[Congressional Record (Bound Edition), Volume 148 (2002), Part 3]
[House]
[Pages 4056-4075]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  1930
         TAXPAYER PROTECTION AND IRS ACCOUNTABILITY ACT OF 2002

  Mr. THOMAS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 3991) to amend the Internal Revenue Code of 1986 to protect 
taxpayers and ensure accountability of the Internal Revenue Service, as 
amended.
  The Clerk read as follows:

                               H.R. 3991

       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 2002''.
       (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--PENALTIES AND INTEREST

Sec. 101. Reduction of Federal tax deposit penalty.
Sec. 102. Failure to pay estimated tax penalty converted to interest 
              charge on accumulated unpaid balance.
Sec. 103. Exclusion from gross income for interest on overpayments of 
              income tax by individuals.
Sec. 104. Abatement of interest.
Sec. 105. Deposits made to suspend running of interest on potential 
              underpayments.
Sec. 106. Expansion of interest netting for individuals.
Sec. 107. Waiver of certain penalties for first-time unintentional 
              minor errors.
Sec. 108. Frivolous tax submissions.

              TITLE II--FAIRNESS OF COLLECTION PROCEDURES

Sec. 201. Partial payment of tax liability in installment agreements.
Sec. 202. Additional considerations to be taken into account as bases 
              for accepting offer-in-compromise.
Sec. 203. Extension of time for return of property.
Sec. 204. Seven-day threshold on tolling of statute of limitations 
              during tax review.
Sec. 205. Study of liens and levies.

              TITLE III--EFFICIENCY OF TAX ADMINISTRATION

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. Study of taxpayer notification alternatives.

                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.

                         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.

                TITLE VI--AUTHORIZATION OF APPROPRIATION

Sec. 601. Low-income taxpayer clinics.

                    TITLE I--PENALTIES AND INTEREST

     SEC. 101. REDUCTION OF FEDERAL TAX DEPOSIT PENALTY.

       (a) In General.--Subparagraph (A) of section 6656(b)(1) is 
     amended to read as follows:
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `applicable percentage' means 2 percent.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to deposits required to be made after December 
     31, 2002.

     SEC. 102. 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--

[[Page 4057]]

       ``(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 $2,000, 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 $2,000 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, 2002.

     SEC. 103. 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. 104. 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. 105. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS.

       (a) In General.--Subchapter B of chapter 67 (relating to 
     interest on overpayments) is amended by redesignating section 
     6612 as section 6613 and by inserting after section 6611 the 
     following new section:

     ``SEC. 6612. 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 6601(e)(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,

[[Page 4058]]

     loss, deduction, or credit which the taxpayer reasonably 
     believes the Secretary has a reasonable basis for disputing 
     the treatment on the taxpayer's return.
       ``(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.
       ``(B) 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 B of chapter 67 is amended by striking the last 
     item and inserting the following new items:

``Sec. 6612. Deposits made to suspend running of interest on potential 
              underpayments, etc.
``Sec. 6613. Cross references.''

       (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 6612 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 6612.

     SEC. 106. 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, 2002.

     SEC. 107. 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 error.--
     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--
       ``(1) the individual has a history of compliance with the 
     requirements of this title,
       ``(2) it is shown that the failure is due to an 
     unintentional minor error,
       ``(3) the penalty would otherwise be disproportionate to 
     the amount involved, and
       ``(4) waiving the penalty would promote compliance with the 
     requirements of this title and effective tax administration.
     The preceding sentence shall not apply if the Secretary has 
     waived any addition to tax under this subsection with respect 
     to any prior failure by such individual.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect on January 1, 2003.

     SEC. 108. 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--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified frivolous 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 promptly 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) Treatment of Frivolous Requests for Hearings before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''.
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''.
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested appeal''.
       (c) Treatment of Frivolous Requests for Hearings upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested appeal''.
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''.
       (e) Conforming 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.''

       (f) 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).

              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

[[Page 4059]]

     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. ADDITIONAL CONSIDERATIONS TO BE TAKEN INTO ACCOUNT 
                   AS BASES FOR ACCEPTING OFFER-IN-COMPROMISE.

       (a) In General.--Paragraph (3) of section 7122(c) (relating 
     to special rules relating to treatment of offers) is amended 
     by striking ``and'' at the end of subparagraph (A), by 
     striking the period at the end of subparagraph (B) and 
     inserting a semicolon, and by adding at the end the following 
     new subparagraphs:
       ``(C) in all cases, consideration shall be given to--
       ``(i) whether the taxpayer has a history of complying with 
     the requirements of this title,
       ``(ii) whether there is evidence of an error by the 
     Internal Revenue Service in determining or administering the 
     tax which is the subject of the offer-in-compromise, and
       ``(iii) whether the taxpayer has made a good faith effort 
     to resolve and pay the liability;
       ``(D) a reasonable annual allowance shall be made for 
     voluntary payments for the support of any dependent (as 
     defined in section 152) of the taxpayer;
       ``(E) a reasonable allowance shall be made for payments on 
     unsecured debt of the taxpayer to the extent such debt is 
     attributable to Federal, State, or local income taxes, 
     medical care expenses, burial expenses, or other basic living 
     expenses; and
       ``(F) consideration shall be given to the level of the 
     taxpayer's education and financial and business experience 
     relative the complexity of the transaction giving rise to the 
     liability.''
       (b) Limitations.--Subsection (c) of section 7122 is amended 
     by adding at the end the following new paragraph:
       ``(4) Limitations on certain factors in considering offer-
     in-compromise.--
       ``(A) Period for certain considerations.--Subparagraph (E) 
     of paragraph (3) shall apply only during the 3-year period 
     beginning on whichever of the following is the earliest:
       ``(i) The date of the receipt by the taxpayer of the notice 
     of the decision of the Internal Revenue Service Office of 
     Appeals.
       ``(ii) The date of the notice of deficiency.
       ``(iii) The date on which the first letter of proposed 
     deficiency which allows the taxpayer an opportunity for 
     administrative review in the Internal Revenue Service Office 
     of Appeals is sent.
       ``(B) Dollar limitations.--
       ``(i) Allowances.--The allowances under subparagraphs (D) 
     and (E) shall not exceed the dollar amount in effect under 
     section 2503(b).
       ``(ii) Consideration of education and financial 
     sophistication.--Subparagraph (F) of paragraph (3) shall 
     apply only if the amount of the liability does not exceed the 
     dollar amount in effect under section 2503(b).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to proposed offers-in-compromise submitted after 
     the date of the enactment of this Act.

     SEC. 203. 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. 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--EFFICIENCY OF TAX ADMINISTRATION

     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. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

       ``(a) In General.--Subject to subsection (c), the 
     Commissioner of Internal Revenue shall terminate the 
     employment of 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.
       ``(b) Acts or Omissions.--The acts or omissions referred to 
     under subsection (a) 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 termination for an act or omission under 
     subsection (a).
       ``(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 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 in subsection (b) occurred may be reviewed.
       ``(d) Definition.--For the purposes of the provisions 
     described in clauses (i), (ii), and

[[Page 4060]]

     (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 terminations of employment 
     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. Termination of employment for misconduct.''

       (c) 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 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. STUDY OF TAXPAYER NOTIFICATION ALTERNATIVES.

       The Secretary of the Treasury, or the Secretary's delegate, 
     shall conduct a study of alternative methods of notifying 
     taxpayers of determinations and other actions of the 
     Secretary. The study shall examine the advantages and 
     disadvantages of--
       (1) the use of certificates of mailing,
       (2) modifications to certified or registered mail 
     requirements which eliminate return receipt requested, and
       (3) modifications with respect to dual notices to taxpayers 
     filing a joint return and residing at the same address.
     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 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.--Subsection (h) of section 6103 (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 paragraph:
       ``(7) Taxpayer representatives.--Notwithstanding paragraph 
     (1), 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 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 paragraph (4) shall not be disclosed under 
     clause (ii) or (iii) of subparagraph (A) until after the 
     Secretary makes a section shall take effect on 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 paragraph (4) shall not be disclosed under 
     clause (ii) or (iii) of subparagraph (A) until after the 
     Secretary makes a easonable 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 to--

       ``(I) any ex parte proceeding for obtaining a search 
     warrant, order for entry on premises or safe deposit boxes, 
     or similar ex parte proceeding,
       ``(II) disclosure of third party return information by 
     indictment or criminal information, or
       ``(III) if the Secretary determines that the application of 
     such clause would seriously impair a criminal tax 
     investigation.''.

       (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) 
     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) In 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 tax payer'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.--Notwithstanding any other 
     provision of this section, no return or return information 
     shall be disclosed by any officer or employee of

[[Page 4061]]

     any Federal agency or State to any contractor of such agency 
     or State unless such agency or State--
       ``(A) has requirements in effect which require each 
     contractor of such agency or State 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 contractor 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 all contractors are in compliance with all such 
     requirements.
     The certification required by subparagraph (D) shall include 
     the name and address of each contractor, a description of the 
     contract of the contractor with the Federal agency or State, 
     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, 2002.
       (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 2003.

     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 or sections 
     7213, 7213A, or 7431 if--
       ``(A) at the time of execution, such request or coe of 
     Service To Act on Determinations Treated as Exhaustion of 
     Remedies.--The second sentence of paragraph (2) of section 
     7428(b) (relating to exhaustion of administrative remedies) 
     is amended to read as follows: ``An organization which 
     requests the determination of an issue referred to in 
     subsection (a)(1) and which has taken, in a timely manner, 
     all reasonable steps to secure such determination, shall be 
     deemed to have exhausted its administrative remedies with 
     respect to--
       ``(A) a failure by the Secretary to make a determination 
     with respect to such issue, at the expiration of 270 days 
     after the date on which the request for such determination 
     was made, and
       ``(B) a failure by any office of the Internal Revenue 
     Service (other than the office which is responsible for 
     initial determinations with respect to such issue) to make a 
     determination with respect to such issue, at the expiration 
     of 450 days after the date on which such request was made.''.
       (d) Effective Dates.--
       (1) Declaratory judgment.--The amendments made by 
     subsections (a) and (b) shall apply to pleadings filed with 
     respect to determinations (or requests for determinations) 
     made after the date of the enactment of this Act.
       (2) Failure of service to act.--The amendments made by 
     subsection (c) shall apply to applications received in the 
     national office of the Internal Revenue Service 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 2001, 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 2001, 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 in 2000 and later 
     (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. 7527. 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. 7525. Enrolled agents.''

       (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.

                TITLE VI--AUTHORIZATION OF APPROPRIATION

     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 2002, $12,000,000 for 2003, and $15,000,000 
     for each year thereafter''.
       (b) Limitation on Use of Clinics for Tax Return 
     Preparation.--Section 7526(b)(1) is amended by adding at the 
     end the following new subparagraph:
       ``(C) Limitation regarding tax return preparation.--A 
     clinic meets the requirements of subparagraph (A)(ii)(II) if 
     the programs operated by the clinic do not include routine 
     tax return preparation.''.

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Protection and IRS Accountability Act of 2002''.
       (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--PENALTIES AND INTEREST

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.

[[Page 4062]]

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 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--EFFICIENCY OF TAX ADMINISTRATION

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.

                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.

                         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. Capital gain treatment under section 631(b) to apply to 
              outright sales by land owner.

                 TITLE VI--LOW-INCOME TAXPAYER CLINICS

Sec. 601. Low-income taxpayer clinics.

 TITLE VII--REVISIONS TO SECTION 527 ORGANIZATION DISCLOSURE PROVISIONS

Sec. 701. Modifications of reporting requirements for certain State and 
              local political organizations.
Sec. 702. Notification of interaction of reporting requirements.
Sec. 703. Technical corrections to section 527 organization disclosure 
              provisions.

                    TITLE I--PENALTIES AND INTEREST

     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 $2,000, 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 $2,000 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:

[[Page 4063]]

  ``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, 2002.

     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.''.
       (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.
       ``(B) 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, 2002.

     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, 2003.

     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

[[Page 4064]]

       ``(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--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(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 promptly 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) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''.
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''.
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''.
       (e) 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.''.
       (f) 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

[[Page 4065]]

     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, 2002.

     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--EFFICIENCY OF TAX ADMINISTRATION

     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 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.--

[[Page 4066]]

       ``(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 taxable years beginning after December 31, 
     2001.

                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.--Subsection (h) of section 6103 (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 paragraph:
       ``(7) Taxpayer representatives.--Notwithstanding paragraph 
     (1), 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 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) In 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.--Notwithstanding any other 
     provision of this section, no return or return information 
     shall be disclosed by any officer or employee of any Federal 
     agency or State to any contractor of such agency or State 
     unless such agency or State--
       ``(A) has requirements in effect which require each 
     contractor of such agency or State 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 contractor 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 all contractors are in compliance with all such 
     requirements.
     The certification required by subparagraph (D) shall include 
     the name and address of each contractor, a description of the 
     contract of the contractor with the Federal agency or State, 
     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, 2002.
       (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 2003.

     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 or sections 
     7213, 7213A, or 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

[[Page 4067]]

       ``(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 Amendment.--Section 6103(c) is amended by 
     striking ``Taxpayer.--The Secretary'' and inserting 
     ``Taxpayer.--
       ``(1) In General.--The Secretary''.
       (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 determines 
     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 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 
     representatives of the appropriate State officer designated 
     as the individuals who are to inspect or to receive the 
     returns or return information under this paragraph on behalf 
     of such 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 and Federal issues relating to such 
     organization.
       ``(3) Use in judicial and administrative proceedings.--
     Returns and return information disclosed pursuant to this 
     subsection may be disclosed in civil administrative and 
     judicial 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) the head of any State agency, body, or commission 
     which is charged under the laws of such State with 
     responsibility for overseeing organizations of the type 
     described in section 501(c)(3).''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 6103 is amended--
       (A) by inserting ``or section 6104(c)'' after ``this 
     section'' in paragraph (2), and
       (B) by striking ``or subsection (n)'' in paragraph (3) and 
     inserting ``subsection (n), or section 6104(c)''.
       (2) Subparagraph (A) of section 6103(p)(3) is amended by 
     inserting ``and section 6104(c)'' after ``section'' in the 
     first sentence.
       (3) Paragraph (4) of section 6103(p) is amended--
       (A) in the matter preceding subparagraph (A), by striking 
     ``(16) or any other person described in subsection (l)(16)'' 
     and inserting ``(16), any other person described in 
     subsection (l)(16), or any appropriate State officer (as 
     defined in section 6104(c))'', and
       (B) in subparagraph (F), by striking ``or any other person 
     described in subsection (l)(16)'' and inserting ``any other 
     person described in subsection (l)(16), or any appropriate 
     State officer (as defined in section 6104(c))''.
       (4) Paragraph (2) of section 7213(a) is amended by 
     inserting ``or under section 6104(c)'' after ``6103''.
       (5) Paragraph (2) of section 7213A(a) is amended by 
     inserting ``or 6104(c)'' after ``6103''.
       (6) Paragraph (2) of section 7431(a) is amended by 
     inserting ``(including any disclosure in violation of section 
     6104(c))'' after ``6103''.
       (b) 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.

                         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.''.

[[Page 4068]]

     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 section 501(c) (other than 
     paragraph (3)) 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 2001, 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 2001, 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 2001 
     (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. 7527. 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. 7525. Enrolled agents.''.

       (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. CAPITAL GAIN TREATMENT UNDER SECTION 631(B) TO 
                   APPLY TO OUTRIGHT SALES BY LAND OWNER.

       (a) In General.--The first sentence of section 631(b) of 
     the Internal Revenue Code of 1986 (relating to disposal of 
     timber with a retained economic interest) is amended by 
     striking ``retains an economic interest in such timber'' and 
     inserting ``either retains an economic interest in such 
     timber or makes an outright sale of such timber''.
       (b) Conforming Amendment.--The third sentence of section 
     631(b) of such Code is amended by striking ``The date of 
     disposal'' and inserting ``In the case of disposal of timber 
     with a retained economic interest, the date of disposal''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales 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 2002, $12,000,000 for 2003, and $15,000,000 
     for each year thereafter''.
       (b) Limitation on Use of Clinics for Tax Return 
     Preparation.--Subparagraph (A) of section 7526(b)(1) is 
     amended by adding at the end the following flush language:
     ``The term does not include a clinic that provides routine 
     tax return preparation. The preceding sentence shall not 
     apply to return preparation in connection with a controversy 
     with the Internal Revenue Service.''.
       (c) Promotion of Clinics.--Section 7526(c) is amended by 
     adding at the end the following new paragraph:
       ``(7) 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.''.

 TITLE VII--REVISIONS TO SECTION 527 ORGANIZATION DISCLOSURE PROVISIONS

     SEC. 701. MODIFICATIONS OF REPORTING REQUIREMENTS FOR CERTAIN 
                   STATE AND LOCAL POLITICAL ORGANIZATIONS.

       (a) Notification.--
       (1) Paragraph (5) of section 527(i) (relating to 
     organizations must notify Secretary that they are section 527 
     organizations) is amended by striking ``or'' at the end of 
     subparagraph (A), by striking the period at the end of 
     subparagraph (B) and inserting ``, or'', and by adding at the 
     end the following:
       ``(C) which is--
       ``(i) a political committee of a State or local candidate, 
     or
       ``(ii) a local committee of an entity which is a political 
     party under State law.''.
       (2) Subparagraph (B) of section 527(j)(5) (relating to 
     coordination with other requirements) is amended to read as 
     follows:
       ``(B) to any organization which is--
       ``(i) a political committee of a State or local candidate, 
     or
       ``(ii) a State or local committee of an entity which is a 
     political party under State law,''.

[[Page 4069]]

       (b) Exemption for Certain State and Local Political 
     Committees From Reporting Requirements.--
       (1) In general.--Paragraph (5) of section 527(j) (relating 
     to required disclosures of expenditures and contributions) is 
     amended by redesignating subparagraphs (C), (D), and (E) as 
     subparagraphs (D), (E), and (F), respectively, and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) to any organization which is an exempt State or local 
     political organization,''.
       (2) Exempt state or local political organization.--
     Subsection (e) of section 527 (relating to other definitions) 
     is amended by adding at the end the following new paragraph:
       ``(5) Exempt state or local political organization.--
       ``(A) In general.--The term `exempt State or local 
     political organization' means a political organization--
       ``(i) which does not engage in any exempt function other 
     than to influence or to attempt to influence the selection, 
     nomination, election, or appointment of any individual to any 
     State or local public office or office in a State or local 
     political organization,
       ``(ii) which is subject to State or local requirements to 
     submit reports containing information--

       ``(I) regarding individual expenditures from and 
     contributions to such organization, and
       ``(II) regarding the person who makes such contributions or 
     receives such expenditures,

     which is substantially similar to the information which would 
     otherwise be required to be reported under this section, and
       ``(iii) with respect to which the reports referred to in 
     clause (ii) are made public by the agency with which such 
     reports are filed and are publicly available for inspection 
     in a manner similar to that required by section 6104(d)(1).
       ``(B) Participation of federal candidate or office 
     holder.--The term `exempt State or local political 
     organization' shall not include any organization otherwise 
     described in subparagraph (A) if a candidate for nomination 
     or election to Federal elective office or an individual who 
     holds such office--
       ``(i) controls or materially participates in the direction 
     of the organization, or
       ``(ii) directs, in whole or in part, expenditures or 
     fundraising activities of the organization.''.
       (c) Annual Return Requirements.--
       (1) Income tax returns required only where political 
     organization taxable income.--Paragraph (6) of section 
     6012(a) (relating to general rule of persons required to make 
     returns of income) is amended by striking ``or which has 
     gross receipts of $25,000 or more for the taxable year (other 
     than an organization to which section 527 applies solely by 
     reason of subsection (f)(1) of such section)''.
       (2) Information returns.--Subsection (g) of section 6033 
     (relating to returns required by political organizations) is 
     amended to read as follows:
       ``(g) Returns Required by Political Organizations.--
       ``(1) In general.--Every political organization (within the 
     meaning of section 527(e)(1)), and every fund treated under 
     section 527(g) as if it constituted a political organization, 
     which has gross receipts of $25,000 or more for the taxable 
     year shall file a return--
       ``(A) containing the information required, and complying 
     with the other requirements, under subsection (a)(1) for 
     organizations exempt from taxation under section 501(a), and
       ``(B) containing such other information as the Secretary 
     deems necessary to carry out the provisions of this 
     subsection.
       ``(2) Exceptions from filing.--
       ``(A) Mandatory exceptions.--Paragraph (1) shall not apply 
     to an organization--
       ``(i) which is an exempt State or local political 
     organization (as defined in section 527(e)(5)),
       ``(ii) which is a State or local committee of a political 
     party, or political committee of a State or local candidate, 
     as defined by State law,
       ``(iii) which is a caucus or association of State or local 
     elected officials,
       ``(iv) which is a national association of State or local 
     officials,
       ``(v) which is an authorized committee (as defined in 
     section 301(6) of the Federal Election Campaign Act of 1971) 
     of a candidate for Federal office,
       ``(vi) which is a national committee (as defined in section 
     301(14) of the Federal Election Campaign Act of 1971) of a 
     political party, or
       ``(vii) to which section 527 applies for the taxable year 
     solely by reason of subsection (f)(1) of such section.
       ``(B) Discretionary exception.--The Secretary may relieve 
     any organization required under paragraph (1) to file an 
     information return from filing such a return where he 
     determines that such filing is not necessary to the efficient 
     administration of the internal revenue laws.''
       (d) Waiver of penalties.--Section 527 is amended by adding 
     at the end the following:
       ``(k) Authority To Waive.--The Secretary may waive all or 
     any portion of the--
       ``(1) tax assessed on an organization by reason of the 
     failure of the organization to give notice under subsection 
     (i), or
       ``(2) penalty imposed under subsection (j) for a failure to 
     file a report,
     on a showing that such failure was due to reasonable cause 
     and not due to willful neglect.''
       (e) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     Public Law 106-230.

     SEC. 702. NOTIFICATION OF INTERACTION OF REPORTING 
                   REQUIREMENTS.

       (a) In General.--The Secretary of the Treasury, in 
     consultation with the Federal Election Commission, shall 
     publicize information on--
       (1) the effect of the amendments made by this Act, and
       (2) the interaction of requirements to file a notification 
     or report under section 527 of the Internal Revenue Code of 
     1986 and reports under the Federal Election Campaign Act of 
     1971.
       (b) Information.--Information provided under subsection (a) 
     shall be included in any appropriate form, instruction, 
     notice, or other guidance issued to the public by the 
     Secretary of the Treasury or the Federal Election Commission 
     regarding reporting requirements of political organizations 
     (as defined in section 527 of the Internal Revenue Code of 
     1986) or reporting requirements under the Federal Election 
     Campaign Act of 1971.

     SEC. 703. TECHNICAL CORRECTIONS TO SECTION 527 ORGANIZATION 
                   DISCLOSURE PROVISIONS.

       (a) Unsegregated Funds Not To Avoid Tax.--Paragraph (4) of 
     section 527(i) (relating to failure to notify) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of the preceding sentence, the term `exempt function income' 
     means any amount described in a subparagraph of subsection 
     (c)(3), whether or not segregated for use for an exempt 
     function.''
       (b) Procedures for Assessment and Collection of Penalty.--
     Paragraph (1) of section 527(j) (relating to required 
     disclosure of expenditures and contributions) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of subtitle F, the penalty imposed by this paragraph shall be 
     assessed and collected in the same manner as penalties 
     imposed by section 6652(c).''
       (c) Application of Fraud Penalty.--Section 7207 (relating 
     to fraudulent returns, statements, and other documents) is 
     amended by striking ``pursuant to subsection (b) of section 
     6047 or pursuant to subsection (d) of section 6104'' and 
     inserting ``pursuant to section 6047(b), section 6104(d), or 
     subsection (i) or (j) of section 527''.
       (d) Duplicate Electronic and Written Filings Not 
     Required.--Subparagraph (A) of section 527(i)(1) is amended 
     by striking ``, electronically and in writing,''
       (e) Effective Dates.--
       (1) Subsections (a) and (b).--The amendments made by 
     subsections (a) and (b) shall apply to failures occurring on 
     or after the date of the enactment of this Act.
       (2) Subsections (c) and (d).--The amendments made by 
     subsections (c) and (d) shall take effect as if included in 
     the amendments made by Public Law 106-230.

  The SPEAKER pro tempore (Mrs. Biggert). Pursuant to the rule, the 
gentleman from California (Mr. Thomas) and the gentleman from New York 
(Mr. Rangel) each will control 20 minutes.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, the Taxpayer Protection and IRS Accountability Act of 
2002 might be called modest, but if one looks at the particular 
provisions, I think for those individuals engaged with the Internal 
Revenue Service, I think they might find them relatively important.
  The Chair would like to thank the gentleman from New York (Mr. 
Houghton), the chairman of the Subcommittee on Oversight, and 
especially the gentleman from Ohio (Mr. Portman) and the gentleman from 
Maryland (Mr. Cardin) in their ongoing work in providing the committee 
with excellent legislation.
  As I said in announcing the call-up for the vote, that this bill was 
amended. It was amended in committee. Two amendments were taken, one by 
the gentleman from New York (Mr. Rangel), which would allow IRS 
information to be provided to State Attorneys General. I think it is 
significant that it was offered by the gentleman from New York. The 
information is an examination of 501(c)(3) groups and whether they 
would refuse, or whether there was a revocation or whether there was a 
tax deficiency reported at the Federal level, that information to be 
shared at the State level.
  As my colleagues might imagine, how unseemly as it might be, there 
are

[[Page 4070]]

individuals and groups who tried to take advantage of the disaster 
because of the events of September 11. There are individuals or groups 
who seek to take advantage of the charitable nature of Americans and 
New Yorkers as well. What this amendment does is allow the sharing of 
Federal information to assist in the State's administering their laws 
governing a charitable organization as well. Quite an appropriate 
amendment, and it was accepted on a voice vote.
  The gentleman from Ohio, I think, speaking as well for the gentleman 
from Maryland, offered some specific amendments dealing with the way in 
which the IRS commissioner would treat IRS employees who were engaged 
in what have become now known as the ``10 deadly sins,'' based upon 
recent legislation in which if an employee of the IRS examines forms 
unauthorized, a number of them are grounds for immediate dismissal. As 
my colleagues might guess, that kind of an administrative tool perhaps 
is too extreme in some instances, and based upon the argument of the 
two gentlemen, it seemed persuasive to provide a degree of discretion 
to the commissioner in pursuing either disciplinary action or 
dismissal.
  In addition to that, there are some other specific provisions that 
would greatly assist individuals who are interacting with the IRS, and 
I will go into those in some detail later.
  Madam Speaker, I reserve the balance of my time.
  Mr. RANGEL. Madam Speaker, I yield myself such time as I may consume.
  I want to support what the chairman of the committee has said and the 
cooperative spirit that existed on the Ways and Means Committee under 
the leadership of the gentleman from New York (Mr. Houghton) in working 
with the gentleman from Pennsylvania (Mr. Coyne) and the gentleman from 
Texas (Mr. Doggett) as well as the gentleman from Maryland (Mr. Cardin) 
in correcting the duplicity that existed in terms of organizations 
reporting political contributions.
  We had worked so well together on this, it was almost frightening, 
because it was done in an atmosphere that we do not normally enjoy on 
the Ways and Means Committee. So it should not have come as any shock 
to me when the bill that was overwhelmingly accepted by all members of 
the committee, that the Chairman would put in a poison pill at the very 
last minute that caused the committee to be divided on a party line 
vote.
  It just seems to me that at the height, when the whole Nation is 
lauding the House and the Senate and the President for campaign finance 
reform, that if we find some flaw or some mistake or some area that we 
did not remove the fault, that we would take the opportunity under the 
Taxpayer Protection and IRS Accountability Act, may not be the right 
vehicle, but certainly that we would improve on what the House and 
Senate has done.
  Instead of that, this bill has a provision in it, a fatally flawed 
provision, that opens up gaping loopholes in our campaign finance 
disclosure laws, so big that every reform group in the Nation that 
campaigned for campaign finance reform are now prepared to say that 
this is no way for us to conduct business.
  We do not take a good piece of legislation like the Taxpayer 
Protection and IRS Accountability Act and then put a sleeper poison 
pill in it to kill all of the good work that Members on both sides of 
the aisle, led by the gentleman from Connecticut (Mr. Shays) and the 
gentleman from Massachusetts (Mr. Meehan) and Senator McCain, the 
person from the other body, we just do not do it. It is not fair, it is 
not equitable, it is not moral. It just may be legal.
  Then on top of that, to compound the moral failing of the way this 
legislation comes to the floor, it is presented as though it is 
noncontroversial, or certainly that is the reason why it goes on the 
suspension calendar; no amendments, no opportunity for people who 
disagree with parts of the bill to vote on an amendment. One does not 
have to be a campaign manager to know that it was a party vote in the 
committee. That sounds pretty controversial to me. Why not have it to 
be at least a vote on the floor where people can at least express 
themselves?
  So it is not bad enough that my colleagues bring it out on the 
Suspension Calendar, and I might add far too many tax bills are coming 
out on the Suspension Calendar, but my colleagues are not asking that 
we vote on it this evening. A lot of people may wonder why is it that 
we would bring a bill out that is so popular that we put it on the 
Suspension Calendar and not request a vote this evening?
  The reason for it is that they do not even want Members to stick 
around here to find out what the debate is on the bill. There are no 
votes, so Members can now leave the floor, leave the Hill, and take 
care of other business; because this issue, according to the 
leadership, is not important enough for them to stay around and vote on 
it. Oh, stay around and talk about it, if one will. It is just so 
unfair when people have worked so hard to try to sneak this in in the 
middle of the night, with no one on the floor, and do not even say vote 
for it until tomorrow.
  Then we come in tomorrow and there will be a vote, without any 
debate, without any discussions. Because of what? Because the rules 
prohibit it. How well packaged.
  I think we will defeat this, not because we do not appreciate the 
work that has been done by the Members on the base bill, but we are 
going to defeat it just because people think that they can get away 
with anything in this House. Some Republicans did not stand for it in 
the committee, and I think many more Members are not going to stand for 
this if my colleagues allow a vote on it at least tomorrow.
  Madam Speaker, I reserve the balance of my time.
  Mr. THOMAS. Madam Speaker, I yield myself such time as I might 
consume.
  I am kind of interested in the words that the gentleman from New York 
used, ``filled with loopholes,'' ``fatally flawed,'' ``poison pill.'' I 
find it ironic that two-thirds of the Democrats on the committee voted 
for it. It is true all of the Republicans voted for it, and if my 
colleagues spent the time to really look at what the provision the 
gentleman was referring to in correcting current law does, the sum and 
substance is to basically say if someone is reporting to an agency that 
requires a person under the State and local laws of the State to 
report, they also do not have to duplicate that reporting at the 
Federal level if they are not involved in Federal activities. That is 
the sum and substance of what it is that the gentleman from Texas (Mr. 
Brady) offered and was included in the bill.
  I find it interesting that there was a press conference today by the 
very same gentleman that my friend and colleague from New York 
mentioned, Senator McCain and Senator Lieberman, and, of course, the 
bulk of that press conference was complaining about the current law, 
that they do not like the current 527, the one that they put into 
effect. It is not enough.
  The answer is they will never be satisfied. And what we have to do is 
look at what is reasonable and prudent, and numbers of groups have said 
that the double reporting when we are not involved at the Federal level 
is a significant burden. One would say, how burdensome is it? The IRS 
form that they are required to fill out says, as part of the truth in 
packaging and paperwork law, how many hours it requires to deal with 
the form. The number on that form is 94 hours; 94 hours of filling out 
a form in which someone was not involved in any way in a Federal 
election because of the way in which the legislation was written.
  What this bill does is correct that to say that there are no 
loopholes, that people who are required to report in the previous law 
are required to report today. The so-called stealth or phantom PACs are 
required to report as current law requires. What we do is remove the 
duplication.
  Madam Speaker, I reserve the balance of my time.
  Mr. RANGEL. Madam Speaker, I yield 3 minutes to the gentlewoman from 
Florida (Mrs. Thurman), an outstanding member of our committee.

[[Page 4071]]

  Mrs. THURMAN. Madam Speaker, I would say to our chairman that I think 
one of the issues here is that we are really trying to get an 
opportunity to debate this issue, and not under the consent calendar, 
and to move it along in a different manner.
  I would also bring in today that we had a hearing in the Subcommittee 
on Oversight that I know the gentleman from New York (Mr. Houghton) and 
others have worked very hard on, and I want to remind the body that 
this bill is actually called the Taxpayer Protection and IRS 
Accountability Act, which I think is important for us to understand. I 
was concerned when I went to this hearing today because there have been 
some articles over the last couple of days that talk about Affluent 
Avoid Scrutiny on Taxes Even as IRS Warns of Cheating. In my own 
newspaper at home, Poorly Aimed Audits: The IRS is giving more scrutiny 
to the returns of the working poor than to those of wealthy people who 
have formed partnerships or special corporations. It is just not fair 
and it makes little sense.
  I think the point that the gentleman from New York (Mr. Rangel) is 
making is that we are not going to have another Taxpayers Protection 
Act come out of this House. We are not going to have the opportunity to 
debate this again. But we do have the opportunity to do it now, and if 
we went through the process of going to the Committee on Rules, looking 
at some of these issues that the commissioner and other folks in this 
country brought to our attention today, we might have the opportunity 
to actually send a better bill than what potentially would come out of 
here today.
  I think there is a single issue here that I feel strongly about. We 
are going to send our tax payments to the IRS on April 15th. Every 
taxpayer has a right to believe that others are also paying their 
taxes. They need to believe that tax cheaters are going to be 
discovered, they are going to be audited, and they are going to be 
punished and they are going to be treated like everybody else.

                              {time}  1945

  I think we have some new information before this bill went through 
the committee process. We have a process set up that we can use in a 
debating process, to go to the Committee on Rules, fix some of these 
issues; and I think it would be a much better bill and I think we would 
find more support.
  I would say I do not want to tell people at home that one out of 47 
working-poor taxpayers will be audited, but only one of 145 of high-
income taxpayers and one in 400 partnerships get the same treatment. We 
need to do something about that, and we do not need to wait. We need to 
include this in the bill, and we need to do it in the right process.
  Mr. THOMAS. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, I say to the gentlewoman that the record shows that 
the gentlewoman voted for this bill. We are not limited by the number 
of bills that we can report out. This bill was based upon previous 
hearings. I am going to call shortly the chairman of the Subcommittee 
on Oversight, who the gentlewoman discussed today; and it will very 
likely lead to additional legislation, and we will move additional 
bills.
  The idea that we would hold hearings all year long and never move a 
bill, and then try to pull it together at the end is a novel idea. We 
might want to consider it, but it certainly runs against the tradition 
of this House.
  Madam Speaker, I yield 2 minutes to the gentleman from New York (Mr. 
Houghton), the chairman of the Subcommittee on Oversight.
  Mr. HOUGHTON. Madam Speaker, I am delighted to be able to talk about 
this bill very briefly.
  I know there is a contentious issue on 527. I do not think that it is 
a serious one. Members can have their own opinions, but I think there 
are enough safeguards to make it accountable. I want to talk about some 
of the other important features.
  The bill allows the IRS to waive unfair penalties. The bill allows 
taxpayers more time to contest levies. The bill allows the IRS to 
forgive interest when a taxpayer receives an erroneous refund. The bill 
also makes several reforms on the 10 deadly sins. There is even an 11th 
deadly sin now.
  Madam Speaker, this bill is pro-taxpayer and promotes commonsense 
solutions to some of the more frustrating issues that we are dealing 
with. I hope my colleagues support the bill.
  Mr. RANGEL. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, I agree with the gentleman from New York (Mr. 
Houghton) that it is a good bill, and it is totally unfair to have this 
contentious idea included in this bill; and I ask for its defeat. This 
provision should not be in the bill. It fatally flaws the good work 
that has been done.
  Madam Speaker, I yield 3 minutes to the gentleman from Massachusetts 
(Mr. Meehan), one of the outstanding reformers of campaign finance, who 
certainly knows good legislation when he sees it, and the gentleman 
also knows a poison pill when he smells it, and thank the gentleman for 
all of the fine work that he has done in campaign finance reform.
  Mr. MEEHAN. Madam Speaker, I agree with the underlying bill as well. 
I congratulate the bipartisanship of the Committee on Ways and Means 
for coming together to put together a good bill; but, unfortunately, 
there is a provision in this bill that even if Members disagree with 
it, should not be part of a suspension.
  Madam Speaker, just 2 weeks ago the President signed into law the 
most comprehensive rewrite of this Nation's campaign finance laws in a 
generation. It is an enormous step towards cleaner elections and a 
better democracy. The ink on this new law is barely dry, and we are 
already debating a proposal to add back the loopholes. The Taxpayer 
Bill of Rights bill is a good bill, but it includes several provisions 
that will torpedo key disclosure requirements for so-called stealth 
PACs. These disclosure requirements were put in place by a law that 
this Congress passed 2 years ago to shine sunlight on organizations 
influencing Federal elections without disclosing a dime of their 
expenditures or contributions.
  This bill would exempt State and local PACs from Federal disclosure 
requirements even where there is not adequate disclosure at the State 
level. What does that mean? How do we know that States are going to 
require disclosure of every single contribution. We cannot have 
guarantees; that is why we needed a stealth PAC legislation.
  There are so-called sham issue ads that disguise themselves as real 
issue ads. They influence Federal elections. This bill is a loophole, 
the beginning of what many of us are afraid will be a series of 
loopholes designed to undermine campaign finance reform that this 
Congress passed and the President of the United States signed.
  This bill would permit State and local PACs for which Federal office 
holders raise soft money, Federal office holders raising soft money to 
qualify for this exemption from Federal filing requirements. That is 
why this provision should not be in this bill.
  All Members should be proud of what we have accomplished on campaign 
finance reform. It was a historic effort by both sides of the aisle to 
pass meaningful disclosure requirements, to rein in sham issue ads, and 
to bring some accountability back to our Federal campaign finance 
system, or any ads meant to influence a Federal election.
  We should not be taking steps backwards after taking major steps 
forward. Let us work together, as our colleagues on the other body have 
said, and they have had a dialogue about this in a bipartisan, 
responsible way to fix the 527 law. The gentleman from Texas (Mr. 
Doggett) has been on this issue for some time. In fact, the gentleman 
warned many of us 2 years ago when we were debating this legislation 
that there might be a loophole. Let us do this the right way and not 
undermine the wonderful work that this Congress has done on campaign 
finance reform.
  Mr. THOMAS. Madam Speaker, I yield myself 45 seconds.
  Madam Speaker, perhaps the gentleman does not understand the law.

[[Page 4072]]

The sham issue ads are not involved with the IRS and the reporting 
structure. If a Federal office holder influences a State and local PAC 
decision, this says they have to report at the Federal level. If there 
is Federal activity, they report at the Federal level. There is no 
loophole that is created. What it gets rid of is duplication where if a 
State and local PAC, not involved at the Federal level, that has to 
report at the State and local level. And as the gentleman indicated, he 
wants them to report on the Federal level even though they are not 
involved in Federal activity.
  At some point we have to ask ourselves whether continuing to use the 
phrase ``why put in loopholes, why do a poison pill,'' Members ought to 
look at the specifics of the legislation instead of the rhetoric, and 
ought to respond to what is on the page instead of chasing bogeymen.
  Madam Speaker, I yield 3 minutes to the gentleman from Ohio (Mr. 
Portman), a valued member of the Committee on Ways and Means in helping 
us write reasonable and responsive legislation, and not press releases.
  Mr. PORTMAN. Madam Speaker, I rise this evening in strong support of 
this legislation. It is good commonsense legislation that will help 
protect taxpayers. This is a busy week for a lot of Americans. Millions 
of us are filing our tax returns, trying to get them in by April 15. 
This is time for us to provide a little bit of help.
  In 1998, this Congress passed historic legislation to restructure and 
reform the IRS and included over 50 new taxpayer rights and substantial 
reforms to the way the IRS operates. This legislation tonight, I think, 
builds on those efforts; and I commend the chairman and the gentleman 
from New York (Mr. Houghton) for bringing it forward.
  Madam Speaker, tax records do contain sensitive and personal 
information; and no one, not even the employees of the IRS, should be 
allowed to see them without a legitimate reason. This legislation makes 
it very clear that there will be stiff penalties for IRS employees who 
explore taxpayers' records without proper authorization.
  It also encourages broader use of electronic filing. This is 
extremely important. The IRS is able to process tax returns in a much 
more timely fashion with electronic means. It is also less expensive 
for the IRS; and, therefore, the taxpayers save money. And electronic 
returns have been shown to be more accurate. There are fewer IRS 
errors, and this is great news for taxpayers. We want to encourage it, 
and so will extend the filing deadline until April 30 for those willing 
to file electronically.
  The legislation we are debating today also adds some commonsense 
reform to IRS penalties. The gentleman from New York (Mr. Houghton) 
talked about these earlier. Many individuals and companies make 
innocent mistakes on their tax returns and are then hit with outrageous 
fines and penalties. This bill allows the IRS to waive unfair penalties 
for taxpayers with good records who have made honest mistakes.
  The bill is good news for low-income taxpayers. It substantially 
increases the funding available for low-income taxpayer clinics. This 
is something that we put in place with the restructuring reform act, 
the thought being that when low-income individuals are involved with 
disputes with the IRS, they need a little help, and these clinics have 
proven to be very successful in helping taxpayers who do not have the 
means to be able to deal with the IRS when disputes arise. I commend 
the chairman for bringing it forward and providing funding for it.
  There are a lot of other important things that this legislation 
accomplishes. We have heard from the other side of the aisle about the 
section 527 provisions. As I see it, these are also sensible changes. 
The changes in section 527 are in keeping with what our original intent 
was in Congress in passing 527 reforms. This relates strictly to those 
organizations and entities that only deal with State and local issues. 
All it says is that we should not have burdensome and duplicative 
filing requirements at the Federal level where there is a State filing. 
This State filing has to be substantially similar, and any time there 
is any Federal involvement in any way, taxpayers have to file at the 
Federal level.
  Madam Speaker, I do not see the loophole here. I think the 
legislation we have on the bill this evening is going to help 
taxpayers. It makes sense. It is the kind of stuff we ought to be doing 
as we approach April 15 to help Americans with their dealings with the 
IRS.
  Mr. RANGEL. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, we are not going to hear too much debate because the 
method selected by the leadership to bring this bill to the floor 
actually restricts debate. I know that the chairman of the Committee on 
Ways and Means says that most of us have restricted our understanding 
of the bill to tax press releases and do not have a clear understanding 
of the legislation.
  I have to admit that the chairman is one of the brightest people that 
we have in the House, if not in the Congress; but the gentleman does 
not have a reputation of supporting campaign finance reform; and the 
Members who think they understand it, like the gentleman from 
Massachusetts (Mr. Meehan) and the gentleman from Connecticut (Mr. 
Shays), and like the editorial writers of all of our major newspapers 
that fought hard for campaign finance reform, while not nearly as 
bright as the chairman, believe it is a flaw and believe it is a 
loophole. So even a little compassion, even if we do not have debate, 
can go a long way.
  Madam Speaker, I yield 3 minutes to the gentlewoman from California 
(Ms. Pelosi), the minority whip.
  Ms. PELOSI. Madam Speaker, I thank the gentleman for yielding me this 
time, and I associate myself with his very eloquent remarks about the 
stealth nature in which this bill is being brought to the floor of the 
House. Stealth is a good word for it. It is about abuses of stealth 
PACs, which this bill would reinstitute.
  Less than 2 weeks after President Bush signed a historic campaign 
finance reform bill into law, the Republican leadership once again 
wants to weaken one of its primary provisions. The New York Times calls 
this bill a travesty, and a travesty it is. Two years ago this House 
voted, under the leadership of our distinguished ranking member, the 
gentleman from New York (Mr. Rangel), and a hard-working member of the 
committee whose leadership was essential to this, the gentleman from 
Texas (Mr. Doggett), to require that political organizations which are 
exempt from taxation under section 527 of the IRS Code to disclose 
their contributions and expenditures. One would think this would have 
been made to order for the Republicans who have argued over time that 
we did not need campaign finance reform, all we needed was disclosure. 
And now this bill foils attempts at disclosure.

                              {time}  2000

  This when it was passed was a major campaign finance reform 
initiative adopted after abuses by the stealth PACs which ran attack 
ads under the tax-exempt section of the code without meaningful 
disclosure.
  This proposal tonight would allow individuals to hide behind groups 
to influence the political system without disclosing who they are or 
where they got their money. The notion that this is simply an attempt 
to get rid of duplicative reporting requirements was shown to be a 
farce when the Republicans would not allow a proposed Democratic 
amendment that would have eliminated duplication but still ensures that 
there would be full disclosure. Instead, this bill opens up new 
loopholes in the 527 reporting requirement and creates potential for 
abuse. It is clearly an attempt by opponents of campaign finance reform 
to begin to erode the excellent provisions of the Shays-Meehan bill.
  I urge my colleagues to reject this travesty and seriously object to 
the manner in which this bill was railroaded to the floor. This body 
spent a good deal of time focusing on campaign finance reform. We had 
to take extraordinary measures to get the bill heard on the floor of 
this Congress with

[[Page 4073]]

a discharge petition. The bill has passed both Houses, it has been 
signed by the President of the United States, and it is being 
undermined by the proposal that the Republicans are putting on the 
floor today.
  I urge our colleagues to vote ``no.''
  Mr. THOMAS. Madam Speaker, it is my pleasure to yield 1\1/2\ minutes 
to the gentleman from Arizona (Mr. Hayworth), a member of the 
committee.
  Mr. HAYWORTH. Madam Speaker, I listened with great interest to my 
friend, the distinguished minority whip from the State of California, 
and listened to her say vote ``no'' on this. Understand that a ``no'' 
vote means a lack of real reform where it counts: to allow people to 
pay penalties to the IRS in a reasonable and rational way; to allow 
those who have inadvertently made a mistake to be recused from the 
wrath of a government charging them inordinately for a mistake they 
made in good faith.
  And speaking of good faith, does it not make sense to have those who 
are involved in the political process report via the 527 situation 
there? Indeed, we see we have form 990 here. We already know that 
Members of Congress file a return form 1120POL which is required to be 
made public.
  And what is interesting, do you want to have bipartisanship? Even the 
general counsel of the Democratic National Committee admits these 
additional forms are unnecessary. Joe Sandler was recently quoted as 
saying, ``It just doesn't make sense to require campaigns and parties 
to file the forms as these organizations already provide detailed 
disclosure of their finances.''
  Full disclosure? Absolutely. Redundant disclosure targeting those who 
are not even involved in the political process? Of course not. That is 
what this bill does. That is why we should support it, in the spirit of 
real reform and rational regulation, not bureaucratic overkill and 
other alternative consequences.
  Mr. THOMAS. Madam Speaker, it is my pleasure to yield 1-3/4 minutes 
to the gentleman from Illinois (Mr. Weller).
  Mr. WELLER. Madam Speaker, I commend the chairman for bringing to the 
floor a bill which received bipartisan support in the Committee on Ways 
and Means, a bill which was supported by two-thirds of the members of 
the committee, both Democrat and Republican. It is taxpayer protection, 
it is IRS accountability, it is IRS reform.
  I would note the tax administration reforms that are included in this 
are good. We are all interested in improving electronic filing and our 
goal is 80 percent by the year 2007. Today, the IRS Commissioner noted 
that the reforms regarding electronic filing today will help them 
achieve that goal by allowing an extra 15 days for those who file 
electronically.
  But because so much of the discussion in this room has focused on the 
527 provisions, I thought I would focus on them as well. Two years ago, 
this House passed 527 reforms, legislation that was well intentioned. 
We gave some surprises for some folks back home, our local officials 
and our State legislators, and some local organizations who discovered 
all of a sudden that the heavy hand of the IRS was targeted at them. 
They were told that even though they are already reporting to the 
county clerk in Grundy County, my home county, and they are already 
reporting to the Illinois State Board of Elections, that they also have 
to fill out a form to the IRS, and if they fail, even if they were 
unaware of this law, that they faced IRS penalty.
  I would note that this legislation eliminates double reporting by 
State and local organizations and also allows the IRS to waive 
penalties for unintentional violations. The opponents of this 
legislation feel that is still okay. But here are the facts. If you are 
run by a Member of Congress or you play a role in Federal campaigns, 
you still have to file with the IRS. If you are solely a State or local 
organization and only get involved in State or local issues, you file 
as you currently do with the State board of elections or the local 
county clerk. Why should someone who only has activity in Illinois file 
with the IRS in Washington? Why should they not be allowed to do what 
they have already done and file with the folks in Springfield?
  Mr. THOMAS. Madam Speaker, it is my pleasure to yield 2 minutes to 
the gentleman from Texas (Mr. Brady).
  Mr. BRADY of Texas. Madam Speaker, one of the tenets in Washington is 
if your argument does not have substance, describe it as a loophole. 
The fact of the matter is Congress hates to admit its mistakes, and 
this debate tonight is proof.
  When Congress targeted unreported Federal PACs, stealth PACs, 2 years 
ago in the bill that I supported, we unintentionally fired into the 
crowd, putting new and burdensome Federal reporting requirements on a 
lot of people we should have never done it to, these people like local 
legislators, school board candidates, school bond issues, local 
sheriffs, who have nothing to do with stealth PACs. It turned out to be 
more like stealth legislation. They had no idea they got caught up as 
innocent victims in this bill and are facing heavy penalties for 
unknowingly violating Federal law.
  Without Congress acting responsibly now to correct our mistake, 
finding the true stealth PACs among the more than 13,000 unnecessary 
reports is akin to searching for a needle in a haystack. You have to 
ask yourself, what national policy interest is served by forcing local 
candidates to report to Washington what they spent to buy the highest 
bidder at the local county fair? We are trying to scrutinize stealth 
PACs, not stealth FAA supporters. We took great care to follow the 
intent of the law and everyone who files today will file tomorrow 
because we have created no loopholes. In fact, we have strengthened 
campaign finance reform by putting a spotlight on true stealth PACs and 
relieving the mistaken, innocent victims from reporting in the future.
  This bill is a win-win because it relieves those non-Federal 
candidates and it is a bright white light on our stealth Federal PACs. 
They will receive that greater scrutiny they deserve; that is, if 
Congress is willing to own up to its mistake.
  Mr. RANGEL. Madam Speaker, I yield 2 minutes to the gentleman from 
Connecticut (Mr. Shays) who has displayed bipartisan leadership on the 
question of campaign finance reform. We all are proud of him as a 
Member.
  Mr. SHAYS. Madam Speaker, I thank the gentleman for yielding me this 
time. One of the problems when a bill has a name after you, it 
personalizes the debate and it disguises really what is at issue. I 
think that the one thing that unites opponents and proponents of 
campaign finance reform is disclosure. We all said we were for it. 
There is duplicative filing that needs to be addressed. But I really 
believe that the 527 provision that is put in this bill, substantially 
similar, defined by the States, is a loophole. It is not the camel's 
head under the tent, something that can be a bigger problem in the 
future. It will be a problem immediately.
  The one thing we know with our campaign finance reform bill is 527s 
are going to proliferate. We know that. Special interests will have a 
greater say. We know that. That is what people on both sides of the 
aisle argued for: Let the Americans have their say. But if you do not 
disclose it, you have got a gigantic problem. And if you allow the 
States to define ``substantially similar,'' you have a loophole. What 
will happen is people will go to the State that has the biggest 
loophole to disguise their expenditures and their contributions.
  I really regret that this is in a good bill. But this provision is 
deadly, I think, to disclosure. Therefore, we have no choice but to 
oppose the bill and hopefully if it is defeated, it will be brought out 
without this provision and then we can get a provision that will work.
  The SPEAKER pro tempore (Mrs. Biggert). The gentleman from California 
(Mr. Thomas) has 4 minutes and the gentleman from New York (Mr. Rangel) 
has 2\1/2\ minutes.
  Mr. RANGEL. I have one speaker left.
  Mr. THOMAS. Madam Speaker, it is my pleasure to yield 2 minutes to 
the gentleman from Louisiana (Mr.

[[Page 4074]]

Vitter) who has been focusing on this issue since the time that he 
arrived in Congress.
  Mr. VITTER. Madam Speaker, I stand to strongly support this bill and 
particularly the 527 provisions. I support it because I am a strong 
advocate of reform and have a strong reform record, both in the 
Congress and in the State legislature.
  The gentleman from Connecticut (Mr. Shays) made some points, but I 
think the logical extension of all of his comments is that we should 
federalize every aspect of disclosure around the country and not have 
any State systems State by State, because a political action committee 
only qualifies for this exemption if they do not spend a penny on 
Federal races. If they have any involvement in any Federal race 
whatsoever, then they are still obligated to file under Federal law. 
This exemption only applies to them if they are active purely on the 
local and State level. Furthermore, even if that is the case, if a 
Federal official is involved in a meaningful way in their activity, 
then the exemption still does not apply for them.
  Duplicative filing is not reform. It is the enemy of reform. Mounds 
and mounds of useless paper is not productive for disclosure. It is the 
enemy of disclosure. Therefore, making this corrective action is very 
much consistent in promoting reform. And duplicative filing, burdensome 
regulations, federalizing all campaign finance disclosure, that is not 
reform, that is moving in the wrong direction. That is why I strongly 
support this corrective legislation, the 527 provisions in this bill.
  Mr. RANGEL. Madam Speaker, I yield the balance of my time to the 
gentleman from Texas (Mr. Doggett), this outstanding member of the 
Committee on Ways and Means, to close our debate. Since he led the 
fight for reform in the tax committee, I think he can most eloquently 
explain our position.
  The SPEAKER pro tempore. The gentleman from Texas (Mr. Doggett) is 
recognized for 2\1/2\ minutes.
  Mr. DOGGETT. Madam Speaker, I thank the gentleman for yielding time.
  This has been a truly historic year for reform, for genuine campaign 
finance reform, for cleaning up our political system. It is so 
troubling that at the very moment that the bipartisan Shays-Meehan, 
McCain-Feingold bill was being approved across the Capitol, that here 
in the House, some of those who have been the most effective in 
delaying that reform from becoming a reality were working to undermine 
it before it could even be signed into law with the approval of this 
legislation.
  When we banned soft money in that bipartisan reform, we knew that the 
soft money would be out searching for a new home. What we did not know 
was that the ``for rent'' sign for that new home would be up before the 
reform law was even signed into being. It just goes to show that you 
can dead-bolt the front door, but reform opponents will always be 
seeking ways to get the money in the back window.
  The 527 language in this bill does not require that each and every 
contribution and expenditure be reported anywhere. That is a loophole. 
The 527 language in this bill terminates all Federal disclosure, even 
when Federal candidates and officeholders are actively participating in 
raising funds. That is a loophole. I believe we need bipartisan 
solutions on this issue, just like every other one that concerns 
campaign finance. That is why the Senate agreed on a bipartisan answer 
to the duplicative filing issue, put it in the President's tax bill, 
and the conference committee, chaired by the gentleman from California 
(Mr. Thomas), removed it last year from that tax bill.

                              {time}  2015

  That is why the language that I offered as an alternative to deal 
with duplicative filing in the committee-tracked language that Mr. 
Lieberman and my Senator, Kay Bailey Hutchison, proposed. They have now 
proposed some further improvement on that language, and I plan to 
introduce the very same language and seek bipartisan support for it 
here in the House, because some State and local officials do have 
legitimate concern, and we ought to eliminate duplicative filing, but 
we ought to do it without creating new gaps in the reform law that was 
just signed by the President.
  This morning, at a public citizen press conference that highlighted 
how really extensive 527s are being used to abuse and funnel millions 
into campaigns, John McCain, Joe Lieberman, and Russ Feingold said this 
proposal will never become law. Let us save them the time, and 
disapprove it this evening.
  Mr. THOMAS. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, it is really amazing when you listen to the 
individuals argue why they do not want this to become law, the argument 
that there is some duplication and that we ought to correct it. The 
gentleman from Texas who just spoke did not spend too much time talking 
about his suggested amendment which was defeated in committee, because 
it will give you an idea of what they mean by duplicate. His amendment 
said that any State or local government would be exempt from reporting 
to the Federal level if the law they had in place was exactly identical 
to the Federal law.
  You heard the gentleman in the well on our side say that the only way 
you are ever going to carry these arguments to their logical conclusion 
is to make everything Federal, require everyone to report to the 
Federal level.
  The gentleman from New York wanted to know why this was included in a 
bill which was labeled ``Taxpayer Protection and IRS Accountability.'' 
I can tell you why: Because the burden placed on these individuals is 
to file Internal Revenue Service papers. They are irrelevant to the 
activities at the Federal level that are carried on in the State and 
local governments.
  The Texas Funeral Directors Association, no Federal involvement, has 
to file. The New York Physical Therapy Association, no Federal 
involvement, has to file. The Baltimore Sitting Judges Committee, no 
Federal involvement, has to file. Why? Because the law says they have 
to file, not because they are involved in any way in Federal elections.
  Let me underscore this point, because our opponents do not seem to 
understand this. If you are involved, if you are dealing directly with 
Federal elections, you are going to be required to continue to report 
at the Federal level. If you are not, you will report to those 
reporting requirements that are in place in the State and local level. 
That is the sum and substance of this adjustment.
  But if you really read Senator McCain and Senator Lieberman's 
statements carefully, they do not even like the current law. What they 
want is more intrusive specific reporting when you are not involved at 
the Federal level. Disclosure only works if people believe it is 
appropriate disclosure.
  The gentleman from Connecticut's example was an example of someone 
violating the law; not that this is a loophole. The activity that he 
discussed, which said it was a loophole, is violating the law. It is 
violating the law under current law, it would violate the law under 
this amendment if it becomes law.
  If you look at the good taxpayer provisions in this measure, 
including removing duplication, this is a bill worth voting for, as 34 
Members of the Committee on Ways and Means did, and I ask your support.
  Madam Speaker, I include for the Record correspondence between the 
Committee on Ways and Means and the Committee on Government Reform 
regarding the jurisdictional matters on H.R. 3991.
         Congress of the United States, House of Representatives, 
           Committee on Government Reform,
                                    Washington, DC, April 9, 2002.
     Hon. J. Dennis Hastert,
     Speaker, House of Representatives, Washington, DC.
       Dear Mr. Speaker: On March 20, 2002, the Committee on Ways 
     and Means ordered reported H.R. 3991, the ``Taxpayer 
     Protection and IRS Accountability Act of 2002,'' as amended. 
     The bill was subsequently referred to the Committee on 
     Government Reform because section 301 of the amended bill 
     addressed matters that are within the jurisdiction of the 
     Committee on Government Reform under House Rule X, clause 
     1(h)(1).

[[Page 4075]]

       After examining the amended bill and consulting with the 
     Committee on Ways and Means, the Committee on Government 
     Reform will not take any action on the bill in order to 
     expedite its consideration on the floor. This does not 
     constitute waiver of the Committee's jurisdiction over H.R. 
     3991. Furthermore, the Committee reserves its authority to 
     seek conferees on any provisions of the bill that fall within 
     the Committee's jurisdiction during any House-Senate 
     conference that may be convened on this legislation.
           Sincerely,
                                                       Dan Burton,
     Chairman.
                                  ____

         Congress of the United States, House of Representatives, 
           Committee on Ways and Means,
                                    Washington, DC, April 9, 2002.
     Hon. Dan Burton,
     Chairman, Committee on Government Reform, Washington, DC.
       Dear Chairman Burton: Thank you for your letter regarding 
     H.R. 3991, the ``Taxpayer Protection and IRS Accountability 
     Act of 2002.''
       As you have noted, the Committee on Ways and Means has 
     ordered favorably reported H.R. 3991, the ``Taxpayer 
     Protection and IRS Accountability Act of 2002.'' I appreciate 
     your agreement to expedite the passage of this legislation 
     despite affecting provisions within the jurisdiction of the 
     Committee on Government Reform. I acknowledge your decision 
     to forego further action on the bill was based on our mutual 
     understanding that it will not prejudice the Committee on 
     Government Reform with respect to the appointment of 
     conferees or its jurisdictional prerogatives on this or 
     similar legislation.
       Finally, I will include in the Congressional Record a copy 
     of our exchange of letters on this matter. Thank you for your 
     assistance and cooperation. We look forward to working with 
     you in the future.
           Best regards,
                                                      Bill Thomas,
                                                         Chairman.

  The SPEAKER pro tempore (Mrs. Biggert). The question is on the motion 
offered by the gentleman from California (Mr. Thomas) that the House 
suspend the rules and pass the bill, H.R. 3991, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. RANGEL. Madam Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Pursuant to clause 8, rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.
  The point of no quorum is considered withdrawn.

                          ____________________