses produced 
2,000 claims of IRS excesses nationwide. While no abuse is acceptable, 
I think that we need to look at these cases in the context of the 
agency's overall performance, which is impressive. Our income tax 
system relies on voluntary compliance. Our compliance rate is over 80 
percent. We have the lowest effective tax rate of any of the major 
industrialized nations. I think that those facts should be considered 
as well.
  Finally, to the extent that the IRS went too far in certain cases in 
seeking to maximize revenue, we should not place all of the blame on 
the IRS. Congress has, in no small way, pressured the IRS to maximize 
revenues--and Congress has insisted that IRS adopt the types of 
performance measures that apparently drove IRS field offices to excess 
in certain circumstances. In the end, Congress must tell the IRS how it 
should balance the often competing concerns of productivity and 
fairness.
  I want to commend Secretary Rubin and Representatives Portman, 
Johnson, and Rangel for all of their hard work on this legislation over 
the last few months. I believe that if this bill is enacted, taxpayers 
will experience a fairer, more efficient, and more responsive IRS in 
the coming years.
  I urge my colleagues to support H.R. 2676.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Louisiana [Mr. McCrery], a member of the Committee on Ways and Means.
  (Mr. McCRERY asked and was given permission to revise and extend his 
remarks.)
  Mr. McCRERY. Mr. Speaker, I rise today to do two things. No. 1, 
praise the IRS Reform Act that we will pass today; and No. 2, tell my 
colleagues and the country that, while this is certainly a good bill, 
it will offer only slight relief from the burden that the real culprit, 
our Tax Code, places on our people and their work.
  First the praise. This is indeed an excellent piece of legislation 
constructed by two of the most able members of the Committee on Ways 
and Means, the gentleman from Ohio [Mr. Portman] and the gentleman from 
Maryland [Mr. Cardin], and the gentleman from Texas [Mr. Archer], our 
excellent chairman.
  This legislation will make the IRS more accountable by creating an 
independent oversight board. It would also establish several important 
taxpayer rights, such as the ability to sue for legal fees when the IRS 
is wrong and shift the burden of proof in tax court from the taxpayer 
to the IRS. Finally, this legislation includes measures to ease the 
transition to electronic filing of taxes, thus relieving some of the 
burden on small businesses.

[[Page H10027]]

  Mr. Speaker, the admonition is that this is not enough. As long as we 
have the complex Tax Code that we have, no amount of IRS reform will be 
sufficient to relieve the costly burden of compliance. Let me share 
with my colleagues a few numbers.
  Thirty-six. That is the number of times the paperwork received each 
year by the IRS would circle the Earth. Five and a half million. That 
is the number of words in our Tax Code and the regulations. It is 
nearly seven times longer than the Bible. Five billion, 400 million. 
The number of hours Americans spent complying with Federal tax forms. 
One hundred fifty-seven billion. That is the number of dollars spent by 
the private sector to comply with income tax laws.
  Mr. Speaker, I am glad we are going to pass this badly needed IRS 
reform bill. It is a great piece of legislation. But, Mr. Speaker, we 
ought not to leave here today thinking that we have done all that needs 
to be done to relieve our citizens of the crushing burden our current 
tax system places on them. That burden will not be lifted until we 
throw the Tax Code in the trash can and start all over, until we create 
a fairer, simpler tax system for everyone.
  Mr. RANGEL. Mr. Speaker, I yield myself 30 seconds to respond to the 
previous speaker.
  I want to agree with him that this Tax Code that we have is very 
complicated, and I think that not only taxpayers, but people on both 
sides of the aisle would like to do something with it. But he should be 
reminded that, for the last 3 years, his party really has been in 
charge of the Tax Code. So I hope he is proud of what they have 
produced during these 3 years. And every Democrat would like to join 
with him in trying to reform it.
  Mr. Speaker, I yield to the gentleman from Tennessee [Mr. Tanner].
  (Mr. TANNER asked and was given permission to revise and extend his 
remarks.)
  Mr. TANNER. Mr. Speaker, I want to thank the gentleman from Texas 
[Mr. Archer] and the gentleman from New York [Mr. Rangel] and the 
gentleman from Ohio [Mr. Portman] and the gentleman from Maryland [Mr. 
Cardin] and others who worked so long, and I want to thank the 
gentlewoman from Washington [Ms. Dunn] in a few minutes.
  But let me just say at the outset that the tax man has been and will 
continue to be an easy target since Biblical times. The fact is that 
the function of the IRS is necessary. Its sole purpose is to collect 
taxes. No one likes to pay taxes, so their anger is projected upon 
those who do the collecting.
  We have to have taxes to fund the vital and necessary functions of 
the Government, defense, interstate highways, food inspection, public 
health, FAA, and other missions that only the Government can and must 
do for all of us. We cannot change the function or the nature of the 
work the IRS performs, but we can change the approach.
  The IRS has not been reformed in over 40 years. Currently, it seems 
to many of us, that the emphasis of the IRS is on collection at all 
costs by any means necessary. As a result, the IRS is antiquated, less 
responsive, more aggressive with a persona akin to private-sector 
collection agencies. The IRS needs a makeover to reshape their image, 
and they need fresh, new, innovative ideas and new vision. We seek to 
do that today.
  We need to transform the IRS from a collection agency to a taxpayer 
customer-oriented agency which values individual taxpayers and citizens 
and treats them with respect and dignity and not just as a number.
  To accomplish this, many of us believe we need to look to the private 
sector for vision and direction. This bill accomplishes that objective. 
Also, included in the measures are an expanded taxpayers bill of 
rights, which the gentlewoman from Washington [Ms. Dunn] and I 
introduced to end fishing expeditions, curb IRS summons authority to 
provide greater protection for taxpayer information, and to require the 
IRS to demonstrate just cause to pursue an audit.
  Mr. Speaker, I urge support for H.R. 2676.
  Mr. PORTMAN. Mr. Speaker, I yield 30 seconds to my friend, the 
gentleman from Louisiana [Mr. McCrery].
  Mr. McCRERY. Mr. Speaker, I just want to use 30 seconds to respond to 
my friend the gentleman from New York [Mr. Rangel], who pointed out 
that Republicans have been in control for the last 3 years.
  That is true. Democrats were in control for 40 years prior to that, 
and most of the complexity was built under their tenure. However, I do 
hope that the gentleman from New York [Mr. Rangel] will join with me 
and others who agree that the Tax Code is too complex and promote 
overall tax reform for this country. It is in all of our interests to 
do that.
  Mr. RANGEL. Mr. Speaker, I yield myself 30 seconds.
  We are trying desperately hard to keep partisanship out of this. But 
if it is going to take my colleagues 37 more years to simplify the tax 
system, then I do not think the taxpayers are going to get much relief.
  It just seems to me that it should not take 3 years to get what we 
would want done and it would be more like 3 months. So let us say next 
year we are going to do it, we are going to come up with something and 
in a bipartisan way work together with the way the gentleman from Ohio 
[Mr. Portman] has found so easy to work with we Democrats on this bill.
  Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from North 
Carolina [Mr. Etheridge].
  Mr. ETHERIDGE. Mr. Speaker, I thank my friend the gentleman from New 
York [Mr. Rangel] for yielding me the time.
  I rise today in support of this bill to reform the IRS service. I 
want to thank my friend the gentleman from New York [Mr. Rangel], the 
gentleman from Maryland [Mr. Cardin] and the gentleman from Texas [Mr. 
Archer] for their leadership in this important issue.
  When the people of the Second District of North Carolina sent me to 
this body, they wanted an advocate, someone who would stand up for them 
in the people's House. And I am pleased to support this piece of 
legislation on behalf of the people of my district. Working families in 
North Carolina and across this country face enough challenges in their 
lives without the added burden of the things we have heard about in 
recent months of certain members of the IRS who are out of control. If 
a criminal has a right to be presumed innocent before the courts, so 
should the American taxpayers.
  The Congress has taken a strong bipartisan step forward in working 
for American families and can do it by enacting the first comprehensive 
reform of the IRS since 1952. The IRS reform bill, H.R. 2676, is based 
on an aggressive 3-point plan, which shifts the burden of proof from 
the taxpayer to the IRS, creates 28 new taxpayer rights, and overhauls 
the management of the agency through the creation of an independent 
board.
  Mr. Speaker, I would urge Members on both sides of the aisle to move 
forward for the hard-working families of America.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Washington [Ms. Dunn], who added some valuable provisions in the 
taxpayer rights section of this legislation.
  Ms. DUNN. Mr. Speaker, I must say we are delighted that in only 3 
years of holding the majority, we have been able to put together a 
bipartisan piece of legislation that shows real listening to our 
constituents and results in upgrading and making much more positive the 
IRS.
  Throughout my tenure in Congress, I have heard from thousands of 
constituents who have talked to me about numerous problems they have 
had with our system of taxation and particularly with the IRS. The 
theme has been the intrusive and sometimes abusive interference of the 
Internal Revenue System when taxpayers were only trying to be honest.
  One of my constituents, Mr. Speaker, was told by the IRS that his 
wife was dead even though he produced his wife and her doctor before a 
local IRS agent. Another constituent, a local businessman, was forced 
to undergo a costly, long-lasting audit by the IRS because of a 
supposed discrepancy of 65 cents, only to find out that the IRS was 
wrong.
  This agency operates too often, Mr. Speaker, under the belief that 
taxpayers are trying to cheat the Government. The bill that we propose 
today is the first step in providing citizens

[[Page H10028]]

greater tax fairness, protections from the abuse of the IRS. Our bill 
includes provisions proposed by the gentleman from Tennessee [Mr. 
Tanner] and myself for an increased confidentiality protection for 
taxpayers and for the tax advice that they receive from their advisers. 
Currently, the IRS can subpoena even the thought process of a taxpayer 
unless that taxpayer is represented by an attorney.
  Our bill also reins in the lifestyle audits that can currently be 
initiated by something as simple as a new car in the driveway unless 
there is reasonable indication of unreported income. So no more fishing 
expeditions.
  Mr. Speaker, while the language in the bill is not as broad as we 
proposed, and in our particular proposals the gentleman from Tennessee 
[Mr. Tanner] and I will continue through this bill into the next year 
to ensure that every taxpayer is afforded confidentiality protections 
currently enjoyed by only those who can afford attorneys and those who 
through this new legislation can afford an accountant.
  We intend to make it clear to the IRS and the courts that Congress 
does intend for them to be limited to the scope of their information 
gathering ability. I encourage support of this bill.

                              {time}  1230

  Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
[Mr. Strickland].
  Mr. STRICKLAND. Mr. Speaker, I was walking down the sidewalk in a 
small town in my district recently, and an older woman in a wheelchair 
called to me. I went over and sat down and talked with her for a while. 
During the course of that conversation, she said to me, ``Congressman, 
I wish you would just chew up the IRS and spit it out.'' I asked that 
sweet, gentle, older woman why she felt as strongly as she did, and she 
said, ``I believe the IRS contributed to my husband's death because 
they hounded him,'' and she said, ``It didn't bother me as much as him 
because I'm a tough old bird.''
  I walked away thinking that it is sad that any American would ever 
feel that way about an agency of our Government. And so I came to the 
floor today mostly to say thank you to my Ohio colleague [Mr. Portman] 
for all the work he has done on this. I know many have worked on this 
legislation. This may be the most significant piece of legislation 
directly affecting the lives of American citizens that this Congress 
deals with.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
California [Mr. Herger], a member of the Committee on Ways and Means.
  Mr. HERGER. Mr. Speaker, today I rise in strong support of H.R. 2676, 
the IRS Restructuring and Reform Act. In town hall meetings throughout 
my northern California congressional district and wherever I go, I hear 
from taxpayers who are fed up with IRS abuses and who are demanding 
Congress to take steps to reform this agency. Today we move forward 
with strong bipartisan legislation that will not only reform the way 
the IRS does business, but will also restructure the agency to help 
assure that taxpayers are better protected from IRS abuses in the 
future.
  This legislation makes a number of important changes. First, it 
shifts the burden of proof from the taxpayer to the IRS in disputed tax 
cases that reach U.S. Tax Court. No longer will taxpayers be considered 
guilty until they are able to prove themselves innocent.
  Second, this bill expands taxpayer rights by providing citizens 28 
new legal protections against the IRS. When taken together, these 28 
new taxpayer rights will shift the IRS's primary focus from heavy 
enforcement to customer service.
  Finally, this bill will establish a more accountable IRS oversight 
structure. This new board, which will bring to the IRS outside 
expertise, will assist in fundamentally changing the culture and 
management of the IRS.
  The gentleman from Texas [Mr. Archer], the gentleman from Ohio [Mr. 
Portman] and the gentleman from Maryland [Mr. Cardin] are to be 
commended for their efforts on IRS reform. I would urge my colleagues 
to support this common-sense yet long overdue legislation.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Wisconsin [Mr. Kleczka], a member of the Committee on Ways and Means.
  Mr. KLECZKA. Mr. Speaker, I thank the gentleman from New York for 
yielding me this time to speak on the IRS Restructuring and Reform Act 
of 1997. As a member of the Committee on Ways and Means, I was pleased 
that we were able to formulate a bipartisan bill that will benefit all 
American taxpayers.
  I must say that I have had several conversations with the gentleman 
from Maryland [Mr. Cardin] and also the gentleman from Ohio [Mr. 
Portman] on the bill, and I was quite surprised that we were able to 
work together to come to this day.
  One of the most difficult hurdles in formulating the legislation was 
determining the structure and responsibilities of the oversight board. 
I had strong reservations and concerns about the IRS Restructuring 
Committee's recommendation that the board made up of private 
individuals have the power to hire and to fire the IRS commissioner. 
Fortunately, a workable compromise was made that gives the oversight 
board significant input into the workings of the IRS, but keeps the 
appointment of the Commissioner in the hands of the President.
  This bill also contains some important provisions protecting the 
rights of taxpayers. For example, innocent spouses will now have an 
easier time of attaining this protective status. In addition, attorney/
client confidentiality privileges are being extended to protect 
taxpayers who choose to confide with their certified tax preparer, 
their certified public accountant. Finally the burden of proof for 
taxpayers who cooperate in IRS proceedings will now fall to the IRS 
should the case go to court.
  These are some of the changes that should make dealing with the IRS 
much easier. Today we are moving forward with the legislation that 
sends a strong message to all our constituents. We have heard your 
frustrations with the IRS, and we are taking actions to right these 
wrongs.
  Mr. PORTMAN. Mr. Speaker, I enjoyed working with the gentleman. We 
did have a lot of good, constructive conversations, and the gentleman 
helped to make it a better bill.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Texas [Mr. Paul].
  (Mr. PAUL asked and was given permission to revise and extend his 
remarks.)
  Mr. PAUL. Mr. Speaker, I rise in support of this legislation. It is a 
step in the right direction. Get rid of the Code, get rid of the IRS, 
and get rid of the income tax.
  Mr. Speaker, I rise in tepid support of H.R. 2676, the Internal 
Revenue Service Restructuring and Reform Act of 1997. As most recently 
evidenced by Senate hearings, taxpayers across the country are 
clamoring for real reform. Yet, instead of delivering genuine reform, 
the Congress delivers an Oversight Board made up, in part, of experts 
from the fields of management, customer service, Federal tax laws, and 
information technology--in other words, more guards to oversee the 
watchdogs.
  I can support this bill because it partially shifts the burden of 
proving guilt from the taxpayer to the Government. Innocent until 
proven guilty is a tenet that permeates any free society but has 
somehow been ignored with respect to the Internal Revenue Service's 
imposition of criminal penalties. Additionally, this bill makes 
political audits by executive branch officials felonies punishable by 
fine and/or imprisonment.
  While these small steps are laudable, in light of the massive nature 
of the problem, the complexity of the Tax Code, and the oppressive 
nature of the excessive taxation under which we are currently so 
heavenly burdened, this bill is but token reform. The current taxation 
problem is rooted in the excessive spending by Government resulting 
from a bad case of congressional activism under which the legislative 
body has repeatedly overstepped it's article I, section 8, 
constitutional powers.
  No one likes to pay taxes--almost. The large majority of people in 
any society enjoy the benefits that come to them through Government 
programs, yet, essentially no one likes to have their taxes increased, 
believing they are always on the short end of receiving benefits in 
return. And this of course is true. The most people never get back what 
is taken from them in the form of taxes.
  Oliver Wendell Holmes, however, was different. He claimed he likes to 
pay taxes saying: ``I like to pay taxes. With them I buy 
civilization.'' In a more famous quote, Holmes said:

[[Page H10029]]

``Taxes are what we pay for civilized society.'' A more accurate 
statement might be that taxes, especially if collected with the tactics 
of the IRS, are what permits Governments to act in a most uncivilized 
manner.
  Teddy Roosevelt, during the Progressive era, 1902, appointed Oliver 
Wendell Holmes, Chief Justice of the Supreme Court, a time during which 
the ground work was laid for the modern welfare state later promoted by 
Teddy's cousin FDR. And it was not too many years after the appointment 
of Oliver Wendell Holmes to the Supreme Court that these progressive 
ideas led to the establishment of the income tax, the IRS, and an 
equally threatening organization, the Federal Reserve.
  Frank Chadorow had a much better understanding of what the income tax 
meant. ``Income taxation is in principle the worst of all forms of 
taxation because it begins by asserting the prior right of the state to 
all wealth.'' This principle can be applied to almost all taxes. A tax 
on inheritance could be considered even worse since we accumulate 
property and capital often with after taxed money. Since all taxes are 
essentially a tax on productive effort, whether it be corporate tax or 
even a sales tax, this principle is certainly accurate when the 
revenues are used for redistributive purposes.
  I see nothing wrong with the slogan ``taxation is theft,'' when the 
revenues are used to transfer wealth or privilege from one group or 
person to another. In spite of all the talk in recent months regarding 
the method of taxation and the abuse by the IRS these basic principles 
are not being discussed. There has been too much emphasis placed on the 
taxing process rather than the philosophical principles that not only 
endorse but encourage an abusive tax system.
  The recent Senate hearings on IRS procedures however were very 
beneficial in that they were reported by the major media and confirmed 
what most Americans suspected. Probably the most outrageous 
confirmation was that IRS agents did confess to a deliberate policy 
directed toward the weak and the poor to intimidate and make examples 
of them. Agents testified that the wealthy and the sophisticated were 
generally left alone because they were more capable of defending their 
rights. This is an outrage that should not be forgotten and should be 
used as a strong motivation to eventually do something about our tax 
system.
  The fact the some citizens have even committed suicide over the 
pressure of facing the tax collectors is something that should not ever 
happen in the civilized society that Holmes claimed we were paying for. 
Thousands of Americans are quite willing to pay the penalties and 
excess tax without challenging the Government even when they know they 
are right because the emotional and financial penalty of fighting the 
IRS is too great.
  For the last four decades it has become known to most Americans that 
both Republican and Democratic administrations have been willing to use 
the IRS, and for that matter other regulatory agencies, to punish their 
political enemies. It seems that the current administration has refined 
this technique to near perfection. It has been quite willing to attack, 
through the Tax Code, those foundations and groups that oppose 
Clinton's policies while ignoring the friendly ones.
  If we indeed lived in a truly civilized society individuals would be 
willing to come forth and reveal the Government's atrocities against 
its own people instead of choosing to hide their identity. The fact 
that IRS agents are hidden behind screens makes one think that they 
believe they belong to an organization such as the Mafia and if 
discovered they themselves would become a victim. It reminds me of the 
horrible pictures that we see of our FBI, BATF, and DEA agents making 
questionable raids on private citizens with stocking caps over their 
heads. In a civilized and free society, Government agents would act as 
our servants and not convey an appearance of a criminal element. But, 
nearly two decades ago Milton Friedman asked ``When you sit across the 
table from a representative of the IRS who is auditing your tax return, 
which one of you is the master and which the servant?''
  In light of recent revelations the administration was quick to defend 
the IRS and explain the need for a strong collection agency. What else 
could we expect? However, even the administration senses that the 
public is on the verge of revolt and quickly added that certain reforms 
would be necessary. Reforms suggested by the administration included an 
advisory board, of course without clout, as well as making sure the IRS 
offices were kept open for longer periods of time including Saturdays. 
The advisory board would be used to advocate suspensions of seizure of 
property when appropriate. Sure. When an agency of Government is acting 
outside the law, i.e., the Constitution, while continuously making 
numerous errors, then expanding their hours seems to me to only 
compound our problem, not reduce them. Though I'm sure some Americans 
will see this as a positive for the administration, hardly will this do 
anything to help the problem.
  Even the Republican proposal to have a private board with more clout 
doesn't address the real problem. And another Taxpayer's Bill of Rights 
won't help either. If a private board is being appointed, what would 
keep the establishment from appointing friendly people to the board? I 
can't see where this would be any different from the IRS being 
supervised by political hacks from the Treasury Department. This whole 
notion that better service can be given to the taxpayer is a bit 
preposterous. The fact that we call this the Internal Revenue Service 
is an obvious misnomer. How can an agency of Government that sets out 
to confiscate our wealth provide a service to us? It is just as 
preposterous to refer to victims as customers. Taxpayers are no more 
customers of an organization providing a service than the man in the 
moon. This type of wording is nothing more than the newspeak of which 
Orwell wrote. So far the reforms advocated by the administration and 
the Congress will do nothing to solve our long-term problems.
  Other more serious reforms have been suggested, such as eliminating 
the current Tax Code and replacing it with a flat tax or a national 
sales tax. Both of these proposals come up far short of dealing with 
the real problem. Supporters of both proposals never touch the problem 
of the Social Security, Medicare, flat tax of 17 percent which not only 
is here to stay but will surely rise. Since these programs are sacred 
no one can suggest that something should be done about them. But in 
reality, as I have mentioned before, the Social Security and Medicare 
tax is an income tax that is used for general revenues as the trust 
funds are nonexistent.
  When one adds the tax that the employer and the employees pays, which 
is the real labor cost, each individual is paying 17 percent of their 
income up to $65,000, which is a truly regressive income tax. If a flat 
tax of 17 percent is added we are immediately at 34 percent and rising. 
With a flat tax this high and with removal of tax exemptions for 
everything, and especially our donations as well as our interest on our 
houses, we are actually setting the stage for a much higher tax rate 
which will make no one happy. Sure, there might be a little less 
difficulty figuring out the code, a cost in and of itself, but if one 
can save some money by having a complex code this could actually be 
better than a simple code where we are forced to divvy up more to the 
welfare state. Besides, the flat tax that is proposed has exemptions 
for low income so immediately it is a flat tax after a certain amount 
thus it is in reality a graduated tax. Businesses would still have to 
deduct the expense of doing business prior to reporting their profits.

  A national sales tax has also been bantered around as an alternative 
to the income tax. Where it too has some advantages, reducing the 
effects of the complicated Tax Code and making filling out our tax 
returns easier, it also has many short-comings. First, nobody knows 
precisely what rate would be require to pay all the bills. Some have 
suggested 15 percent, others believe it will be over 30 percent, which 
I am inclined to believe. The reason it's impossible to calculate is 
that at a certain level of taxation there will be a motivation to avoid 
the sales tax by expanding the underground economy.
  The argument is made that the sale tax is a good way to collect 
revenue because those who are ducking taxes like the drug dealers and 
other criminals will be forced to pay the sales tax when they buy 
luxury items. There is nothing automatic about that assumption. 
Besides, IRS agents, who may be called something else, will be required 
to monitor every small business and every small profession to make sure 
that the revenues are collected and deposited in the Treasury. I can 
imagine that many small businesses and entrepreneurs working at home 
will have every bit as many records to fill out as they do now with 
their tax return. Obviously, reforming the tax collecting system to 
make productive Americans happy is much more difficult than meets the 
eye. Many Americans and Washington politicians are overly optimistic 
about changing the method of collection as the solution to the problems 
we face with our over exuberant revenuers.
  Changing the collecting system, if the goal is to pay the bills and 
avoid a deficit, does nothing to solve the real problem of 
disenchantment with Government and the disgust with high taxes as well 
as with the prodding Federal bureaucrats who invade every aspect of our 
lives.
  What is really upsetting most productive Americans is the fact that 
they have to work until July 3, before they get to keep any of their 
earnings for themselves. It's ironic that July 4th is our first day of 
independence from all taxation. This does not even take into 
consideration the inflation tax, i.e., the loss of value of our 
purchasing power, as our Government continues to diminish the value of 
the dollar.
  The inflation tax is something that is much more difficult to 
understand and yet is the tax of last resort of all authoritarian 
governments.

[[Page H10030]]

We are now at the point where the American people are starting to rebel 
against any increase in taxation. In spite of the fact that we cannot 
pay our bills we were actually able, for political reasons, to make a 
token cut in some taxes last summer. This sill not prevent our 
Government, acting through the Federal Reserve, from creating new 
credit when necessary thus diminishing the value of the money already 
held. On this tax, however, because it's difficult to see and the 
victims harder to find, the measurement is elusive. For this reason I 
am predicting that when push comes to shove with the budget it will be 
the ultimate tax used on the American people in an effort to continue 
to finance the welfare/warfare state. The real tragedy of this is that 
perceptions of the value of the dollar make it almost impossible to 
predict who the victims are going to be and when the value of the 
dollar will suddenly change. For instance it was quite clear when the 
recent devaluation hit the Mexican Peso it occurred suddenly and 
sharply and the victims were the middle-class and the poor throughout 
the country. But it was not gradual, steady and logical because the 
inflation tax frequently comes in sudden bursts.
  The attention that token reforms are getting today, whether it be 
reforming the current system and devising a friendlier IRS or talking 
about a flat tax or a sales tax, actually is more of a distraction than 
a constructive debate. I am not saying this is intentionally done or of 
no value but I think that is the result of the current discussion.
  The reason for this is that fundamentally and foremost it's not a tax 
problem we face. The basic problem confronting us as a country is a 
spending problem. Concentrating only on taxes, which is okay to a 
degree, avoids the subject of the size of government and the reason why 
the Government spends so much of the Nation's output. If we concentrate 
only on taxes and we avoid the subject of the role of Government and 
why the Government wants more of our money, we cannot and will not 
solve the problem. The goal ought to be to shrink the size of 
government and lower taxes. As bad as the income tax is on principle, 
an income tax of 3 percent on all money earned would not cause a tax 
revolt and most Americans would voluntarily pay their taxes. Even a 
national sales tax of 5 percent would not prompt a hue and cry over the 
tax system. The problem, of course, is that the Government is spending 
way too much money and there is no serious effort to cut back.

  Recent budgetary efforts in Washington indicates that there's not 
much chance that the current Congress is going to do anything about 
cutting back. The welfare state is alive and well. Even the National 
Endowment for the Arts could not be cut, Clinton's health program is 
being implemented by the Republican Congress, public housing money is 
increasing, and just recently, in our Education Committee, a Republican 
proposal supported by Democrats to increase national educational 
expenditure for the purpose of promoting charter schools was easily 
passed, although it authorized a new $100 million program.
  As long as this attitude prevails on the spending side, Saturday 
morning hours for the IRS and keeping telephone lines open 24 hours or 
having a review panel or instituting a sales tax or a flax tax will do 
nothing other than delay the serious discussion about reducing the role 
of government in our lives, in our economy and in the world at large.
  Supply side economics pushed by many during the 1980's argued 
strenuously for lower tax rates with which I agreed. But the goal of 
the supply siders was merely to stimulate the economy so that higher 
revenues would flow to Washington--a bad motivation. It is possible 
that with lower tax rate the economy would pick up but if the result 
was higher tax revenues, these revenues should be used to further cut 
taxes not increase expenditures. At the same time the supply siders 
were pushing the lower tax rates for the purpose of increasing 
revenues, they were advocating higher and higher budgets for the IRS to 
enhance the ability of the tax collectors. The Reagan administration 
was quite receptive to this principle believing that if a $1 billion in 
additional funds was given to the IRS it promised to produce $17 
billion more in revenues through the process of harassment, 
intimidation and audit. Even this year the Treasury bill appropriation, 
which contained the pay raise for the Members of Congress, had an 
increase in the IRS budget of 9 percent giving them an increase of more 
than a half billion dollars to do exactly what they have been doing for 
decades. So, in the middle of the hearings on the Hill revealing the 
outrageous tactics of the IRS, and at the same time the politicians 
were propagandizing for tax reform, the large majority of Democrats and 
Republicans were voting for a huge increase in the IRS budget to 
continue the very process they were publicly condemning.
  Today the atmosphere in Washington can be described as deceptively 
optimistic. Many of those who were preaching cutbacks and austerity a 
few years ago are claiming great victories with the accomplishment of a 
balanced budget. This budget is not balanced regardless of what the 
politicians are saying. Last year's national debt went up nearly $200 
billion when the funds taken from the trust funds are considered. 
Members are actually sitting around figuring out how to spend the 
excess they expect over the next several years. What they don't 
understand is that their projections of our future spending habits, the 
tax revenues, interest rates, and the state of the economy are unknown 
to them and quite frankly are going to be a lot different than their 
optimistic projections.

  All taxes are extracted from the productive effort of the people. 
Whether the tax comes through an income tax, a sales tax, an 
inheritance tax, a school tax, property tax, or whatever, this is the 
method whereby the state confiscates the productive effort from the 
people. Governments produce nothing. All governments can do is use 
force to redistribute wealth and pay off their political cronies. The 
name of the game is power. Power is achieved by the politicians through 
the control of people's income through a taxing system as well as 
manipulating the value of money. As Chief Justice John Marshall said: 
``The power to tax is the power to destroy.'' It is not just a 
coincidence that those who introduced us to the welfare state, the 
Progressives of the early 20th century, believed both in the power to 
tax as well as the power to inflate.
  In our relatively free society where productive efforts still exist 
and a profit motive remains, big government programs can be tolerated 
and funded for long periods of time. But as time goes on the productive 
ability of corporations and individuals is diminished as are all our 
freedoms for personal freedom cannot long exist without economic 
freedom. Today, we are living under conditions which encourage the 
export of capital and the exporting of jobs while encouraging the 
immigration of individuals who will do quite well living off our 
welfare state. In spite of the euphoria now being expressed in 
Washington, at the height of our so-called recovery, the conditions are 
set for soon recognizing that productive efforts are being impeded by 
our tax and regulatory system and there has been absolutely no serious 
intent to change our spending habits. The welfare/warfare state is 
moving briskly along and is being encouraged by the deceptive 
pronouncements that our budget is balanced and all we need to do is 
change the method by which we collect revenues.
  We do not have a technical problem or an IRS code problem. We have a 
problem in defining the proper role for government. As long as the 
majority of the American people still believe it's in their best 
interests to have a government that redistributes wealth and polices 
the world, this crisis will continue to build. A proper sized 
government would require minimal taxes and would be designed for the 
protection of liberty and equal justice for all. We have come a long 
way from those intentions of the Founders of this country, but we'll 
soon face a crisis of confidence and be forced once again to decide for 
ourselves just what kind of government we want and how much government 
will tolerate. Let's hope and pray that those of us who believe in 
limited government and maximum individual freedom will use the events 
of the coming years to promote the cause of liberty and not just tinker 
with the Tax Code. When that day comes the big tax debates will 
probably be; should we have a 5-percent import tax or a 10-percent 
import tax and we will not be dealing with a Federal income tax nor a 
Federal sales tax at all. Moreover, we will not be concerning ourselves 
with triffling reforms of a revenue agency which harasses our people 
and eats out our substance. Let us hasten that day.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Arizona [Mr. Hayworth], a member of the Committee on Ways and Means.
  Mr. HAYWORTH. I thank the gentleman from Ohio for yielding me this 
time.
  Mr. Speaker, I have heard from many of my constituents, but this 
morning I heard from an Arizonan who made an indelible impression and 
really brought a face to this debate, Mr. Speaker. His name is Bob 
Brockamp. Bob's grandfather, Stan McGill, at age 93 several years ago 
made a mistake in writing a check to the Internal Revenue Service. He 
meant to write a check, Mr. Speaker, for $700. He added an extra zero. 
$7,000. Other merchants and other entities with whom Mr. McGill had 
dealt understood that he was having problems. Indeed, he was in the 
stages of Alzheimer's disease, and they would say, ``Obviously there's 
been a mistake in his remittance, we're sending back a significant 
portion of that money.'' Just about every business he dealt with caught 
that mistake, but the IRS, when it received a check for $7,000, kept 
the money.
  Mr. McGill passed away. Bob's mom received basically a threat from 
the Internal Revenue Service. Even though

[[Page H10031]]

her late father had paid $7,000 more than he owed, the Internal Revenue 
Service said to Mrs. Brockamp that his estate owed $1,000, and she 
should pay it if she wanted to keep her home and personal property.
  The Brockamps tried to fight this in court. They took it all the way 
to the Supreme Court. The Supreme Court ruled 9 to 0, ``Gee, Brockamps, 
you might be right on this morally, but you're incorrect legally 
because the statute of limitations has run out.''
  Mr. Speaker, one of the many great things we do in today's 
legislation is to change the statute of limitations, indeed to remove 
the statute of limitations or suspend that statute for those taxpayers 
who are mentally and/or physically disabled and unable to understand 
what they were doing. Sadly, it will not help Stan McGill, but it will 
help thousands of senior Americans across the country. Support this 
legislation. Let us make a move positively for America.
  Mr. RANGEL. Mr. Speaker, we would not be talking about burden of 
proof if it were not for the tenacity of the gentleman from Ohio [Mr. 
Traficant]. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio.
  Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Ohio [Mr. Traficant].
  The SPEAKER pro tempore (Mr. Pease). The gentleman from Ohio [Mr. 
Traficant] is recognized for 5 minutes.
  Mr. TRAFICANT. Mr. Speaker, I want to commend the Republican Party, 
the gentleman from Texas [Mr. Archer], the gentleman from Georgia [Mr. 
Gingrich], the gentleman from Ohio [Mr. Portman], and also along with 
the gentleman from New York [Mr. Rangel] and the gentleman from 
Maryland [Mr. Cardin] for this great bill. This is a great day. I want 
to also commend the Republican Party for beginning the dialog to change 
the Tax Code.
  By the way, I would like to see us reduce income taxes in half and 
couple it with a small sales tax, require a two-thirds vote to increase 
it, and exemptions for poor people.
  But let me say this today. In America, an American citizen accused 
shall be considered innocent until proven guilty, and the accuser shall 
carry the burden of proof in that matter. Where, ladies and gentlemen, 
in God's name have the bureaucrats been able to seduce Congress over 
the years to change that provision? If it is good enough for mass 
murderers, it should be good enough for Mom and Dad, our taxpayers.
  I come to the floor here today because I know the White House has not 
signed off on this last provision. The Secretary of the Treasury 
questions its revenue impact, and the other body still has some 
reservations. I want the gentleman from New York [Mr. Rangel] to 
imagine if we could travel back in time with all this technology, that 
Members of Congress decided to go to Philadelphia and look into the 
Founders. Mr. Madison leans over to Mr. Jefferson, he says, ``Great 
stuff here, isn't it, Tom?'' And Jefferson says, ``Great day. Aptly 
named the Bill of Rights, Mr. Madison. Do you agree, Ben?''
  Ben Franklin says, ``Hey, don't let it be written that Ben Franklin's 
not for this.'' Freedom of religion, freedom of speech, trial by a jury 
of our peers, no search warrant without seizure. A great day. ``Do you 
agree, Mr. Hancock?''
  ``I think it's great, but I think we should run it by George. Mr. 
Washington?''
  ``Fellows, this is great, but what is it going to cost? What are the 
revenue impacts? We better hire some accountants and score it.''
  Unbelievable. We know George Washington never said that. The House of 
Representatives must insist today to put the Bill of Rights back in the 
Tax Code of the United States of America because if it was up to the 
IRS, they would score the Bill of Rights, and, by God, we would not 
have it.
  Those IRS workers are not demons. We have created a monster. Most of 
them are good people. But in America the people govern. It is time to 
take our Government back. Today's vote is the most important vote we 
will cast in that whole process.
  I thank the gentleman from Ohio [Mr. Portman] for working hard to 
include my provision in this bill. I want to thank the gentleman from 
Georgia [Mr. Linder], the gentleman from Georgia [Mr. Collins], the 
gentlewoman from Washington [Ms. Dunn], all of you.
  Let me say this before I close out. I am not on a first-name basis 
with anybody at the White House, but I will make a house call over this 
provision that I have worked for for 10 years. Some 98 percent of the 
American people understood it and supported it.
  I am glad to see there is no partisanship here today. The gentleman 
from New York [Mr. Rangel], one of the most qualified Democrats we have 
ever had on Ways and Means, was not in the position to take a stand on 
the Traficant provision. But I am going to compliment the Republican 
Party here today for swallowing hard and including my provision. I know 
it was not easy. I know there are still some words in there that I am 
not totally crazy about, and they know that as well. But we can ratchet 
down the beginning, and I am hoping that next year after a track record 
of the burden of proof language change, you will consider two things 
from Jim Traficant: Cleaning up that language on burden of proof which 
can be improved; and, second of all, dealing more specifically with the 
seizure practices of the IRS and look at the Traficant provision that 
says before they can seize your property, they must have judicial 
consent, you must have a notice of a hearing, and you shall be present 
and allowed to be represented at such hearing.
  But let me tell you what. No one is going to be totally satisfied 
with anything. I am satisfied today. I am satisfied today that the 
Republican Party included a Democrat provision that, by God, I could 
not get heard on my own side of the aisle. I compliment you, I thank 
you, and let me say this. Keep the burden-of-proof provision in that 
final bill.
  Mr. PORTMAN. Mr. Speaker, I once again want to commend the gentleman 
for his persistence and for his patience and for his strong support now 
of the legislation, a 10-year crusade.
  Mr. Speaker, I yield 2 minutes to the gentleman from Minnesota [Mr. 
Ramstad], a member of the Committee on Ways and Means.
  Mr. RAMSTAD. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, as a cosponsor of this important legislation to provide 
a sweeping overhaul of the IRS, I appreciated the opportunity to work 
in a bipartisan, pragmatic and collaborative way with the gentleman 
from Ohio [Mr. Portman], the gentleman from New York [Mr. Rangel], the 
gentleman from Maryland [Mr. Cardin], the gentleman from Texas [Mr. 
Archer] and other members of the Committee on Ways and Means.

                              {time}  1245

  We promised, Mr. Speaker, tax relief for the American people, and we 
delivered. We also promised a major overhaul of the IRS, and today we 
must deliver again.
  Mr. Speaker, this first comprehensive reform of the Internal Revenue 
Service in over 45 years is long overdue. I have heard from countless 
constituents about IRS abuses like most of my colleagues have about 
unfair and selective audits, arbitrary rulings, communications couched 
in gobbledygook and legalese. Mr. Speaker, these kinds of abuses of the 
American taxpayers must stop now. We must never forget we work for the 
taxpayers of the United States of America, and this legislation will 
make a big difference to the taxpayers of this country.
  It is high time we change the IRS from an adversarial organization to 
a consumer-friendly, service-oriented organization. Let us pass this 
important bipartisan IRS reform bill today. Let us pass these 28 new 
rights for taxpayers. Let us overhaul the management of the IRS and 
hold the IRS accountable. Let us shift the burden of proof, as the 
gentleman from Ohio [Mr. Traficant] has so eloquently called for for 10 
years. Let us shift the burden of proof in tax cases from the taxpayer 
to the Government. Mr. Speaker, the taxpayers of America deserve 
nothing less.
  Mr. RANGEL. Mr. Speaker, I yield 2 \1/2\ minutes to the gentlewoman 
from Florida [Mrs. Thurman].
  Mrs. THURMAN. Mr. Speaker, I thank the ranking member, the gentleman 
from New York [Mr. Rangel], for yielding this time to me. I want to

[[Page H10032]]

express my strong support for this legislation.
  The oversight committee conducted a series of hearings on the 
problems facing the IRS and the American taxpayers who must deal with 
the IRS. The committee took seriously the negative experiences of 
taxpayers before drafting this bill.
  The goal of this bill is that IRS operate efficiently while treating 
all Americans with the respect they deserve. This bill will ensure that 
incidents of harassment and intimidation against law-abiding taxpayers 
become a thing of the past.
  Some of the provisions of H.R. 2676 codify reforms already 
implemented by the administration. Others come from the bipartisan 
National Commission on Restructuring the IRS. All of these are 
necessary. The taxpayer bill of rights language will protect innocent 
spouses from having to pay tax penalties for the action of their 
spouses. The bill also provides civil damages to the taxpayer when IRS 
employees negligently disregard the law. The bill shifts the burden of 
proof onto the IRS in Tax Court cases when the taxpayer has cooperated 
fully with reasonable requests for information. This is long overdue. 
These are real and not just cosmetic reforms. The IRS needs to do a 
better job of educating the people of the availability of taxpayer 
services.
  As Members of Congress, we all try to help our constituents who have 
tax problems. In Florida, we have used an excellent taxpayer advocate 
in the IRS Jacksonville office. She has been able to resolve many 
longstanding tax problems of the people of Florida's Fifth District. I 
encourage taxpayers to contact their advocates. They might be able to 
quickly resolve some of their tax problems, and it is time to move 
forward.
  I also want to remind my colleagues and the taxpayers that on 
Saturday, November 15, the IRS will hold the first of its monthly 
problem-solving days in each of its 33 district offices. This day will 
give taxpayers and practitioners the opportunity to resolve problem tax 
cases.
  The IRS is encouraging, and I think this is important, is encouraging 
taxpayers to contact the IRS as soon as possible to schedule an 
appointment in the nearest district office. I hope that taxpayers with 
outstanding problems will take advantage of this.
  Mr. Speaker, H.R. 2676 represents an important step in returning 
government to the people it represents. I urge the support of this 
bipartisan bill.
  Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
Connecticut [Mrs. Johnson], the chair of the Subcommittee on Oversight 
of the Committee on Ways and Means, who played a very important role in 
electronic filing, taxpayer rights, and many other provisions of this 
legislation.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in strong support of 
this legislation, and I want to commend my colleague, the gentleman 
from Ohio [Mr. Portman], for his leadership of what was a yearlong 
process of analyzing the serious problems plaguing the IRS and taking 
responsibility for developing solutions to those problems as the House 
chair of the Reform Commission. I commend him as well for his careful 
stewardship of the commission's report, educating Members on its 
substance, being open to rethinking some of its difficult issues, and, 
as a member of my subcommittee, working with us to strengthen and 
enlarge the taxpayers' rights.
  Today we will adopt the most dramatic reform of the IRS since 1952. 
The three-point plan will overhaul the tax-writing process to help 
simplify the Code and protect taxpayers. It will create an independent 
oversight board to bring private sector expertise to the table to 
modernize the IRS's technology and create a customer service culture 
that can provide timely and accurate answers to questions and assist 
taxpayers with problems.
  Third, it will create 28 new taxpayer rights, including the right to 
sue the IRS for damages resulting from the IRS's negligence, shifting 
the burden of proof to the IRS in the Tax Court, and for the first time 
taxpayers will be able to report abusive agent behavior to the IRS 
without fear of retaliation. Letters threatening an audit if someone 
does not participate in some voluntary program will end, and for the 
first time taxpayers will be given an explanation of the reasons for an 
audit and their rights in that process.
  This should end politically inspired activities, it should end costly 
multiyear audits, even in cases where the person audited has been found 
to be owed money by the Government, and for the first time 30,000 
innocent spouses will be saved $30 million in taxes because they will 
not have to pay taxes owed by their former spouses, not by them. Too 
often the deadbeat dad not paying child support or taxes gets off while 
the innocent spouse is dunned by the IRS because she is available and 
she is responsible.
  The 28 taxpayer protections will protect taxpayers forcefully and 
fairly, and I am proud of the work of my subcommittee in shaping these 
recommendations and in strengthening the taxpayers' protections.
  I urge support of this bill as it represents a giant step forward, 
but I urge the committee to move forward with tax simplification which 
is the route of reform.
  Mr. RANGEL. Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from 
Maryland [Mr. Hoyer] to express his views. Whenever anyone talks about 
improving how we collect taxes, his name, whether it was a Republican 
or Democratic President, was always there. He has worked very hard in 
not only trying to improve the present system but trying to improve the 
present piece of legislation.
  Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland [Mr. Hoyer].
  Mr. HOYER. Mr. Speaker, I thank the gentleman from New York for his 
comments.
  As a preface, I have served on the Subcommittee on Treasury, Postal 
Service, and General Government since January 1983. It is the 
responsibility of that subcommittee to oversee the Internal Revenue 
Service's budget and its management practices.
  In the last three terms of Congress under Democratic and Republican 
leadership, our subcommittee has raised very substantial questions, and 
we have worked with the distinguished gentlewoman from Connecticut on 
those issues and the distinguished staff of her subcommittee who has 
done such an outstanding job.
  I want to say to the gentleman from Ohio [Mr. Portman] and to Senator 
Kerrey, as they know, that I think their efforts have produced a good 
work product. I think the commission raised many appropriate questions 
and recommended some very solid solutions. Having said that, I want to 
preface my remarks by saying that I ask no colleague to follow me in 
either adopting my premises or my vote, not one, because I understand 
the power of the rhetoric that precedes this bill to reform the IRS.
  There have been a lot of columns written on this issue. Jim Glassman, 
not an apologist for Democratic policies, says do not reform the IRS, 
and he says Republicans talk grandly about simplification but this year 
passed legislation adding 285 new sections and 824 amendments to the 
tax law.
  Mortimer Caplin, a distinguished former IRS commissioner, said this:

       The proposed overall design by the Restructuring Commission 
     and its statutory offspring is deeply flawed. It would 
     obscure the core focus of the IRS, blur the lines of 
     authority, and hamstring efficiency.

  The good news, my colleagues, is that under Secretary Rubin and 
Deputy Secretary Summers, for the first time since I have been on the 
Appropriations Committee, there has been a focus on management issues 
in addition to tax policy issues. As a result, very substantial things 
are happening at the IRS.
  We are starting to get a handle on tax systems modernization, which 
was a disaster under the Reagan administration, under the Bush 
administration, and under the early Clinton administration, because the 
IRS clearly did not get a handle on its information systems technology. 
The good news is, we are now doing just that. We have an outstanding 
person that was recruited specifically to take on this task.
  The Senate just a few days ago confirmed Mr. Charles Rossotti as the 
new Commissioner of the IRS. He is the former president of the American 
Management Systems, Inc., a firm of 7,000 people in northern Virginia. 
He has been doing exactly what IRS needs to

[[Page H10033]]

do, in the private sector: Handling information and providing quick, 
user-friendly responses in an efficient manner. This administration has 
moved to make sure that the IRS makes many of the changes proposed by 
the restructuring commission.
  Now, having said that, the administration, myself, and others raised 
very substantial questions about the bill that was originally 
introduced.
  I might say tangentially, there has been no speaker raising any 
questions prior to me about the problems with this legislation. 
However, numerous responsible, thoughtful, conservative observers have 
said that this is not the way to go.
  On its surface the legislation which we consider today is about IRS 
reform. The proponents claim that it will be the answer to all of our 
concerns about an agency which has admittedly failed to manage its 
operations well.
  However, too many of my colleagues believe that the simple creation 
of a private sector oversight board will lead to a more user-friendly 
and responsive IRS.
  I would argue that the net effect of H.R. 2676 will be nothing more 
than phony tax populism as described by Gloria Borger of U.S. News.
  And while there are many provisions in this bill which I support, I 
think the empowerment of a private sector board, with far-ranging 
powers, will do little more than add just another layer of bureaucracy.
  The taxpayer bill of rights title is necessary to provide much needed 
relief to innocent spouses and those who, because they are ill, are not 
able to file for a tax refund in a timely manner.
  There are also provisions in the bill which I support that are 
designed to increase electronic filing.
  However, the bill creates an unnecessary and more complicated 
organizational structure at the IRS, which I believe will have the 
overall effect of less accountability.
  While there is no doubt a role for private sector advice and 
expertise, what the IRS needs is more accountability, not less.
  H.R. 2676 would place management in the hands of people who, however 
well-meaning, are loyal and accountable to the firms and businesses 
that employ them.
  And while IRS bashing may be both fun and easy, I would suggest that 
if we are truly attempting to make the IRS more user friendly, we ought 
to take a closer look at the tax writers, not the tax collectors.
  As the national commission on restructuring the IRS concluded, 
Congress' attempt to micro-manage the IRS and its frequent changes of 
the Tax Code, have undermined the ability of the IRS to manage 
efficiently in the long or short term.
  No matter how many managerial changes we make, it will not make the 
IRS more user friendly. We ought to focus on improving education and 
services for taxpayers, better training for IRS employees, modernizing 
computers, and simplifying the overall Tax Code.
  Let's not hamstring the Commissioner's ability to enact real IRS 
reform by fooling ourselves into believing that adding another layer of 
bureaucracy in the chain of command is going to solve IRS' problems.
  Let's build upon the progress started by Secretary Rubin and ensure 
that we enter the 21st century with an IRS that is customer-friendly, 
technologically-advanced, and governed ``by the people, for the 
people.''
  Let us not delegate authority of the IRS to private interests who 
could easily undermine public confidence in the Agency and dramatically 
decrease voluntary tax compliance.
  Are we all against the outrageous actions of the IRS? Absolutely. 
Should we take every action possible to eliminate the abuse of citizens 
that has occurred by IRS personnel or any other person in government? 
Absolutely.

                              {time}  1300

  But let me point out to my colleagues, that as Charles Krauthammer 
wrote so compellingly just a few days ago, ``The IRS does not write the 
rules it must enforce. Congress and the President do, and the rules are 
now an insane 9,451 pages long. The Tax Code is so extraordinarily 
complicated that no taxpayer can ever be sure he has fully complied 
with the law.''
  That is the difficulty the IRS has in implementing the Code, and your 
commission said so. Your commission said one of the problems IRS has is 
that the Congress has not given them stable and steady funding levels. 
Your commission also said that there was not a systemic problem, and I 
appreciated those honest remarks.
  I would hope, Mr. Speaker, that as we vote on this legislation, and 
clearly it will pass with over 400 votes so that we can all go home and 
say we are for IRS reform. My colleagues recognize that if one is not 
for IRS reform on appropriation bills and on tax bills, it will not 
happen. We will not be able to hide behind this vote.
  I will look forward to the conference committee. In my opinion, the 
chairman of the Committee on Finance wants to go in exactly the wrong 
direction, as reported today in the papers, exactly the wrong 
direction, and that is what I fear. I would hope that we would look 
carefully at the product of the conference committee and ensure 
ourselves that we are in fact doing the right thing for the taxpayers 
of America.
  Mr. PORTMAN. Mr. Speaker, I yield myself just 30 seconds to respond 
briefly, and then I would like to yield to the gentleman from Missouri. 
But with regard to the gentleman's comments, again I appreciate the 
supportive words he said. I would ask him again to read the 
legislation, because he has misstated what the oversight board's 
responsibilities are. They do not come up with the budget for the IRS, 
the Congress still does that of course ultimately, but in fact the 
Treasury Department will send its own budget. We do get an 
informational budget which I think is going to be very important, 
particularly to the appropriators.
  Second, he talks about an additional layer of bureaucracy. What we 
are doing here is we are providing oversight that does not currently 
exist. We are filling a void; it is not an additional layer of 
bureaucracy.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Missouri 
[Mr. Hulshof], a member of the Committee on Ways and Means, who has 
improved this legislation.
  Mr. HULSHOF. Mr. Speaker, I accept the invitation of the preceding 
speaker to go beyond the rhetoric and talk about the outrages.
  Mr. Speaker, let not my words today be an indictment against the 
hard-working men and women that are our tax collectors that are trying 
to do the best job they can. But as a Member of the House Committee on 
Ways and Means, particularly the Subcommittee on Oversight, we have the 
responsibility of looking at the inner workings of the Internal Revenue 
Service, and here are some of the examples we have seen already this 
calendar year. Earlier this year, we learned that over 100 IRS agents 
conducted unauthorized inspections of individual taxpayer records.
  Example No. 2: The IRS delayed its notification to business owners of 
a new requirement to electronically file payroll taxes, and then the 
agency threatened these same business owners with severe sanctions for 
noncompliance.
  Example No. 3: The error and fraud rate in one program alone, the 
earned income credit, is nearly 21 percent. Five billion dollars were 
erroneously paid out of tax money last year alone.
  If these examples of mismanagement are not troubling enough, they 
pale in comparison to a recent Associated Press story that hit the 
newspapers in Missouri, and that is that the IRS is now targeting the 
victims of the great flood of 1993 with audits of these individual 
taxpayers who cannot document their losses because receipts were washed 
away in the flood.
  Now, Mr. Speaker, the next time that the rivers in this country run 
high, Americans should not have to look after their family heirlooms, 
their prized possessions, their loved ones, and their tax records. 
Clearly, the time has come to institute bold management reforms.
  I agree with the preceding speaker, the gentleman from Maryland [Mr. 
Hoyer]. We also have to begin to talk about fundamental reform of the 
tax system. We have to talk about a fundamental discourse about how to 
change and simplify the Tax Code. But this legislation will begin to 
implement that taxpayer service. Shifting

[[Page H10034]]

the focus from audit quotas and collection goals to taxpayer service, 
to enhance taxpayer rights, allow individuals to collect attorney's 
fees when the IRS is wrong.
  It is time to return the word ``service'' to the Internal Revenue 
Service. This restructuring bill does that, and I urge its support.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Mississippi [Mr. Taylor].
  Mr. TAYLOR of Mississippi. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  I would also like to thank the gentleman from Ohio [Mr. Portman] for 
bringing this to the floor, and above all, I would like to thank the 
gentleman from Ohio [Mr. Traficant]. It is said that Moses, after first 
freeing his people from the Pharaoh, and then wandering for 40 years in 
the desert, never got to see the promised land. That is sort of how the 
gentleman from Ohio [Mr. Traficant] must feel after his 10 years of 
trying to get this done.
  Mr. Speaker, I agree with the gentleman from Ohio. Had the Democratic 
leadership done its job and allowed this to come to the floor when the 
Democrats controlled the House and allowed the gentleman from Georgia 
[Mr. Deal] to bring his welfare reform bill to the floor when the 
Democrats still controlled this House, we would probably still be in 
the majority.
  But having said that, let me compliment all of the people that worked 
to make this possible, because it is right under American law that a 
person is innocent until proven guilty, and therefore, it should only 
be that a taxpayer is innocent of breaking the law until the tax court 
proves him guilty.
  Second, I think it is very important that those people, and I have 
had a very close friend contact me and say that he thinks the only 
reason he was audited was because he helped me in one of my campaigns. 
That is wrong. If that is what really happened, it is wrong, and the 
people who did that should be punished. This bill would provide a 
$5,000 fine and up to 5 years in jail to any executive branch employee 
who is convicted of using undue influence over an IRS audit.
  Third, I hope that this is just the beginning of true tax reform in 
this country. I say to my colleagues today, or actually this Friday is 
the day that the apprentice welders at the shipyards back home get 
their first paycheck, they will pay more in income taxes than all of 
the cruise ships who do more than $9 billion worth of business in 
American ports will pay collectively. They use our ports, they use our 
firemen, our police, our Corps of Engineers to dredge the channel, our 
Coast Guard to rescue them when they have trouble at sea. They pay 
nothing in corporate income taxes.
  So it is simply not fair to allow that to happen. We need to follow 
up this great first step with the closing of the loopholes that allow 
the big guys to get off scot-free.
  Mr. PORTER. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Florida [Mr. Miller].
  Mr. MILLER of Florida. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  This is a good time to be talking about this issue as the President 
has come out supporting this issue. It is kind of surprising that the 
President is sporting this issue, but on Monday of this week he talks 
about how selfish the taxpayers are to want to cut taxes. So at least 
he will say let us reform the legislation, even though he does not like 
the idea of cutting taxes.
  While I support this bill, I have concern that the bill does little 
to mitigate the impact of the bureaucratic unions on the restructuring 
efforts. In 1996, Congress made serious attempts to downsize and reform 
the IRS. These efforts, however, were hampered by the union that 
represents the IRS employees. As pointed out in a Washington Post 
article, the union was more concerned with keeping their dues than 
helping Congress and their union Members make the IRS operate better.
  I am also disturbed about the abuse of official time that has taken 
place at the IRS. Official time is, ``authorized paid time off for 
Federal employees to engage in union activities.'' In layman's terms, 
that is union work at taxpayers' expense.
  Although there may be some legitimate functions for using official 
time, the amount is skyrocketing at the IRS. Last year alone, the 
employees logged in over 718,000 hours; 718,000 hours paid by the 
taxpayers for official time to do union work. This is a 55-percent 
increase since 1993.
  I realize the Chairman's limitations in addressing these issues, but 
want to bring them to their attention and appreciate the interest in 
addressing this issue in the future. I applaud this bill and believe it 
is a big win for the rights of hard-working taxpayers.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Missouri [Mr. Gephardt], the Democratic leader. It should be noted that 
he was the first to reach out to the gentleman from Ohio [Mr. Portman] 
and the Republican leadership to make certain that this did not become 
a partisan issue.
  (Mr. GEPHARDT asked and was given permission to revise and extend his 
remarks.)
  Mr. GEPHARDT. Mr. Speaker, I would like to commend the gentleman from 
Ohio [Mr. Portman], who worked so hard to bring this legislation 
together and brought together the bipartisan bill. I would like to 
commend the gentleman from New York [Mr. Rangel], and the gentleman 
from Maryland [Mr. Cardin], who worked so hard on our side, with the 
gentleman from Ohio, [Mr. Portman] and others to do this, and this 
truly is a bipartisan bill.
  I strongly support this bill to reform the Internal Revenue Service. 
In my view, we are taking an important step to increase the 
accountability of the IRS and to shift the balance of power back toward 
the taxpayer. But it is important to remember that this bill is not the 
end game in our battle to make the tax system fairer.
  Let us make sure that this bipartisan step taken today will not fall 
prey to partisan fodder for next year's campaign. House Republicans, I 
hope, will pressure their Senate leaders to pass this bill. Let us get 
it in place before the tax season so that people can benefit 
immediately.
  Over the last several weeks we saw the abuses which took place at the 
IRS, abuses which caused Americans to become even more outraged by our 
system of taxation. There have been countless numbers of stories about 
abuses of the enforcement power of the IRS. However, one incident which 
took place in my hometown of St. Louis, I think sums up what is wrong 
and what this bill begins to address.
  In 1993, Missouri suffered from record flooding which destroyed 
thousands of homes and belongings. There was a designation of a Federal 
disaster, and we made special arrangements for individuals to deduct 
their losses suffered from the flood. Amazingly, 3 years after the 
natural disaster took place, there was a manmade disaster which 
revisited the flood's victims.
  The IRS challenged over 200 households about the value of the loss 
they claimed. Taxpayers were asked to prove the market value of lost 
assets when they had their records wiped out by the flood itself. A 
woman who lost her mobile home was forced to pay $10,000 in back taxes 
from this incident.
  Now, this is not a case of IRS agents who have run amok, this is a 
case where common sense, good common sense and fairness was not 
applied. People who were allegedly victims of a disaster were 
victimized once again by their own Government. This bill will help 
eliminate horror stories like this from being repeated.
  This is just the beginning to a critical process of radically 
overwhelming our entire tax system. We also need to restore some sanity 
to the process of filing and preparing taxes. We need to take the major 
step of abolishing the Tax Code itself and then writing and rewriting a 
Tax Code that allows people to make decisions based on their families' 
best interest, a Tax Code that eliminates gimmicks and loopholes that 
only benefit the wealthiest taxpayers.
  One thing is for certain. Democrats are going to fight for the 
working men and women of this country to get a system that works for 
them. The American people have had enough of a tax system that is 
secretive, adversarial, and unfair. Let us start making change happen. 
Let us make it fair today for working people, and let us start today 
and let us get our friends in the other body to follow the lead of this 
bipartisan group to make historic change in our Tax Code.

[[Page H10035]]

  Mr. PORTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Pennsylvania [Mr. Fox].
  Mr. FOX of Pennsylvania. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  Many individuals have experienced enforcement powers of the IRS at 
their worst. Reports by GAO uncovered tales told by many taxpayers of 
unfair, unruly, and sometimes illegal treatment by IRS employees toward 
taxpayers demanding additional taxes and even seizing property for 
payment of taxes that could not effectively be challenged without 
substantial investment of time and money on the part of the taxpayer.
  Thankfully, beginning in 1996, the gentleman from Ohio, [Mr. 
Portman], and the gentleman from Nebraska Senator Bob Kerrey, were 
appointed to cochair a bipartisan commission to study and make 
recommendations to Congress about suitable reforms. H.R. 2676 is a 
result of that commission.
  I can say to my colleagues, this bill will prohibit specific 
Government officials from requesting that the IRS conduct or suspend an 
audit, stop fishing expeditions by the IRS, require probable cause for 
IRS investigations, direct the Treasury to study the implementation of 
a paper-free tax system, extend confidentiality privileges, provide 
statutory rules governing innocent spouse relief, change the burden of 
proof to the IRS and not the taxpayer, and finally, an oversight board. 
All of this makes this bill one worthy of passage in a bipartisan 
fashion.

                              {time}  1315

  Mr. RANGEL. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from 
Massachusetts [Mr. Neal], a member of the Committee on Ways and Means.
  Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  Mr. Speaker, while I rise in support of the Internal Revenue Service 
Restructuring and Reform Act of 1997, I also want to temper my support 
with a couple of warnings. While this legislation would restructure the 
Internal Revenue Service to provide better oversight, greater 
continuity of leadership, improved access to expert advice from the 
private sector, and additional management flexibility, I also think 
that there are potential difficulties on the horizon.
  There has long been an agreement on the need for fundamental reform 
of the IRS, and I certainly commend the work of the National Commission 
on Restructuring the IRS. I support a majority of the recommendations 
made by the National Commission, and I am certainly pleased that 
further improvements have been made to the additional legislation 
introduced by the gentleman from Ohio [Mr. Portman] and the gentleman 
from Maryland [Mr. Cardin]. They have worked diligently to modify their 
original bills to reflect the concerns of many of us on the Committee 
on Ways and Means concerning governance.
  I believe that the Constitution requires that the IRS Commissioner be 
appointed, hired, and, if necessary, fired by the President. The 
legislation today before us keeps the President ultimately responsible 
for the actions of the IRS and the decisions of its Commissioner. The 
Department of Treasury would still have a role in the oversight and 
management of the IRS. A key component of the bill is taxpayer rights. 
These provisions will provide new protections and assistance to 
millions of taxpayers. I support the overall goals of this legislation.
  Let me relate two concerns. First, I am concerned about the authority 
given to a newly created oversight board. This oversight board has the 
authority to review and approve strategic plans of the IRS, and review 
and approve the Commissioner's plans for major reorganization. Under 
this bill, eight private sector individuals would have this authority.
  The bill is not clear on what happens to our tax administration 
system under these new board authorities if a consensus is not reached 
among the board members, or if the IRS Commissioner and Treasury 
Secretary disagree with the views of private sector individuals.
  Second, I am concerned about the provision in the shift of burden of 
proof. This bill provides for the burden of proof to be raised to the 
Secretary of the Treasury in any court proceeding with respect to 
factual issues if the taxpayer asserts a reasonable dispute with 
respect to the taxpayer's income liability.
  The shift in the burden of proof could result in unintended 
consequences. It could result in the IRS conducting more intrusive 
examinations, and the IRS issuing more subpoenas and more summonses to 
third parties in search of evidence. This provision could induce 
taxpayers simply not to keep records.
  Our tax system is voluntary, and we have an overall compliance rate 
of 85 percent, the envy of much of the industrialized world. The 
individual nonbusiness compliance rate is 97.5 percent. The individual 
business compliance rate is 70 percent, and the shift of burden of 
proof could indeed, if we are not careful, make it worse.
  Mr. Speaker, the IRS conducts more than 2 million audits each year, 
but only about 30,000 cases reach court annually. This provision could 
have more far-reaching consequences. It could help aggressive taxpayers 
avoid taxation. We should make it easier for taxpayers to deal with the 
IRS, but I do not think we should make it easier for taxpayers to evade 
taxes. This provision needs to be improved, because those who 
voluntarily comply with our tax system simply deserve more.
  Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Nevada [Mr. Ensign], a very valued member of the Committee on Ways and 
Means.
  Mr. RANGEL. Mr. Speaker, I yield 30 seconds to the gentleman from 
Nevada [Mr. Ensign].
  The SPEAKER pro tempore. The gentleman from Nevada [Mr. Ensign] is 
recognized for 3\1/2\ minutes.
  (Mr. ENSIGN asked and was given permission to revise and extend his 
remarks.)
  Mr. ENSIGN. Mr. Speaker, this bill that we have before us today is 
brought forth in a bipartisan fashion. I would like to recognize my 
colleagues on the Committee on Ways and Means, the gentleman from Ohio 
[Mr. Portman] and the gentleman from Maryland [Mr. Cardin]. They have 
done outstanding work. This is a very good bill, and I think we are 
hearing a lot of reasons why this is a good bill today. But the 
American people have been way ahead of the Congress for many, many 
years. They have recognized how intrusive the IRS has been.
  In my city of Las Vegas, the IRS is viewed almost like the KGB or 
Gestapo was once viewed in other countries. This is not necessarily the 
fault of individual IRS employees. This is the fault of the U.S. 
Congress and the Presidents of past, who have passed an incredibly 
complex Tax Code.
  Former Representative Sam Gibbons said, in a retreat that we had a 
couple of years ago, that there was no single Member of Congress more 
responsible than he himself was for messing up our Tax Code. That was 
because every single time that they tried to reform the Tax Code, 
because of all the special interest groups that we have up here, it 
gets more complex. And the more complex it is, the more incentive there 
is for the IRS to do some of the shenanigans that they do.
  I said before that the American people are way ahead of the Congress. 
The American people are demanding not tax reform, but tax replacement. 
Every place I go around my district, people are saying, we have to 
lower the tax rates. As we are replacing the Tax Code, we have to 
address this issue. That issue is the issue of fairness. We have to 
define exactly what fair is.
  During hearings in front of the Committee on Ways and Means a couple 
of years ago, I asked Jack Kemp, the gentleman from Texas, [Mr. Dick 
Armey] and the gentleman from Missouri, [Mr. Dick Gephardt] what their 
definition was. Jack Kemp and the gentleman from Texas, [Mr. Dick 
Armey], said, when everybody is treated the same. The definition of the 
gentleman from Missouri, [Mr. Dick Gephardt] was, based on your ability 
to pay.
  That means if somebody works twice as hard, you have a farmer over 
here who works twice as many hours a week, happens to make twice as 
much money because they work twice as hard, they should be penalized by 
paying a higher tax rate than the farmer over here who does not work 
quite as hard.
  Mr. Speaker, we need to have a fair Tax Code in America that does not 
penalize people who work harder, who

[[Page H10036]]

make the sacrifices necessary to be successful. In America we have been 
about rewarding success in the past. Let us get back to where success 
is treated in a manner that we want more people to try to achieve it, 
like we do in school. We do not penalize people for getting A's in 
school. We should not penalize people for wanting to be entrepreneurs, 
for wanting to create jobs in America, for wanting to be successful 
themselves.
  This is the fundamental issue that we have to get to, not only today, 
by reforming the way the IRS works, but truly to get to overall tax 
replacement with a fair, simple, lower tax rate and tax system.
  Mr. RANGEL. Mr. Speaker, will the gentleman yield?
  Mr. ENSIGN. I yield to the gentleman from New York.
  Mr. RANGEL. Mr. Speaker, I would ask one question, which is, 
basically, how long would the gentleman say, as a new member of the 
committee, it would take to draft this legislation to bring it to the 
committee and to pass this new tax that the gentleman wants? How long 
would it take to do it?
  Mr. ENSIGN. Mr. Speaker, as we have seen going through the committee, 
the administration is against replacing the income tax as we know it, 
based on their testimony from the Committee on Ways and Means.
  Mr. RANGEL. Mr. Speaker, I would like to reword my question. Forget 
the administration. The gentleman is in the majority. He has the 
majority of the votes. How long would it take for him to get a bill 
passed?
  Mr. Speaker, I yield 2 minutes to the gentlewoman from Connecticut 
[Mrs. Kennelly], a member of the committee.
  Mrs. KENNELLY of Connecticut. Mr. Speaker, I rise in support of this 
IRS reform. Let there be no doubt that IRS abuses will not be 
tolerated. Many of the unfortunate situations that were brought forth 
by the Senate hearings are already improper or illegal under the law, 
and obviously should not be tolerated.
  There also, unfortunately, was something we found out that happened, 
that there was some kind of pervasive atmosphere in some of the offices 
that tied advancement to collection. As a result, throughout the 
offices, if you did not collect, you did not get advanced. This moved 
on to the point that common courtesy and common sense were forgotten. 
This also cannot be tolerated. I think these hearings have brought this 
forth.
  Having said that, I do also want to mention that there are many, 
many, many thousands of people working for the IRS that were carrying 
out their duties in a courteous and common-sense manner. We should 
recognize that. However, the bureaucracy absolutely should know that 
their day is over.
  I would also like to point out that in all of the debate of this 
issue, one fact has been obscured, that the enhanced taxpayers' bill of 
rights has always enjoyed broad support in a bipartisan manner. In 
fact, the very first Taxpayer bill of rights was enacted some years 
ago, and I believe this should be an ongoing process.
  Finally, I believe the legislation is significantly improved over the 
earlier versions, and all members of the Committee on Ways and Means 
worked on this. But I believe it can require further improvement, 
particularly in the area of burden of proof and conflict of interest.
  For instance, in committee the gentleman from California [Mr. Stark] 
offered an amendment to preclude IRS board members from representing 
clients before the IRS. Unfortunately, this amendment did not pass. I 
think as Members look at this, as other Members in the body look at 
this, this could be remedied, because this obviously will cause 
conflict down the line.
  I support this, and am glad this bill has been improved. It certainly 
was needed, and I hope everybody listened and learned from the lessons 
of the Senate hearings.
  Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would like to say that this is an historic moment. We 
are considering landmark legislation today. It is the first time in 45 
years that we have attempted as a Congress to enact fundamental reforms 
at the IRS.
  I want to start by thanking the gentleman from Texas, Mr. Bill 
Archer, chairman of the Committee on Ways and Means, not just on behalf 
of me, but really on behalf of the millions of Americans who will be 
positively affected by this legislation, the taxpayers. For the past 
year and a half he has consistently supported this reform effort; 
first, the bipartisan National Commission on Restructuring the IRS that 
I cochaired, and then the legislation that came out of that Commission.
  It was the gentleman from Texas, Mr. Bill Archer who made this the 
Committee on Ways and Means' top priority for the fall. It was he who 
moved it expeditiously for the floor. We would not be here having this 
debate today if it were not for his support.
  I also want to thank my cosponsor, the gentleman from Maryland, Mr. 
Ben Cardin. He worked with me on this legislation long before it was 
fashionable on his side of the aisle. He looked at the legislation 
carefully, independently. He judged the bill on its merits, rather than 
listening to, frankly, the critics in the administration and others. He 
actually took the time to study it himself. He stood up for what he 
believed in. As a result, he improved the final product.
  I want to commend the gentleman from New York, Mr. Charlie Rangel, 
senior Democrat on the Committee on Ways and Means, who I think today 
as I have heard him talk has just joined the Scrap the Code Tour. But 
the gentleman from New York, Mr. Charlie Rangel, played a very 
important role as a bridge between the Congress and the Clinton 
administration.
  This is a very comprehensive and ambitious package of reforms. 
Members have heard a lot of people talk about it. As such, it is the 
product of a lot of hard work by a lot of good people: Members and 
staff of the IRS Subcommittee on Oversight, chaired by the gentlewoman 
from Connecticut, Mrs. Nancy Johnson, who did a tremendous job on 
taxpayer rights, electronic filing and other committee issues; the full 
Committee on Ways and Means staff, many of whom are here today; the 
Joint Tax Committee staff, Ken Kies and others; the Government Reform 
and Oversight Committee had jurisdiction over this, and they helped us 
on this.
  Regarding the Committee on Appropriations, the gentleman from 
Maryland, Mr. Steny Hoyer, talked earlier about the appropriators. The 
gentleman from Arizona, Mr. Jim Kolbe, and the gentleman from Maryland, 
Mr. Steny Hoyer, had a lot of input into this process, as did their 
staffs; and finally, the Committee on the Budget and the Committee on 
Rules. Both of those committees also had jurisdiction over parts of 
this comprehensive legislation.
  Also, I give thanks to the many outside groups who spent a lot of 
time working on this legislation and gave us valuable input. Then, when 
we had a good package together, they went out and sold it to their 
members, the people at the grass roots. The National Taxpayers Union, 
Americans for Tax Reform, the NFIB, the Chamber, Citizens Against 
Government Waste, and yes, the tax preparer community again gave us 
valuable input and helped us to put that together. They work closely 
with the taxpayers and the IRS every day. They know this will help. 
That is why they are supporting it.
  Special thanks to people who were there from the beginning, to each 
member of the National Commission on Restructuring the IRS, including 
my cochair, of course, Senator Bob Kerrey of Nebraska; but also our 
colleague Senator Chuck Grassley of Iowa, and the gentleman from 
Pennsylvania, Mr. Bill Coyne; the Commission staff; and finally, to my 
own personal staff, who have gone well beyond the call of duty.
  The Commission conducted a year-long audit of the IRS and made 
specific legislative recommendations for change. It was successful, I 
think, for two reasons. First, we kept politics out of it. In fact, we 
brought expertise in. The people who were represented on the Commission 
brought the kind of expertise to bear that we needed to solve the real 
problems at the IRS.
  Commission members not only included a former IRS Commissioner, the 
heads of the New York and California State tax systems, but also a 
small businessman, a representative of the

[[Page H10037]]

people who work at the IRS, technology experts, taxpayer advocates.
  And the Commission did its homework. We conducted 15 days of hearings 
in and out of Washington, interviewed all the senior level IRS 
managers, and for the first time ever actually conducted interviews 
with 300 on-line IRS employees to find out from them what the problems 
were. Finally, we listened carefully to the concerns and stories of the 
taxpayers who foot the bill.
  After our year-long audit, we ended up with more than 50 specific 
reform recommendations for the most comprehensive overhaul of the 
agency since 1952. The IRS Restructuring and Reform Act before us today 
takes these recommendations and, I think, improves on them. Others have 
given a good overview of the bill. Let me just touch on a view of the 
points.

                              {time}  1330

  First, while this effort focuses on making the tax collection system 
work much better, not the Internal Revenue Code itself, the commission 
found, as many of my colleagues have discussed today, that we also need 
to simplify our Tax Code. We take the first step in doing that in this 
legislation.
  We do so by putting in place new legislative incentives for tax 
simplification as compared to every other incentive around here which 
is for more complexity. We also force the IRS to be at the table to 
tell us what a great-sounding new tax legislative proposal is going to 
result in, in terms of new tax schedules, time for the taxpayer to fill 
them out, and work for the IRS.
  The bill also targets Congress by consolidating and streamlining 
congressional oversight. There are now seven committees that give the 
IRS advice. We streamline it, and we force these committees to come 
together and to send a clear and consistent and single message to the 
Internal Revenue Service from Capitol Hill.
  The overall thrust of this bill is to make service to the taxpayer, 
not heavy handed enforcement, but service to the taxpayer the top 
priority of the IRS. It does so in a number of ways. Importantly, it 
dramatically increases IRS accountability for getting the job done by 
establishing a more effective IRS oversight body.
  You have heard other Members talk about the oversight board today. 
The important thing is that it brings expertise to the IRS that is 
absolutely needed and is not there now. Second, it provides continuity, 
stability of leadership, so that over time we actually have changes 
that are going to work for the taxpayers so we are not up here 3 or 4 
or 5 years from now discussing the same problems.
  With this input from nongovernmental experts to hold the IRS 
responsible for answering the phones, getting the computers to work, 
ensuring that IRS employees are trained, and, yes, treating taxpayers 
more courteously, with more respect, we will have a new IRS.
  Much of the media attention has focused on the oversight board, what 
is often overlooked, is that we actually give the IRS commissioner more 
power, more tools to be able to manage the agency, to get the job done 
day-to-day.
  We give the commissioner a 5-year term so the commissioner's 
responsibilities go beyond any single administration. We also give the 
commissioner the ability to bring in his or her own team of senior 
managers. Charles Rossotti was just confirmed by the Senate this week. 
I think he will be a good IRS commissioner. He brings management 
experience and information technology experience that is badly needed. 
We need to give him these tools because without them, frankly, he is 
going to have a very difficult job doing what he wants to do, which is 
to turn the IRS around and make it a taxpayer service organization.
  Taxpayer rights. If Members saw the Senate Committee on Finance 
hearings, they know that we do need new rights in legislation for 
taxpayers. The bill provides us 28 specific new taxpayer rights, like 
allowing taxpayers to recover damages when the IRS does something 
wrongful, like the burden of proof shift we have heard about from the 
gentleman from Ohio [Mr. Traficant] and others, like protecting 
innocent spouses from IRS harassment. All of these are extremely 
important. They compliment the other provisions of the bill.
  Very importantly, this legislation also creates a new system within 
the IRS to evaluate employees. Again, it has been overlooked by many, 
but this is one of the most fundamental changes in terms of changing 
the culture at the IRS. The new system would evaluate employees and 
managers not on the amount of money, taxes, they collect, but on the 
degree to which they are providing good service to the taxpayer.
  It also puts in place unprecedented personnel flexibility to allow 
IRS managers to promote folks who are doing a good job within the 
agency and, yes, to fire the bad apples at the agency. This is called 
reinventing government. We are not just talking about it today, we are 
actually passing legislation to do so. Again, along with the other 
reforms, this is what is going to change the culture at the IRS.
  There are many other key provisions in this legislation: Establishing 
new financial accountability to force the IRS to balance its own books; 
knocking down barriers to electronic filing, which is a win-win for the 
taxpayer and the IRS; and, finally, making the taxpayer advocate truly 
independent so that that taxpayer advocate is indeed an independent 
advocate for the taxpayer.
  Taken as a whole, these legislative changes, this whole package, will 
create a new IRS that treats the taxpayer with respect, gives the 
taxpayer the service they deserve. We have to remember, this troubled 
agency touches more Americans than any other Federal entity. Today, all 
of us as taxpayers are the real winners.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  I would like to take some time to again congratulate the gentleman 
that just spoke, not just because of the expertise that he brought in 
perfecting a bill, but his ability to reach across the aisle to make it 
very easy for the members of the committee to at least take a look at 
what he is talking about.
  I notice a provision that is very close to the gentleman, and that is 
the tax complexity analysis that he spoke about in the well. I would 
like to yield to the gentleman to respond. If this was an existing law, 
how would this apply to the bill that was reported out of our 
committee?
  Mr. PORTMAN. Mr. Speaker, will the gentleman yield?
  Mr. RANGEL. I yield to the gentleman from Ohio.
  Mr. PORTMAN. Mr. Speaker, I think if this had been in place, we would 
have had a better tax bill enacted this summer by the U.S. Congress. I 
think we would have known more about what the complexities are, not 
just for the taxpayer but for the tax collection agency.
  Mr. RANGEL. Well, I do not want to get involved in how the bill came 
to the floor, but the gentleman is asking the people that are 
responsible for doing what we tell them to do. We are the ones that 
made their job difficult, and the gentleman and I agree on that, and so 
does the chairman. We have beat up on them because they did it poorly, 
but it was our complex legislation that they had to administer.
  The gentleman and I are now seeking to improve the Code after, as the 
mumblers would say on the floor, after 37 years of Democratic fiascoes. 
We have had a similar extension of 3 years of Republican fiascoes. Now 
we are saying, let us clean it up. I share with the gentleman that 
unless we attempt to do this in a bipartisan way, it will be America 
that loses.
  I just want to compliment the gentleman for the direction that he is 
going. I hope when we say we have to work together to scrap the Code, 
as the gentleman likes to say, or to pull up the IRS by the roots, that 
we are talking about pulling up this Tax Code by the roots and 
replacing it with something that is fair and equitable. We cannot agree 
unless we see what the gentleman is talking about. For 3 years, I have 
not seen it. But I look forward to working with the gentleman, hoping 
that the other side, while they are talking about scrapping, pulling 
up, and getting rid of, would give us something to work with.
  Mr. Speaker, I yield 2 minutes to the gentleman from Michigan [Mr. 
Levin], a distinguished member of the Committee on Ways and Means.

[[Page H10038]]

  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  I rise in support of this bill. It is a positive step in the 
direction of restoring and increasing confidence in a system that 
relies on taxpayer compliance to be successful. It addresses the 
responsibility that both the Congress and the administration must play 
in improving the accountability and customer service of an agency, as 
said here, that touches the lives of nearly all Americans.
  The bill contains a number of provisions which will reform the IRS. 
It will improve the use of technology at the IRS by enhancing the 
electronic filing of tax returns and other documents. It is 
unacceptable in this day and age that the IRS does not have the most 
up-to-date computer technology.
  It will expand taxpayer relief for the innocent spouse and provide 
tax refund relief to taxpayers during periods of disability. It will 
also expand relief to taxpayers through taxpayer assistance orders, 
grants for low-income clinics, and penalty relief for those who have 
installment agreements with the IRS. The revised bill also retains the 
accountability of the administration over the IRS by retaining the 
President's authority to hire and fire the IRS commissioner.
  This bill is an important step in addressing critical management and 
oversight issues at the IRS, but it is not a panacea. There remain some 
issues in this legislation that we need to continue to work on. I have 
met with IRS officials in Michigan to discuss problems, and I intend to 
continue to do so.
  We do need to look at the Tax Code itself and debate differences of 
opinion about how to improve it. In doing so, the aim must be to 
benefit the citizens that we represent, not to jockey for position at 
the next election.
  Mr. PORTMAN. Mr. Speaker, I yield 5 minutes to the gentleman from 
Florida [Mr. Shaw], chairman of a subcommittee of the Committee on Ways 
and Means and former CPA and recovering lawyer, who added a great deal 
to this legislation.
  Mr. SHAW. Mr. Speaker, I thank the gentlemen for yielding me this 
time.
  I would like to congratulate the gentleman and the gentleman from 
Maryland [Mr. Cardin], the gentleman from Texas [Mr. Archer], and the 
gentleman from New York [Mr. Rangel] for getting together and bringing 
such a wonderful bill that is long past due to the floor of this 
Congress.
  I think perhaps the most shivering words that anybody can hear is the 
knock on the door or the phone call or the letter that starts out, I am 
from the IRS, because of the complexity of the Tax Code and the 
problems involved in filing one's own return.
  Not too many years ago, I think it was just 2 years ago, an 
accounting problem was given to the top accounting firms in the United 
States and asked them to take this example and, from this, to devise an 
income tax return and to figure the tax liability from that set of 
circumstances that were given. Out of the many tax preparers that 
participated in this experiment, not one of them came up with the same 
tax liability. It was not even close. It was thousands and thousands of 
dollars apart. It just shows the tremendous complexities of the Tax 
Code and the problems that they have.
  During the debate on the floor, I know it has been going back and 
forth as to the complexities that were put into the Tax Code and 
whether the Democrats or Republicans did it. I do not think that makes 
any difference. It is this Congress that is bringing about the 
correction and is bringing it about in a bipartisan way, as a 
beginning, I would say, as a beginning.
  Under the new rules that we have imposed upon ourselves, when we give 
somebody a tax break, we have got to work in revenue somewhere else in 
the Code. What has this developed over the years? It has developed a 
patchwork quilt. It has provided for us a real mess that is going to 
take a lot of effort, a lot of bipartisan effort, to straighten out.
  The only way to do it is to try to get together and to at least get 
some bipartisan support. It is not going to be complete. There will be 
a lot of controversy when it finally goes. But this Code has to be 
ripped up by the roots.
  Now, this is going to balance the playing field as far as the 
Internal Revenue Service for the taxpayers. This is tremendously 
important. The Internal Revenue Service should be more of a service 
rather than a policeman in watching over the taxpayers.
  But in doing this, it is just basic fairness. We do not want to give 
the police in this country a criminal code that is so complicated that 
they do not know how to administer it or to enforce it, but yet we have 
done this with the IRS. To make it worse, we have provided that the 
taxpayer has no privacy or right of confidentiality with their CPA.
  In this regard, I think it is most important that when somebody is 
talking to their tax preparer, when they are going over all their books 
and records, that they know that their tax preparer is not going to be 
called in and questioned because he has no particular rights of 
confidentiality. This particular bill will correct this situation and 
let the taxpayer have confidence, the same confidence that he has in 
dealing with his lawyer, and that is only fair.
  I think one of the other big things in this bill that other Members 
have talked about today but is tremendously important, it puts the 
burden of proof on the IRS instead of the taxpayer.
  I remember in studying the Tax Code as a student in college and at 
law school that it always was confusing to me how we could have this 
sense of justice where a taxpayer has to prove his innocence as far as 
the amount of taxes that are owed in order to prove his case and the 
IRS really does not have to prove anything. This is bringing about 
fairness, and for the first time the burden of proof will be on the 
IRS.
  This is a tremendous bill. This is a first step. I want to say, it is 
only a first step in ripping out the entire Code to reform the Code and 
perhaps even give us the opportunity, the historic opportunity, to 
take, eliminate the income tax as we know it today and, in its place, 
put another type of revenue collection for the Federal Government that 
will be fairer, easier to administer, and much easier and fairer in 
being able to enforce by the Federal Government.
  Again, my compliments for all of those who put this bill in place. It 
certainly is, I think, a very, very good day in the history of the U.S. 
House of Representatives.

                              {time}  1345

  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, let me associate myself with the remarks of the 
gentleman from Florida [Mr. Shaw] that we have in a bipartisan way 
moved forward in trying to correct the abuses and better the collection 
of taxes. I do not see anything in this bill that deals with the 
simplification, even though there is hope that this bipartisan spirit 
will continue.
  I have been invited to join this Scrap the Code trip, and I accept. 
Let us scrap it. But I think they ought to, anyone that is going to 
join with them in this effort, to at least talk about what they are 
going to replace it with. There are just as many different views on 
their side as there is on our side. But I do not think it is fair to 
the American people, as political as it may sound, to promise them that 
they are getting rid of this complex Tax Code, which none of us are 
proud of, and not tell them what they are replacing it with.
  Mr. PORTMAN. Mr. Speaker, will the gentleman yield?
  Mr. RANGEL. I yield to the gentleman from Ohio.
  Mr. PORTMAN. Mr. Speaker, the gentleman from New York [Mr. Rangel] 
just said that there is nothing in this legislation with regard to 
simplification. As the gentleman from New York [Mr. Rangel] is aware, 
there is for the first time ever in this legislation the requirement 
that my colleague or I or anybody else who has a new tax idea has to 
subject it to this simplification analysis. And if we do not do that, 
my colleague or I or any other Member can raise a point of order on the 
floor of the House.
  This is not the flat tax. It is not the sales tax. It is not 
scrapping the code and starting over. But it is a first small, baby 
step in the right direction, because every incentive now, as my 
colleague knows, goes the other way, and he talked about it earlier.

[[Page H10039]]

  Mr. RANGEL. When this reaches the President's desk, let us, my 
colleague and I, talk about that provision.
  Mr. Speaker, I yield 2 minutes to the gentleman from North Carolina 
[Mr. Price].
  Mr. PRICE of North Carolina. Mr. Speaker, like other Members, I have 
helped many, many constituents resolve disputes with the Internal 
Revenue Service.
  In one case earlier this year, a Raleigh man trying to make good on 
his back taxes was not told that he had the option of setting up a 
payment plan. Instead, the IRS placed a lien on his bank account. In 
another case, a woman who had set up a payment plan and made every 
payment on time received notice that her plan had been canceled and her 
entire balance was due within 2 weeks.
  Fortunately, I was able to help these constituents. But not every 
taxpayer is able to come to their Member of Congress. We need to fix 
the system for everybody. We need to restructure the IRS. We need to do 
away with tax collection quotas. We need to revise rigid rules. And we 
need to set customer service oriented collection policies that are 
geared toward assisting taxpayers in complying with the law rather than 
punishing them.
  H.R. 2676 is based on the recommendations of the bipartisan National 
Commission on Restructuring the IRS. It will strengthen taxpayer rights 
and modernize the administration of the IRS. The new IRS Oversight 
Board, made up of a majority of private sector professionals, will have 
the authority to eliminate collection quotas and measure performance by 
the quality of service that agents provide.
  Mr. Speaker, passage of H.R. 2676 will restructure the IRS and pave 
the way for further reform and simplification of the Tax Code. I urge 
my colleagues to vote for this long overdue legislation.
  Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from 
Montana [Mr. Hill].
  Mr. HILL. Mr. Speaker, I rise in strong support of the Portman-
McCrery reform of the IRS.
  Mr. Speaker, nothing evokes greater fear in the heart of taxpayers, 
in the hearts of small business owners than does a notice from the IRS. 
Men and women who obey the law, follow the rules, and respect their 
responsibilities to collect and report and pay taxes have great fear of 
the IRS.
  Why is it that law-abiding people fear this organization? Well, the 
reason is, what we saw in the Senate hearings just a few days ago, 
reported abuses by the employees in the IRS and abuses in terms of how 
the IRS is oriented toward dealing with the public. We do not need 
hearings in the House of Representatives to know that the IRS is 
frequently causing great conflict for taxpayers.
  H.R. 2676 is a good start because it focuses on serving the public 
and serving taxpayers rather than enforcement. It changes performance 
standards so people are rated on the basis of how well they serve the 
public rather than how strictly they enforce the law. It creates an 
oversight board of citizens. It creates a taxpayers' advocate. It 
creates accountability, Mr. Speaker. And that is why I support the 
measure.
  Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Texas [Ms. Jackson-Lee].
  [Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman from New 
York [Mr. Rangel] for yielding me the time, and I thank the committee 
for its leadership.
  The discussion that we have had on the floor today emphasizes that we 
have come now full circle to recognize that concerns by citizens about 
the IRS are well-founded. Although we pay tribute to those hard-working 
Internal Revenue Service employees that work day after day doing their 
job, it is important that we now in a bipartisan manner reform the IRS. 
I think that is important.
  This is not a Republican piece of legislation. It is not a Democratic 
piece of legislation. In fact, I would like to see more things being 
done. But I am here to generally speak to the fact that we are, at 
least, doing something. And I will continue to review H.R. 2676, along 
with its many amendments, to determine its adaptability to the concerns 
that I have.
  First of all, I held a hearing with constituents in my district in 
Houston where they testified to many examples of problems with the IRS. 
The story of a doctor who was obviously not leaving town, and who 
attempted to resolve his problems with the IRS; when an IRS agent came 
into his office to physically remove him from his medical practice 
while he was attending to his patients and then to further close down 
his doors. What about the law enforcement officer, wounded and injured 
and in his hospital bed, only to find out that his house had been 
foreclosed on and other tragic situations happening while he was 
recuperating from a job injury. These are the kinds of grievances that 
we face all the time.
  I am delighted that we are looking at opportunities, for example, to 
move the burden of proof so that taxpayers in IRS court cases are 
considered innocent until being proven guilty. I am interested, of 
course, in the oversight board. I think that has great possibilities. 
And certainly I am concerned about the fairness of IRS audits. The 
common law privilege of attorney-client privilege for those authorized 
to practice before the IRS will now be afforded, as it should be to 
persons--tax advisors--representing taxpayers before the IRS. It will 
also end the use and abuse of summons by the IRS in looking for 
documents. A spouse who may be innocent for the mistakes of another 
spouse in preparing a tax return will also now be afforded tax relief.
  Let me conclude, Mr. Speaker, by explaining parts of IRS reform 
legislation, the Taxpayers Justice Act of 1997, that I intend to offer 
in the legislation. It provides for a true taxpayer's citizen's 
advocate located in IRS regions throughout the Nation, serving as a 
watchdog over the IRS. Additional provisions relating to eliminating 
discrimination in the workplace and solving unfair tax burdens put on 
the divorced spouse.
  Mr. Speaker, I include the following for the Record:
  Mr. Speaker, I rise today in support of reforming the Internal 
Revenue Service to make it more efficient, accountable, modern and 
taxpayer friendly. This is the call from the constituents of the 18th 
Congressional District in Texas that I heard when I recently held a 
town hall forum on IRS abuses of taxpayers.
  The stories of coercion, corruption and scare tactics of IRS agents 
that I heard were more than enough for me to prepare for introduction 
of my own IRS reform bill. Entitled the ``Taxpayer Justice Act of 
1997'' it has many of the provisions that are being offered today in 
this comprehensive reform bill.
  My bill called for civil and criminal penalties if there is a finding 
of abuse of taxpayer's rights. Therefore, I can endorse the opening up 
of the Government for civil liability for taxpayer abuse. This bill 
would extend the liability of the government for IRS abuse caused by 
those who may negligently diregard our tax laws. This is a safeguard 
that I know taxpayers are demanding and one that I strongly support.
  The establishment of an independent oversight board by the President 
is another provision in my bill as well. There is no doubt that such 
oversight of the administrative functions of the IRS is necessary after 
the disclosure of the atrocities that I heard and the stories that came 
forward from the citizens in Houston. There were, in fact, cases of 
possible suicide over the tactics that were used and it is time to end 
such abuses. The oversight board will have the responsibility to review 
and advise the Secretary of the Treasury about customer service 
measures that will make sense. Such oversight is necessary if we are to 
make the IRS more efficient.
  Shifting the burden of proof to the IRS is another practical measure 
that makes good sense and one that is in my bill as well. In every 
other proceeding where the government is moving against a citizen in a 
court of law, the government bears the burden of proving the facts. It 
is high time that the IRS come in line with this time-honored tradition 
of the government bearing the burden of proving any factual issue it is 
asserting in a court of law.
  This burden of proof will be enforced after the taxpayer has fully 
cooperated with the IRS with respect to the factual issue. A taxpayer 
would be required to provide access to the information, witnesses and 
documents within the control of the taxpayer. This makes the proceeding 
more in line with every other court proceeding and makes it fair.
  This bill would also correct meaningful measures that will insure 
taxpayer fairness in IRS audits and collection activities. The common 
law privilege of attorney-client privilege for those tax advisors 
authorized to practice

[[Page H10040]]

before the IRS will now be afforded as it should be. It would also end 
the use and abuse of summons by the IRS in looking for documents. Under 
this bill the IRS would be required to make reasonable inquiries and 
could not issue a summons until it has used other reasonable methods to 
ascertain where the information it is seeking may be.
  The bill also provides for making more information available to the 
taxpayers. It requires the IRS to print and make available to taxpayers 
explanations that make sense and clarify a variety of complicated 
matters. Married taxpayers will be alerted to liabilities that they 
would be jointly liable for even though only one spouse earned the 
income.
  A spouse who may be innocent for the mistakes of another spouse in 
preparing a tax return will also now be afforded relief from tax 
liability, interest and penalties. Now a spouse who has nothing to do 
with the preparation of the return is fully liable for the mistakes. 
This wrong and would be corrected by this bill.
  Again, Mr. Speaker, it is high time that we have the IRS reform that 
the American people have been calling for. I support this bill and urge 
my colleagues to vote for it.
  Mr. PORTMAN. Mr. Speaker, I ask the gentleman from New York [Mr. 
Rangel] if he has any additional speakers?
  Mr. RANGEL. Mr. Speaker, I have no speakers at this time.

                          ____________________