[Congressional Record Volume 144, Number 25 (Wednesday, March 11, 1998)]
[Senate]
[Pages S1779-S1784]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Reid, and Mr. Kerrey):
  S. 1747. A bill to amend the Internal Revenue Code of 1986 to provide 
for additional taxpayer rights and taxpayer education, notice, and 
resources, and for other purposes.


                       taxpayer bill of rights 3

  Mr. GRASSLEY. Mr. President, I rise today to introduce legislation to 
further protect taxpayer rights.
  Mr. President, I have long championed taxpayer rights. In 1989, I co-
authored the first ever taxpayer bill of rights with Senator David 
Pryor of Arkansas. We joined forces again in 1996 to pass the sequel 
known as T2, the Taxpayer Bill of Rights 2. Yet, my work as a member of 
the National Commission on the Restructuring of the IRS and as a senior 
member of the Senate Finance Committee led me to believe that we need 
even more taxpayer protections. In addition, we need to make a 
concerted effort to educate taxpayers of their rights and the IRS tax 
procedures.
  The findings of the National Commission on Restructuring the Internal 
Revenue Service, of which I was a member, recommended increasing 
taxpayer rights. The Senate Finance Committee recently concluded months 
of hearings that demonstrated to us, and to the public, that American 
taxpayers are being treated unfairly by the IRS. I cannot sit idly by 
and let this happen to the American people.
  For a start, last year Senator Kerrey and I introduced legislation 
that would implement the Restructuring Commission's proposals, 
including the taxpayer rights recommendations. The House of 
Representatives, when considering identical legislation, weakened some 
of the provisions. To its credit, the House also added some strong, 
imaginative protections in return. I applaud everyone who works to 
increase taxpayer rights, and to give the unrepresented taxpayer a 
louder voice against the IRS.
  With introduction of this legislation, the Taxpayer Bill of Rights 3, 
or T3, I am saying that I want to see the strongest taxpayer 
protections possible in any Senate-passed IRS restructuring 
legislation. The bill I am introducing today, the Taxpayer Bill of 
Rights 3, contains the strongest provisions from both the Kerrey-
Grassley bill and from the House-passed bill, and also some additional 
protections.
  This bill takes a two-pronged approach to assure taxpayer rights. 
First, it increases basic taxpayer rights. It helps place a check on 
IRS collection actions. It gets the IRS off the back of delinquent 
taxpayers who are making good faith efforts to resolve disputes, and it 
prohibits the IRS from harassing and abusing taxpayers. Specifically, 
it requires the IRS to obtain court approval before seizing taxpayer 
property or belongings. Further, it requires that the levy is 
reasonable. If the IRS is levying a principal residence or business, 
then the IRS must have exhausted all other payment options, including 
the use of installment agreements. It also increases taxpayer rights by 
allowing honest citizens to sue the IRS when its employees negligently 
disregard provisions of the code or regulations.
  It also requires the IRS to enter into installment agreements for tax 
liability that is less than $10,000, if the taxpayer has not failed to 
file or pay taxes in the last 5 years, and has no prior installment 
agreements. It also requires the Commissioner to catalog and review 
taxpayer complaints of misconduct by IRS employees, and develop 
procedures for review and discipline. It expands the grounds on which 
taxpayers can sue the IRS for civil damages to include negligent 
actions.

[[Page S1780]]

These are only a few of this bill's provisions.
  Another inequity that is solved is the difference between interest on 
tax overpayments and underpayments. Currently, the IRS charges you more 
in interest on money you owe to it, than it gives you on money that it 
owes you. This is simply not fair.
  Another unfairness that occurs is that the IRS does not have to live 
by the same collection rules that creditors live by. My bill prohibits 
the IRS from communicating with a delinquent taxpayer at any unusual 
time or place, generally prohibiting telephone calls other than between 
8:00 a.m. and 9:00 p.m. It also prohibits the IRS from harassing or 
abusing delinquent taxpayers.
  The second prong of my bill increases taxpayer education, notice and 
resources. Taxpayers must be aware of their rights in order to take 
advantage of them. Recent hearings have exposed IRS strategies that 
target the little guy by using his lack of knowledge about the process 
and about his rights against him. I intend to bring this unjust 
practice to an end. My bill establishes a 24-hour a day, toll-free 
taxpayer help line. This help line must be staffed at all times by a 
person trained in helping individual taxpayers, and during regular 
business hours by a person trained to help small businesses. All paper 
communications received from the IRS must prominently display this 
phone number, as well as the number of the local taxpayer advocate, 
low-income taxpayer clinics and the toll-free number for taxpayers to 
register complaints of misconduct by IRS employees.

  In addition, the IRS must inform taxpayers of their rights and IRS 
processes. This includes notice at the time of an interview, in a first 
notice of appeal, and in other contacts with the IRS. Taxpayers also 
must be notified of their right to refuse to extend the statute of 
limitations when the IRS asks the taxpayer to extend this time.
  Mr. President, this bill sends a clear signal to the IRS: put the 
customer first. Blame only those who are guilty. To this end, my bill 
is missing one provision that is vital to taxpayer rights reform. 
Today, in addition to introducing my own freestanding legislation, I am 
adding myself as a cosponsor to Senator D'Amato's innocent spouse 
reform bill. Innocent spouses are caught in the trap of joint and 
several liability and are unfairly saddled with another's tax debt. If 
we are truly trying to bring fairness and equity to the American tax 
system, then strong, and retroactive innocent spouse reform must be a 
part of any IRS reform bill.
  Finally, I'll be working during Finance Committee and Senate 
consideration of IRS reform legislation to give taxpayers the rights 
they deserve. This bill, the Taxpayer Bill of Rights 3, is the first 
step in this direction. Let the word ring clear: The era of IRS 
bullying is over.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

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

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Bill of Rights 3''.
       (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.
Sec. 2. Findings.

                        TITLE I--TAXPAYER RIGHTS

Sec. 101. Disclosure of criteria for examination selection.
Sec. 102. Civil damages for negligence in collection actions.
Sec. 103. Tax return information.
Sec. 104. Freedom of information.
Sec. 105. Elimination of application of failure to pay penalty during 
              period of installment agreement.
Sec. 106. Safe harbor for qualification for installment agreements.
Sec. 107. Cataloging complaints.
Sec. 108. Suspension of statute of limitations on filing refund claims 
              during periods of disability.
Sec. 109. Limitation on financial status audit techniques.
Sec. 110. Notice of deficiency to specify deadlines for filing tax 
              court petition.
Sec. 111. Refund or credit of overpayments before final determination.
Sec. 112. Threat of audit prohibited to coerce tip reporting 
              alternative commitment agreements.
Sec. 113. Court approval for seizure of taxpayer's property.
Sec. 114. Expansion of authority to issue taxpayer assistance orders.
Sec. 115. Modifications to certain levy exemption amounts.
Sec. 116. Offers-in-compromise.
Sec. 117. Increase in overpayment rate payable to taxpayers other than 
              corporations.
Sec. 118. Levy prohibited during certain negotiations.
Sec. 119. Application of certain fair debt collection procedures.
Sec. 120. Allowance of civil damage suits by persons other than 
              taxpayers for IRS unauthorized collection actions.
Sec. 121. Cooperative agreements with State tax authorities.

          TITLE II--TAXPAYER EDUCATION, NOTICE, AND RESOURCES

Sec. 201. Explanation of taxpayers' rights.
Sec. 202. Toll-free customer help line.
Sec. 203. Notice of various telephone numbers.
Sec. 204. Procedures involving taxpayer interviews.
Sec. 205. Explanation of joint and several liability.
Sec. 206. Procedures relating to extensions of statute of limitations 
              by agreement.
Sec. 207. Explanations of appeals and collection process.
Sec. 208. Independent operation of local taxpayer advocates.

     SEC. 2. FINDINGS.

       The Senate finds that--
       (1) the National Commission on Restructuring the Internal 
     Revenue Service has found the urgent need for significant 
     Internal Revenue Service reform;
       (2) the ongoing hearings of the Committee on Finance of the 
     Senate have uncovered consistent abuse of taxpayers by the 
     Internal Revenue Service;
       (3) the Internal Revenue Service should be responsible and 
     held accountable for its treatment of taxpayers;
       (4) the American public expects and deserves timely and 
     accurate service from the Internal Revenue Service; and
       (5) additional taxpayer protections are necessary to ensure 
     that taxpayers receive fair, impartial, and courteous 
     assistance from the Internal Revenue Service.
                        TITLE I--TAXPAYER RIGHTS

     SEC. 101. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.

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

     SEC. 102. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.

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

     SEC. 104. FREEDOM OF INFORMATION.

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

[[Page S1781]]

       (2) expedited processing is warranted because the 
     information sought involves possible questions about the 
     government's integrity which affect public confidence.

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

     SEC. 105. ELIMINATION OF APPLICATION OF FAILURE TO PAY 
                   PENALTY DURING PERIOD OF INSTALLMENT AGREEMENT.

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

     SEC. 106. SAFE HARBOR FOR QUALIFICATION FOR INSTALLMENT 
                   AGREEMENTS.

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

     SEC. 107. CATALOGING COMPLAINTS.

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

     SEC. 108. 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:
       ``(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.

     SEC. 109. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

       Section 7602 is amended by adding at the end the following:
       ``(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. 110. 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: ``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. 111. 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:
       ``(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: ``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. 112. 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.

     SEC. 113. COURT APPROVAL FOR SEIZURE OF TAXPAYER'S PROPERTY.

       (a) In General.--Section 6331(a) (relating to levy and 
     distraint) is amended by adding at the end the following:
       ``(2) Limitation on authority of secretary.--
     Notwithstanding paragraph (1), the Secretary shall not levy 
     upon any property or rights to property until a court of 
     competent jurisdiction--
       ``(A) has determined that--
       ``(i) such levy is reasonable under the circumstances, and
       ``(ii) in the case of a levy upon the principal residence 
     or business establishment of the taxpayer, the Secretary has 
     exhausted all other payment options, and
       ``(B) issues a writ of execution.''
       (b) Conforming Amendment.--Section 6331(a) is amended by 
     striking ``If any person'' and inserting:
       ``(1) In general.--If any person''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective for seizures occurring on or after the 
     date of the enactment of this Act.

     SEC. 114. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       (a) In General.--Section 7811(a) (relating to taxpayer 
     assistance orders) is amended--
       (1) by striking ``Upon application'' and inserting the 
     following:
       ``(1) In general.--Upon application'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following:

[[Page S1782]]

       ``(2) Determination of hardship.--For purposes of 
     determining whether a taxpayer is suffering or about to 
     suffer a significant hardship, the Taxpayer Advocate should 
     consider--
       ``(A) whether the Internal Revenue Service employee to 
     which such order would issue is following applicable 
     published administrative guidance, including the Internal 
     Revenue Manual,
       ``(B) whether there is an immediate threat of adverse 
     action,
       ``(C) whether there has been a delay of more than 30 days 
     in resolving taxpayer account problems,
       ``(D) the prospect that the taxpayer will have to pay 
     significant professional fees for representation,
       ``(E) whether the taxpayer will suffer irreparable injury, 
     or a long-term adverse impact, if relief is not granted, and
       ``(F) any other factor the Taxpayer Advocate deems 
     appropriate.''
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 115. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

       (a) Fuel, Etc.--Section 6334(a)(2) (relating to fuel, 
     provisions, furniture, and personal effects) is amended by 
     striking ``$2,500'' and inserting ``$5,000''.
       (b) Books, Etc.--Section 6334(a)(3) (relating to books and 
     tools of a trade, business, or profession) is amended by 
     striking ``$1,250'' and inserting ``$10,000''.
       (c) Conforming Amendment .--Section 6334(f)(1) (relating to 
     inflation adjustment) is amended--
       (1) by striking ``1997'' and inserting ``1999'', and
       (2) by striking ``1996'' in subparagraph (B) and inserting 
     ``1998''.
       (d) Effective Date.--The amendments made by this section 
     shall tale effect with respect to levies issued after 
     December 31, 1998.

     SEC. 116. OFFERS-IN-COMPROMISE.

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

     SEC. 117. 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.

     SEC. 118. LEVY PROHIBITED DURING CERTAIN NEGOTIATIONS.

       (a) In General.--Section 6331 (relating to levy and 
     distraint) is amended by redesignating subsection (i) as 
     subsection (j) and by inserting after subsection (h) the 
     following:
       ``(j) No Levy During Certain Negotiations.--
       ``(1) In general.--No levy may be made under subsection (a) 
     on the salary or wages or other property of any person with 
     respect to any unpaid tax in a case, and during the period, 
     to which paragraph (2) or (3) applies.
       ``(2) Offers in compromise; installment agreements.--This 
     paragraph applies to any unpaid tax of such person--
       ``(A) during the period that an offer by such person in 
     compromise under section 7122, or for an installment 
     agreement under section 6159, of such unpaid tax is pending 
     with the Secretary, and
       ``(B) if such offer is rejected by the Secretary, during 
     the 30 days thereafter (and, if an appeal of such rejection 
     is filed within such 30 days, during the period that such 
     appeal is pending).
       ``(3) Certain assessments of individual income tax.--This 
     paragraph applies to any unpaid tax of an individual which is 
     imposed by subtitle A during the 60-day period beginning on 
     the date such individual requests that this paragraph apply 
     to such tax if--
       ``(A) such tax was included in a notice of deficiency under 
     section 6212 mailed to the last known address of such 
     individual, and
       ``(B) the assessment of such tax was not prevented at any 
     prior time by reason of any action taken by such individual.
       ``(4) Exception.--Paragraph (1) shall not apply if the 
     Secretary finds that--
       ``(A) the collection of the tax is in jeopardy, or
       ``(B) the offer or request is made solely to delay 
     collection.
       ``(5) Suspension of statute of limitations on collection.--
     Subsection (i)(4) shall apply for purposes of this 
     subsection.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxes assessed on or after the 60th day after 
     the date of the enactment of this Act.

     SEC. 119. APPLICATION OF CERTAIN FAIR DEBT COLLECTION 
                   PROCEDURES.

       (a) In General.--Subchapter A of chapter 64 (relating to 
     collection) is amended by inserting after section 6303 the 
     following:

     ``SEC. 6304. FAIR TAX COLLECTION PRACTICES.

       ``(a) Communication With the Taxpayer.--Without the prior 
     consent of the taxpayer given directly to the Secretary or 
     the express permission of a court of competent jurisdiction, 
     the Secretary may not communicate with a taxpayer in 
     connection with the collection of any unpaid tax--
       ``(1) at any unusual time or place or a time or place known 
     or which should be known to be inconvenient to the taxpayer;
       ``(2) if the Secretary knows the taxpayer is represented by 
     an attorney with respect to such unpaid tax and has knowledge 
     of, or can readily ascertain, such attorney's name and 
     address, unless the attorney fails to respond within a 
     reasonable period of time to a communication from the 
     Secretary or unless the attorney consents to direct 
     communication with the taxpayer; or
       ``(3) at the taxpayer's place of employment if the 
     Secretary knows or has reason to know that the taxpayer's 
     employer prohibits the taxpayer from receiving such 
     communication.

     In the absence of knowledge of circumstances to the contrary, 
     the Secretary shall assume that the convenient time for 
     communicating with a taxpayer is after 8 a.m. and before 9 
     p.m., local time at the taxpayer's location.
       ``(b) Prohibition of Harassment and Abuse.--The Secretary 
     may not engage in any conduct the natural consequence of 
     which is to harass, oppress, or abuse any person in 
     connection with any unpaid tax. Without limiting the general 
     application of the foregoing, the following conduct is a 
     violation of this subsection:
       ``(1) The use or threat of use of violence or other 
     criminal means to harm the physical person, reputation, or 
     property of any person.
       ``(2) The use of obscene or profane language or language 
     the natural consequence of which is to abuse the hearer or 
     reader.
       ``(3) The publication of a list of taxpayers who allegedly 
     refuse to pay taxes, except to a consumer reporting agency or 
     to persons meeting the requirements of section 603(f) or 
     604(a)(3) of the Fair Credit Reporting Act.
       ``(4) Causing a telephone to ring or engaging any person in 
     telephone conversation repeatedly or continuously with intent 
     to annoy, abuse, or harass any person at the called number.
       ``(5) Except as provided under rules similar to the rules 
     in section 804 of the Fair Debt Collection Practices Act (15 
     U.S.C. 1692b), the placement of telephone calls without 
     meaningful disclosure of the caller's identity.
       ``(c) Civil Action for Violations of Section.--

  ``For civil action for violations of this section, see section 
7433.''

       (b) Clerical Amendment.--The table of sections for 
     subchapter A of chapter 64 is amended by inserting after the 
     item relating to section 6303 the following:

``Sec. 6304. Fair tax collection practices.''

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

     SEC. 120. ALLOWANCE OF CIVIL DAMAGE SUITS BY PERSONS OTHER 
                   THAN TAXPAYERS FOR IRS UNAUTHORIZED COLLECTION 
                   ACTIONS.

       (a) In General.--Section 7433(a) (relating to civil damages 
     for certain unauthorized collection damages) is amended--
       (1) by striking ``a taxpayer'' and inserting ``any 
     person'', and
       (2) by striking ``such taxpayer'' and inserting ``such 
     person''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to actions by officers or employees of the 
     Internal Revenue Service after the date of the enactment of 
     this Act.

     SEC. 121. COOPERATIVE AGREEMENTS WITH STATE TAX AUTHORITIES.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding after section 7524 the 
     following:

     ``SEC. 7525. TAX ADMINISTRATION AGREEMENTS.

       ``(a) In General.--To the extent provided in regulations, 
     the Secretary is authorized to enter into tax administration 
     agreements with any State agency, body, or commission 
     described in section 6103(d)(1). Under such agreements, the 
     Secretary may delegate powers relating to the administration 
     of this title to officers and employees of such State agency, 
     body, or commission, only if such officers and employees in 
     exercising such powers are under the supervision of the 
     Secretary.
       ``(b) Tax Administration Agreement Defined.--A tax 
     administration agreement is a written agreement entered into 
     by the Secretary and a State agency, body, or commission 
     described in section 6103(d)(1) that provides for a 
     delegation of tax administration powers or a payment of 
     reasonable compensation for activities conducted by either 
     party to the agreement. Each Federal or State tax 
     administration power to be exercised pursuant to a tax 
     administration agreement shall be performed in accordance 
     with the terms of the agreement to the extent such terms do 
     not conflict with the Federal or State laws that otherwise 
     authorize the respective tax administration function.
       ``(c) Judicial Proceedings.--
       ``(1) Review by the united states courts.--Nothing in this 
     subchapter shall give any court of the United States any 
     additional jurisdiction nor diminish its jurisdiction.
       ``(2) Prohibition of review by the state courts.--No court 
     or other tribunal of any State shall have jurisdiction to 
     adjudicate in any action, legal or equitable, the validity or

[[Page S1783]]

     scope of an assessment of an internal revenue tax that is the 
     subject of a tax administration agreement.
       ``(3) Limitation on personal jurisdiction.--No court or 
     other tribunal of any State shall have jurisdiction over an 
     individual who exercises Federal tax administration powers 
     pursuant to a tax administration agreement for actions 
     relating to the exercise of those powers.
       ``(d) Payment for Services.--The Secretary is authorized to 
     pay reasonable compensation for activities conducted by a 
     State pursuant to a tax administration agreement. The 
     Secretary is authorized to collect reasonable compensation 
     for activities conducted by the United States pursuant to a 
     tax administration agreement.
       ``(e) Availability of Funds.--Any funds appropriated for 
     purposes of the administration of this title shall be 
     available for purposes of carrying out the Secretary's 
     responsibilities under a tax administration agreement. Any 
     reasonable compensation received pursuant to a tax 
     administration agreement shall be credited to the amounts so 
     appropriated and shall remain available to the Internal 
     Revenue Service until expended to supplement appropriations 
     made available to the appropriations accounts in the fiscal 
     year during which this provision is enacted and all fiscal 
     years thereafter.
       ``(f) Tax Treaties and Other International Agreements.--To 
     the extent the provisions of this subchapter or a tax 
     administration agreement may conflict with the terms of any 
     tax treaty, or other international agreement of the United 
     States containing provisions relating to taxation or the 
     administration of tax laws, the terms of the treaty or 
     international agreement shall control.
       ``(g) Employee Status.--Any officer or employee of the 
     United States acting pursuant to a tax administration 
     agreement shall be deemed to remain a Federal employee. 
     Except as otherwise expressly provided by the laws of the 
     United States, any officer or employee of a State acting 
     pursuant to a tax administration agreement shall be deemed to 
     remain a State employee.''
       (b) Conforming Amendments.--
       (1) Section 6103(d) is amended--
       (A) by amending paragraph (1) to read as follows:
       ``(1)(A) In General.--Returns and return information with 
     respect to taxes imposed by chapters 1, 2, 6, 11, 12, 21, 23, 
     24, 31, 32, 44, 51, and 52 and subchapter D of chapter 36 
     shall be open to inspection by, or disclosure to, any State 
     agency, body, or commission, or its legal representative, 
     which is charged under the laws of such State with the 
     responsibility for the administration of State tax laws for 
     the purpose of, and only to the extent necessary in--
       ``(i) the administration of such laws, including any 
     procedures with respect to locating, any person who may be 
     entitled to a refund; or
       ``(ii) the administration of Federal tax laws pursuant to a 
     tax administration agreement entered into between such 
     agency, body or commission and the Secretary under section 
     7525.
       ``(B) Written request by agency head required for 
     disclosure.--The inspection of returns and return information 
     under this paragraph shall be permitted, or disclosure of 
     such returns and return information made, only upon written 
     request by the head of such agency, body, or commission, and 
     only to the representatives of such agency, body, or 
     commission designated in such written request as the 
     individuals who are to inspect or receive the returns or 
     return information on behalf of such agency, body, or 
     commission.
       ``(C) Permissible recipients.--The representatives of such 
     agency, body, or commission to whom disclosure is permitted 
     under this paragraph shall include only employees or legal 
     representatives of such agency, body, or commission, or a 
     person described in subsection (n) of this section. However, 
     notwithstanding the foregoing, disclosure shall not be 
     permitted to any individual who is the chief executive 
     officer of such State.
       ``(D) Confidential informants; impairment of 
     investigations.--Return information shall not be disclosed 
     under this paragraph to the extent that the Secretary 
     determines that such disclosure would identify a confidential 
     informant or seriously impair any civil or criminal tax 
     investigation.''; and
       (B) by adding at the end the following:
       ``(5) Joint return filing programs.--
       ``(A) In general.--Upon written request by the head of any 
     agency, body, or commission described in paragraph (1), the 
     Secretary may disclose common data to such agency, body or 
     commission for the purpose of carrying out a joint return 
     filing program entered into under section 7525.
       ``(B) Common data defined.--For purposes of this paragraph, 
     `common data' means any item of information that is required 
     by both Federal and State law to be attached to or included 
     on the respective Federal and State returns.
       ``(C) Procedures for state agencies.--Subsections (a)(2) 
     and (p)(4) of this section shall not apply with respect to 
     any disclosures made pursuant to this paragraph. However, 
     common data disclosed pursuant to this paragraph is subject 
     to subsection (p)(8) of this section.''
       (2) Section 6103(p)(3) is amended--
       (A) in subparagraph (A) by inserting ``(d),'' after 
     ``subsections (c),''; and
       (B) in subparagraph (C)(i) by striking ``(d),''.
       (3) Section 7212(a) is amended by inserting ``or any State 
     officer or employee who is authorized to administer Federal 
     tax laws pursuant to an agreement authorized by section 
     7525'' after ``any officer or employee of the United States'' 
     in both places it appears.
       (4) Section 7213(a)(2) is amended by deleting ``(d),'' and 
     inserting instead ``(d)(1), (2), (3), or (4),''.
       (5) Section 7214 is amended--
       (A) in subsection (a), by inserting ``or any State officer 
     or employee who is authorized to administer Federal tax laws 
     pursuant to an agreement authorized by section 7525'' after 
     ``Any officer or employee of the United States''; and
       (B) in subsection (b), by inserting ``or any State employee 
     who is authorized to administer Federal tax laws pursuant to 
     an agreement authorized by section 7525'' after ``Any 
     internal revenue officer or employee''.
       (6) Section 7431(a)(1) is amended by inserting ``or any 
     State employee who is authorized to administer Federal tax 
     laws pursuant to an agreement authorized by section 7525'' 
     after ``If any officer or employee of the United States''.
       (7) Section 7432(a) is amended by inserting ``or any State 
     employee who is authorized to release liens under section 
     6325 pursuant to an agreement authorized by section 7525'' 
     after ``If any officer or employee of the Internal Revenue 
     Service''.
       (8) Section 7433(a), as amended by this Act, is amended by 
     inserting ``or any State employee who is authorized to 
     collect Federal taxes pursuant to an agreement authorized by 
     section 7525'' after ``If, in connection with any collection 
     of Federal tax with respect to any person, any officer or 
     employee of the Internal Revenue Service''.
       (c) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following:

``Sec. 7525.  Tax administration agreements.''
          TITLE II--TAXPAYER EDUCATION, NOTICE, AND RESOURCES

     SEC. 201. EXPLANATION OF TAXPAYERS' RIGHTS.

       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.

     SEC. 202. TOLL-FREE CUSTOMER HELP LINE.

       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 a 24-
     hour-a-day toll-free telephone customer help line, staffed at 
     all times by a person trained in helping individual taxpayers 
     and staffed during regular business hours (for all time zones 
     in the United States) by a person trained in helping small 
     business taxpayers.

     SEC. 203. NOTICE OF VARIOUS TELEPHONE NUMBERS.

       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, provide that all 
     paper communications received by a taxpayer from the Internal 
     Revenue Service shall include in a prominent manner the 
     telephone number and purpose of the nearest local office of 
     the taxpayer advocate and the low income taxpayer clinic and 
     the toll-free telephone number for taxpayers to register 
     complaints of misconduct by Internal Revenue Service 
     employees established under section 107(b).

     SEC. 204. PROCEDURES INVOLVING TAXPAYER INTERVIEWS.

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

     If the taxpayer is represented by an individual described in 
     subsection (c), the interview may not proceed without the 
     presence of such individual unless the taxpayer consents.''

[[Page S1784]]

       (b) Effective Date.--The amendments made by this section 
     shall apply to interviews and examinations taking place after 
     the date of the enactment of this Act.

     SEC. 205. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

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

     SEC. 206. 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:
       ``(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. 207. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

       (a) Taxpayer Specific Explanation.--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.
       (b) General Explanation.--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, make available to the general public, a booklet 
     which in simple language provides an explanation of the 
     appeals process and the collection process and the rights of 
     taxpayers at each step of such process.

     SEC. 208. INDEPENDENT OPERATION OF LOCAL TAXPAYER ADVOCATES.

       (a) Independent Operation of Local Offices.--Section 
     7802(d) (relating to Office of Taxpayer Advocate) is amended 
     by adding at the end the following:
       ``(4) Operation of local offices.--
       ``(A) Independent operation.--Each local taxpayer advocate 
     shall, at the taxpayer advocate's discretion, not disclose to 
     the Internal Revenue Service contact with, or information 
     provided by, a taxpayer.
       ``(B) Maintenance of independent communications.--Each 
     local office of the taxpayer advocate shall maintain separate 
     phone, facsimile, and other electronic communication access, 
     and a separate post office address from the Internal Revenue 
     Service district office or service center which it serves.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

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