[Congressional Record Volume 160, Number 122 (Thursday, July 31, 2014)]
[Senate]
[Pages S5222-S5224]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself and Mr. Wyden):
  S. 2736. A bill to amend the Internal Revenue Code of 1986 to prevent 
identity theft related tax refund fraud, and for other purposes; to the 
Committee on Finance.
  Mr. HATCH. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2736

       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 ``Tax Refund 
     Theft Prevention Act of 2014''.
       (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.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; etc.
Sec. 2. Safe harbor for de minimis errors on information returns and 
              payee statements.
Sec. 3. Internet platform for Form 1099 filings.
Sec. 4. Requirement that electronically prepared paper returns include 
              scannable code.
Sec. 5. Single point of contact for identity theft victims.
Sec. 6. Criminal penalty for misappropriating taxpayer identity in 
              connection with tax fraud.
Sec. 7. Extend Internal Revenue Service authority to require truncated 
              social security numbers on Form W-2.
Sec. 8. Improvement in access to information in the National Directory 
              of New Hires for tax administration purposes.
Sec. 9. Password system for prevention of identity theft tax fraud.
Sec. 10. Increased penalty for improper disclosure or use of 
              information by preparers of returns.
Sec. 11. Increase electronic filing of returns.
Sec. 12. Increased real-time filing.
Sec. 13. Limitation on multiple individual income tax refunds to the 
              same account.
Sec. 14. Identity verification required under due diligence rules.
Sec. 15. Report on refund fraud.

     SEC. 2. SAFE HARBOR FOR DE MINIMIS ERRORS ON INFORMATION 
                   RETURNS AND PAYEE STATEMENTS.

       (a) In General.--Subsection (c) of section 6721 is 
     amended--
       (1) by striking ``Exception for De Minimis Failure to 
     Include All Required Information'' in the heading and 
     inserting ``Exceptions for Certain De Minimis Failures'',
       (2) by striking ``In general'' in the heading of paragraph 
     (1) and inserting ``Exception for de minimis failure to 
     include all required information'', and
       (3) by adding at the end the following new paragraph:
       ``(3) Safe harbor for certain de minimis errors.--
       ``(A) In general.--If, with respect to an information 
     return filed with the Secretary--
       ``(i) there are 1 or more failures described in subsection 
     (a)(2)(B) relating to an incorrect dollar amount, and
       ``(ii) no single amount in error differs from the correct 
     amount by more than $25,

     then no correction shall be required and, for purposes of 
     this section, such return shall be treated as having been 
     filed with all of the correct required information.
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     returns required under section 6049.
       ``(C) Regulatory authority.--The Secretary may issue 
     regulations to prevent the abuse of the safe harbor under 
     this paragraph, including regulations providing that this 
     subparagraph shall not apply to the extent necessary to 
     prevent any such abuse.''.
       (b) Failure to Furnish Correct Payee Statements.--
     Subsection (c) of section 6722 is amended by adding at the 
     end the following new paragraph:
       ``(3) Safe harbor for certain de minimis errors.--
       ``(A) In general.--If, with respect to any payee 
     statement--
       ``(i) there are 1 or more failures described in subsection 
     (a)(2)(B) relating to an incorrect dollar amount, and
       ``(ii) no single amount in error differs from the correct 
     amount by more than $25,
     then no correction shall be required and, for purposes of 
     this section, such statement shall be treated as having been 
     filed with all of the correct required information.
       ``(B) Exception.--Subparagraph (A) shall not apply to payee 
     statements required under section 6049.
       ``(C) Regulatory authority.--The Secretary may issue 
     regulations to prevent the abuse of the safe harbor under 
     this paragraph, including regulations providing that this 
     subparagraph shall not apply to the extent necessary to 
     prevent any such abuse.''.
       (c) Conforming Amendments.--
       (1) Subsection (i) of section 408 is amended by striking 
     ``$10'' and inserting ``$25''.
       (2) Paragraph (5) of section 3406(b) is amended--
       (A) by striking ``$10'' both places it appears and 
     inserting ``$25'', and
       (B) by adding at the end the following flush text:

     ``The preceding sentence shall not apply to payments of 
     interest to which section 6049 applies.''.
       (3) Subparagraphs (A) and (B) of section 6042(a)(1) are 
     each amended by striking ``$10'' and inserting ``$25''.
       (4) Paragraph (2) of section 6042(a) is amended by striking 
     ``$10'' and inserting ``$25''.
       (5) Paragraphs (1) and (2) of section 6044(a) are each 
     amended by striking ``$10'' and inserting ``$25''.
       (6) Paragraph (1) of section 6047(d) is amended by striking 
     ``$10'' and inserting ``$25''.
       (7) Subsection (a) of section 6050B is amended by striking 
     ``$10'' and inserting ``$25''.
       (8) Subsection (a) of section 6050E is amended by striking 
     ``$10'' and inserting ``$25''.

[[Page S5223]]

       (9) Paragraphs (1) and (2) of section 6050N(a) are each 
     amended by striking ``$10'' and inserting ``$25''.
       (10) Paragraphs (1) and (2) of section 6652(a) are each 
     amended by striking ``$10'' and inserting ``$25''.
       (11) The heading of subsection (a) of section 6652 is 
     amended by striking ``$10'' and inserting ``$25''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to information returns required to be filed, and 
     payee statements required to be provided, on or after the 
     date of the enactment of this Act.

     SEC. 3. INTERNET PLATFORM FOR FORM 1099 FILINGS.

       (a) In General.--Not later than 3 years after the date of 
     the enactment of this Act, the Secretary of the Treasury (or 
     such Secretary's delegate) shall make available an Internet 
     website or other electronic media, similar to the Business 
     Services Online Suite of Services provided by the Social 
     Security Administration, that will provide taxpayers access 
     to resources and guidance provided by the Internal Revenue 
     Service and will allow taxpayers to--
       (1) prepare and file (in batches of not more than 50) Forms 
     1099,
       (2) prepare Forms 1099 for distribution to recipients other 
     than the Internal Revenue Service, and
       (3) create and maintain necessary taxpayer records.
       (b) Early Implementation for Forms 1099-MISC.--Not later 
     than 1 year after the date of the enactment of this Act, the 
     Internet website under subsection (a) shall be available in a 
     partial form that will allow taxpayers to take the actions 
     described in such subsection with respect to Forms 1099-MISC 
     required to be filed or distributed by such taxpayers.

     SEC. 4. REQUIREMENT THAT ELECTRONICALLY PREPARED PAPER 
                   RETURNS INCLUDE SCANNABLE CODE.

       (a) In General.--Subsection (e) of section 6011 is amended 
     by adding at the end the following new paragraph:
       ``(5) Special rule for returns prepared electronically and 
     submitted on paper.--The Secretary shall require that any 
     return of tax which is prepared electronically, but is 
     printed and filed on paper, bear a code which can, when 
     scanned, convert such return to electronic format.''.
       (b) Conforming Amendment.--Paragraph (1) of section 6011(e) 
     is amended by striking ``paragraph (3)'' and inserting 
     ``paragraphs (3) and (5)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns of tax the due date for which 
     (determined without regard to extensions) is after December 
     31, 2014.

     SEC. 5. SINGLE POINT OF CONTACT FOR IDENTITY THEFT VICTIMS.

       (a) In General.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary of the Treasury (or 
     such Secretary's delegate) shall establish new procedures to 
     ensure that any taxpayer whose return has been delayed or 
     otherwise adversely affected due to misappropriation of the 
     taxpayer's taxpayer identity (as defined in section 
     6103(b)(6) of the Internal Revenue Code of 1986) has a single 
     point of contact who--
       (1) is an individual employee of the Internal Revenue 
     Service, and
       (2) tracks the case of the taxpayer from start to finish 
     and coordinates with other specialized units to resolve case 
     issues as quickly as possible.
       (b) Change of Contact.--The procedures under subsection (a) 
     shall provide that the single point of contact may be 
     changed--
       (1) upon request of the taxpayer, or
       (2) in any case where the individual employee ceases 
     employment or is otherwise unavailable for any period, or a 
     change is required to meet agency staffing needs, but only if 
     the taxpayer is notified of any such change within 5 business 
     days.

     SEC. 6. CRIMINAL PENALTY FOR MISAPPROPRIATING TAXPAYER 
                   IDENTITY IN CONNECTION WITH TAX FRAUD.

       (a) In General.--Section 7206 is amended--
       (1) by striking ``Any person'' and inserting the following:
       ``(a) In General.--Any person'', and
       (2) by adding at the end the following new subsection:
       ``(b) Misappropriation of Identity.--Any person who 
     willfully misappropriates another person's taxpayer identity 
     (as defined in section 6103(b)(6)) for the purpose of making 
     any list, return, account, statement, or other document 
     submitted to the Secretary under the provisions of this title 
     shall be guilty of a felony and, upon conviction thereof, 
     shall be fined not more than $250,000 ($500,000 in the case 
     of a corporation) or imprisoned not more than 5 years, or 
     both, together with the costs of prosecution.''.
       (b) Aggravated Identity Theft.--Section 1028A(c) of title 
     18, United States Code, is amended by striking ``or'' at the 
     end of paragraph (10), by striking the period at the end of 
     paragraph (11) and inserting ``; or'', and by adding at the 
     end the following new paragraph:
       ``(12) section 7206(b) of the Internal Revenue Code of 1986 
     (relating to misappropriation of identity in connection with 
     tax fraud).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to offenses committed on or after the date of the 
     enactment of this Act.

     SEC. 7. EXTEND INTERNAL REVENUE SERVICE AUTHORITY TO REQUIRE 
                   TRUNCATED SOCIAL SECURITY NUMBERS ON FORM W-2.

       (a) In General.--Paragraph (2) of section 6051(a) is 
     amended by striking ``his social security number'' and 
     inserting ``an identifying number for the employee''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 8. IMPROVEMENT IN ACCESS TO INFORMATION IN THE NATIONAL 
                   DIRECTORY OF NEW HIRES FOR TAX ADMINISTRATION 
                   PURPOSES.

       (a) In General.--Paragraph (3) of section 453(i) of the 
     Social Security Act (42 U.S.C. 653(i)) is amended to read as 
     follows:
       ``(3) Administration of federal tax laws relating to 
     fraud.--The Secretary of the Treasury shall have access to 
     the information in the National Directory of New Hires for 
     the sole purpose of identifying and preventing fraudulent tax 
     return filings and claims for refund under the Internal 
     Revenue Code of 1986.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 9. PASSWORD SYSTEM FOR PREVENTION OF IDENTITY THEFT TAX 
                   FRAUD.

       (a) In General.--The Secretary of the Treasury shall 
     implement an identity theft tax fraud prevention program 
     under which any individual taxpayer may elect to be provided 
     with a unique password which, as a result of such election, 
     will be required to be included on any Federal tax return 
     filed by such individual before the return will be processed. 
     Such program shall be available not later than January 1 of 
     the first calendar year beginning on or after the date that 
     is 2 years after the date of the enactment of this Act.
       (b) Study and Report.--The Secretary of the Treasury shall 
     conduct a study of the program under subsection (a) and, not 
     later than 3 years after the January 1 date under such 
     subsection, shall report to the Committee on Finance of the 
     Senate and the Committee on Ways and Means of the House of 
     Representatives on the efficacy of such program in reducing 
     tax refund fraud. Such report shall include a recommendation 
     as to whether the program under subsection (a) should be made 
     mandatory, rather than elective, for all taxpayers.

     SEC. 10. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF 
                   INFORMATION BY PREPARERS OF RETURNS.

       (a) In General.--Section 6713 is amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d), respectively, and
       (2) by inserting after subsection (a) the following new 
     subsection:
       ``(b) Enhanced Penalty for Improper Use or Disclosure 
     Relating to Identity Theft.--
       ``(1) In general.--In the case of a disclosure or use 
     described in subsection (a) that is made in connection with a 
     crime relating to the misappropriation of another person's 
     taxpayer identity (as defined in section 6103(b)(6)), whether 
     or not such crime involves any tax filing, subsection (a) 
     shall be applied--
       ``(A) by substituting `$1,000' for `$250', and
       ``(B) by substituting `$50,000' for `$10,000'.
       ``(2) Separate application of total penalty limitation.--
     The limitation on the total amount of the penalty under 
     subsection (a) shall be applied separately with respect to 
     disclosures or uses to which this paragraph applies and to 
     which it does not apply.''.
       (b) Criminal Penalty.--Section 7216(a) is amended by 
     striking ``$1,000'' and inserting ``$1,000 ($100,000 in the 
     case of a disclosure or use to which section 6713(b) 
     applies)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures or uses after the date of the 
     enactment of this Act.

     SEC. 11. INCREASE ELECTRONIC FILING OF RETURNS.

       (a) In General.--Subparagraph (A) of section 6011(e)(2) is 
     amended by striking ``250'' and inserting ``the applicable 
     number of''.
       (b) Applicable Number.--Subsection (e) of section 6011, as 
     amended by this Act, is amended by adding at the end the 
     following new paragraph:
       ``(6) Applicable number.--For purposes of paragraph (2)(A), 
     the applicable number is--
       ``(A) in the case of returns and statements relating to 
     calendar years before 2015, 250,
       ``(B) in the case of returns and statements relating to 
     calendar year 2015, 100,
       ``(C) in the case of returns and statements relating to 
     calendar year 2016, 50, and
       ``(D) in the case of returns and statements relating to 
     calendar years after 2016, 20.''.
       (c) Returns Filed by a Tax Return Preparer.--
       (1) In general.--Subparagraph (A) of section 6011(e)(3) is 
     amended to read as follows:
       ``(A) In general.--The Secretary shall require that--
       ``(i) any individual income tax return, and
       ``(ii) any return or statement under subpart B, C, or E of 
     part III of this subchapter,

     which is prepared by a tax return preparer be filed on 
     magnetic media. The Secretary may waive the requirement of 
     the preceding sentence if the Secretary determines, on the 
     basis of an application by the tax return preparer, that the 
     preparer cannot meet such requirement based on technological 
     constraints (including lack of access to the Internet).''.
       (2) Conforming amendment.--Paragraph (3) of section 6011(e) 
     is amended by striking subparagraph (B), and by redesignating 
     subparagraph (C) as subparagraph (B).

[[Page S5224]]

       (d) Effective Dates.--The amendments made by this section 
     shall apply to returns the due date for which (determined 
     without regard to extensions) is after December 31, 2014.

     SEC. 12. INCREASED REAL-TIME FILING.

       (a) Accelerated Filing of Forms W-2 and W-3.--
       (1) In general.--Section 6071 is amended by redesignating 
     subsection (c) as subsection (d), and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Returns Relating to Employee Wage Information.--
     Returns and statements made under sections 6051 and 6052 
     shall be filed on or before February 15 of the year following 
     the calendar year to which such returns relate.''.
       (2) Conforming amendment.--Subsection (b) of section 6071 
     is amended by striking ``subparts B and C'' and inserting 
     ``section 6053 and subpart B''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to returns and statements relating to calendar 
     years beginning after the date of the enactment of this Act.
       (b) Accelerated Filing for Certain Forms 1099.--
       (1) In general.--Subsection (c) of section 6071, as amended 
     by subsection (a), is amended--
       (A) by striking ``Wage Information'' in the heading and 
     inserting ``Wage Information and Forms 1099-MISC'', and
       (B) by inserting ``, and any return which is filed on Form 
     1099-MISC,'' after ``6052''.
       (2) Conforming amendment.--Subsection (b) of section 6071, 
     as amended by this Act, is amended by striking ``section 6053 
     and subpart B of part III of this subchapter'' and inserting 
     ``subpart B of part III of this subchapter (other than 
     returns filed on Form 1099-MISC)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to returns relating to calendar years beginning 
     after December 31, 2014.
       (c) Study Regarding Administrative Implementation.--Not 
     later than January 1, 2017, the Secretary of the Treasury 
     shall report to the Committee on Finance of the Senate and 
     the Committee on Ways and Means of the House of 
     Representatives including--
       (1) a recommendation of whether the due dates for filing 
     Forms W-2 and W-3 with the Internal Revenue Service and the 
     Social Security Administration should be accelerated to 
     January 31 to match the due date for furnishing copies of 
     such forms to the recipient of the reported income,
       (2) recommendations for processes--
       (A) to match the information reported on Forms W-2 and 
     Forms 1099-MISC for the effective processing of returns and 
     accurate determination of refunds, and
       (B) to correct errors on such documents, and
       (3) any other recommendations such Secretary may have for 
     accelerating information reporting, including the 
     identification of any other forms that should be due on an 
     accelerated schedule in order to prevent tax refund fraud.

     SEC. 13. LIMITATION ON MULTIPLE INDIVIDUAL INCOME TAX REFUNDS 
                   TO THE SAME ACCOUNT.

       (a) In General.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     issue regulations that restrict the delivery or deposit of 
     multiple individual income tax refunds from the same tax year 
     to the same individual account or mailing address.
       (b) Exception.--The regulation promulgated under subsection 
     (a) shall provide that the restrictions shall not apply in 
     cases and situations where the Secretary of the Treasury 
     determines there is not a likelihood of tax fraud.

     SEC. 14. IDENTITY VERIFICATION REQUIRED UNDER DUE DILIGENCE 
                   RULES.

       (a) In General.--Subsection (g) of section 6695 is amended 
     by adding at the end the following new sentence: ``Such due 
     diligence requirements shall include a requirement that such 
     preparer verify (in such manner and with such documentation 
     as the Secretary shall provide) the identity of the taxpayer 
     with respect to such return or claim for refund.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to returns or claims for refund filed after 
     December 31, 2014.

     SEC. 15. REPORT ON REFUND FRAUD.

       Not later than 1 year after the date of the enactment of 
     this Act, and annually thereafter, the Secretary of the 
     Treasury (or the Secretary's delegate) shall report to the 
     Committee on Finance of the Senate and the Committee on Ways 
     and Means of the House of Representatives on the extent and 
     nature of fraud involving the use of a misappropriated 
     taxpayer identity with respect to claims for refund under the 
     Internal Revenue Code of 1986 during the preceding completed 
     income tax filing season, and the detection, prevention, and 
     enforcement activities undertaken by the Internal Revenue 
     Service with respect to such fraud, including--
       (1) the development of fraud detection filters and how they 
     are or may be updated and improved;
       (2) the effectiveness of fraud detection activities, and 
     the ways in which such effectiveness is measured; and
       (3) the methods by which such Service categorizes of refund 
     fraud, and the amounts of fraud that are associated with each 
     category.
                                 ______