[Congressional Record Volume 149, Number 90 (Wednesday, June 18, 2003)]
[House]
[Pages H5514-H5535]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAXPAYER PROTECTION AND IRS ACCOUNTABILITY ACT OF 2003
Mr. McCRERY. Mr. Speaker, pursuant to House Resolution 282, I call up
the bill (H.R. 1528) to amend the Internal Revenue Code of 1986 to
protect taxpayers and ensure accountability of the Internal Revenue
Service, and ask for its immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 282, the bill
is considered read for amendment.
The text of H.R. 1528 is as follows:
H.R. 1528
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Taxpayer
Protection and IRS Accountability Act of 2003''.
(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; etc.
TITLE I--PENALTY AND INTEREST REFORMS
Sec. 101. Failure to pay estimated tax penalty converted to interest
charge on accumulated unpaid balance.
Sec. 102. Exclusion from gross income for interest on overpayments of
income tax by individuals.
Sec. 103. Abatement of interest.
Sec. 104. Deposits made to suspend running of interest on potential
underpayments.
Sec. 105. Expansion of interest netting for individuals.
Sec. 106. Waiver of certain penalties for first-time unintentional
minor errors.
Sec. 107. Frivolous tax submissions.
Sec. 108. Clarification of application of Federal tax deposit penalty.
TITLE II--FAIRNESS OF COLLECTION PROCEDURES
Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Extension of time for return of property.
Sec. 203. Individuals held harmless on wrongful levy, etc., on
individual retirement plan.
Sec. 204. Seven-day threshold on tolling of statute of limitations
during tax review.
Sec. 205. Study of liens and levies.
TITLE III--TAX ADMINISTRATION REFORMS
Sec. 301. Revisions relating to termination of employment of Internal
Revenue Service employees for misconduct.
Sec. 302. Confirmation of authority of tax court to apply doctrine of
equitable recoupment.
Sec. 303. Jurisdiction of tax court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. 15-day delay in due date for electronically filed individual
income tax returns.
Sec. 306. Access of National Taxpayer Advocate to independent legal
counsel.
Sec. 307. Payment of motor fuel excise tax refunds by direct deposit.
Sec. 308. Family business tax simplification.
Sec. 309. Health insurance costs of eligible individuals.
Sec. 310. Suspension of tax-exempt status of terrorist organizations.
TITLE IV--CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Collection activities with respect to joint return
disclosable to either spouse based on oral request.
Sec. 402. Taxpayer representatives not subject to examination on sole
basis of representation of taxpayers.
Sec. 403. Disclosure in judicial or administrative tax proceedings of
return and return information of persons who are not
party to such proceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification
information with respect to disclosure of accepted
offers-in-compromise.
[[Page H5515]]
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of
browsing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to
section 501(c)(3) organizations.
Sec. 411. Confidentiality of taxpayer communications with the Office of
the Taxpayer Advocate.
TITLE V--MISCELLANEOUS
Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt
organizations.
Sec. 503. Employee misconduct report to include summary of complaints
by category.
Sec. 504. Annual report on awards of costs and certain fees in
administrative and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of
failure to file.
Sec. 508. Amendment to treasury auction reforms.
Sec. 509. Enrolled agents.
Sec. 510. Financial management service fees.
Sec. 511. Extension of Internal Revenue Service user fees.
TITLE VI--LOW-INCOME TAXPAYER CLINICS
Sec. 601. Low-income taxpayer clinics.
TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS.
Sec. 701. Applicability of certain Federal-State agreements relating to
unemployment assistance.
TITLE I--PENALTY AND INTEREST REFORMS
SEC. 101. FAILURE TO PAY ESTIMATED TAX PENALTY CONVERTED TO
INTEREST CHARGE ON ACCUMULATED UNPAID BALANCE.
(a) Penalty Moved to Interest Chapter of Code.--The
Internal Revenue Code of 1986 is amended by redesignating
section 6654 as section 6641 and by moving section 6641 (as
so redesignated) from part I of subchapter A of chapter 68 to
the end of subchapter E of chapter 67 (as added by subsection
(e)(1) of this section).
(b) Penalty Converted to Interest Charge.--The heading and
subsections (a) and (b) of section 6641 (as so redesignated)
are amended to read as follows:
``SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY
ESTIMATED INCOME TAX.
``(a) In General.--Interest shall be paid on any
underpayment of estimated tax by an individual for a taxable
year for each day of such underpayment. The amount of such
interest for any day shall be the product of the underpayment
rate established under subsection (b)(2) multiplied by the
amount of the underpayment.
``(b) Amount of Underpayment; Interest Rate.--For purposes
of subsection (a)--
``(1) Amount.--The amount of the underpayment on any day
shall be the excess of--
``(A) the sum of the required installments for the taxable
year the due dates for which are on or before such day, over
``(B) the sum of the amounts (if any) of estimated tax
payments made on or before such day on such required
installments.
``(2) Determination of interest rate.--
``(A) In general.--The underpayment rate with respect to
any day in an installment underpayment period shall be the
underpayment rate established under section 6621 for the
first day of the calendar quarter in which such installment
underpayment period begins.
``(B) Installment underpayment period.--For purposes of
subparagraph (A), the term `installment underpayment period'
means the period beginning on the day after the due date for
a required installment and ending on the due date for the
subsequent required installment (or in the case of the 4th
required installment, the 15th day of the 4th month following
the close of a taxable year).
``(C) Daily rate.--The rate determined under subparagraph
(A) shall be applied on a daily basis and shall be based on
the assumption of 365 days in a calendar year.
``(3) Termination of estimated tax interest.--No day after
the end of the installment underpayment period for the 4th
required installment specified in paragraph (2)(B) for a
taxable year shall be treated as a day of underpayment with
respect to such taxable year.''.
(c) Increase in Safe Harbor Where Tax is Small.--
(1) In general.--Clause (i) of section 6641(d)(1)(B) (as so
redesignated) is amended to read as follows:
``(i) the lesser of--
``(I) 90 percent of the tax shown on the return for the
taxable year (or, if no return is filed, 90 percent of the
tax for such year), or
``(II) the tax shown on the return for the taxable year
(or, if no return is filed, the tax for such year) reduced
(but not below zero) by $1,600, or''.
(2) Conforming amendment.--Subsection (e) of section 6641
(as so redesignated) is amended by striking paragraph (1) and
redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(d) Conforming Amendments.--
(1) Paragraphs (1) and (2) of subsection (e) (as
redesignated by subsection (c)(2)) and subsection (h) of
section 6641 (as so designated) are each amended by striking
``addition to tax'' each place it occurs and inserting
``interest''.
(2) Section 167(g)(5)(D) is amended by striking ``6654''
and inserting ``6641''.
(3) Section 460(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(4) Section 3510(b) is amended--
(A) by striking ``section 6654'' in paragraph (1) and
inserting ``section 6641'';
(B) by amending paragraph (2)(B) to read as follows:
``(B) no interest would be required to be paid (but for
this section) under 6641 for such taxable year by reason of
the $1,600 amount specified in section
6641(d)(1)(B)(i)(II).'';
(C) by striking ``section 6654(d)(2)'' in paragraph (3) and
inserting ``section 6641(d)(2)''; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(6) Section 6601(h) is amended by striking ``6654'' and
inserting ``6641''.
(7) Section 6621(b)(2)(B) is amended by striking ``addition
to tax under section 6654'' and inserting ``interest required
to be paid under section 6641''.
(8) Section 6622(b) is amended--
(A) by striking ``Penalty for'' in the heading; and
(B) by striking ``addition to tax under section 6654 or
6655'' and inserting ``interest required to be paid under
section 6641 or addition to tax under section 6655''.
(9) Section 6658(a) is amended--
(A) by striking ``6654, or 6655'' and inserting ``or 6655,
and no interest shall be required to be paid under section
6641,''; and
(B) by inserting ``or paying interest'' after ``the tax''
in paragraph (2)(B)(ii).
(10) Section 6665(b) is amended--
(A) in the matter preceding paragraph (1) by striking ``,
6654,''; and
(B) in paragraph (2) by striking ``6654 or''.
(11) Section 7203 is amended by striking ``section 6654 or
6655'' and inserting ``section 6655 or interest required to
be paid under section 6641''.
(e) Clerical Amendments.--
(1) Chapter 67 is amended by inserting after subchapter D
the following:
``Subchapter E--Interest on Failure by Individual to Pay Estimated
Income Tax
``Sec. 6641. Interest on failure by individual to pay estimated income
tax.''.
(2) The table of subchapters for chapter 67 is amended by
adding at the end the following new items:
``Subchapter D. Notice requirements.
``Subchapter E. Interest on failure by individual to pay estimated
income tax.''.
(3) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to
section 6654.
(f) Effective Date.--The amendments made by this section
shall apply to installment payments for taxable years
beginning after December 31, 2003.
SEC. 102. EXCLUSION FROM GROSS INCOME FOR INTEREST ON
OVERPAYMENTS OF INCOME TAX BY INDIVIDUALS.
(a) In General.--Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income)
is amended by inserting after section 139 the following new
section:
``SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTEREST ON
OVERPAYMENTS OF INCOME TAX BY INDIVIDUALS.
``(a) In General.--In the case of an individual, gross
income shall not include interest paid under section 6611 on
any overpayment of tax imposed by this subtitle.
``(b) Exception.--Subsection (a) shall not apply in the
case of a failure to claim items resulting in the overpayment
on the original return if the Secretary determines that the
principal purpose of such failure is to take advantage of
subsection (a).
``(c) Special Rule for Determining Modified Adjusted Gross
Income.--For purposes of this title, interest not included in
gross income under subsection (a) shall not be treated as
interest which is exempt from tax for purposes of sections
32(i)(2)(B) and 6012(d) or any computation in which interest
exempt from tax under this title is added to adjusted gross
income.''.
(b) Clerical Amendment.--The table of sections for part III
of subchapter B of chapter 1 is amended by inserting after
the item relating to section 139 the following new item:
``Sec. 139A. Exclusion from gross income for interest on overpayments
of income tax by individuals.''.
(c) Effective Date.--The amendments made by this section
shall apply to interest received in calendar years beginning
after the date of the enactment of this Act.
SEC. 103. ABATEMENT OF INTEREST.
(a) Abatement of Interest With Respect to Erroneous Refund
Check Without Regard to Size of Refund.--Paragraph (2) of
section 6404(e) is amended by striking ``unless--'' and all
that follows and inserting ``unless the taxpayer (or a
related party) has in any way caused such erroneous
refund.''.
[[Page H5516]]
(b) Abatement of Interest to Extent Interest is
Attributable to Taxpayer Reliance on Written Statements of
the IRS.--Subsection (f) of section 6404 is amended--
(1) in the subsection heading, by striking ``Penalty or
Addition'' and inserting ``Interest, Penalty, or Addition'';
and
(2) in paragraph (1) and in subparagraph (B) of paragraph
(2), by striking ``penalty or addition'' and inserting
``interest, penalty, or addition''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to interest accruing on or after the
date of the enactment of this Act.
SEC. 104. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS.
(a) In General.--Subchapter A of chapter 67 (relating to
interest on underpayments) is amended by adding at the end
the following new section:
``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS, ETC.
``(a) Authority To Make Deposits Other Than as Payment of
Tax.--A taxpayer may make a cash deposit with the Secretary
which may be used by the Secretary to pay any tax imposed
under subtitle A or B or chapter 41, 42, 43, or 44 which has
not been assessed at the time of the deposit. Such a deposit
shall be made in such manner as the Secretary shall
prescribe.
``(b) No Interest Imposed.--To the extent that such deposit
is used by the Secretary to pay tax, for purposes of section
6601 (relating to interest on underpayments), the tax shall
be treated as paid when the deposit is made.
``(c) Return of Deposit.--Except in a case where the
Secretary determines that collection of tax is in jeopardy,
the Secretary shall return to the taxpayer any amount of the
deposit (to the extent not used for a payment of tax) which
the taxpayer requests in writing.
``(d) Payment of Interest.--
``(1) In general.--For purposes of section 6611 (relating
to interest on overpayments), a deposit which is returned to
a taxpayer shall be treated as a payment of tax for any
period to the extent (and only to the extent) attributable to
a disputable tax for such period. Under regulations
prescribed by the Secretary, rules similar to the rules of
section 6611(b)(2) shall apply.
``(2) Disputable tax.--
``(A) In general.--For purposes of this section, the term
`disputable tax' means the amount of tax specified at the
time of the deposit as the taxpayer's reasonable estimate of
the maximum amount of any tax attributable to disputable
items.
``(B) Safe harbor based on 30-day letter.--In the case of a
taxpayer who has been issued a 30-day letter, the maximum
amount of tax under subparagraph (A) shall not be less than
the amount of the proposed deficiency specified in such
letter.
``(3) Other definitions.--For purposes of paragraph (2)--
``(A) Disputable item.--The term `disputable item' means
any item of income, gain, loss, deduction, or credit if the
taxpayer--
``(i) has a reasonable basis for its treatment of such
item, and
``(ii) reasonably believes that the Secretary also has a
reasonable basis for disallowing the taxpayer's treatment of
such item.
``(B) 30-day letter.--The term `30-day letter' means the
first letter of proposed deficiency which allows the taxpayer
an opportunity for administrative review in the Internal
Revenue Service Office of Appeals.
``(4) Rate of interest.--The rate of interest allowable
under this subsection shall be the Federal short-term rate
determined under section 6621(b), compounded daily.
``(e) Use of Deposits.--
``(1) Payment of tax.--Except as otherwise provided by the
taxpayer, deposits shall be treated as used for the payment
of tax in the order deposited.
``(2) Returns of deposits.--Deposits shall be treated as
returned to the taxpayer on a last-in, first-out basis.''.
(b) Clerical Amendment.--The table of sections for
subchapter A of chapter 67 is amended by adding at the end
the following new item:
``Sec. 6603. Deposits made to suspend running of interest on potential
underpayments, etc.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to deposits made after the date of the enactment of
this Act.
(2) Coordination with deposits made under revenue procedure
84 0958.--In the case of an amount held by the Secretary of
the Treasury or his delegate on the date of the enactment of
this Act as a deposit in the nature of a cash bond deposit
pursuant to Revenue Procedure 84 0958, the date that the
taxpayer identifies such amount as a deposit made pursuant to
section 6603 of the Internal Revenue Code (as added by this
Act) shall be treated as the date such amount is deposited
for purposes of such section 6603.
SEC. 105. EXPANSION OF INTEREST NETTING FOR INDIVIDUALS.
(a) In General.--Subsection (d) of section 6621 (relating
to elimination of interest on overlapping periods of tax
overpayments and underpayments) is amended by adding at the
end the following: ``Solely for purposes of the preceding
sentence, section 6611(e) shall not apply in the case of an
individual.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to interest accrued after December 31, 2003.
SEC. 106. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME
UNINTENTIONAL MINOR ERRORS.
(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:
``(i) Treatment of First-Time Unintentional Minor Errors.--
``(1) In general.--In the case of a return of tax imposed
by subtitle A filed by an individual, the Secretary may waive
an addition to tax under subsection (a) if--
``(A) the individual has a history of compliance with the
requirements of this title,
``(B) it is shown that the failure is due to an
unintentional minor error,
``(C) the penalty would be grossly disproportionate to the
action or expense that would have been needed to avoid the
error, and imposing the penalty would be against equity and
good conscience,
``(D) waiving the penalty would promote compliance with the
requirements of this title and effective tax administration,
and
``(E) the taxpayer took all reasonable steps to remedy the
error promptly after discovering it.
``(2) Exceptions.--Paragraph (1) shall not apply if--
``(A) the Secretary has waived any addition to tax under
this subsection with respect to any prior failure by such
individual,
``(B) the failure is a mathematical or clerical error (as
defined in section 6213(g)(2)), or
``(C) the failure is the lack of a required signature.''.
(b) Effective Date.--The amendment made by this section
shall take effect on January 1, 2004.
SEC. 107. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission is based on a position which the
Secretary has identified as frivolous under subsection (c).
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 7811 (relating to taxpayer assistance
orders),
``(II) section 6159 (relating to agreements for payment of
tax liability in installments), or
``(III) section 7122 (relating to compromises).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(c) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
[[Page H5517]]
SEC. 108. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT
PENALTY.
Nothing in section 6656 of the Internal Revenue Code of
1986 shall be construed to permit the percentage specified in
subsection (b)(1)(A)(iii) thereof to apply other than in a
case where the failure is for more than 15 days.
TITLE II--FAIRNESS OF COLLECTION PROCEDURES
SEC. 201. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT
AGREEMENTS.
(a) In General.--
(1) Section 6159(a) (relating to authorization of
agreements) is amended--
(A) by striking ``satisfy liability for payment of'' and
inserting ``make payment on'', and
(B) by inserting ``full or partial'' after ``facilitate''.
(2) Section 6159(c) (relating to Secretary required to
enter into installment agreements in certain cases) is
amended in the matter preceding paragraph (1) by inserting
``full'' before ``payment''.
(b) Requirement To Review Partial Payment Agreements Every
Two Years.--Section 6159 is amended by redesignating
subsections (d) and (e) as subsections (e) and (f),
respectively, and inserting after subsection (c) the
following new subsection:
``(d) Secretary Required To Review Installment Agreements
for Partial Collection Every Two Years.--In the case of an
agreement entered into by the Secretary under subsection (a)
for partial collection of a tax liability, the Secretary
shall review the agreement at least once every 2 years.''.
(c) Effective Date.--The amendments made by this section
shall apply to agreements entered into on or after the date
of the enactment of this Act.
SEC. 202. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) Extension of Time for Return of Property Subject to
Levy.--Subsection (b) of section 6343 (relating to return of
property) is amended by striking ``9 months'' and inserting
``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of
section 6532 (relating to suits by persons other than
taxpayers) is amended--
(1) in paragraph (1) by striking ``9 months'' and inserting
``2 years'', and
(2) in paragraph (2) by striking ``9-month'' and inserting
``2-year''.
(c) Effective Date.--The amendments made by this section
shall apply to--
(1) levies made after the date of the enactment of this
Act, and
(2) levies made on or before such date if the 9-month
period has not expired under section 6343(b) of the Internal
Revenue Code of 1986 (without regard to this section) as of
such date.
SEC. 203. INDIVIDUALS HELD HARMLESS ON WRONGFUL LEVY, ETC.,
ON INDIVIDUAL RETIREMENT PLAN.
(a) In General.--Section 6343 (relating to authority to
release levy and return property) is amended by adding at the
end the following new subsection:
``(f) Individuals Held Harmless on Wrongful Levy, etc., on
Individual Retirement Plan.--
``(1) In general.--If the Secretary determines that an
individual retirement plan has been levied upon in a case to
which subsection (b) or (d)(2)(A) applies, an amount equal to
the sum of--
``(A) the amount of money returned by the Secretary on
account of such levy, and
``(B) interest paid under subsection (c) on such amount of
money,
may be deposited into an individual retirement plan (other
than an endowment contract) to which a rollover from the plan
levied upon is permitted.
``(2) Treatment as rollover.--The distribution on account
of the levy and any deposit under paragraph (1) with respect
to such distribution shall be treated for purposes of this
title as if such distribution and deposit were part of a
rollover described in section 408(d)(3)(A)(i); except that--
``(A) interest paid under subsection (c) shall be treated
as part of such distribution and as not includible in gross
income,
``(B) the 60-day requirement in such section shall be
treated as met if the deposit is made not later than the 60th
day after the day on which the individual receives an amount
under paragraph (1) from the Secretary, and
``(C) such deposit shall not be taken into account under
section 408(d)(3)(B).
``(3) Refund, etc., of income tax on levy.--If any amount
is includible in gross income for a taxable year by reason of
a levy referred to in paragraph (1) and any portion of such
amount is treated as a rollover under paragraph (2), any tax
imposed by chapter 1 on such portion shall not be assessed,
and if assessed shall be abated, and if collected shall be
credited or refunded as an overpayment made on the due date
for filing the return of tax for such taxable year.
``(4) Interest.--Notwithstanding subsection (d), interest
shall be allowed under subsection (c) in a case in which the
Secretary makes a determination described in subsection
(d)(2)(A) with respect to a levy upon an individual
retirement plan.''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid under subsections (b), (c), and
(d)(2)(A) of section 6343 of the Internal Revenue Code of
1986 after December 31, 2003.
SEC. 204. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF
LIMITATIONS DURING TAX REVIEW.
(a) In General.--Section 7811(d)(1) (relating to suspension
of running of period of limitation) is amended by inserting
after ``application,'' the following: ``but only if the date
of such decision is at least 7 days after the date of the
taxpayer's application''.
(b) Effective Date.--The amendment made by this section
shall apply to applications filed after the date of the
enactment of this Act.
SEC. 205. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary's delegate,
shall conduct a study of the practices of the Internal
Revenue Service concerning liens and levies. The study shall
examine--
(1) the declining use of liens and levies by the Internal
Revenue Service, and
(2) the practicality of recording liens and levying against
property in cases in which the cost of such actions exceeds
the amount to be realized from such property.
Not later than 1 year after the date of the enactment of this
Act, the Secretary shall submit such study to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate.
TITLE III--TAX ADMINISTRATION REFORMS
SEC. 301. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF
INTERNAL REVENUE SERVICE EMPLOYEES FOR
MISCONDUCT.
(a) In General.--Subchapter A of chapter 80 (relating to
application of internal revenue laws) is amended by inserting
after section 7804 the following new section:
``SEC. 7804A. DISCIPLINARY ACTIONS FOR MISCONDUCT.
``(a) Disciplinary Actions.--
``(1) In general.--Subject to subsection (c), the
Commissioner shall take an action in accordance with the
guidelines established under paragraph (2) against any
employee of the Internal Revenue Service if there is a final
administrative or judicial determination that such employee
committed any act or omission described under subsection (b)
in the performance of the employee's official duties or where
a nexus to the employee's position exists.
``(2) Guidelines.--The Commissioner shall issue guidelines
for determining the appropriate level of discipline, up to
and including termination of employment, for committing any
act or omission described under subsection (b).
``(b) Acts or Omissions.--The acts or omissions described
under this subsection are--
``(1) willful failure to obtain the required approval
signatures on documents authorizing the seizure of a
taxpayer's home, personal belongings, or business assets;
``(2) willfully providing a false statement under oath with
respect to a material matter involving a taxpayer or taxpayer
representative;
``(3) with respect to a taxpayer or taxpayer
representative, the willful violation of--
``(A) any right under the Constitution of the United
States;
``(B) any civil right established under--
``(i) title VI or VII of the Civil Rights Act of 1964;
``(ii) title IX of the Education Amendments of 1972;
``(iii) the Age Discrimination in Employment Act of 1967;
``(iv) the Age Discrimination Act of 1975;
``(v) section 501 or 504 of the Rehabilitation Act of 1973;
or
``(vi) title I of the Americans with Disabilities Act of
1990; or
``(C) the Internal Revenue Service policy on unauthorized
inspection of returns or return information;
``(4) willfully falsifying or destroying documents to
conceal mistakes made by any employee with respect to a
matter involving a taxpayer or taxpayer representative;
``(5) assault or battery on a taxpayer or taxpayer
representative, but only if there is a criminal conviction,
or a final adverse judgment by a court in a civil case, with
respect to the assault or battery;
``(6) willful violations of this title, Department of the
Treasury regulations, or policies of the Internal Revenue
Service (including the Internal Revenue Manual) for the
purpose of retaliating against, or harassing, a taxpayer or
taxpayer representative;
``(7) willful misuse of the provisions of section 6103 for
the purpose of concealing information from a congressional
inquiry;
``(8) willful failure to file any return of tax required
under this title on or before the date prescribed therefor
(including any extensions) when a tax is due and owing,
unless such failure is due to reasonable cause and not due
to willful neglect;
``(9) willful understatement of Federal tax liability,
unless such understatement is due to reasonable cause and not
due to willful neglect; and
``(10) threatening to audit a taxpayer, or to take other
action under this title, for the purpose of extracting
personal gain or benefit.
``(c) Determinations of Commissioner.--
``(1) In general.--The Commissioner may take a personnel
action other than a disciplinary action provided for in the
guidelines under subsection (a)(2) for an act or omission
described under subsection (b).
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may not be delegated to any other officer.
The Commissioner, in his sole discretion, may establish a
procedure to determine if an individual
[[Page H5518]]
should be referred to the Commissioner for a determination by
the Commissioner under paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination of the Commissioner under this
subsection may not be reviewed in any administrative or
judicial proceeding. A finding that an act or omission
described under subsection (b) occurred may be reviewed.
``(d) Definition.--For the purposes of the provisions
described in clauses (i), (ii), and (iv) of subsection
(b)(3)(B), references to a program or activity regarding
Federal financial assistance or an education program or
activity receiving Federal financial assistance shall include
any program or activity conducted by the Internal Revenue
Service for a taxpayer.
``(e) Annual Report.--The Commissioner shall submit to
Congress annually a report on disciplinary actions under this
section.''.
(b) Clerical Amendment.--The table of sections for chapter
80 is amended by inserting after the item relating to section
7804 the following new item:
``Sec. 7804A. Disciplinary actions for misconduct.''.
(c) Repeal of Superseded Section.--Section 1203 of the
Internal Revenue Service Restructuring and Reform Act of 1998
(Public Law 105 09206; 112 Stat. 720) is repealed.
(d) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 302. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY
DOCTRINE OF EQUITABLE RECOUPMENT.
(a) Confirmation of Authority of Tax Court To Apply
Doctrine of Equitable Recoupment.--Subsection (b) of section
6214 (relating to jurisdiction over other years and quarters)
is amended by adding at the end the following new sentence:
``Notwithstanding the preceding sentence, the Tax Court may
apply the doctrine of equitable recoupment to the same extent
that it is available in civil tax cases before the district
courts of the United States and the United States Court of
Federal Claims.''.
(b) Effective Date.--The amendments made by this section
shall apply to any action or proceeding in the Tax Court with
respect to which a decision has not become final (as
determined under section 7481 of the Internal Revenue Code of
1986) as of the date of the enactment of this Act.
SEC. 303. JURISDICTION OF TAX COURT OVER COLLECTION DUE
PROCESS CASES.
(a) In General.--Section 6330(d)(1) (relating to judicial
review of determination) is amended to read as follows:
``(1) Judicial review of determination.--The person may,
within 30 days of a determination under this section, appeal
such determination to the Tax Court (and the Tax Court shall
have jurisdiction with respect to such matter).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to judicial appeals filed after the date of the
enactment of this Act.
SEC. 304. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN
COMPROMISE.
(a) In General.--Section 7122(b) (relating to record) is
amended by striking ``Whenever a compromise'' and all that
follows through ``his delegate'' and inserting ``If the
Secretary determines that an opinion of the General Counsel
for the Department of the Treasury, or the Counsel's
delegate, is required with respect to a compromise, there
shall be placed on file in the office of the Secretary such
opinion''.
(b) Conforming Amendments.--Section 7122(b) is amended by
striking the second and third sentences.
(c) Effective Date.--The amendments made by this section
shall apply to offers-in-compromise submitted or pending on
or after the date of the enactment of this Act.
SEC. 305. 15-DAY DELAY IN DUE DATE FOR ELECTRONICALLY FILED
INDIVIDUAL INCOME TAX RETURNS.
(a) In General.--Section 6072 (relating to time for filing
income tax returns) is amended by adding at the end the
following new subsection:
``(f) Electronically Filed Returns of Individuals.--
``(1) In general.--Returns of an individual under section
6012 or 6013 (other than an individual to whom subsection (c)
applies) which are filed electronically--
``(A) in the case of returns filed on the basis of a
calendar year, shall be filed on or before the 30th day of
April following the close of the calendar year, and
``(B) in the case of returns filed on the basis of a fiscal
year, shall be filed on or before the last day of the 4th
month following the close of the fiscal year.
``(2) Electronic filing.--Paragraph (1) shall not apply to
any return unless--
``(A) such return is accepted by the Secretary, and
``(B) the balance due (if any) shown on such return is paid
electronically in a manner prescribed by the Secretary.
``(3) Special rules.--
``(A) Estimated tax.--If--
``(i) paragraph (1) applies to an individual for any
taxable year, and
``(ii) there is an overpayment of tax shown on the return
for such year which the individual allows against the
individual's obligation under section 6641,
then, with respect to the amount so allowed, any reference in
section 6641 to the April 15 following such taxable year
shall be treated as a reference to April 30.
``(B) References to due date.--Paragraph (1) shall apply
solely for purposes of determining the due date for the
individual's obligation to file and pay tax and, except as
otherwise provided by the Secretary, shall be treated as an
extension of the due date for any other purpose under this
title.''.
(b) Effective Date.--The amendment made by this section
shall apply to returns filed with respect to taxable years
beginning after December 31, 2002.
SEC. 306. ACCESS OF NATIONAL TAXPAYER ADVOCATE TO INDEPENDENT
LEGAL COUNSEL.
Clause (i) of section 7803(c)(2)(D) (relating to personnel
actions) is amended by striking ``and'' at the end of
subclause (I), by striking the period at the end of subclause
(II) and inserting ``, and'', and by adding at the end the
following new subclause:
``(III) appoint a counsel in the Office of the Taxpayer
Advocate to report solely to the National Taxpayer
Advocate.''.
SEC. 307. PAYMENT OF MOTOR FUEL EXCISE TAX REFUNDS BY DIRECT
DEPOSIT.
(a) In General.--Subchapter II of chapter 33 of title 31,
United States Code, is amended by adding at the end the
following new section:
``1A3337. Payment of motor fuel excise tax refunds by direct
deposit
``The Secretary of the Treasury shall make payments under
sections 6420, 6421, and 6427 of the Internal Revenue Code of
1986 by electronic funds transfer (as defined in section
3332(j)(1)) if the person who is entitled to the payment--
``(1) elects to receive the payment by electronic funds
transfer; and
``(2) satisfies the requirements of section 3332(g) with
respect to such payment at such time and in such manner as
the Secretary may require.''.
(b) Clerical Amendment.--The table of sections for
subchapter II of chapter 33 of title 31, United States Code,
is amended by adding at the end the following new item:
``3337. Payment of motor fuel excise tax refunds by direct deposit.''.
SEC. 308. FAMILY BUSINESS TAX SIMPLIFICATION.
(a) In General.--Section 761 (defining terms for purposes
of partnerships) is amended by redesignating subsection (f)
as subsection (g) and by inserting after subsection (e) the
following new subsection:
``(f) Qualified Joint Venture.--
``(1) In general.--In the case of a qualified joint venture
conducted by a husband and wife who file a joint return for
the taxable year, for purposes of this title--
``(A) such joint venture shall not be treated as a
partnership,
``(B) all items of income, gain, loss, deduction, and
credit shall be divided between the spouses in accordance
with their respective interests in the venture, and
``(C) each spouse shall take into account such spouse's
respective share of such items as if they were attributable
to a trade or business conducted by such spouse as a sole
proprietor.
``(2) Qualified joint venture.--For purposes of paragraph
(1), the term `qualified joint venture' means any joint
venture involving the conduct of a trade or business if--
``(A) the only members of such joint venture are a husband
and wife,
``(B) both spouses materially participate (within the
meaning of section 469(h) without regard to paragraph (5)
thereof) in such trade or business, and
``(C) both spouses elect the application of this
subsection.''.
(b) Net Earnings From Self-Employment.--
(1) Subsection (a) of section 1402 (defining net earnings
from self-employment) is amended by striking ``and'' at the
end of paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``; and'', and by inserting
after paragraph (15) the following new paragraph:
``(16) notwithstanding the preceding provisions of this
subsection, each spouse's share of income or loss from a
qualified joint venture shall be taken into account as
provided in section 761(f) in determining net earnings from
self-employment of such spouse.''.
(2) Subsection (a) of section 211 of the Social Security
Act (defining net earnings from self-employment) is amended
by striking ``and'' at the end of paragraph (14), by striking
the period at the end of paragraph (15) and inserting ``;
and'', and by inserting after paragraph (15) the following
new paragraph:
``(16) Notwithstanding the preceding provisions of this
subsection, each spouse's share of income or loss from a
qualified joint venture shall be taken into account as
provided in section 761(f) of the Internal Revenue Code of
1986 in determining net earnings from self-employment of such
spouse.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 309. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.
(a) Consumer Options.--Paragraph (2) of section 35(e) is
amended by inserting at the end the following new
subparagraph:
``(C) Waiver by eligible individuals.--With respect to any
month which ends before January 1, 2006, this paragraph shall
not apply with respect to any eligible individual and such
individual's qualifying family members if such eligible
individual elects to waive the application of this
paragraph with respect to such month.''.
[[Page H5519]]
(b) Effective Date.--The amendment made by this section
shall apply to months beginning after the date of the
enactment of this Act.
SEC. 310. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 for any contribution to an organization
described in paragraph (2) during the period described in
paragraph (3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
TITLE IV--CONFIDENTIALITY AND DISCLOSURE
SEC. 401. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN
DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL
REQUEST.
(a) In General.--Paragraph (8) of section 6103(e) (relating
to disclosure of collection activities with respect to joint
return) is amended by striking ``in writing'' the first place
it appears.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 402. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION
ON SOLE BASIS OF REPRESENTATION OF TAXPAYERS.
(a) In General.--Paragraph (1) of section 6103(h) (relating
to disclosure to certain Federal officers and employees for
purposes of tax administration, etc.) is amended--
(1) by striking ``Returns'' and inserting the following:
``(A) In general.--Returns'', and
(2) by adding at the end the following new subparagraph:
``(B) Taxpayer representatives.--Notwithstanding
subparagraph (A), the return of the representative of a
taxpayer whose return is being examined by an officer or
employee of the Department of the Treasury shall not be open
to inspection by such officer or employee on the sole basis
of the representative's relationship to the taxpayer unless a
supervisor of such officer or employee has approved the
inspection of the return of such representative on a basis
other than by reason of such relationship.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date which is 180 days after the
date of the enactment of this Act.
SEC. 403. DISCLOSURE IN JUDICIAL OR ADMINISTRATIVE TAX
PROCEEDINGS OF RETURN AND RETURN INFORMATION OF
PERSONS WHO ARE NOT PARTY TO SUCH PROCEEDINGS.
(a) In General.--Paragraph (4) of section 6103(h) (relating
to disclosure to certain Federal officers and employees for
purposes of tax administration, etc.) is amended by adding at
the end the following new subparagraph:
``(B) Disclosure in judicial or administrative tax
proceedings of return and return information of persons not
party to such proceedings.--
``(i) Notice.--Return or return information of any person
who is not a party to a judicial or administrative proceeding
described in this paragraph shall not be disclosed under
clause (ii) or (iii) of subparagraph (A) until after the
Secretary makes a reasonable effort to give notice to such
person and an opportunity for such person to request the
deletion of matter from such return or return information,
including any of the items referred to in paragraphs (1)
through (7) of section 6110(c). Such notice shall include a
statement of the issue or issues the resolution of which is
the reason such return or return information is sought. In
the case of S corporations, partnerships, estates, and
trusts, such notice shall be made at the entity level.
``(ii) Disclosure limited to pertinent portion.--The only
portion of a return or return information described in clause
(i) which may be disclosed under subparagraph (A) is that
portion of such return or return information that directly
relates to the resolution of an issue in such proceeding.
``(iii) Exceptions.--Clause (i) shall not apply--
``(I) to any civil action under section 7407, 7408, or
7409,
``(II) to any ex parte proceeding for obtaining a search
warrant, order for entry on premises or safe deposit boxes,
or similar ex parte proceeding,
``(III) to disclosure of third party return information by
indictment or criminal information, or
``(IV) if the Attorney General or the Attorney General's
delegate determines that the application of such clause would
seriously impair a criminal tax investigation or
proceeding.''.
(b) Conforming Amendments.--Paragraph (4) of section
6103(h) is amended by--
(1) by striking ``proceedings.--A return'' and inserting
``proceedings.--
``(A) In general.--Except as provided in subparagraph (B),
a return'';
(2) by redesignating subparagraphs (A), (B), (C), and (D)
as clauses (i), (ii), (iii), and (iv), respectively; and
(3) in the matter following clause (iv) (as so
redesignated), by striking ``subparagraph (A), (B), or (C)''
and inserting ``clause (i), (ii), or (iii)'' and by moving
such matter 2 ems to the right.
(c) Effective Date.--The amendments made by this section
shall apply to proceedings commenced after the date of the
enactment of this Act.
SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER
IDENTIFICATION INFORMATION WITH RESPECT TO
DISCLOSURE OF ACCEPTED OFFERS-IN-COMPROMISE.
(a) General.--Paragraph (1) of section 6103(k) (relating
to disclosure of certain returns and return information for
tax administrative purposes) is amended by inserting ``(other
than the taxpayer's address and TIN)'' after ``Return
information''.
(b) Effective Date.--The amendment made by this section
shall apply to disclosures made after the date of the
enactment of this Act.
SEC. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY
SAFEGUARDS.
(a) In General.--Section 6103(p) (relating to State law
requirements) is amended by adding at the end the following
new paragraph:
[[Page H5520]]
``(9) Disclosure to contractors and other agents.--
Notwithstanding any other provision of this section, no
return or return information shall be disclosed to any
contractor or other agent of a Federal, State, or local
agency unless such agency, to the satisfaction of the
Secretary--
``(A) has requirements in effect which require each such
contractor or other agent which would have access to returns
or return information to provide safeguards (within the
meaning of paragraph (4)) to protect the confidentiality of
such returns or return information,
``(B) agrees to conduct an annual, on-site review (mid-
point review in the case of contracts of less than 1 year in
duration) of each such contractor or other agent to determine
compliance with such requirements,
``(C) submits the findings of the most recent review
conducted under subparagraph (B) to the Secretary as part of
the report required by paragraph (4)(E), and
``(D) certifies to the Secretary for the most recent annual
period that each such contractor or other agent is in
compliance with all such requirements.
The certification required by subparagraph (D) shall include
the name and address of each contractor and other agent, a
description of the contract of the contractor or other agent
with the agency, and the duration of such contract.''.
(b) Conforming Amendment.--Subparagraph (B) of section
6103(p)(8) is amended by inserting ``or paragraph (9)'' after
``subparagraph (A)''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to disclosures made after December 31, 2003.
(2) Certifications.--The first certification under section
6103(p)(9)(D) of the Internal Revenue Code of 1986, as added
by subsection (a), shall be made with respect to calendar
year 2004.
SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO
DISCLOSURE.
(a) In General.--Subsection (c) of section 6103 (relating
to disclosure of returns and return information to designee
of taxpayer) is amended by adding at the end the following
new paragraphs:
``(2) Requirements for valid requests and consents.--A
request for or consent to disclosure under paragraph (1)
shall only be valid for purposes of this section, sections
7213, 7213A, and 7431 if--
``(A) at the time of execution, such request or consent
designates a recipient of such disclosure and is dated, and
``(B) at the time such request or consent is submitted to
the Secretary, the submitter of such request or consent
certifies, under penalty of perjury, that such request or
consent complied with subparagraph (A).
``(3) Restrictions on persons obtaining information.--Any
person shall, as a condition for receiving return or return
information under paragraph (1)--
``(A) ensure that such return and return information is
kept confidential,
``(B) use such return and return information only for the
purpose for which it was requested, and
``(C) not disclose such return and return information
except to accomplish the purpose for which it was requested,
unless a separate consent from the taxpayer is obtained.
``(4) Requirements for form prescribed by secretary.--For
purposes of this subsection, the Secretary shall prescribe a
form for requests and consents which shall--
``(A) contain a warning, prominently displayed, informing
the taxpayer that the form should not be signed unless it is
completed,
``(B) state that if the taxpayer believes there is an
attempt to coerce him to sign an incomplete or blank form,
the taxpayer should report the matter to the Treasury
Inspector General for Tax Administration, and
``(C) contain the address and telephone number of the
Treasury Inspector General for Tax Administration.''.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Treasury Inspector General for Tax
Administration shall submit a report to the Congress on
compliance with the designation and certification
requirements applicable to requests for or consent to
disclosure of returns and return information under section
6103(c) of the Internal Revenue Code of 1986, as amended by
subsection (a). Such report shall--
(1) evaluate (on the basis of random sampling) whether--
(A) the amendment made by subsection (a) is achieving the
purposes of this section;
(B) requesters and submitters for such disclosure are
continuing to evade the purposes of this section and, if so,
how; and
(C) the sanctions for violations of such requirements are
adequate; and
(2) include such recommendations that the Treasury
Inspector General for Tax Administration considers necessary
or appropriate to better achieve the purposes of this
section.
(c) Conforming Amendments.--
(1) Section 6103(c) is amended by striking ``Taxpayer.--The
Secretary'' and inserting ``Taxpayer.--
``(1) In General.--The Secretary''.
(2) Section 7213(a)(1) is amended by striking ``section
6103(n)'' and inserting ``subsections (c) and (n) of section
6103''.
(3) Section 7213A(a)(1)(B) is amended by striking
``subsection (l)(18) or (n) of section 6103'' and inserting
``subsection (c), (l)(18), or (n) of section 6103''.
(d) Effective Date.--The amendments made by this section
shall apply to requests and consents made after 3 months
after the date of the enactment of this Act.
SEC. 407. NOTICE TO TAXPAYER CONCERNING ADMINISTRATIVE
DETERMINATION OF BROWSING; ANNUAL REPORT.
(a) Notice to Taxpayer.--Subsection (e) of section 7431
(relating to notification of unlawful inspection and
disclosure) is amended by adding at the end the following:
``The Secretary shall also notify such taxpayer if the
Treasury Inspector General for Tax Administration
substantiates that such taxpayer's return or return
information was inspected or disclosed in violation of any of
the provisions specified in paragraph (1), (2), or (3).''.
(b) Reports.--Subsection (p) of section 6103 (relating to
procedure and recordkeeping), as amended by section 405, is
further amended by adding at the end the following new
paragraph:
``(10) Report on unauthorized disclosure and inspection.--
As part of the report required by paragraph (3)(C) for each
calendar year, the Secretary shall furnish information
regarding the unauthorized disclosure and inspection of
returns and return information, including the number, status,
and results of--
``(A) administrative investigations,
``(B) civil lawsuits brought under section 7431 (including
the amounts for which such lawsuits were settled and the
amounts of damages awarded), and
``(C) criminal prosecutions.''.
(c) Effective Date.--
(1) Notice.--The amendment made by subsection (a) shall
apply to determinations made after the date of the enactment
of this Act.
(2) Reports.--The amendment made by subsection (b) shall
apply to calendar years ending after the date of the
enactment of this Act.
SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.
(a) In General.--Section 6103(i)(3)(B) (relating to danger
of death or physical injury) is amended by striking ``or
State'' and inserting ``, State, or local''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND
PURPOSES.
(a) In General.--Paragraph (1) of section 6103(m) (relating
to disclosure of taxpayer identity information) is amended by
striking ``and other media'' and by inserting ``, other
media, and through any other means of mass communication,''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS
RELATED TO SECTION 501(C)(3) ORGANIZATIONS.
(a) In General.--Subsection (c) of section 6104 is amended
by striking paragraph (2) and inserting the following new
paragraphs:
``(2) Disclosure of proposed actions.--
``(A) Specific notifications.--In the case of an
organization to which paragraph (1) applies, the Secretary
may disclose to the appropriate State officer--
``(i) a notice of proposed refusal to recognize such
organization as an organization described in section
501(c)(3) or a notice of proposed revocation of such
organization's recognition as an organization exempt from
taxation,
``(ii) the issuance of a letter of proposed deficiency of
tax imposed under section 507 or chapter 41 or 42, and
``(iii) the names, addresses, and taxpayer identification
numbers of organizations that have applied for recognition as
organizations described in section 501(c)(3).
``(B) Additional disclosures.--Returns and return
information of organizations with respect to which
information is disclosed under subparagraph (A) may be made
available for inspection by or disclosed to an appropriate
State officer.
``(C) Procedures for disclosure.--Information may be
inspected or disclosed under subparagraph (A) or (B) only--
``(i) upon written request by an appropriate State officer,
and
``(ii) for the purpose of, and only to the extent necessary
in, the administration of State laws regulating such
organizations.
Such information may only be inspected by or disclosed to a
person other than the appropriate State officer if such
person is an officer or employee of the State and is
designated by the appropriate State officer to receive the
returns or return information under this paragraph on behalf
of the appropriate State officer.
``(D) Disclosures other than by request.--The Secretary may
make available for inspection or disclose returns and return
information of an organization to which paragraph (1) applies
to an appropriate State officer of any State if the Secretary
determines that such inspection or disclosure may facilitate
the resolution of State or Federal issues relating to the
tax-exempt status of such organization.
``(3) Use in administrative and judicial civil
proceedings.--Returns and return information disclosed
pursuant to this subsection may be disclosed in
administrative and judicial civil proceedings pertaining to
the enforcement of State laws regulating such organizations
in a manner prescribed by the Secretary similar to that for
tax administration proceedings under section 6103(h)(4).
[[Page H5521]]
``(4) No disclosure if impairment.--Returns and return
information shall not be disclosed under this subsection, or
in any proceeding described in paragraph (3), to the extent
that the Secretary determines that such disclosure would
seriously impair Federal tax administration.
``(5) Definitions.--For purposes of this subsection--
``(A) Return and return information.--The terms `return'
and `return information' have the respective meanings given
to such terms by section 6103(b).
``(B) Appropriate state officer.--The term `appropriate
State officer' means--
``(i) the State attorney general, or
``(ii) any other State official charged with overseeing
organizations of the type described in section 501(c)(3).''.
(b) Conforming Amendments.--
(1) Subparagraph (A) of section 6103(p)(3) is amended by
inserting ``and section 6104(c)'' after ``section'' in the
first sentence.
(2) Paragraph (4) of section 6103(p) is amended--
(A) in the matter preceding subparagraph (A), by inserting
``, or any appropriate State officer (as defined in section
6104(c)),'' before ``or any other person'',
(B) in subparagraph (F)(i), by inserting ``or any
appropriate State officer (as defined in section 6104(c)),''
before ``or any other person'', and
(C) in the matter following subparagraph (F), by inserting
``, an appropriate State officer (as defined in section
6104(c)),'' after ``including an agency'' each place it
appears.
(3) Paragraph (2) of section 7213(a) is amended by
inserting ``or under section 6104(c)'' after ``6103''.
(4) Paragraph (2) of section 7213A(a) is amended by
inserting ``or 6104(c)'' after ``6103''.
(5) Paragraph (2) of section 7431(a) is amended by
inserting ``(including any disclosure in violation of section
6104(c))'' after ``6103''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act
but shall not apply to requests made before such date.
SEC. 411. CONFIDENTIALITY OF TAXPAYER COMMUNICATIONS WITH THE
OFFICE OF THE TAXPAYER ADVOCATE.
(a) In General.--Subsection (c) of section 7803 is amended
by adding at the end the following new paragraph:
``(5) Confidentiality of taxpayer information.--
``(A) In general.--To the extent authorized by the National
Taxpayer Advocate or pursuant to guidance issued under
subparagraph (B), any officer or employee of the Office of
the Taxpayer Advocate may withhold from the Internal Revenue
Service and the Department of Justice any information
provided by, or regarding contact with, any taxpayer.
``(B) Issuance of guidance.--In consultation with the Chief
Counsel for the Internal Revenue Service and subject to the
approval of the Commissioner of Internal Revenue, the
National Taxpayer Advocate may issue guidance regarding the
circumstances (including with respect to litigation) under
which, and the persons to whom, employees of the Office of
the Taxpayer Advocate shall not disclose information obtained
from a taxpayer. To the extent to which any provision of the
Internal Revenue Manual would require greater disclosure by
employees of the Office of the Taxpayer Advocate than the
disclosure required under such guidance, such provision shall
not apply.
``(C) Employee protection.--Section 7214(a)(8) shall not
apply to any failure to report knowledge or information if--
``(i) such failure to report is authorized under
subparagraph (A), and
``(ii) such knowledge or information is not of fraud
committed by a person against the United States under any
revenue law.''.
(b) Conforming Amendment.--Subparagraph (A) of section
7803(c)(4) is amended by inserting ``and'' at the end of
clause (ii), by striking ``; and'' at the end of clause (iii)
and inserting a period, and by striking clause (iv).
TITLE V--MISCELLANEOUS
SEC. 501. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.
Subsection (i) of section 7611 (relating to section not to
apply to criminal investigations, etc.) is amended by
striking ``or'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``, or'',
and by inserting after paragraph (5) the following:
``(6) information provided by the Secretary related to the
standards for exemption from tax under this title and the
requirements under this title relating to unrelated business
taxable income.''.
SEC. 502. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (1) of section 7428(a) (relating
to creation of remedy) is amended--
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))''; and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in subsection (c) (other than
paragraph (3)) or (d) of section 501 which is exempt from tax
under section 501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is
amended in the material following paragraph (2) by striking
``United States Tax Court, the United States Claims Court, or
the district court of the United States for the District of
Columbia'' and inserting the following: ``United States
Tax Court (in the case of any such determination or
failure) or the United States Claims Court or the district
court of the United States for the District of Columbia
(in the case of a determination or failure with respect to
an issue referred to in subparagraph (A) or (B) of
paragraph (1)),''.
(c) Effective Date.--The amendments made by this section
shall apply to pleadings filed with respect to determinations
(or requests for determinations) made after the date of the
enactment of this Act.
SEC. 503. EMPLOYEE MISCONDUCT REPORT TO INCLUDE SUMMARY OF
COMPLAINTS BY CATEGORY.
(a) In General.--Clause (ii) of section 7803(d)(2)(A) is
amended by inserting before the semicolon at the end the
following: ``, including a summary (by category) of the 10
most common complaints made and the number of such common
complaints''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply with respect to reporting periods ending after
the date of the enactment of this Act.
SEC. 504. ANNUAL REPORT ON AWARDS OF COSTS AND CERTAIN FEES
IN ADMINISTRATIVE AND COURT PROCEEDINGS.
Not later than 3 months after the close of each Federal
fiscal year after fiscal year 2003, the Treasury Inspector
General for Tax Administration shall submit a report to
Congress which specifies for such year--
(1) the number of payments made by the United States
pursuant to section 7430 of the Internal Revenue Code of 1986
(relating to awarding of costs and certain fees);
(2) the amount of each such payment;
(3) an analysis of any administrative issue giving rise to
such payments; and
(4) changes (if any) which will be implemented as a result
of such analysis and other changes (if any) recommended by
the Treasury Inspector General for Tax Administration as a
result of such analysis.
SEC. 505. ANNUAL REPORT ON ABATEMENT OF PENALTIES.
Not later than 6 months after the close of each Federal
fiscal year after fiscal year 2003, the Treasury Inspector
General for Tax Administration shall submit a report to
Congress on abatements of penalties under the Internal
Revenue Code of 1986 during such year, including information
on the reasons and criteria for such abatements.
SEC. 506. BETTER MEANS OF COMMUNICATING WITH TAXPAYERS.
Not later than 18 months after the date of the enactment of
this Act, the Treasury Inspector General for Tax
Administration shall submit a report to Congress evaluating
whether technological advances, such as e-mail and facsimile
transmission, permit the use of alternative means for the
Internal Revenue Service to communicate with taxpayers.
SEC. 507. EXPLANATION OF STATUTE OF LIMITATIONS AND
CONSEQUENCES OF FAILURE TO FILE.
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),
and any instructions booklet accompanying a general income
tax return form for taxable years beginning after 2002
(including forms 1040, 1040A, 1040EZ, and any similar or
successor forms relating thereto), to provide for an
explanation of--
(1) the limitations imposed by section 6511 of the Internal
Revenue Code of 1986 on credits and refunds; and
(2) the consequences under such section 6511 of the failure
to file a return of tax.
SEC. 508. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) In General.--Clause (i) of section 202(c)(4)(B) of the
Government Securities Act Amendments of 1993 (31 U.S.C. 3121
note) is amended by inserting before the semicolon ``(or, if
earlier, at the time the Secretary releases the minutes of
the meeting in accordance with paragraph (2))''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to meetings held after the date of the enactment
of this Act.
SEC. 509. ENROLLED AGENTS.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:
``SEC. 7528. ENROLLED AGENTS.
``(a) In General.--The Secretary may prescribe such
regulations as may be necessary to regulate the conduct of
enrolled agents in regards to their practice before the
Internal Revenue Service.
``(b) Use of Credentials.--Any enrolled agents properly
licensed to practice as required under rules promulgated
under section (a) herein shall be allowed to use the
credentials or designation as `enrolled agent', `EA', or
`E.A.'.''.
(b) Clerical Amendment.--The table of sections for chapter
77 is amended by adding at the end the following new item:
``Sec. 7528. Enrolled agents.''.
(c) Prior Regulations.--Nothing in the amendments made by
this section shall be construed to have any effect on part 10
of
[[Page H5522]]
title 31, Code of Federal Regulations, or any other Federal
rule or regulation issued before the date of the enactment of
this Act.
SEC. 510. FINANCIAL MANAGEMENT SERVICE FEES.
Notwithstanding any other provision of law, the Financial
Management Service may charge the Internal Revenue Service,
and the Internal Revenue Service may pay the Financial
Management Service, a fee sufficient to cover the full cost
of implementing a continuous levy program under subsection
(h) of section 6331 of the Internal Revenue Code of 1986. Any
such fee shall be based on actual levies made and shall be
collected by the Financial Management Service by the
retention of a portion of amounts collected by levy pursuant
to that subsection. Amounts received by the Financial
Management Service as fees under that subsection shall be
deposited into the account of the Department of the Treasury
under section 3711(g)(7) of title 31, United States Code, and
shall be collected and accounted for in accordance with the
provisions of that section. The amount credited against the
taxpayer's liability on account of the continuous levy shall
be the amount levied, without reduction for the amount paid
to the Financial Management Service as a fee.
SEC. 511. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions), as amended by section 509, is further amended by
adding at the end the following new section:
``SEC. 7529. INTERNAL REVENUE SERVICE USER FEES.
``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--
``(I) the fifth plan year the pension benefit plan is in
existence, or
``(II) the end of any remedial amendment period with
respect to the plan beginning within the first 5 plan years,
or
``(ii) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
``(C) Definitions and special rules.--For purposes of
subparagraph (B)--
``(i) Pension benefit plan.--The term `pension benefit
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
``(ii) Eligible employer.--The term `eligible employer'
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)) which has at least 1 employee who is not
a highly compensated employee (as defined in section 414(q))
and is participating in the plan. The determination of
whether an employer is an eligible employer under
subparagraph (B) shall be made as of the date of the request
described in such subparagraph.
``(iii) Determination of average fees charged.--For
purposes of any determination of average fees charged, any
request to which subparagraph (B) applies shall not be
taken into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be
less than the amount determined under the following table:
Average
``Category Fee
Employee plan ruling and opinion............................$250 ....
Exempt organization ruling..................................$350 ....
Employee plan determination.................................$300 ....
Exempt organization determination...........................$275 ....
Chief counsel ruling........................................$200.....
``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:
``Sec. 7529. Internal Revenue Service user fees.''.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of
law, any fees collected pursuant to section 7527 of the
Internal Revenue Code of 1986, as added by subsection (a),
shall not be expended by the Internal Revenue Service unless
provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.
TITLE VI--LOW-INCOME TAXPAYER CLINICS
SEC. 601. LOW-INCOME TAXPAYER CLINICS.
(a) Limitation on Amount of Grants.--Paragraph (1) of
section 7526(c) (relating to special rules and limitations)
is amended by striking ``$6,000,000 per year'' and inserting
``$9,000,000 for 2004, $12,000,000 for 2005, and $15,000,000
for each year thereafter''.
(b) Promotion of Clinics.--Section 7526(c) is amended by
adding at the end the following new paragraph:
``(6) Promotion of clinics.--The Secretary is authorized to
promote the benefits of and encourage the use of low-income
taxpayer clinics through the use of mass communications,
referrals, and other means.''.
(c) Use of Grants for Overhead Expenses Prohibited.--
Section 7526(c), as amended by subsection (b), is further
amended by adding at the end the following new paragraph:
``(7) Use of grants for overhead expenses prohibited.--No
grant made under this section may be used for the general
overhead expenses of any institution sponsoring a qualified
low-income taxpayer clinic.''.
(d) Eligible Clinics.--
(1) In general.--Paragraph (2) of section 7526(b) is
amended to read as follows:
``(2) Eligible clinic.--The term `eligible clinic' means--
``(A) any clinical program at an accredited law, business,
or accounting school in which students represent low-income
taxpayers in controversies arising under this title; and
``(B) any 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.''.
(2) Conforming amendment.--Subparagraph (A) of section
7526(b)(1) is amended by striking ``means a clinic'' and
inserting ``means an eligible clinic''.
TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS
SEC. 701. APPLICABILITY OF CERTAIN FEDERAL-STATE AGREEMENTS
RELATING TO UNEMPLOYMENT ASSISTANCE.
Effective as of May 25, 2003, section 208 of Public Law 107
09147 is amended--
(1) in subsection (a)(2), by inserting ``on or'' after
``ending''; and
(2) in subsection (b), by striking ``May 31'' each place it
appears and inserting ``June 1''.
The SPEAKER pro tempore. Pursuant to House Resolution 282, the
amendment in the nature of a substitute printed in the bill, modified
by the amendment printed in part A of House Report 108-158, is adopted.
The text of H.R. 1528, as amended, as modified, is as follows:
H.R. 1528
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Taxpayer
Protection and IRS Accountability Act of 2003''.
(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; etc.
TITLE I--PENALTY AND INTEREST REFORMS
Sec. 101. Failure to pay estimated tax penalty converted to interest
charge on accumulated unpaid balance.
Sec. 102. Exclusion from gross income for interest on overpayments of
income tax by individuals.
Sec. 103. Abatement of interest.
Sec. 104. Deposits made to suspend running of interest on potential
underpayments.
Sec. 105. Expansion of interest netting for individuals.
Sec. 106. Waiver of certain penalties for first-time unintentional
minor errors.
Sec. 107. Frivolous tax submissions.
Sec. 108. Clarification of application of Federal tax deposit penalty.
TITLE II--FAIRNESS OF COLLECTION PROCEDURES
Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Extension of time for return of property.
Sec. 203. Individuals held harmless on wrongful levy, etc., on
individual retirement plan.
Sec. 204. Seven-day threshold on tolling of statute of limitations
during tax review.
Sec. 205. Study of liens and levies.
TITLE III--TAX ADMINISTRATION REFORMS
Sec. 301. Revisions relating to termination of employment of Internal
Revenue Service employees for misconduct.
Sec. 302. Confirmation of authority of tax court to apply doctrine of
equitable recoupment.
[[Page H5523]]
Sec. 303. Jurisdiction of tax court over collection due process cases.
Sec. 304. Office of Chief Counsel review of offers in compromise.
Sec. 305. 15-day delay in due date for electronically filed individual
income tax returns.
Sec. 306. Access of National Taxpayer Advocate to independent legal
counsel.
Sec. 307. Payment of motor fuel excise tax refunds by direct deposit.
Sec. 308. Family business tax simplification.
Sec. 309. Health insurance costs of eligible individuals.
Sec. 310. Suspension of tax-exempt status of terrorist organizations.
Sec. 311. Extension of joint review of strategic plans and budget for
the Interal Revenue Service.
TITLE IV--CONFIDENTIALITY AND DISCLOSURE
Sec. 401. Collection activities with respect to joint return
disclosable to either spouse based on oral request.
Sec. 402. Taxpayer representatives not subject to examination on sole
basis of representation of taxpayers.
Sec. 403. Disclosure in judicial or administrative tax proceedings of
return and return information of persons who are not
party to such proceedings.
Sec. 404. Prohibition of disclosure of taxpayer identification
information with respect to disclosure of accepted
offers-in-compromise.
Sec. 405. Compliance by contractors with confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Notice to taxpayer concerning administrative determination of
browsing; annual report.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to
section 501(c)(3) organizations.
Sec. 411. Confidentiality of taxpayer communications with the Office of
the Taxpayer Advocate.
TITLE V--MISCELLANEOUS
Sec. 501. Clarification of definition of church tax inquiry.
Sec. 502. Expansion of declaratory judgment remedy to tax-exempt
organizations.
Sec. 503. Employee misconduct report to include summary of complaints
by category.
Sec. 504. Annual report on awards of costs and certain fees in
administrative and court proceedings.
Sec. 505. Annual report on abatement of penalties.
Sec. 506. Better means of communicating with taxpayers.
Sec. 507. Explanation of statute of limitations and consequences of
failure to file.
Sec. 508. Amendment to treasury auction reforms.
Sec. 509. Enrolled agents.
Sec. 510. Financial management service fees.
Sec. 511. Extension of Internal Revenue Service user fees.
TITLE VI--LOW-INCOME TAXPAYER CLINICS
Sec. 601. Low-income taxpayer clinics.
TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS.
Sec. 701. Applicability of certain Federal-State agreements relating to
unemployment assistance.
TITLE I--PENALTY AND INTEREST REFORMS
SEC. 101. FAILURE TO PAY ESTIMATED TAX PENALTY CONVERTED TO
INTEREST CHARGE ON ACCUMULATED UNPAID BALANCE.
(a) Penalty Moved to Interest Chapter of Code.--The
Internal Revenue Code of 1986 is amended by redesignating
section 6654 as section 6641 and by moving section 6641 (as
so redesignated) from part I of subchapter A of chapter 68 to
the end of subchapter E of chapter 67 (as added by subsection
(e)(1) of this section).
(b) Penalty Converted to Interest Charge.--The heading and
subsections (a) and (b) of section 6641 (as so redesignated)
are amended to read as follows:
``SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY
ESTIMATED INCOME TAX.
``(a) In General.--Interest shall be paid on any
underpayment of estimated tax by an individual for a taxable
year for each day of such underpayment. The amount of such
interest for any day shall be the product of the underpayment
rate established under subsection (b)(2) multiplied by the
amount of the underpayment.
``(b) Amount of Underpayment; Interest Rate.--For purposes
of subsection (a)--
``(1) Amount.--The amount of the underpayment on any day
shall be the excess of--
``(A) the sum of the required installments for the taxable
year the due dates for which are on or before such day, over
``(B) the sum of the amounts (if any) of estimated tax
payments made on or before such day on such required
installments.
``(2) Determination of interest rate.--
``(A) In general.--The underpayment rate with respect to
any day in an installment underpayment period shall be the
underpayment rate established under section 6621 for the
first day of the calendar quarter in which such installment
underpayment period begins.
``(B) Installment underpayment period.--For purposes of
subparagraph (A), the term `installment underpayment period'
means the period beginning on the day after the due date for
a required installment and ending on the due date for the
subsequent required installment (or in the case of the 4th
required installment, the 15th day of the 4th month following
the close of a taxable year).
``(C) Daily rate.--The rate determined under subparagraph
(A) shall be applied on a daily basis and shall be based on
the assumption of 365 days in a calendar year.
``(3) Termination of estimated tax interest.--No day after
the end of the installment underpayment period for the 4th
required installment specified in paragraph (2)(B) for a
taxable year shall be treated as a day of underpayment with
respect to such taxable year.''.
(c) Increase in Safe Harbor Where Tax is Small.--
(1) In general.--Clause (i) of section 6641(d)(1)(B) (as so
redesignated) is amended to read as follows:
``(i) the lesser of--
``(I) 90 percent of the tax shown on the return for the
taxable year (or, if no return is filed, 90 percent of the
tax for such year), or
``(II) the tax shown on the return for the taxable year
(or, if no return is filed, the tax for such year) reduced
(but not below zero) by $1,600, or''.
(2) Conforming amendment.--Subsection (e) of section 6641
(as so redesignated) is amended by striking paragraph (1) and
redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(d) Conforming Amendments.--
(1) Paragraphs (1) and (2) of subsection (e) (as
redesignated by subsection (c)(2)) and subsection (h) of
section 6641 (as so designated) are each amended by striking
``addition to tax'' each place it occurs and inserting
``interest''.
(2) Section 167(g)(5)(D) is amended by striking ``6654''
and inserting ``6641''.
(3) Section 460(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(4) Section 3510(b) is amended--
(A) by striking ``section 6654'' in paragraph (1) and
inserting ``section 6641'';
(B) by amending paragraph (2)(B) to read as follows:
``(B) no interest would be required to be paid (but for
this section) under 6641 for such taxable year by reason of
the $1,600 amount specified in section
6641(d)(1)(B)(i)(II).'';
(C) by striking ``section 6654(d)(2)'' in paragraph (3) and
inserting ``section 6641(d)(2)''; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(6) Section 6601(h) is amended by striking ``6654'' and
inserting ``6641''.
(7) Section 6621(b)(2)(B) is amended by striking ``addition
to tax under section 6654'' and inserting ``interest required
to be paid under section 6641''.
(8) Section 6622(b) is amended--
(A) by striking ``Penalty for'' in the heading; and
(B) by striking ``addition to tax under section 6654 or
6655'' and inserting ``interest required to be paid under
section 6641 or addition to tax under section 6655''.
(9) Section 6658(a) is amended--
(A) by striking ``6654, or 6655'' and inserting ``or 6655,
and no interest shall be required to be paid under section
6641,''; and
(B) by inserting ``or paying interest'' after ``the tax''
in paragraph (2)(B)(ii).
(10) Section 6665(b) is amended--
(A) in the matter preceding paragraph (1) by striking ``,
6654,''; and
(B) in paragraph (2) by striking ``6654 or''.
(11) Section 7203 is amended by striking ``section 6654 or
6655'' and inserting ``section 6655 or interest required to
be paid under section 6641''.
(e) Clerical Amendments.--
(1) Chapter 67 is amended by inserting after subchapter D
the following:
``Subchapter E--Interest on Failure by Individual to Pay Estimated
Income Tax
``Sec. 6641. Interest on failure by individual to pay estimated income
tax.''.
(2) The table of subchapters for chapter 67 is amended by
adding at the end the following new items:
``Subchapter D. Notice requirements.
``Subchapter E. Interest on failure by individual to pay estimated
income tax.''.
(3) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to
section 6654.
(f) Effective Date.--The amendments made by this section
shall apply to installment payments for taxable years
beginning after December 31, 2003.
SEC. 102. EXCLUSION FROM GROSS INCOME FOR INTEREST ON
OVERPAYMENTS OF INCOME TAX BY INDIVIDUALS.
(a) In General.--Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income)
is amended by inserting after section 139 the following new
section:
``SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTEREST ON
OVERPAYMENTS OF INCOME TAX BY INDIVIDUALS.
``(a) In General.--In the case of an individual, gross
income shall not include interest paid under section 6611 on
any overpayment of tax imposed by this subtitle.
``(b) Exception.--Subsection (a) shall not apply in the
case of a failure to claim items resulting in the overpayment
on the original return if the Secretary determines that the
principal purpose of such failure is to take advantage of
subsection (a).
``(c) Special Rule for Determining Modified Adjusted Gross
Income.--For purposes of this title, interest not included in
gross income
[[Page H5524]]
under subsection (a) shall not be treated as interest which
is exempt from tax for purposes of sections 32(i)(2)(B) and
6012(d) or any computation in which interest exempt from tax
under this title is added to adjusted gross income.''.
(b) Clerical Amendment.--The table of sections for part III
of subchapter B of chapter 1 is amended by inserting after
the item relating to section 139 the following new item:
``Sec. 139A. Exclusion from gross income for interest on overpayments
of income tax by individuals.''.
(c) Effective Date.--The amendments made by this section
shall apply to interest received in calendar years beginning
after the date of the enactment of this Act.
SEC. 103. ABATEMENT OF INTEREST.
(a) Abatement of Interest With Respect to Erroneous Refund
Check Without Regard to Size of Refund.--Paragraph (2) of
section 6404(e) is amended by striking ``unless--'' and all
that follows and inserting ``unless the taxpayer (or a
related party) has in any way caused such erroneous
refund.''.
(b) Abatement of Interest to Extent Interest is
Attributable to Taxpayer Reliance on Written Statements of
the IRS.--Subsection (f) of section 6404 is amended--
(1) in the subsection heading, by striking ``Penalty or
Addition'' and inserting ``Interest, Penalty, or Addition'';
and
(2) in paragraph (1) and in subparagraph (B) of paragraph
(2), by striking ``penalty or addition'' and inserting
``interest, penalty, or addition''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to interest accruing on or after the
date of the enactment of this Act.
SEC. 104. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS.
(a) In General.--Subchapter A of chapter 67 (relating to
interest on underpayments) is amended by adding at the end
the following new section:
``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS, ETC.
``(a) Authority To Make Deposits Other Than As Payment of
Tax.--A taxpayer may make a cash deposit with the Secretary
which may be used by the Secretary to pay any tax imposed
under subtitle A or B or chapter 41, 42, 43, or 44 which has
not been assessed at the time of the deposit. Such a deposit
shall be made in such manner as the Secretary shall
prescribe.
``(b) No Interest Imposed.--To the extent that such deposit
is used by the Secretary to pay tax, for purposes of section
6601 (relating to interest on underpayments), the tax shall
be treated as paid when the deposit is made.
``(c) Return of Deposit.--Except in a case where the
Secretary determines that collection of tax is in jeopardy,
the Secretary shall return to the taxpayer any amount of the
deposit (to the extent not used for a payment of tax) which
the taxpayer requests in writing.
``(d) Payment of Interest.--
``(1) In general.--For purposes of section 6611 (relating
to interest on overpayments), a deposit which is returned to
a taxpayer shall be treated as a payment of tax for any
period to the extent (and only to the extent) attributable to
a disputable tax for such period. Under regulations
prescribed by the Secretary, rules similar to the rules of
section 6611(b)(2) shall apply.
``(2) Disputable tax.--
``(A) In general.--For purposes of this section, the term
`disputable tax' means the amount of tax specified at the
time of the deposit as the taxpayer's reasonable estimate of
the maximum amount of any tax attributable to disputable
items.
``(B) Safe harbor based on 30-day letter.--In the case of a
taxpayer who has been issued a 30-day letter, the maximum
amount of tax under subparagraph (A) shall not be less than
the amount of the proposed deficiency specified in such
letter.
``(3) Other definitions.--For purposes of paragraph (2)--
``(A) Disputable item.--The term `disputable item' means
any item of income, gain, loss, deduction, or credit if the
taxpayer--
``(i) has a reasonable basis for its treatment of such
item, and
``(ii) reasonably believes that the Secretary also has a
reasonable basis for disallowing the taxpayer's treatment of
such item.
``(B) 30-day letter.--The term `30-day letter' means the
first letter of proposed deficiency which allows the taxpayer
an opportunity for administrative review in the Internal
Revenue Service Office of Appeals.
``(4) Rate of interest.--The rate of interest allowable
under this subsection shall be the Federal short-term rate
determined under section 6621(b), compounded daily.
``(e) Use of Deposits.--
``(1) Payment of tax.--Except as otherwise provided by the
taxpayer, deposits shall be treated as used for the payment
of tax in the order deposited.
``(2) Returns of deposits.--Deposits shall be treated as
returned to the taxpayer on a last-in, first-out basis.''.
(b) Clerical Amendment.--The table of sections for
subchapter A of chapter 67 is amended by adding at the end
the following new item:
``Sec. 6603. Deposits made to suspend running of interest on potential
underpayments, etc.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to deposits made after the date of the enactment of
this Act.
(2) Coordination with deposits made under revenue procedure
84-58.--In the case of an amount held by the Secretary of the
Treasury or his delegate on the date of the enactment of this
Act as a deposit in the nature of a cash bond deposit
pursuant to Revenue Procedure 84-58, the date that the
taxpayer identifies such amount as a deposit made pursuant to
section 6603 of the Internal Revenue Code (as added by this
Act) shall be treated as the date such amount is deposited
for purposes of such section 6603.
SEC. 105. EXPANSION OF INTEREST NETTING FOR INDIVIDUALS.
(a) In General.--Subsection (d) of section 6621 (relating
to elimination of interest on overlapping periods of tax
overpayments and underpayments) is amended by adding at the
end the following: ``Solely for purposes of the preceding
sentence, section 6611(e) shall not apply in the case of an
individual.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to interest accrued after December 31, 2003.
SEC. 106. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME
UNINTENTIONAL MINOR ERRORS.
(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:
``(i) Treatment of First-Time Unintentional Minor Errors.--
``(1) In general.--In the case of a return of tax imposed
by subtitle A filed by an individual, the Secretary may waive
an addition to tax under subsection (a) if--
``(A) the individual has a history of compliance with the
requirements of this title,
``(B) it is shown that the failure is due to an
unintentional minor error,
``(C) the penalty would be grossly disproportionate to the
action or expense that would have been needed to avoid the
error, and imposing the penalty would be against equity and
good conscience,
``(D) waiving the penalty would promote compliance with the
requirements of this title and effective tax administration,
and
``(E) the taxpayer took all reasonable steps to remedy the
error promptly after discovering it.
``(2) Exceptions.--Paragraph (1) shall not apply if--
``(A) the Secretary has waived any addition to tax under
this subsection with respect to any prior failure by such
individual,
``(B) the failure is a mathematical or clerical error (as
defined in section 6213(g)(2)), or
``(C) the failure is the lack of a required signature.''.
(b) Effective Date.--The amendment made by this section
shall take effect on January 1, 2004.
SEC. 107. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission is based on a position which the
Secretary has identified as frivolous under subsection (c).
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 7811 (relating to taxpayer assistance
orders),
``(II) section 6159 (relating to agreements for payment of
tax liability in installments), or
``(III) section 7122 (relating to compromises).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section
[[Page H5525]]
shall be in addition to any other penalty provided by law.''.
(b) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(c) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 108. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT
PENALTY.
Nothing in section 6656 of the Internal Revenue Code of
1986 shall be construed to permit the percentage specified in
subsection (b)(1)(A)(iii) thereof to apply other than in a
case where the failure is for more than 15 days.
TITLE II--FAIRNESS OF COLLECTION PROCEDURES
SEC. 201. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT
AGREEMENTS.
(a) In General.--
(1) Section 6159(a) (relating to authorization of
agreements) is amended--
(A) by striking ``satisfy liability for payment of'' and
inserting ``make payment on'', and
(B) by inserting ``full or partial'' after ``facilitate''.
(2) Section 6159(c) (relating to Secretary required to
enter into installment agreements in certain cases) is
amended in the matter preceding paragraph (1) by inserting
``full'' before ``payment''.
(b) Requirement To Review Partial Payment Agreements Every
Two Years.--Section 6159 is amended by redesignating
subsections (d) and (e) as subsections (e) and (f),
respectively, and inserting after subsection (c) the
following new subsection:
``(d) Secretary Required To Review Installment Agreements
for Partial Collection Every Two Years.--In the case of an
agreement entered into by the Secretary under subsection (a)
for partial collection of a tax liability, the Secretary
shall review the agreement at least once every 2 years.''.
(c) Effective Date.--The amendments made by this section
shall apply to agreements entered into on or after the date
of the enactment of this Act.
SEC. 202. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) Extension of Time for Return of Property Subject to
Levy.--Subsection (b) of section 6343 (relating to return of
property) is amended by striking ``9 months'' and inserting
``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of
section 6532 (relating to suits by persons other than
taxpayers) is amended--
(1) in paragraph (1) by striking ``9 months'' and inserting
``2 years'', and
(2) in paragraph (2) by striking ``9-month'' and inserting
``2-year''.
(c) Effective Date.--The amendments made by this section
shall apply to--
(1) levies made after the date of the enactment of this
Act, and
(2) levies made on or before such date if the 9-month
period has not expired under section 6343(b) of the Internal
Revenue Code of 1986 (without regard to this section) as of
such date.
SEC. 203. INDIVIDUALS HELD HARMLESS ON WRONGFUL LEVY, ETC.,
ON INDIVIDUAL RETIREMENT PLAN.
(a) In General.--Section 6343 (relating to authority to
release levy and return property) is amended by adding at the
end the following new subsection:
``(f) Individuals Held Harmless on Wrongful Levy, Etc. on
Individual Retirement Plan.--
``(1) In general.--If the Secretary determines that an
individual retirement plan has been levied upon in a case to
which subsection (b) or (d)(2)(A) applies, an amount equal to
the sum of--
``(A) the amount of money returned by the Secretary on
account of such levy, and
``(B) interest paid under subsection (c) on such amount of
money,
may be deposited into an individual retirement plan (other
than an endowment contract) to which a rollover from the plan
levied upon is permitted.
``(2) Treatment as rollover.--The distribution on account
of the levy and any deposit under paragraph (1) with respect
to such distribution shall be treated for purposes of this
title as if such distribution and deposit were part of a
rollover described in section 408(d)(3)(A)(i); except that--
``(A) interest paid under subsection (c) shall be treated
as part of such distribution and as not includible in gross
income,
``(B) the 60-day requirement in such section shall be
treated as met if the deposit is made not later than the 60th
day after the day on which the individual receives an amount
under paragraph (1) from the Secretary, and
``(C) such deposit shall not be taken into account under
section 408(d)(3)(B).
``(3) Refund, etc., of income tax on levy.--If any amount
is includible in gross income for a taxable year by reason of
a levy referred to in paragraph (1) and any portion of such
amount is treated as a rollover under paragraph (2), any tax
imposed by chapter 1 on such portion shall not be assessed,
and if assessed shall be abated, and if collected shall be
credited or refunded as an overpayment made on the due date
for filing the return of tax for such taxable year.
``(4) Interest.--Notwithstanding subsection (d), interest
shall be allowed under subsection (c) in a case in which the
Secretary makes a determination described in subsection
(d)(2)(A) with respect to a levy upon an individual
retirement plan.''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid under subsections (b), (c), and
(d)(2)(A) of section 6343 of the Internal Revenue Code of
1986 after December 31, 2003.
SEC. 204. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF
LIMITATIONS DURING TAX REVIEW.
(a) In General.--Section 7811(d)(1) (relating to suspension
of running of period of limitation) is amended by inserting
after ``application,'' the following: ``but only if the date
of such decision is at least 7 days after the date of the
taxpayer's application,''.
(b) Effective Date.--The amendment made by this section
shall apply to applications filed after the date of the
enactment of this Act.
SEC. 205. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary's delegate,
shall conduct a study of the practices of the Internal
Revenue Service concerning liens and levies. The study shall
examine--
(1) the declining use of liens and levies by the Internal
Revenue Service, and
(2) the practicality of recording liens and levying against
property in cases in which the cost of such actions exceeds
the amount to be realized from such property.
Not later than 1 year after the date of the enactment of this
Act, the Secretary shall submit such study to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate.
TITLE III--TAX ADMINISTRATION REFORMS
SEC. 301. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF
INTERNAL REVENUE SERVICE EMPLOYEES FOR
MISCONDUCT.
(a) In General.--Subchapter A of chapter 80 (relating to
application of internal revenue laws) is amended by inserting
after section 7804 the following new section:
``SEC. 7804A. DISCIPLINARY ACTIONS FOR MISCONDUCT.
``(a) Disciplinary Actions.--
``(1) In general.--Subject to subsection (c), the
Commissioner shall take an action in accordance with the
guidelines established under paragraph (2) against any
employee of the Internal Revenue Service if there is a final
administrative or judicial determination that such employee
committed any act or omission described under subsection (b)
in the performance of the employee's official duties or where
a nexus to the employee's position exists.
``(2) Guidelines.--The Commissioner shall issue guidelines
for determining the appropriate level of discipline, up to
and including termination of employment, for committing any
act or omission described under subsection (b).
``(b) Acts or Omissions.--The acts or omissions described
under this subsection are--
``(1) willful failure to obtain the required approval
signatures on documents authorizing the seizure of a
taxpayer's home, personal belongings, or business assets;
``(2) willfully providing a false statement under oath with
respect to a material matter involving a taxpayer or taxpayer
representative;
``(3) with respect to a taxpayer or taxpayer
representative, the willful violation of--
``(A) any right under the Constitution of the United
States;
``(B) any civil right established under--
``(i) title VI or VII of the Civil Rights Act of 1964;
``(ii) title IX of the Education Amendments of 1972;
``(iii) the Age Discrimination in Employment Act of 1967;
``(iv) the Age Discrimination Act of 1975;
``(v) section 501 or 504 of the Rehabilitation Act of 1973;
or
``(vi) title I of the Americans with Disabilities Act of
1990; or
``(C) the Internal Revenue Service policy on unauthorized
inspection of returns or return information;
``(4) willfully falsifying or destroying documents to
conceal mistakes made by any employee with respect to a
matter involving a taxpayer or taxpayer representative;
``(5) assault or battery on a taxpayer or taxpayer
representative, but only if there is a criminal conviction,
or a final adverse judgment by a court in a civil case, with
respect to the assault or battery;
``(6) willful violations of this title, Department of the
Treasury regulations, or policies of the Internal Revenue
Service (including the Internal Revenue Manual) for the
purpose of retaliating against, or harassing, a taxpayer or
taxpayer representative;
``(7) willful misuse of the provisions of section 6103 for
the purpose of concealing information from a congressional
inquiry;
``(8) willful failure to file any return of tax required
under this title on or before the date prescribed therefor
(including any extensions) when a tax is due and owing,
unless such failure is due to reasonable cause and not due to
willful neglect;
``(9) willful understatement of Federal tax liability,
unless such understatement is due to reasonable cause and not
due to willful neglect; and
``(10) threatening to audit a taxpayer, or to take other
action under this title, for the purpose of extracting
personal gain or benefit.
``(c) Determinations of Commissioner.--
``(1) In general.--The Commissioner may take a personnel
action other than a disciplinary action provided for in the
guidelines under subsection (a)(2) for an act or omission
described under subsection (b).
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may not be delegated to any other officer.
The Commissioner, in his sole discretion, may establish a
procedure to
[[Page H5526]]
determine if an individual should be referred to the
Commissioner for a determination by the Commissioner under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination of the Commissioner under this
subsection may not be reviewed in any administrative or
judicial proceeding. A finding that an act or omission
described under subsection (b) occurred may be reviewed.
``(d) Definition.--For the purposes of the provisions
described in clauses (i), (ii), and (iv) of subsection
(b)(3)(B), references to a program or activity regarding
Federal financial assistance or an education program or
activity receiving Federal financial assistance shall include
any program or activity conducted by the Internal Revenue
Service for a taxpayer.
``(e) Annual Report.--The Commissioner shall submit to
Congress annually a report on disciplinary actions under this
section.''.
(b) Clerical Amendment.--The table of sections for chapter
80 is amended by inserting after the item relating to section
7804 the following new item:
``Sec. 7804A. Disciplinary actions for misconduct.''.
(c) Repeal of Superseded Section.--Section 1203 of the
Internal Revenue Service Restructuring and Reform Act of 1998
(Public Law 105-206; 112 Stat. 720) is repealed.
(d) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 302. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY
DOCTRINE OF EQUITABLE RECOUPMENT.
(a) Confirmation of Authority of Tax Court To Apply
Doctrine of Equitable Recoupment.--Subsection (b) of section
6214 (relating to jurisdiction over other years and quarters)
is amended by adding at the end the following new sentence:
``Notwithstanding the preceding sentence, the Tax Court may
apply the doctrine of equitable recoupment to the same extent
that it is available in civil tax cases before the district
courts of the United States and the United States Court of
Federal Claims.''.
(b) Effective Date.--The amendments made by this section
shall apply to any action or proceeding in the Tax Court with
respect to which a decision has not become final (as
determined under section 7481 of the Internal Revenue Code of
1986) as of the date of the enactment of this Act.
SEC. 303. JURISDICTION OF TAX COURT OVER COLLECTION DUE
PROCESS CASES.
(a) In General.--Section 6330(d)(1) (relating to judicial
review of determination) is amended to read as follows:
``(1) Judicial review of determination.--The person may,
within 30 days of a determination under this section, appeal
such determination to the Tax Court (and the Tax Court shall
have jurisdiction with respect to such matter).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to judicial appeals filed after the date of the
enactment of this Act.
SEC. 304. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN
COMPROMISE.
(a) In General.--Section 7122(b) (relating to record) is
amended by striking ``Whenever a compromise'' and all that
follows through ``his delegate'' and inserting ``If the
Secretary determines that an opinion of the General Counsel
for the Department of the Treasury, or the Counsel's
delegate, is required with respect to a compromise, there
shall be placed on file in the office of the Secretary such
opinion''.
(b) Conforming Amendments.--Section 7122(b) is amended by
striking the second and third sentences.
(c) Effective Date.--The amendments made by this section
shall apply to offers-in-compromise submitted or pending on
or after the date of the enactment of this Act.
SEC. 305. 15-DAY DELAY IN DUE DATE FOR ELECTRONICALLY FILED
INDIVIDUAL INCOME TAX RETURNS.
(a) In General.--Section 6072 (relating to time for filing
income tax returns) is amended by adding at the end the
following new subsection:
``(f) Electronically Filed Returns of Individuals.--
``(1) In general.--Returns of an individual under section
6012 or 6013 (other than an individual to whom subsection (c)
applies) which are filed electronically--
``(A) in the case of returns filed on the basis of a
calendar year, shall be filed on or before the 30th day of
April following the close of the calendar year, and
``(B) in the case of returns filed on the basis of a fiscal
year, shall be filed on or before the last day of the 4th
month following the close of the fiscal year.
``(2) Electronic filing.--Paragraph (1) shall not apply to
any return unless--
``(A) such return is accepted by the Secretary, and
``(B) the balance due (if any) shown on such return is paid
electronically in a manner prescribed by the Secretary.
``(3) Special rules.--
``(A) Estimated tax.--If--
``(i) paragraph (1) applies to an individual for any
taxable year, and
``(ii) there is an overpayment of tax shown on the return
for such year which the individual allows against the
individual's obligation under section 6641,
then, with respect to the amount so allowed, any reference in
section 6641 to the April 15 following such taxable year
shall be treated as a reference to April 30.
``(B) References to due date.--Paragraph (1) shall apply
solely for purposes of determining the due date for the
individual's obligation to file and pay tax and, except as
otherwise provided by the Secretary, shall be treated as an
extension of the due date for any other purpose under this
title.
``(4) Termination.--This subsection shall not apply to any
return filed with respect to a taxable year which begins
after December 31, 2005.''.
(b) Effective Date.--The amendment made by this section
shall apply to returns filed with respect to taxable years
beginning after December 31, 2002.
SEC. 306. ACCESS OF NATIONAL TAXPAYER ADVOCATE TO INDEPENDENT
LEGAL COUNSEL.
Clause (i) of section 7803(c)(2)(D) (relating to personnel
actions) is amended by striking ``and'' at the end of
subclause (I), by striking the period at the end of
subclause (II) and inserting ``, and'', and by adding at
the end the following new subclause:
``(III) appoint a counsel in the Office of the Taxpayer
Advocate to report solely to the National Taxpayer
Advocate.''.
SEC. 307. PAYMENT OF MOTOR FUEL EXCISE TAX REFUNDS BY DIRECT
DEPOSIT.
(a) In General.--Subchapter II of chapter 33 of title 31,
United States Code, is amended by adding at the end the
following new section:
``Sec. 3337. Payment of motor fuel excise tax refunds by
direct deposit
``The Secretary of the Treasury shall make payments under
sections 6420, 6421, and 6427 of the Internal Revenue Code of
1986 by electronic funds transfer (as defined in section
3332(j)(1)) if the person who is entitled to the payment--
``(1) elects to receive the payment by electronic funds
transfer; and
``(2) satisfies the requirements of section 3332(g) with
respect to such payment at such time and in such manner as
the Secretary may require.''.
(b) Clerical Amendment.--The table of sections for
subchapter II of chapter 33 of title 31, United States Code,
is amended by adding at the end the following new item:
``3337. Payment of motor fuel excise tax refunds by direct deposit.''.
SEC. 308. FAMILY BUSINESS TAX SIMPLIFICATION.
(a) In General.--Section 761 (defining terms for purposes
of partnerships) is amended by redesignating subsection (f)
as subsection (g) and by inserting after subsection (e) the
following new subsection:
``(f) Qualified Joint Venture.--
``(1) In general.--In the case of a qualified joint venture
conducted by a husband and wife who file a joint return for
the taxable year, for purposes of this title--
``(A) such joint venture shall not be treated as a
partnership,
``(B) all items of income, gain, loss, deduction, and
credit shall be divided between the spouses in accordance
with their respective interests in the venture, and
``(C) each spouse shall take into account such spouse's
respective share of such items as if they were attributable
to a trade or business conducted by such spouse as a sole
proprietor.
``(2) Qualified joint venture.--For purposes of paragraph
(1), the term `qualified joint venture' means any joint
venture involving the conduct of a trade or business if--
``(A) the only members of such joint venture are a husband
and wife,
``(B) both spouses materially participate (within the
meaning of section 469(h) without regard to paragraph (5)
thereof) in such trade or business, and
``(C) both spouses elect the application of this
subsection.''.
(b) Net Earnings From Self-Employment.--
(1) Subsection (a) of section 1402 (defining net earnings
from self-employment) is amended by striking ``and'' at the
end of paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``; and'', and by inserting
after paragraph (15) the following new paragraph:
``(16) notwithstanding the preceding provisions of this
subsection, each spouse's share of income or loss from a
qualified joint venture shall be taken into account as
provided in section 761(f) in determining net earnings from
self-employment of such spouse.''.
(2) Subsection (a) of section 211 of the Social Security
Act (defining net earnings from self-employment) is amended
by striking ``and'' at the end of paragraph (14), by striking
the period at the end of paragraph (15) and inserting ``;
and'', and by inserting after paragraph (15) the following
new paragraph:
``(16) Notwithstanding the preceding provisions of this
subsection, each spouse's share of income or loss from a
qualified joint venture shall be taken into account as
provided in section 761(f) of the Internal Revenue Code of
1986 in determining net earnings from self-employment of such
spouse.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 309. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.
(a) Consumer Options.--
(1) In general.--Paragraph (2) of section 35(e) is amended
by adding at the end the following new subparagraphs:
``(C) Waiver by eligible individuals.--With respect to any
month, clauses (i) and (ii) of subparagraph (A) shall not
apply with respect to any eligible individual and such
individual's qualifying family members if such individual--
``(i) does not reside in a State which the Secretary has
identified by regulation, guidance, or otherwise as a State
in which any coverage which--
``(I) is described in any of subparagraphs (C) through (H)
of paragraph (1), and
``(II) meets the requirements of subparagraphs (A) and (B)
of this paragraph,
is available to eligible individuals (and their qualifying
family members) residing in the State, and
[[Page H5527]]
``(ii) elects to waive the application of clauses (i) and
(ii) of subparagraph (A) of this paragraph.
``(D) Election.--Any election made under subparagraph
(C)(ii) shall be effective for the month for which such
election is made and for all subsequent months.
``(E) Termination.--Subparagraphs (C) and (D) shall not
apply to any month beginning after December 31, 2004.''.
(2) No impact on state consumer protections.--Nothing in
the amendment made by paragraph (1) supercedes or otherwise
affects the application of State law relating to consumer
insurance protections (including State law implementing the
requirements of part B of title XXVII of the Public Health
Service Act).
(b) State-Based Continuation Coverage Not Subject to
Requirements.--Subparagraphs (A) and (B)(i) of section
35(e)(2) are each amended by striking ``subparagraphs (B)
through (H)'' and inserting ``subparagraphs (C) through
(H)''.
(c) Effective Date.--
(1) Consumer options.--The amendment made by subsection (a)
shall apply to months beginning after the date of the
enactment of this Act.
(2) State-based continuation coverage.--The amendments made
by subsection (b) shall take effect as if included in section
201(a) of the Trade Act of 2002.
SEC. 310. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 for any contribution to an organization
described in paragraph (2) during the period described in
paragraph (3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
SEC. 311. EXTENSION OF JOINT REVIEW OF STRATEGIC PLANS AND
BUDGET FOR THE INTERNAL REVENUE SERVICE.
(a) In General.--Paragraph (2) of section 8021(f) (relating
to joint reviews) is amended by striking ``2004'' and
inserting ``2009''.
(b) Report.--Subparagraph (C) of section 8022(3) (regarding
reports) is amended--
(1) by striking ``2004'' and inserting ``2009'', and
(2) by striking ``with respect to--'' and all that follows
and inserting ``with respect to the matters addressed in the
joint review referred to in section 8021(f)(2).''.
TITLE IV--CONFIDENTIALITY AND DISCLOSURE
SEC. 401. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN
DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL
REQUEST.
(a) In General.--Paragraph (8) of section 6103(e) (relating
to disclosure of collection activities with respect to joint
return) is amended by striking ``in writing'' the first place
it appears.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 402. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION
ON SOLE BASIS OF REPRESENTATION OF TAXPAYERS.
(a) In General.--Paragraph (1) of section 6103(h) (relating
to disclosure to certain Federal officers and employees for
purposes of tax administration, etc.) is amended--
(1) by striking ``Returns'' and inserting the following:
``(A) In general.--Returns'', and
(2) by adding at the end the following new subparagraph:
``(B) Taxpayer representatives.--Notwithstanding
subparagraph (A), the return of the representative of a
taxpayer whose return is being examined by an officer or
employee of the Department of the Treasury shall not be open
to inspection by such officer or employee on the sole basis
of the representative's relationship to the taxpayer unless a
supervisor of such officer or employee has approved the
inspection of the return of such representative on a basis
other than by reason of such relationship.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date which is 180 days after the
date of the enactment of this Act.
SEC. 403. DISCLOSURE IN JUDICIAL OR ADMINISTRATIVE TAX
PROCEEDINGS OF RETURN AND RETURN INFORMATION OF
PERSONS WHO ARE NOT PARTY TO SUCH PROCEEDINGS.
(a) In General.--Paragraph (4) of section 6103(h) (relating
to disclosure to certain Federal officers and employees for
purposes of tax administration, etc.) is amended by adding at
the end the following new subparagraph:
``(B) Disclosure in judicial or administrative tax
proceedings of return and return information of persons not
party to such proceedings.--
``(i) Notice.--Return or return information of any person
who is not a party to a judicial or administrative proceeding
described in this paragraph shall not be disclosed under
clause (ii) or (iii) of subparagraph (A) until after the
Secretary makes a reasonable effort to give notice to such
person and an opportunity for such person to request the
deletion of matter from such return or return information,
including any of the items referred to in paragraphs (1)
through (7) of section 6110(c). Such notice shall include a
statement of the issue or issues the resolution of which is
the reason such return or return information is sought. In
the case of S corporations, partnerships, estates, and
trusts, such notice shall be made at the entity level.
``(ii) Disclosure limited to pertinent portion.--The only
portion of a return or return information described in clause
(i) which may be disclosed under subparagraph (A) is that
portion of such return or return information that directly
relates to the resolution of an issue in such proceeding.
``(iii) Exceptions.--Clause (i) shall not apply--
``(I) to any civil action under section 7407, 7408, or
7409,
``(II) to any ex parte proceeding for obtaining a search
warrant, order for entry on premises or safe deposit boxes,
or similar ex parte proceeding,
``(III) to disclosure of third party return information by
indictment or criminal information, or
``(IV) if the Attorney General or the Attorney General's
delegate determines that the application of such clause would
seriously impair a criminal tax investigation or
proceeding.''.
(b) Conforming Amendments.--Paragraph (4) of section
6103(h) is amended by--
(1) by striking ``proceedings.--A return'' and inserting
``proceedings.--
``(A) In general.--Except as provided in subparagraph (B),
a return'';
(2) by redesignating subparagraphs (A), (B), (C), and (D)
as clauses (i), (ii), (iii), and (iv), respectively, and by
moving such clauses 2 ems to the right; and
[[Page H5528]]
(3) in the matter following clause (iv) (as so
redesignated), by striking ``subparagraph (A), (B), or (C)''
and inserting ``clause (i), (ii), or (iii)'' and by moving
such matter 2 ems to the right.
(c) Effective Date.--The amendments made by this section
shall apply to proceedings commenced after the date of the
enactment of this Act.
SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER
IDENTIFICATION INFORMATION WITH RESPECT TO
DISCLOSURE OF ACCEPTED OFFERS-IN-COMPROMISE.
(a) General.--Paragraph (1) of section 6103(k) (relating
to disclosure of certain returns and return information for
tax administrative purposes) is amended by inserting ``(other
than the taxpayer's address and TIN)'' after ``Return
information''.
(b) Effective Date.--The amendment made by this section
shall apply to disclosures made after the date of the
enactment of this Act.
SEC. 405. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY
SAFEGUARDS.
(a) In General.--Section 6103(p) (relating to State law
requirements) is amended by adding at the end the following
new paragraph:
``(9) Disclosure to contractors and other agents.--
Notwithstanding any other provision of this section, no
return or return information shall be disclosed to any
contractor or other agent of a Federal, State, or local
agency unless such agency, to the satisfaction of the
Secretary--
``(A) has requirements in effect which require each such
contractor or other agent which would have access to returns
or return information to provide safeguards (within the
meaning of paragraph (4)) to protect the confidentiality of
such returns or return information,
``(B) agrees to conduct an annual, on-site review (mid-
point review in the case of contracts of less than 1 year in
duration) of each such contractor or other agent to determine
compliance with such requirements,
``(C) submits the findings of the most recent review
conducted under subparagraph (B) to the Secretary as part of
the report required by paragraph (4)(E), and
``(D) certifies to the Secretary for the most recent annual
period that each such contractor or other agent is in
compliance with all such requirements.
The certification required by subparagraph (D) shall include
the name and address of each contractor and other agent, a
description of the contract of the contractor or other agent
with the agency, and the duration of such contract.''.
(b) Conforming Amendment.--Subparagraph (B) of section
6103(p)(8) is amended by inserting ``or paragraph (9)'' after
``subparagraph (A)''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to disclosures made after December 31, 2003.
(2) Certifications.--The first certification under section
6103(p)(9)(D) of the Internal Revenue Code of 1986, as added
by subsection (a), shall be made with respect to calendar
year 2004.
SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO
DISCLOSURE.
(a) In General.--Subsection (c) of section 6103 (relating
to disclosure of returns and return information to designee
of taxpayer) is amended by adding at the end the following
new paragraphs:
``(2) Requirements for valid requests and consents.--A
request for or consent to disclosure under paragraph (1)
shall only be valid for purposes of this section, sections
7213, 7213A, and 7431 if--
``(A) at the time of execution, such request or consent
designates a recipient of such disclosure and is dated, and
``(B) at the time such request or consent is submitted to
the Secretary, the submitter of such request or consent
certifies, under penalty of perjury, that such request or
consent complied with subparagraph (A).
``(3) Restrictions on persons obtaining information.--Any
person shall, as a condition for receiving return or return
information under paragraph (1)--
``(A) ensure that such return and return information is
kept confidential,
``(B) use such return and return information only for the
purpose for which it was requested, and
``(C) not disclose such return and return information
except to accomplish the purpose for which it was requested,
unless a separate consent from the taxpayer is obtained.
``(4) Requirements for form prescribed by secretary.--For
purposes of this subsection, the Secretary shall prescribe a
form for requests and consents which shall--
``(A) contain a warning, prominently displayed, informing
the taxpayer that the form should not be signed unless it is
completed,
``(B) state that if the taxpayer believes there is an
attempt to coerce him to sign an incomplete or blank form,
the taxpayer should report the matter to the Treasury
Inspector General for Tax Administration, and
``(C) contain the address and telephone number of the
Treasury Inspector General for Tax Administration.''.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Treasury Inspector General for Tax
Administration shall submit a report to the Congress on
compliance with the designation and certification
requirements applicable to requests for or consent to
disclosure of returns and return information under section
6103(c) of the Internal Revenue Code of 1986, as amended by
subsection (a). Such report shall--
(1) evaluate (on the basis of random sampling) whether--
(A) the amendment made by subsection (a) is achieving the
purposes of this section;
(B) requesters and submitters for such disclosure are
continuing to evade the purposes of this section and, if so,
how; and
(C) the sanctions for violations of such requirements are
adequate; and
(2) include such recommendations that the Treasury
Inspector General for Tax Administration considers necessary
or appropriate to better achieve the purposes of this
section.
(c) Conforming Amendments.--
(1) Section 6103(c) is amended by striking ``Taxpayer.--The
Secretary'' and inserting ``Taxpayer.--
``(1) In general.--The Secretary''.
(2) Section 7213(a)(1) is amended by striking ``section
6103(n)'' and inserting ``subsections (c) and (n) of section
6103''.
(3) Section 7213A(a)(1)(B) is amended by striking
``subsection (l)(18) or (n) of section 6103'' and inserting
``subsection (c), (l)(18), or (n) of section 6103''.
(d) Effective Date.--The amendments made by this section
shall apply to requests and consents made after 3 months
after the date of the enactment of this Act.
SEC. 407. NOTICE TO TAXPAYER CONCERNING ADMINISTRATIVE
DETERMINATION OF BROWSING; ANNUAL REPORT.
(a) Notice to Taxpayer.--Subsection (e) of section 7431
(relating to notification of unlawful inspection and
disclosure) is amended by adding at the end the following:
``The Secretary shall also notify such taxpayer if the
Treasury Inspector General for Tax Administration
substantiates that such taxpayer's return or return
information was inspected or disclosed in violation of any of
the provisions specified in paragraph (1), (2), or (3).''.
(b) Reports.--Subsection (p) of section 6103 (relating to
procedure and recordkeeping), as amended by section 405, is
further amended by adding at the end the following new
paragraph:
``(10) Report on unauthorized disclosure and inspection.--
As part of the report required by paragraph (3)(C) for each
calendar year, the Secretary shall furnish information
regarding the unauthorized disclosure and inspection of
returns and return information, including the number, status,
and results of--
``(A) administrative investigations,
``(B) civil lawsuits brought under section 7431 (including
the amounts for which such lawsuits were settled and the
amounts of damages awarded), and
``(C) criminal prosecutions.''.
(c) Effective Date.--
(1) Notice.--The amendment made by subsection (a) shall
apply to determinations made after the date of the enactment
of this Act.
(2) Reports.--The amendment made by subsection (b) shall
apply to calendar years ending after the date of the
enactment of this Act.
SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.
(a) In General.--Section 6103(i)(3)(B) (relating to danger
of death or physical injury) is amended by striking ``or
State'' and inserting ``, State, or local''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND
PURPOSES.
(a) In General.--Paragraph (1) of section 6103(m) (relating
to disclosure of taxpayer identity information) is amended by
striking ``and other media'' and by inserting ``, other
media, and through any other means of mass communication,''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS
RELATED TO SECTION 501(C)(3) ORGANIZATIONS.
(a) In General.--Subsection (c) of section 6104 is amended
by striking paragraph (2) and inserting the following new
paragraphs:
``(2) Disclosure of proposed actions.--
``(A) Specific notifications.--In the case of an
organization to which paragraph (1) applies, the Secretary
may disclose to the appropriate State officer--
``(i) a notice of proposed refusal to recognize such
organization as an organization described in section
501(c)(3) or a notice of proposed revocation of such
organization's recognition as an organization exempt from
taxation,
``(ii) the issuance of a letter of proposed deficiency of
tax imposed under section 507 or chapter 41 or 42, and
``(iii) the names, addresses, and taxpayer identification
numbers of organizations that have applied for recognition as
organizations described in section 501(c)(3).
``(B) Additional disclosures.--Returns and return
information of organizations with respect to which
information is disclosed under subparagraph (A) may be made
available for inspection by or disclosed to an appropriate
State officer.
``(C) Procedures for disclosure.--Information may be
inspected or disclosed under subparagraph (A) or (B) only--
``(i) upon written request by an appropriate State officer,
and
``(ii) for the purpose of, and only to the extent necessary
in, the administration of State laws regulating such
organizations.
Such information may only be inspected by or disclosed to a
person other than the appropriate State officer if such
person is an officer or employee of the State and is
designated by the appropriate State officer to receive the
returns or return information under this paragraph on behalf
of the appropriate State officer.
``(D) Disclosures other than by request.--The Secretary may
make available for inspection or disclose returns and return
information
[[Page H5529]]
of an organization to which paragraph (1) applies to an
appropriate State officer of any State if the Secretary
determines that such inspection or disclosure may facilitate
the resolution of State or Federal issues relating to the
tax-exempt status of such organization.
``(3) Use in administrative and judicial civil
proceedings.--Returns and return information disclosed
pursuant to this subsection may be disclosed in
administrative and judicial civil proceedings pertaining to
the enforcement of State laws regulating such organizations
in a manner prescribed by the Secretary similar to that for
tax administration proceedings under section 6103(h)(4).
``(4) No disclosure if impairment.--Returns and return
information shall not be disclosed under this subsection, or
in any proceeding described in paragraph (3), to the extent
that the Secretary determines that such disclosure would
seriously impair Federal tax administration.
``(5) Definitions.--For purposes of this subsection--
``(A) Return and return information.--The terms `return'
and `return information' have the respective meanings given
to such terms by section 6103(b).
``(B) Appropriate state officer.--The term `appropriate
State officer' means--
``(i) the State attorney general, or
``(ii) any other State official charged with overseeing
organizations of the type described in section 501(c)(3).''.
(b) Conforming Amendments.--
(1) Subparagraph (A) of section 6103(p)(3) is amended by
inserting ``and section 6104(c)'' after ``section'' in the
first sentence.
(2) Paragraph (4) of section 6103(p) is amended--
(A) in the matter preceding subparagraph (A), by inserting
``, or any appropriate State officer (as defined in section
6104(c)),'' before ``or any other person'',
(B) in subparagraph (F)(i), by inserting ``or any
appropriate State officer (as defined in section 6104(c)),''
before ``or any other person'', and
(C) in the matter following subparagraph (F), by inserting
``, an appropriate State officer (as defined in section
6104(c)),'' after ``including an agency'' each place it
appears.
(3) Paragraph (2) of section 7213(a) is amended by striking
``6103.'' and inserting ``6103 or under section 6104(c).''.
(4) Paragraph (2) of section 7213A(a) is amended by
inserting ``or 6104(c)'' after ``6103''.
(5) Paragraph (2) of section 7431(a) is amended by
inserting ``(including any disclosure in violation of section
6104(c))'' after ``6103''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act
but shall not apply to requests made before such date.
SEC. 411. CONFIDENTIALITY OF TAXPAYER COMMUNICATIONS WITH THE
OFFICE OF THE TAXPAYER ADVOCATE.
(a) In General.--Subsection (c) of section 7803 is amended
by adding at the end the following new paragraph:
``(5) Confidentiality of taxpayer information.--
``(A) In general.--To the extent authorized by the National
Taxpayer Advocate or pursuant to guidance issued under
subparagraph (B), any officer or employee of the Office of
the Taxpayer Advocate may withhold from the Internal Revenue
Service and the Department of Justice any information
provided by, or regarding contact with, any taxpayer.
``(B) Issuance of guidance.--In consultation with the Chief
Counsel for the Internal Revenue Service and subject to the
approval of the Commissioner of Internal Revenue, the
National Taxpayer Advocate may issue guidance regarding the
circumstances (including with respect to litigation) under
which, and the persons to whom, employees of the Office of
the Taxpayer Advocate shall not disclose information obtained
from a taxpayer. To the extent to which any provision of the
Internal Revenue Manual would require greater disclosure by
employees of the Office of the Taxpayer Advocate than the
disclosure required under such guidance, such provision shall
not apply.
``(C) Employee protection.--Section 7214(a)(8) shall not
apply to any failure to report knowledge or information if--
``(i) such failure to report is authorized under
subparagraph (A), and
``(ii) such knowledge or information is not of fraud
committed by a person against the United States under any
revenue law.''.
(b) Conforming Amendment.--Subparagraph (A) of section
7803(c)(4) is amended by inserting ``and'' at the end of
clause (ii), by striking ``; and'' at the end of clause (iii)
and inserting a period, and by striking clause (iv).
TITLE V--MISCELLANEOUS
SEC. 501. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.
Subsection (i) of section 7611 (relating to section not to
apply to criminal investigations, etc.) is amended by
striking ``or'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``, or'',
and by inserting after paragraph (5) the following:
``(6) information provided by the Secretary related to the
standards for exemption from tax under this title and the
requirements under this title relating to unrelated business
taxable income.''.
SEC. 502. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (1) of section 7428(a) (relating
to creation of remedy) is amended--
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))''; and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in subsection (c) (other than
paragraph (3)) or (d) of section 501 which is exempt from tax
under section 501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is
amended in the material following paragraph (2) by striking
``United States Tax Court, the United States Claims Court, or
the district court of the United States for the District of
Columbia'' and inserting the following: ``United States Tax
Court (in the case of any such determination or failure) or
the United States Claims Court or the district court of the
United States for the District of Columbia (in the case of a
determination or failure with respect to an issue referred to
in subparagraph (A) or (B) of paragraph (1)),''.
(c) Effective Date.--The amendments made by this section
shall apply to pleadings filed with respect to determinations
(or requests for determinations) made after the date of the
enactment of this Act.
SEC. 503. EMPLOYEE MISCONDUCT REPORT TO INCLUDE SUMMARY OF
COMPLAINTS BY CATEGORY.
(a) In General.--Clause (ii) of section 7803(d)(2)(A) is
amended by inserting before the semicolon at the end the
following: ``, including a summary (by category) of the 10
most common complaints made and the number of such common
complaints''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply with respect to reporting periods ending after
the date of the enactment of this Act.
SEC. 504. ANNUAL REPORT ON AWARDS OF COSTS AND CERTAIN FEES
IN ADMINISTRATIVE AND COURT PROCEEDINGS.
Not later than 3 months after the close of each Federal
fiscal year after fiscal year 2003, the Treasury Inspector
General for Tax Administration shall submit a report to
Congress which specifies for such year--
(1) the number of payments made by the United States
pursuant to section 7430 of the Internal Revenue Code of 1986
(relating to awarding of costs and certain fees);
(2) the amount of each such payment;
(3) an analysis of any administrative issue giving rise to
such payments; and
(4) changes (if any) which will be implemented as a result
of such analysis and other changes (if any) recommended by
the Treasury Inspector General for Tax Administration as a
result of such analysis.
SEC. 505. ANNUAL REPORT ON ABATEMENT OF PENALTIES.
Not later than 6 months after the close of each Federal
fiscal year after fiscal year 2003, the Treasury Inspector
General for Tax Administration shall submit a report to
Congress on abatements of penalties under the Internal
Revenue Code of 1986 during such year, including information
on the reasons and criteria for such abatements.
SEC. 506. BETTER MEANS OF COMMUNICATING WITH TAXPAYERS.
Not later than 18 months after the date of the enactment of
this Act, the Treasury Inspector General for Tax
Administration shall submit a report to Congress evaluating
whether technological advances, such as e-mail and facsimile
transmission, permit the use of alternative means for the
Internal Revenue Service to communicate with taxpayers.
SEC. 507. EXPLANATION OF STATUTE OF LIMITATIONS AND
CONSEQUENCES OF FAILURE TO FILE.
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),
and any instructions booklet accompanying a general income
tax return form for taxable years beginning after 2002
(including forms 1040, 1040A, 1040EZ, and any similar or
successor forms relating thereto), to provide for an
explanation of--
(1) the limitations imposed by section 6511 of the Internal
Revenue Code of 1986 on credits and refunds; and
(2) the consequences under such section 6511 of the failure
to file a return of tax.
SEC. 508. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) In General.--Clause (i) of section 202(c)(4)(B) of the
Government Securities Act Amendments of 1993 (31 U.S.C. 3121
note) is amended by inserting before the semicolon ``(or, if
earlier, at the time the Secretary releases the minutes of
the meeting in accordance with paragraph (2))''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to meetings held after the date of the enactment
of this Act.
SEC. 509. ENROLLED AGENTS.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:
``SEC. 7528. ENROLLED AGENTS.
``(a) In General.--The Secretary may prescribe such
regulations as may be necessary to regulate the conduct of
enrolled agents in regards to their practice before the
Internal Revenue Service.
``(b) Use of Credentials.--Any enrolled agents properly
licensed to practice as required under rules promulgated
under section (a) herein shall be allowed to use the
credentials or designation as `enrolled agent', `EA', or
`E.A.'.''.
(b) Clerical Amendment.--The table of sections for chapter
77 is amended by adding at the end the following new item:
``Sec. 7528. Enrolled agents.''.
[[Page H5530]]
(c) Prior Regulations.--Nothing in the amendments made by
this section shall be construed to have any effect on part 10
of title 31, Code of Federal Regulations, or any other
Federal rule or regulation issued before the date of the
enactment of this Act.
SEC. 510. FINANCIAL MANAGEMENT SERVICE FEES.
Notwithstanding any other provision of law, the Financial
Management Service may charge the Internal Revenue Service,
and the Internal Revenue Service may pay the Financial
Management Service, a fee sufficient to cover the full cost
of implementing a continuous levy program under subsection
(h) of section 6331 of the Internal Revenue Code of 1986. Any
such fee shall be based on actual levies made and shall be
collected by the Financial Management Service by the
retention of a portion of amounts collected by levy pursuant
to that subsection. Amounts received by the Financial
Management Service as fees under that subsection shall be
deposited into the account of the Department of the Treasury
under section 3711(g)(7) of title 31, United States Code, and
shall be collected and accounted for in accordance with the
provisions of that section. The amount credited against the
taxpayer's liability on account of the continuous levy shall
be the amount levied, without reduction for the amount paid
to the Financial Management Service as a fee.
SEC. 511. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions), as amended by section 509, is further amended by
adding at the end the following new section:
``SEC. 7529. INTERNAL REVENUE SERVICE USER FEES.
``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--
``(I) the fifth plan year the pension benefit plan is in
existence, or
``(II) the end of any remedial amendment period with
respect to the plan beginning within the first 5 plan years,
or
``(ii) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
``(C) Definitions and special rules.--For purposes of
subparagraph (B)--
``(i) Pension benefit plan.--The term `pension benefit
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
``(ii) Eligible employer.--The term `eligible employer'
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)) which has at least 1 employee who is not
a highly compensated employee (as defined in section 414(q))
and is participating in the plan. The determination of
whether an employer is an eligible employer under
subparagraph (B) shall be made as of the date of the request
described in such subparagraph.
``(iii) Determination of average fees charged.--For
purposes of any determination of average fees charged, any
request to which subparagraph (B) applies shall not be taken
into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be
less than the amount determined under the following table:
Average
``Category Fee
Employee plan ruling and opinion............................$250 ....
Exempt organization ruling..................................$350 ....
Employee plan determination.................................$300 ....
Exempt organization determination...........................$275 ....
Chief counsel ruling........................................$200.....
``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:
``Sec. 7529. Internal Revenue Service user fees.''.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of
law, any fees collected pursuant to section 7527 of the
Internal Revenue Code of 1986, as added by subsection (a),
shall not be expended by the Internal Revenue Service unless
provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.
TITLE VI--LOW-INCOME TAXPAYER CLINICS
SEC. 601. LOW-INCOME TAXPAYER CLINICS.
(a) Limitation on Amount of Grants.--Paragraph (1) of
section 7526(c) (relating to special rules and limitations)
is amended by striking ``$6,000,000 per year'' and inserting
``$9,000,000 for 2004, $12,000,000 for 2005, and $15,000,000
for each year thereafter''.
(b) Promotion of Clinics.--Section 7526(c) is amended by
adding at the end the following new paragraph:
``(6) Promotion of clinics.--The Secretary is authorized to
promote the benefits of and encourage the use of low-income
taxpayer clinics through the use of mass communications,
referrals, and other means.''.
(c) Use of Grants for Overhead Expenses Prohibited.--
Section 7526(c), as amended by subsection (b), is further
amended by adding at the end the following new paragraph:
``(7) Use of grants for overhead expenses prohibited.--No
grant made under this section may be used for the general
overhead expenses of any institution sponsoring a qualified
low-income taxpayer clinic.''.
(d) Eligible Clinics.--
(1) In general.--Paragraph (2) of section 7526(b) is
amended to read as follows:
``(2) Eligible clinic.--The term `eligible clinic' means--
``(A) any clinical program at an accredited law, business,
or accounting school in which students represent low-income
taxpayers in controversies arising under this title; and
``(B) any 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.''.
(2) Conforming amendment.--Subparagraph (A) of section
7526(b)(1) is amended by striking ``means a clinic'' and
inserting ``means an eligible clinic''.
TITLE VII--FEDERAL-STATE UNEMPLOYMENT ASSISTANCE AGREEMENTS
SEC. 701. APPLICABILITY OF CERTAIN FEDERAL-STATE AGREEMENTS
RELATING TO UNEMPLOYMENT ASSISTANCE.
Effective as of May 25, 2003, section 208 of Public Law
107-147 is amended--
(1) in subsection (a)(2), by inserting ``on or'' after
``ending''; and
(2) in subsection (b), by striking ``May 31'' each place it
appears and inserting ``June 1''.
The SPEAKER pro tempore. After 1 hour of debate on the bill, it shall
be in order to consider the further amendment printed in part B of the
report, if offered by the gentleman from New York (Mr. Rangel) or his
designee, which shall be considered read, and shall be debatable for 1
hour, equally divided and controlled by the proponent and an opponent.
The gentleman from Louisiana (Mr. McCrery) and the gentleman from
North Dakota (Mr. Pomeroy) each will control 30 minutes.
The Chair recognizes the gentleman from Louisiana (Mr. McCrery).
Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of the Taxpayer Protection and IRS
Accountability Act. The title of this bill is a good summary for the
fundamental principles contained in it. We are increasing protections
for taxpayers from unfair actions by the IRS while at the same time we
are making reforms in the IRS that will make the administration of our
tax laws more accountable.
Let me mention just a few of the ways we increase protections for
taxpayers. The bill increases the confidentiality of taxpayer
communications when they seek the assistance of the Taxpayer Advocate.
The bill restricts the IRS from auditing the tax returns of taxpayer
representatives simply based on their having prepared the returns of
other taxpayers.
And let me mention some of the ways we improve tax administration of
the IRS.
The bill allows the IRS to enter into installment agreements; to let
a taxpayer pay an unpaid amount over 2 or 3 years without imposing the
requirement that they pay the full amount. The IRS already has the
authority to settle tax debts for less than the full amount. But when
it comes to installment payments, the law requires the agreement to
cover 100 percent of the debt. So in some cases, instead of the
taxpayer paying $9,000 of a $10,000 debt, let us say, giving the IRS
$500 every month, the IRS gets nothing.
The bill improves the so-called ten deadly sins actions for which IRS
employees can be fired, by removing some of the employee versus
employee cases that have bogged down the system, but adding another
standard, that of unauthorized browsing of taxpayer records to the list
of offenses.
Let me conclude by stressing that the health care tax credit
provisions in this bill are sound, prudent and necessary. They do not
overturn or weaken the State plans already in effect in
[[Page H5531]]
eight States, nor do they have any impact on State consumer
protections. The waiver only applies to the preexisting condition and
guarantee issues. And the waiver will only be in place until the end of
2004.
We want workers who have suffered a loss of their job and their
health insurance to be able to receive the tax credit for health
insurance. If we pass this bill, an estimated 12,000 workers will be
able to obtain health insurance. Those workers, without this bill,
would not be able to get health insurance.
I support the bill, and I urge the House to support this bill.
Mr. Speaker, I would like to say that the gentleman from Maryland
(Mr. Cardin) has been instrumental in putting together the provisions
of this bill, along with my colleague on the Committee on Ways and
Means, the gentleman from Ohio (Mr. Portman). So I want to thank both
of those gentlemen for the good work they have done on this
legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. POMEROY. Mr. Speaker, I yield such to time as he may consume to
the gentleman from Maryland (Mr. Cardin).
Mr. CARDIN. Mr. Speaker, let me thank the gentleman for yielding me
this time, and I want to acknowledge the work that both the gentleman
from New York (Mr. Houghton) and the gentleman from North Dakota (Mr.
Pomeroy) have done to develop a process in which we could look at the
Taxpayer Bill of Rights with our staffs in order to make reasonable
changes to protect taxpayers and their relationship with the Internal
Revenue Service.
The gentleman from Ohio (Mr. Portman) has been one of the leaders in
the Congress of the United States on this issue, and I have worked with
him on some of these matters, but the gentleman from North Dakota and
the gentleman from New York, in their subcommittee of oversight, have
really taken on, I think, the right process to review each of these
provisions and to bring forward a group of noncontroversial changes in
the Taxpayer Bill of Rights that are important to protect our
constituents in their dealing with the Internal Revenue Service.
So, Mr. Speaker, I start by saying there is a lot of good provisions.
Most of the provisions in the underlying bill are important provisions
that we need to act on and that have gone through the vetting process,
which I think is appropriate for these types of changes. My concern is
the amendment that was added that was not part of the Taxpayer Bill of
Rights. I think we will have a chance later in this debate to correct
that through an amendment or substitute that will be offered by the
gentleman from New York (Mr. Rangel) that will incorporate all the good
provisions of the underlying bill, but eliminate the provision that
affects TAA.
Let me talk for moment, if I might, about that one provision that I
hope we will find a way to get out of the underlying legislation so
that we can move forward with the Taxpayer Bill of Rights. That
provision is a very controversial provision and a provision that I
think does irreparable harm to a large number of our constituents who
currently or may be without health insurance.
We provided in the trade adjustment assistance provision where we
could deal with workers who have lost their health benefits and their
jobs as a result of foreign trade. That could be a clear example of
what has happened to the steel industry in my community, where so many
Bethlehem Steel workers lost their health benefits as a result of the
financial woes caused by illegally dumped steel here in the United
States.
My concern with the TAA amendment that has been incorporated in the
Taxpayer Bill of Rights is that it removes an important protection for
these workers or retirees in getting health insurance that will cover
them. In my own State of Maryland, we have taken advantage of the TAA
law and the use of the Federal credit by establishing a State pool for
these workers and retirees so they can get health benefits. By removing
the protection that is in the law, we will be encouraging States to
take away protections on preexisting conditions in underwriting.
Mr. Speaker, I think it should be the policy of this body to cover
all these workers and retirees. We should not be distinguishing between
those who, in their most desperate need, have preexisting conditions.
The bill is working as passed by the Congress. It is working in
Maryland, it is working around the Nation. There is no need now to
remove the protections that were included in the TAA legislation.
So, Mr. Speaker, I will be urging my colleagues to support the
substitute that will preserve the important provisions on the Taxpayer
Bill of Rights but will remove this poison pill that could hurt many
workers and retirees in communities' around the Nation.
Mr. McCRERY. Mr. Speaker, I yield such time as he may consume to the
gentleman from New York (Mr. Houghton), the chairman of the
Subcommittee on Oversight of the Committee on Ways and Means.
Mr. HOUGHTON. Mr. Speaker, I thank the gentleman for yielding me this
time, and I thank also the gentleman from North Dakota.
The theme of this bill, and I, of course, support it, is to improve
the IRS. Before I give a few quick examples, I do want to say that I
have stood up here at least three times, and my script is getting musty
because I have used the same words year after year. I hope that somehow
we are going to be able to pass this legislation this year.
But, basically, some of the examples are this. We allow the IRS to
waive unfair penalties for honest taxpayers who make mistakes. We allow
that. For example, a taxpayer who mails his return on April 15 with a
check for $5,000, with a balance due, and he mistakenly puts the wrong
stamp on it, he is in trouble. And the IRS cannot waive any penalties
to people who make an honest mistake. I know of this personally because
of a friend in my area who did this; owed lots and lots of money. There
was no maneuverability on it.
Another example is when the IRS erroneously assesses or levies a
taxpayer's assets. There is a limited time during which the service can
provide relief to the taxpayer. And this is, of course, especially
unfair if the IRS ends up levying the taxpayer's retirement account.
So let us say the IRS, just to take this a little more, misapplies a
tax payment and consequently levies on a taxpayer's IRA account taking
away $25,000. The IRS then later realizes its mistake, but it is unable
to restore the IRA balance. That is problem we have here. Very, very
inflexible rules. So the result under current laws does not make any
sense at all.
Now, this bill requires the IRS to extend the time limit for
taxpayers to contest levies and requires the IRS to provide relief to
taxpayers whose retirement accounts are affected.
Lastly, and the gentleman from Louisiana, my good friend, also
referred to the ten deadly sins that try to strike a balance between
making sure that IRS employees are not engaging in improper behavior on
the one hand and not placing a straitjacket on IRS employees and the
commission on the other hand. These changes are strongly supported by
former Commissioner Rossotti, who did an extraordinary job in
reorganizing and putting more life into the IRS, and have the support
of the National Treasury Employees Union.
So I guess the only thing I can say to sum up, Mr. Speaker, is that
this a good bill. I am honored to be able to join these gentlemen in
urging my colleagues to support this legislation.
{time} 1545
Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would say in response to the gentleman from New York,
what a privilege I feel it is to serve as a ranking member on the
subcommittee chaired by the gentleman from New York (Mr. Houghton). He
is an example of the leading effort in the Congress to forge bipartisan
consensus and address in commonsense ways problems affecting the
American people. That is precisely what the bill before us did, the
bill that the gentleman from New York (Mr. Houghton) and I agreed to
cosponsor until the week before it was to come to the Committee on Ways
and Means, at which time we learned of an extraordinarily offensive
provision added into the bill. This provision significantly changes and
undermines essential consumer protections that exist for displaced
workers as a result of trade agreements that are looking for health
insurance.
[[Page H5532]]
Mr. Speaker, I yield 5 minutes to the gentleman from Washington (Mr.
McDermott) to elaborate on this feature of the bill and other points
relative to the issue before us.
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, the underlying bill here today is not in
dispute. We had the same bill last year, and they could not get it
through because they used it like they are using it this year. They
used it sort of like a bun for a hotdog. Everybody wanted the bun, but
they keeping sticking a poison pill into the hot dog. They did it last
year with section 527, long forgotten. This year with great fanfare
they passed the fast track bill. A lot of Members on this side of the
aisle voted for the fast track bill. They said if we put in some
protections for the workers, and Members said, oh, yes, that is right,
we should give protections for the workers so that if because of trade
they lose their job and they lose their health care benefits, we should
provide some health care benefits for them.
The bill was barely dry from the President signing it, and they
started trying to take that out. The workers have got to think there is
nobody in this place who is honest with them. The first time it
happened, the gentleman on the other side went to the Committee on
Armed Services and stuck it into one of their bills; and he got caught,
and it got dropped out in the conference committee. So it has been
brought back and put in here.
Members know this bill will pass. The taxpayers deserve some relief
and protection. So a bill like that is going to pass 435-0, so Members
can stick in just about anything and figure it will slide by and nobody
will notice it. What they have done to these workers, and I have 11,000
in my State, and there are a few thousand in every State, they are
going to go out thinking I have a 65 percent tax credit on my health
care benefits and all I have to do is find a place to do this.
Our State does not have a program yet, but they are working on it in
the State legislature because they never put in the bill that the
States have to establish programs. What is underlying here is a basic
philosophic disagreement. The gentleman from Louisiana (Mr. McCrery)
and I have been around on this a lot of times. It is the question of do
people have an individual responsibility to take care of themselves, or
should we take care of them collectively by developing a State program
in this particular instance.
Many States have put together plans, in spite of the fact that
Congress gave them no direction. We put it in the bill, and it silently
went out into the ether. Some States woke up and found it. New York and
New Jersey and a few other States were paying attention, but about 30
States have not found it yet. They have not put together a program, or
their legislatures are not capable. I do not know why they have not
done it. But here we come with an amendment which says you States which
have not done it, you cannot have the consumer protections. If your
State legislature says all individual programs have to have a
guaranteed issue and they have to have no preexisting condition
exclusions, then you can buy a policy.
Mr. Speaker, a guy is 55 years old, he gets laid off in this trade
adjustment and, he has got a little problem with his heart or kidneys
or lungs. Now he has a preexisting condition, and he has a voucher in
his hand and he goes to the insurance company, and they take his
history. Oh, you have a kidney problem. Sorry, you have a preexisting
condition. We cannot. Now many States have passed a law and said you
cannot deny him. At that point he is out of luck. He has this promise
of health care, and he cannot get at it.
Somehow the Republicans think that we ought to take away those
protections from workers. Now wait until they try to put a trade bill
through here again and tell people that we are going to protect the
workers. This is where we find out what they really mean about
protecting the workers. They better know they are going to have to go
out in the individual market and get their health care. If it is too
expensive, tough. The other side says we gave them a 65 percent tax
credit. But of course in order to get it, you have to be able to pay
for the insurance. No provision is made for that.
Mr. Speaker, this is a sham that was put in that fast track bill, and
they have been trying to get rid of it ever since because they do not
want the principle to be established that States can put together a
program to take care of individuals in a group and buy group insurance.
That is what is at issue here. This is not fair, and it is wrong and
Members ought to vote the bill down.
Mr. McCRERY. Mr. Speaker, I reserve the balance of my time.
Mr. POMEROY. Mr. Speaker, I yield 3 minutes to the gentleman from
Maine (Mr. Michaud).
Mr. MICHAUD. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, I rise today in opposition to the TAA health care tax
credit rollback provision included in the Taxpayer Protection and IRS
Accountability Act. Make no mistake, I support taxpayer protection and
IRS accountability. But something is wrong, rotten in Congress today.
Why would the House leadership try to slip in such a harmful provision
in a noncontroversial bill?
It is clearly a sneaky attempt to destroy workers' protections and
help leverage big insurance companies' profits. There is no doubt this
unpopular provision would never survive unless it was tucked into a
popular bill such as this. This measure would strip away the
protections for dislocated workers and allow insurers to cherry pick
healthy workers and exclude those who are older or in poor health,
those who need the coverage the most.
Many dislocated workers in Maine are currently enrolled in this
program. Our State has been among the first approved program in the
Nation. These hard-working men and women have lost their jobs; they
deserve some type of health care protection. I would ask the gentleman
from New York (Mr. Houghton) to reconsider this provision. There are
some areas in the State of Maine where unemployment is over 32 percent.
There are other areas abutting that high-labor market area with double
digit employment numbers because we are getting killed by imports
because of our trade agreements. Granted, this is a 65 percent tax
credit. However, when you are on unemployment, you have mortgage
payments to make, automobile payments and health care payments. To come
up with the employees' share, it is difficult. I hope Members oppose
this bill until the TAA health care tax credit rollback provision is
excluded.
Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
(Mr. POMEROY asked and was given permission to revise and extend his
remarks, and include extraneous material.)
Mr. POMEROY. Mr. Speaker, I appreciate the gentleman's outstanding
work on behalf of the displaced workers in the State of Maine and
throughout the country.
Let me try to put in perspective what this is all about. Let me note
back in my days as the State insurance commissioner of North Dakota, I
spent a lot of time working on issues, fundamental consumer protections
for people buying health insurance. We believe it is critical when we
have workers displaced because of trade agreements, they ought to have
some assistance with the expenses they incur while looking for other
careers and other ways to earn their livelihood.
As a result, we got trade adjustment assistance in that last bill,
and it provided for very meaningful assistance, support in purchasing
the premium as well as very strong consumer protections in the purchase
of that coverage. These protections include guaranteed issues; if you
are sick or have some medical condition, it does not matter. You have
the right to get that coverage, no preexisting condition exclusion.
What that means is, say you want to get coverage but I have some
disability maybe that occurred at work. They cannot exclude all medical
conditions arising from that disability; they have to cover that, too.
And then premiums have to be equitable with other premiums; benefits
have to be comparable with other benefits.
What the majority bill would do is allow a period where some of the
most important consumer protections do not have to be offered, those
providing for guaranteed issue, absolute right to get the coverage,
those protecting against
[[Page H5533]]
having something excluded; those are also eliminated in this provision.
We have been upset by this provision; and when I say ``we,'' I speak
about a swath in the caucus that voted for the fast track trade
authority and did so in part because of the protections of trade
adjustment assistance.
Mr. Speaker, I include for the Record a Dear Colleague written by the
gentlewoman from California (Mrs. Tauscher) and signed by 15 Democrats
who voted for the trade bill, all referencing the fact that this trade
adjustment protection for displaced workers was an important part of
them coming to agree that we ought to pass this trade bill.
Pro-trade House Democrats Fight to Keep Worker Assistance in Trade Bill
Today, 15 House Democrats who voted for the Trade Promotion
Authority bill last year sent a strong letter to Ways and
Means Chairman Bill Thomas expressing their concern about his
efforts to rewrite guarantees for healthcare benefits for
displaced workers that were agreed to as part of the
comprehensive trade bill passed last year.
The effort to keep Trade Adjustment Assistance as part of
future trade agreements is being led by Reps. Ellen Tauscher
(D-Calif.), Adam Smith (D-Wash.) and Cal Dooley (D-Calif.).
____
June 11, 2003.
Hon. William M. Thomas,
Chairman, Committee on Ways
and Means.
Dear Chairman Thomas: As pro-trade Democrats who supported
passage of Trade Promotional Authority and the Trade Act of
2002, we write to voice our concerns with your efforts to
rewrite the Trade Adjustment Assistance provision of this new
law.
Inclusion of a strong and robust TAA provision was
paramount to our support of TPA and the Trade Act of 2002.
The commitments made during last year's debate are important
to us and those we represent.
Specifically, we are very concerned that your efforts to
rewrite the healthcare provisions in TAA by adding language
to a non-trade related bill (Section 309; HR 1528, the
Taxpayer Protection and IRS Responsibility Act) vitiates your
commitments made during debate on TPA. More importantly, this
undermines Congress' commitment of providing healthcare tax
credits to displaced workers, regardless of their age or
health status.
Under the guise of ``consumer choice,'' your provision
would eliminate key consumer protections designed to give
states the flexibility to develop pools and negotiate with
private insurance companies while still meeting the law's
consumer protection requirements. States are in the process
of developing these plans and have not indicated to Congress
problems with meeting the TAA requirements. And since
Congress has yet to consider a single FTA since its passage,
it seems counterproductive to change TAA at this time.
The rules of TPA define Congress' role and responsibilities
during negotiations on individual bilateral trade agreements.
As proponents of trade, we take our oversight roles
seriously. We are equally serious in our commitment to the
TAA provisions of the law we worked hard to pass that provide
a safety net to those Americans displaced by new trade
agreements.
We are hopeful you will reconsider rewriting the healthcare
provisions of TAA and remove this provision from HR 1528. We
are concerned that altering such a provision in unrelated
legislation may undermine the bipartisan consensus necessary
for the passage of future FTAs.
Sincerely,
Ellen O. Tauscher, Adam Smith, Cal Dooley, Susan Davis,
Jim Davis, William Jefferson, Rick Larsen, Dennis
Moore, Bob Etheridge, Harold Ford, Jr., Jane Harman,
Norman Dicks, Ken Lucus, Jim Matheson, Jim Moran.
Mr. POMEROY. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman from
North Dakota (Mr. Pomeroy) for his excellent work on this question and
for bringing us together around this particular legislation which deals
with fixing technical problems dealing with taxpayers' needs that all
of us can join in. I thank the gentleman from Ohio (Mr. Portman) and
the chairman of the subcommittee on this particular legislation, and I
would like to say, if I could, that this is a bill that I would run to
the floor to support.
And the reason is because when I first came to Congress, the issue of
advocacy for taxpayers was an enormous issue. In fact, we had a very
serious problem in Houston, Texas, of insensitivity to taxpayers who
were trying to do the right thing. So the very fact that this
legislation, H.R. 1528, has 50 bipartisan and relatively
noncontroversial taxpayer-rights provisions is one that I would want to
support. In fact, title I of the proposed act increases the threshold
in which a taxpayer would not incur penalties for underpayment.
Because, in fact, my colleagues, those taxpayers are trying to pay
their taxes. This is a good provision. This says if you underpay, it
gives you a break to try to get in there and fix the problem.
I would like to be supportive of those kinds of very effective tax
provisions. There is something else in here that I very much
appreciate. The bill eliminates the $50,000 threshold for adjustment of
interest on erroneous refunds.
{time} 1600
Some of us know of situations where those who tried to pay their
taxes got an erroneous refund, and I believe the gentlewoman from
California (Ms. Loretta Sanchez) had an issue on this and worked very
hard on this issue. We now protect those innocent individuals who get a
refund through no fault of their own and they get penalized.
But lo and behold, I have voted for several bills dealing with
enhancing trade, the African Growth and Opportunity Act, the Caribbean
Basin Initiative, here we come with what we call a trade adjustment
assistance health credit, and we do not know where this came from to my
colleagues on the other side of the aisle, why they would put a poison
pill that clearly takes away the protection. The elimination of the TAA
health care program that would be imminent upon the enactment of this
bill as drafted will negate consumer protections for eligible laid-off
workers and certain pensioners who seek health care coverage. States
that have not made health care coverage available to laid-off workers
and pensioners by August 2003 would be able to ignore the TAA consumer
protections, which ensure that all applicants could get coverage.
Mr. Speaker, let me just say this. We have got a crisis in our
States. We have got people being laid off, we have got 177,000 children
being taken off of the CHIPs program in the State of Texas. We have got
the child tax credit languishing in this body. Someone says that we
cannot move that forward. People are hurting. How can we put this bill
forward that has all these good provisions, clearing up the taxpayer
rights, if you will, providing further help in advocating for taxpayer
rights? Remember when I said taxpayer rights, that means we are helping
those who pay taxes as well as those who helped build this country, and
here we are penalizing them for those who may be laid off through no
fault of their own.
I would ask that we correct that poison pill, take it out, and let us
support a bipartisan H.R. 1528. Mr. Speaker, I oppose the bill as it
presently stands.
Mr. Speaker, I rise in opposition to H.R. 1528, the House Resolution
amending the Internal Revenue Code of 1986 to protect taxpayers and
ensure accountability of the Internal Revenue Service (IRS). The bill's
proposed changes purport to give taxpayers many improved rights and
options in a bipartisan fashion. However, in operation, the bill will
change the previously enacted ``Trade Adjustment Assistance (TAA)
health care credit'' law much to the surprise of my fellow colleagues
who understood it to be safely in place. I rather support the
Substitute Amendment offered by Mr. Rangel that will allow us to revamp
our effort to include the relevant provisions of the Senate-passed
child tax credit expansion bill.
The Resolution offers fifty bipartisan and relatively non-
controversial taxpayer rights provisions that deal with rules on
interest payments, penalties, installment payments, levies, first-time
errors, offers in compromise, and other areas that welcome reform.
Title I of the proposed Act, among other things, increases the
threshold in which a taxpayer would not incur penalties for
underpayment, that is, create a ``safe harbor'' for taxpayers. It also
expands the period in which underpayment interest is applied to cover
the entire underpayment period. Interest paid on overpayments of income
tax would be excluded from gross income in this program. Furthermore,
the bill eliminates the $50,000 threshold for abatement of interest on
erroneous refunds. Title II appears to offer taxpayers latitude by
allowing the Commissioner of the IRS to enter into installment
agreements with taxpayers who cannot remit payment on their obligations
when due. The proposed extension from nine months to two years of the
time for repayment of erroneous tax payments also appears
very beneficial to taxpayers. Moreover, Title III amends the Code to
give the Commissioner's rulings more finality, expands the legal
purview of the Tax Court, consolidates the decision as to the proper
forum for collection due process hearings, which would appear to
[[Page H5534]]
make the hearing process more efficient. This Title also proposes to
extend the filing deadline for electronic taxpayers, protect the Office
of the National Taxpayer Advocate; facilitate the payment process for
motor fuel excise tax refunds; improve the tax status of husband and
wife joint ventures filing joint returns; and penalizes designated
terrorist organizations, among other things. Titles IV, V, VI, and VII
deal with Confidentiality and Disclosure, Miscellaneous provisions,
Low-Income Taxpayer Clinics, and Federal-State Unemployment Assistance
Agreements.
While the above proposed provisions promise, at the surface, to help
all taxpayers in a forthright fashion, it contains a very troubling
``poison pill'' provision that would eliminate workers' ability to
obtain health coverage under the current Trade Adjustment Assistance
(TAA) health care program. Furthermore, despite the myriad list of
benefits to taxpayers that this bill will offer, it fails to give any
relief to those working-class income taxpayers who have been
marginalized by the extensive tax cuts of this Administration.
The elimination of the TAA health care program that would be imminent
upon the enactment of this bill as drafted will negate consumer
protections for eligible laid-off workers and certain pensioners who
seek health care coverage. States that have not made health coverage
available to laid-off workers and pensioners by August 2003 would be
able to ignore the TAA consumer protections which assure that (1) all
applicants would get coverage under State plans and (2) preclude plans
from excluding coverage for pre-existing health conditions. It is a
tremendous concern to me that we are proposing to abrogate existing
worker protections when no dysfunction has not been identified that
would warrant such a change.
Unlike the thousands of Houstonians laid off or terminated by
American General, Compaq Computer Corp., Continental Airlines, Texaco
and others this year, Enron's workers must contend with the company's
bankruptcy filing and the threat it has posed to their remaining
benefits. Although federal laws and limited insurance protect pension
plans, a similar safety net does not exist for health care benefits. If
an employer drops any coverage or consolidates plans for current
employees, then the former workers have no rights to the old benefits
and can only get what the employer offers. Furthermore, if an employer
decides to stop offering health insurance altogether, the current
employees and the COBRA participants will all lose their coverage.
There is simply no legal obligation for employers to provide or
continue health insurance. In addition, our employees are amenable to
the threat of health care insurance cuts by employers who file under
the bankruptcy code as this represents an attractive expense to cut.
Corporations that attempt to reorganize under Chapter 11 tend to do so
as a last resort because such actions undermine their abilities to
retain key workers. Those with no hope of recovering from their
financial troubles liquidate their assets under Chapter 7, terminate
their health plans and other liabilities and cease to exist, leaving
the employee with no options. For example, Bethlehem Steel Corp. and
Wheeling-Pittsburgh Steel Corp., both of which are in Chapter 11
proceedings, have asked Congress and the Bush administration to pay
their health-care contractual obligations to approximately 600,000
retirees of the two companies--estimated as high as $13 billion--so
they can merge with U.S. Steel. They proposed the payment of the debt
through a general appropriation or a tax on steel sold in the United
States.
Mr. Rangel's Substitute Amendment does not include anti-consumer
changes to the TAA health credit law as does the drafted language of
this bill. We have a duty to protect those who are most vulnerable to
harmful tax treatment, and this Amendment would allow us to provide a
safety net. Critical to my initiatives and the initiatives of many of
my colleagues, the Amendment includes the provisions of the Senate-
passed child tax credit expansion bill and Senate-passed military tax
relief bill. H.R. 1528 has more than adequate breadth to include these
items. The Amendment also adds provisions that will serve to prevent
abusive tax shelters and assist low and middle-income taxpayers in
complying with the tax laws such as an Earned Income Tax Credit (EITC)
simplification, a balanced IRS audit program, enhanced low-income
taxpayer clinics, a prohibition on EITC pre-certifications, and limits
on excessive tax refund anticipation loan interest rates. Along with
the many above-mentioned bipartisan and non-controversial taxpayer
provisions, this Substitute Amendment will make H.R. 1528 work for more
taxpayers and for our children as well as to allow us to, at minimum,
show some appreciation for the men and women who serve our Country.
I oppose H.R. 1528 for the foregoing reasons and support the
Substitute Amendment offered by Mr. Rangel. I would ask that my
colleagues also vote in this fashion.
Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
I am going to close debate on my side of the aisle, and I would do so
with the following comments. My friend and Ways and Means colleague,
the gentleman from Louisiana, raises on the question of health coverage
for displaced workers the important issue of whether or not coverage is
actually available for these workers or might there be because of these
preexisting conditions circumstances where no coverage is available and
by insisting on these protections we are actually depriving these
workers of the availability to get health coverage.
I am pleased to respond to that concern by saying that negotiations
at the State level are coming along very successfully, and so far 13
States have been successful at getting insurance companies to enter
into an agreement to provide the coverage to these displaced workers
under the consumer protections in the bill. Thirteen States. What
concerns us about raising this issue at this time is that we think it
sends a very bad signal from Congress to the States and the insurance
companies in negotiations with them, that they might not have to comply
with these consumer protections.
As an old insurance commissioner, I know darn well you give an
insurance company the chance of not offering coverage to everybody,
but, rather, cherry-picking, picking only the ones they want to cover
as opposed to the mandate that they cover everybody, well, they are
going to want to cherry-pick. Of course they are going to want to do
that. If you give insurance companies the opportunity to say, well,
we'll cover you except for the disability that you have or the
preexisting health condition that you have, of course insurance
companies are going to want to restrict their coverage from those
medical features that are so troublesome to the displaced workers. We
think that passing this bill with this provision in it is going to
bring negotiations at the State level potentially to a standstill
because the insurance companies are going to hold out for a sweeter
deal, and what a sweet deal it would be.
We are going to have a situation where the insurance companies, under
the majority proposal, would be able to exclude who they want to. Of
the individuals they underwrite, they will be able to exclude the
medical conditions that they want to and they are still going to get
the Federal Government paying 65 percent of the premium. Let us face
it, it is not often you put forward Federal tax dollars to pay private
insurance premiums. We have chosen to do so at this time because these
are workers that lost their jobs because of trade agreements entered by
this country. That is certified by the Department of Labor.
We think under those circumstances, having lost their job through no
fault of their own, because of trade agreements entered and ratified
here in Congress, that those workers need some help while they get
their lives back on track, get a new livelihood in place, and that help
certainly includes health insurance coverage to protect them and their
families. We are even going to help pay for it. Under these
circumstances, let us not let the insurance companies run roughshod by
excluding who they want, by excluding the medical conditions that they
want. We have got to hold for the whole package, give these workers the
absolute right to get the coverage they need and the absolute right to
get coverage for all of their medical conditions, not just those the
insurance company is going to want to pick.
Work is coming along well at the State level. Again, 13 States
concluding these agreements, others still in negotiation now. Now is
not the time to take the pressure off. Now is not the time to give the
insurance companies a pass. Now is not the time to walk away from the
health care needs of our displaced workers. Hold the consumer
protections, reject the majority bill, we will take this taxpayer
protection right, remove the poison pill, bring it back here, as it
should have been in the first place, and get on with reforming the Tax
Code in the responsible ways but not in the ways that, because of the
poison pill, hurt our displaced workers.
Mr. Speaker, I yield back the balance of my time.
Mr. McCRERY. Mr. Speaker, I yield myself the balance of my time.
[[Page H5535]]
Mr. Speaker, the last point that the gentleman from North Dakota made
about if this provision were to pass, then it could reduce the pressure
on the States to enter into agreements which would create qualified
plans under the trade bill we passed last year is a legitimate point.
It is the only legitimate point he or his colleagues on the Democratic
side have made today, but that is a legitimate point. We concede that.
That is why we listened to the gentleman from North Dakota and his
complaints earlier while the committee was considering this and we
reduced the window within which unemployed workers could take advantage
of this waiver.
Under the provision, as it now stands in this bill, they would only
have until the end of calendar year 2004 to waive their rights under
the trade bill and take advantage of the tax credit to purchase
insurance for themselves and their family. So I concede that that is a
legitimate point. We do not want the States to stop their efforts to
create plans that would qualify for the credit under the Trade Act. We
do not think the States will. In fact, of the speakers that were
offered by the other side of the aisle today, Maryland, the first
speaker, the State of Maryland, already has a qualified plan in place,
so this provision in the bill today will not affect unemployed workers
in Maryland at all; North Dakota has a provision in place, so it will
not affect unemployed workers in North Dakota. Texas is very close to
having a provision ready, we are told. The only State that is behind in
this process is the State of Washington.
So we know that basically two-thirds of the States already either
have a plan in place or are negotiating to get plans in place. The
Treasury Department thinks, after researching this, that only about 20
States or so would not have plans in place by this August. So this
provision in this bill would not affect all of those States that have
plans in place by this August, probably not until September or October
because this bill will not make it through the process before this
fall.
But let us think about those States which for whatever reason, their
legislatures do not meet this year, their insurance commissioner is not
as adept as the gentleman from North Dakota was in getting these things
done, for whatever reason, what about the unemployed workers in those
States who want to use their credit to get insurance for their families
and they do not have access to COBRA? They are left out in the cold.
I would say to my good friends on the other side, do you not care
about these people and their families? Do you not want them to use the
generous tax credit that we provided to get health insurance for their
families? If you do not pass the provision that is in this bill, they
cannot get insurance and utilize the credit to get it. Period. You will
leave them with nothing. You will leave them bare. They will not have
insurance. That is the fact. That is what we are trying to correct. We
are trying to make sure that all those unemployed workers who want to
use the credit to cover their families can do so. And so we have said
to the States that have not yet complied with the requirements of the
Trade Act, we are going to give you one more year to do that.
And in the meantime, any of your unemployed workers who want to use
the tax credit can avail themselves of that by waiving the requirements
of the Trade Act. It is not compulsory, it is voluntary, we are not
going to twist anybody's arm to make them waive the requirements of the
Trade Act. We are going to tell them if you want to waive that, you
may. And if that enables you to use the tax credit to cover yourselves
and your families, by golly, that is a good thing. And CBO estimates
that 12,000 workers and their families will take advantage of this
provision and will get coverage and who, if this bill does not pass,
would not be able to get coverage.
I think, Mr. Speaker, what we have heard today from the other side is
a lot of obfuscation. The truth is they never wanted the health tax
credit to be used for anything other than COBRA. That is the truth. It
was we Republicans who insisted that we think about unemployed workers
who did not happen to come from a big company or from a company with
employment coverage that would qualify under COBRA. We said, what about
the people who work for small businesses? What about the people who did
not have any coverage, they had to get individual coverage? Should we
not have some compassion for those unemployed workers as well, not just
unionized workers? We battled and fought and scraped and finally won,
got a compromise so that those workers could get some advantage from
the tax credit.
But the Democrats said, okay, we'll agree to the compromise, but
we're going to have to have a provision that goes even further than the
Republican-passed legislation, the Health Insurance Portability and
Accountability Act, HIPAA.
That was a Republican bill. Up until that time, there were no
guarantees for workers changing jobs. Health insurance was not portable
at all. Everybody was going to be subject to those conditions that the
gentleman from North Dakota talked about, preexisting conditions, no
guaranteed issue, until Republicans passed the bill in 1996, I believe,
called HIPAA, which said that if you had 18 months prior coverage in
the health insurance system, then you do not have to worry about
getting covered again. Insurance companies offering health insurance
must guarantee you issue of that plan. And you are not subject to any
preexisting conditions clauses in those insurance plans.
We did that. We passed that. We are the ones who put those guarantees
in law. And so last year, we agreed for this small set of workers who
lost their jobs because of trade actions or were covered under the
Pension Benefit Guaranty Corporation that in that small set of workers,
we would reduce that 18-month requirement to 3 months, so that if they
only had 3 months prior coverage, they would not have to go through all
the underwriting and so forth that workers used to have to go through
before HIPAA. And we agreed to that. But now we find that we have large
numbers of workers who are not able to avail themselves of the credit
because States have not yet put into place plans that comply with that
3-month prior coverage requirement.
So in the meantime, while those States are getting those plans up and
running, we say, let those individuals who want to waive that
requirement, they may have had 18 months prior coverage and, therefore,
they would still have those guarantees that the gentleman from North
Dakota spoke about, why not let them voluntarily waive their
requirements under the Trade Act, get the insurance for themselves and
their families and then when all the States have these policies in
place, the 3-month requirement will be there in those plans. I simply
do not understand why the other side would object so strenuously to
letting 12,000 families get health insurance who otherwise would not be
able to get it if this provision does not pass.
I urge the House to have compassion for these workers as well as
workers with COBRA coverage and pass this bill today.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. LaTourette). All time for debate on the
bill has expired.
Pursuant to the order of the House of today, further proceedings on
this bill will be postponed until tomorrow.
____________________