[Congressional Record Volume 147, Number 56 (Monday, April 30, 2001)]
[Senate]
[Pages S4049-S4050]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN:

[[Page S4049]]

  S. 802. A bill to assist low income taxpayers in preparing and filing 
their tax returns and to protect taxpayers from unscrupulous refund 
anticipation loan providers, and for other purposes; to the Committee 
on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Low Income 
Taxpayer Protection Act of 2001. This legislation, if enacted, will 
assist low and moderate income taxpayers with the annual task of 
preparing their tax returns and give them some protection from 
exploitive refund anticipation loans. RALs are high interest loans 
offered to taxpayers who are entitled to a refund. Recently, an article 
ran in the Albuquerque Journal about taxpayer abuses that were 
particularly acute near the Navajo Reservation in Gallup, New Mexico. 
While many taxpayers benefit from these loans, many more are hurt by 
outrageously high interest rates and fees. Worse, many taxpayers get 
caught with outstanding loans that they can't pay off because a mistake 
was made on their tax return resulting in a smaller than anticipated 
refund. Many of these loans, when annualized, have interest rates over 
200 percent.
  The majority of these loan recipients are low to moderate income 
taxpayers, many of whom receive an earned income tax credit. The EITC 
has become one of the most effective tools for fighting poverty and 
benefitting working families, and so it is essential that every dollar 
of this credit goes to the taxpayer.
  Congress is not without fault. We have made the EITC so complicated 
that many taxpayers feel they have to pay to have someone prepare their 
return. According to the New Mexico Advocates for Children and 
Families, 83 percent of the low income population in Gallup used a paid 
preparer. Many of these taxpayers won't have the money to pay for this 
service unless they are loaned the money up front, hence a 
proliferation of refund anticipation loans. Although this bill does not 
include simplification of the EITC, I am going to work with my 
colleagues to be sure that any tax bill that is passed through this 
body has made the EITC easier to calculate.
  To help low and moderate income taxpayers, my bill requires all those 
involved with RALs to register with the IRS. Treasury will then be 
required to determine what is a fair amount of interest and fees to be 
charged based on the benefit to the taxpayer and the risk to the 
lender. It will also expand the Volunteer Income Tax Assistance program 
by directly giving them funding to operate. VITA clinics are one of the 
few places low income taxpayers can go to get assistance on their tax 
returns. We need to expand this program. My bill also directs the IRS 
to focus its electronic filing services on the taxpayer. I am afraid 
that our desire to meet Congressional mandates for increasing 
electronic filing rates may have caused the IRS to forget why we are 
advancing electronic filing, to benefit the taxpayer.
  Finally, this legislation will create several mobile electronic tax 
filing centers, at least one of which must be located near a Native 
American reservation or pueblo. Currently, many low income taxpayers do 
not have the ability to file electronically unless they go to a 
commercial electronic filer where there is a fee to file. This trial 
program would allow these taxpayers to enjoy the benefits of electronic 
filing, such as a shorter turn around time for a refund, without having 
to find the money to pay for it.
  I look forward to working with my colleagues to expand this important 
legislation.
  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:

                                 S. 802

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Low Income Taxpayer 
     Protection Act of 2001''.

     SEC. 2. REGULATION OF INCOME TAX RETURN PREPARERS AND REFUND 
                   ANTICIPATION LOAN PROVIDERS.

       (a) Definitions.--In this Act:
       (1) Income tax return preparer.--
       (A) In general.--The term ``income tax return preparer'' 
     means any individual who is an income tax return preparer 
     (within the meaning of section 7701(a)(36) of the Internal 
     Revenue Code of 1986) who prepares not less than 5 returns of 
     tax imposed by subtitle A of such Code or claims for refunds 
     of tax imposed by such subtitle A per taxable year.
       (B) Exception.--Such term shall not include a federally 
     authorized tax practitioner within the meaning of section of 
     7526(a)(3) of such Code.
       (2) Refund anticipation loan provider.--The term ``refund 
     anticipation loan provider'' means a person who makes a loan 
     of money or of any other thing of value to a taxpayer because 
     of the taxpayer's anticipated receipt of a Federal tax 
     refund.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (b) Regulations.--
       (1) Registration required.--
       (A) In general.--Not later than 120 days after the date of 
     the enactment of this Act, the Secretary shall promulgate 
     regulations that--
       (i) require the registration of income tax return preparers 
     and of refund anticipation loan providers with the Secretary 
     or the designee of the Secretary, and
       (ii) prohibit the payment of a refund of tax to a refund 
     anticipation loan provider or an income tax return preparer 
     that is the result of a tax return which is prepared by the 
     refund anticipation loan provider or the income tax return 
     preparer which does not include the refund anticipation loan 
     provider's or the income tax return preparer's registration 
     number.
       (B) No disciplinary action.--The regulations shall require 
     that an applicant for registration must not have demonstrated 
     any conduct that would warrant disciplinary action under part 
     10 of title 31, Code of Federal Regulations.
       (C) Burden of registration.--In promulgating the 
     regulations, the Secretary shall minimize the burden and cost 
     on the registrant.
       (2) Rules of conduct.--All registrants shall be subject to 
     rules of conduct that are consistent with the rules that 
     govern federally authorized tax practitioners.
       (3) Reasonable fees and interest rates.--The Secretary, 
     after consultation with any expert as the Secretary deems 
     appropriate, shall include in the regulations guidance on 
     reasonable fees and interest rates charged to taxpayers in 
     connection with loans to taxpayers made by refund 
     anticipation loan providers.
       (4) Renewal of registration.--The regulations shall 
     determine the time frame required for renewal of registration 
     and the manner in which a registered income tax return 
     preparer or a registered refund anticipation loan provider 
     must renew such registration.
       (5) Fees.--
       (A) In general.--The Secretary may require the payment of 
     reasonable fees for registration and for renewal of 
     registration under the regulations.
       (B) Purpose of fees.--Any fees required under this 
     paragraph shall inure to the Secretary for the purpose of 
     reimbursement of the costs of administering the requirements 
     of the regulations.
       (c) Prohibition.--Section 6695 of the Internal Revenue Code 
     of 1986 (relating to other assessable penalties with respect 
     to the preparation of income tax returns for other persons) 
     is amended by adding at the end the following new subsection:
       ``(h) Actions on a Taxpayer's Behalf by a Non-Registered 
     Person.--Any person not registered pursuant to the 
     regulations promulgated by the Secretary under the Low Income 
     Taxpayer Protection Act of 2001 who--
       ``(1) prepares a tax return for another taxpayer for 
     compensation, or
       ``(2) provides a loan to a taxpayer that is linked to or in 
     anticipation of a tax refund for the taxpayer,

     shall be subject to a $500 penalty for each incident of 
     noncompliance.''.
       (d) Coordination with Section 6060(a).--The Secretary shall 
     determine whether the registration required under the 
     regulations issued pursuant to this section should be in lieu 
     of the return requirements of section 6060.
       (e) Paperwork Reduction.--The Secretary shall minimize the 
     amount of paperwork required of a income tax return preparer 
     or a refund anticipation loan provider to meet the 
     requirements of these regulations.

     SEC. 3. IMPROVED SERVICES FOR TAXPAYERS.

       (a) Electronic Filing Efforts.--
       (1) In general.--The Secretary shall focus electronic 
     filing efforts on benefiting the taxpayer by--
       (A) reducing the time between receipt of an electronically 
     filed return and remitting a refund, if any,
       (B) reducing the cost of filing a return electronically,
       (C) improving services provided by the Internal Revenue 
     Service to low and moderate income taxpayers, and
       (D) providing tax-related computer software at no or 
     nominal cost to low and moderate income taxpayers.
       (2) Report.--Not later than 120 days after the date of the 
     enactment of this Act, the Secretary shall prepare and submit 
     to Congress a report on the efforts made pursuant to 
     paragraph (1).
       (b) Volunteer Income Tax Assistance Program.--
       (1) Study.--The Secretary shall undertake a study on the 
     expansion of the volunteer income tax assistance program to 
     service more low income taxpayers.

[[Page S4050]]

       (2) Report.--Not later than 120 days after the date of the 
     enactment of this Act, the Secretary shall prepare and submit 
     to Congress a report on the study conducted pursuant to 
     paragraph (1).
       (3) Authorization of appropriations.--
       (A) In general.--There is authorized to be appropriated to 
     the Secretary for volunteer income tax assistance clinics 
     $6,000,000, to remain available until expended.
       (B) Use of funds.--Such amounts appropriated under 
     subparagraph (A) shall be used for the operating expenses of 
     volunteer income tax assistance clinics, expenses for 
     providing electronic filing expenditures through such 
     clinics, and related expenses.
       (c) Tele-Filing.--The Secretary shall ensure that tele-
     filing is available for all taxpayers for the filing of tax 
     returns with respect to taxable years beginning in 2001.
       (d) Deposit Indicator Program.--
       (1) Review.--The Secretary shall review the decision to 
     reinstate the Deposit Indicator program.
       (2) Report.--Not later than 120 days after the date of the 
     enactment of this Act, the Secretary shall prepare and submit 
     to Congress a report on the review made pursuant to paragraph 
     (1).
       (e) Direct Deposit Accounts.--The Secretary shall allocate 
     resources to programs to assist low income taxpayers in 
     establishing accounts at financial institutions that receive 
     direct deposits from the United States Treasury.
       (f) Pilot Program for Mobile Tax Return Filing Offices.--
       (1) In general.--The Secretary shall establish a pilot 
     program for the creation of four mobile tax return filing 
     offices with electronic filing capabilities.
       (2) Location of service.--
       (A) In general.--The mobile tax return filing offices shall 
     be located in communities that the Secretary determines have 
     a high incidence of taxpayers claiming the earned income tax 
     credit.
       (B) Indian reservation.--At least one mobile tax return 
     filing office shall be on or near an Indian reservation (as 
     defined in section 168(j)(6) of the Internal Revenue Code of 
     1986).

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