[House Report 107-412]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-412

======================================================================



 
 PROVIDING FOR CONSIDERATION OF THE SENATE AMENDMENT TO THE BILL H.R. 
           586, FAIRNESS FOR FOSTER CARE FAMILIES ACT OF 2001

                                _______
                                

   April 17, 2002.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

Mr. Hastings of Washington, from the Committee on Rules, submitted the 
                               following

                              R E P O R T

                       [To accompany H. Res. 390]

    The Committee on Rules, having had under consideration 
House Resolution 390, by a record vote of 6 to 3, report the 
same to the House with the recommendation that the resolution 
be adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration of a motion 
offered by the chairman of the Committee on Ways and Means or 
his designee to take from the Speaker's table of bill (H.R. 
586) to amend the Internal Revenue Code of 1986 to provide that 
the exclusion from gross income for foster care payments shall 
also apply to payments by qualified placement agencies, and for 
other purposes, with the Senate amendment thereto, and concur 
in the Senate amendment with the amendment printed in this 
report.
    The rule waives all points of order against consideration 
of the motion. The rule provides that the Senate amendment and 
the motion shall be considered as read. The rule provides one 
hour of debate in the House equally divided and controlled by 
the chairman and ranking minority member of the Committee on 
Ways and Means. Finally, the rule provides that the previous 
question shall be considered as ordered on the motion to final 
adoption without intervening motion or demand for division of 
the question.
    The waiver of all points of order applies to the motion and 
therefore applies to the amendment printed in this report as 
part of the motion. The waiver of all points of order include a 
waiver of clause 7 of rule XVI (prohibiting nongermane 
amendments).

                            COMMITTEE VOTES

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee Record Vote No. 74

    Date: April 17, 2002.
    Measure: H.R. 586.
    Motion by: Mr. Frost.
    Summary of motion: To make in order the amendment by 
Representative Phelps to add a new section at the end of the 
resolution directing the Clerk of the House to enroll the 
section repealing the sunset of the tax cut separate from the 
rest of the bill and deliver it to the Senate upon 
certification by the Chairman of the Budget Committee that 
enactment of the legislation would not rely on the use of 
Social Security surplus funds. The sections of the bill related 
to Taxpayer's Bill of Rights and other sections of the bill 
would be enrolled and sent to the Senate immediately.
    Results: Defeated 3 to 6.
    Vote by Members: Linder--Nay; Diaz-Balart--Nay; Myrick--
Nay; Sessions--Nay; Reynolds--Nay; Frost--Yea; Hall--Yea; 
Slaughter--Yea; Dreier--Nay.

Rules Committee Record Vote No. 75

    Date: April 17, 2002.
    Measure: H.R. 586.
    Motion by: Mr. Linder.
    Summary of motion: To report the resolution.
    Results: Agreed to 6 to 3.
    Vote by Members: Linder--Yea; Diaz-Balart--Yea; Myrick--
Yea; Sessions--Yea; Reynolds--Yea; Frost--Nay; Hall--Nay; 
Slaughter--Nay; Dreier--Yea.

              SUMMARY OF AMENDMENT INCLUDED IN THE MOTION

    Thomas: The amendment includes the following provisions:
           repeal of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001 Title IX, which ``sunsets'' 
        tax relief provisions after 2010;
           provision holding Social Security and 
        Medicare trust funds harmless;
           taxpayer protection provisions other than 
        provisions dealing with 527 organizations which were 
        included in H.R. 3991; and
           a Senate amendment to H.R. 586 that advances 
        the effective date of the Economic Growth and Tax 
        Relief Reconciliation Act of 2001 adoption credit 
        expansion provision by one year.

                TEXT OF AMENDMENT INCLUDED IN THE MOTION

  In lieu of the matter proposed to be inserted by the Senate, 
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 ``Tax Relief 
Guarantee 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--TAX REDUCTIONS MADE PERMANENT

Sec. 101. Tax reductions made permanent.
Sec. 102. Protection of social security and medicare.

          TITLE II--TAXPAYER PROTECTION AND IRS ACCOUNTABILITY

Sec. 201. Short title.

                   Subtitle A--Penalties and Interest

Sec. 211. Failure to pay estimated tax penalty converted to interest 
          charge on accumulated unpaid balance.
Sec. 212. Exclusion from gross income for interest on overpayments of 
          income tax by individuals.
Sec. 213. Abatement of interest.
Sec. 214. Deposits made to suspend running of interest on potential 
          underpayments.
Sec. 215. Expansion of interest netting for individuals.
Sec. 216. Waiver of certain penalties for first-time unintentional minor 
          errors.
Sec. 217. Frivolous tax submissions.
Sec. 218. Clarification of application of Federal tax deposit penalty.

              Subtitle B--Fairness of Collection Procedures

Sec. 221. Partial payment of tax liability in installment agreements.
Sec. 222. Extension of time for return of property.
Sec. 223. Individuals held harmless on wrongful levy, etc. on individual 
          retirement plan.
Sec. 224. Seven-day threshold on tolling of statute of limitations 
          during tax review.
Sec. 225. Study of liens and levies.

              Subtitle C--Efficiency of Tax Administration

Sec. 231. Revisions relating to termination of employment of Internal 
          Revenue Service employees for misconduct.
Sec. 232. Confirmation of authority of Tax Court to apply doctrine of 
          equitable recoupment.
Sec. 233. Jurisdiction of Tax Court over collection due process cases.
Sec. 234. Office of Chief Counsel review of offers in compromise.
Sec. 235. 15-day delay in due date for electronically filed individual 
          income tax returns.

               Subtitle D--Confidentiality and Disclosure

Sec. 241. Collection activities with respect to joint return disclosable 
          to either spouse based on oral request.
Sec. 242. Taxpayer representatives not subject to examination on sole 
          basis of representation of taxpayers.
Sec. 243. Disclosure in judicial or administrative tax proceedings of 
          return and return information of persons who are not party to 
          such proceedings.
Sec. 244. Prohibition of disclosure of taxpayer identification 
          information with respect to disclosure of accepted offers-in-
          compromise.
Sec. 245. Compliance by contractors with confidentiality safeguards.
Sec. 246. Higher standards for requests for and consents to disclosure.
Sec. 247. Notice to taxpayer concerning administrative determination of 
          browsing; annual report.
Sec. 248. Expanded disclosure in emergency circumstances.
Sec. 249. Disclosure of taxpayer identity for tax refund purposes.

                        Subtitle E--Miscellaneous

Sec. 251. Clarification of definition of church tax inquiry.
Sec. 252. Expansion of declaratory judgment remedy to tax-exempt 
          organizations.
Sec. 253. Employee misconduct report to include summary of complaints by 
          category.
Sec. 254. Annual report on awards of costs and certain fees in 
          administrative and court proceedings.
Sec. 255. Annual report on abatement of penalties.
Sec. 256. Better means of communicating with taxpayers.
Sec. 257. Explanation of statute of limitations and consequences of 
          failure to file.
Sec. 258. Amendment to Treasury auction reforms.
Sec. 259. Enrolled agents.
Sec. 260. Financial management service fees.
Sec. 261. Capital gain treatment under section 631(b) to apply to 
          outright sales by land owner.
Sec. 262. Acceleration of effective date for expansion of adoption tax 
          credit and adoption assistance programs.

                 Subtitle F--Low-Income Taxpayer Clinics

Sec. 271. Low-income taxpayer clinics.

                 TITLE I--TAX REDUCTIONS MADE PERMANENT

SEC. 101. TAX REDUCTIONS MADE PERMANENT.

  Title IX of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 is hereby repealed.

SEC. 102. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

  The amounts transferred to any trust fund under the Social 
Security Act shall be determined as if the Economic Growth and 
Tax Relief Reconciliation Act of 2001 had not been enacted.

          TITLE II--TAXPAYER PROTECTION AND IRS ACCOUNTABILITY

SEC. 201. SHORT TITLE.

  This title may be cited as the ``Taxpayer Protection and IRS 
Accountability Act of 2002''.

                   Subtitle A--Penalties and Interest

SEC. 211. 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:

  ``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. 212. 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. 213. 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. 214. 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. 215. 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. 216. 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. 217. 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 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 wouldpromote 
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. 218. 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.

             Subtitle B--Fairness of Collection Procedures

SEC. 221. 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 collectionof 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. 222. 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. 223. INDIVIDUALS HELD HARMLESS ON WRONGFUL LEVY, ETC. ON 
                    INDIVIDUAL RETIREMENT PLAN.

  (a) In General.--Section 6343 (relating to authority to 
release levy and return property) is amended by adding at the 
end the following new subsection:
  ``(f) Individuals Held Harmless on Wrongful Levy, Etc. on 
Individual Retirement Plan.--
          ``(1) In general.--If the Secretary determines that 
        an individual retirement plan has been levied upon in a 
        case to which subsection (b) or (d)(2)(A) applies, an 
        amount equal to the sum of--
                  ``(A) the amount of money returned by the 
                Secretary on account of such levy, and
                  ``(B) interest paid under subsection (c) on 
                such amount of money,
        may be deposited into an individual retirement plan 
        (other than an endowment contract) to which a rollover 
        from the plan levied upon is permitted.
          ``(2) Treatment as rollover.--The distribution on 
        account of the levy and any deposit under paragraph (1) 
        with respect to such distribution shall be treated for 
        purposes of this title as if such distribution and 
        deposit were part of a rollover described in section 
        408(d)(3)(A)(i); except that--
                  ``(A) interest paid under subsection (c) 
                shall be treated as part of such distribution 
                and as not includible in gross income,
                  ``(B) the 60-day requirement in such section 
                shall be treated as met if the deposit is made 
                not later than the 60th day after the day on 
                which the individual receives an amount under 
                paragraph (1) from the Secretary, and
                  ``(C) such deposit shall not be taken into 
                account under section 408(d)(3)(B).
          ``(3) Refund, etc., of income tax on levy.--If any 
        amount is includible in gross income for a taxable year 
        by reason of a levy referred to in paragraph (1) and 
        any portion of such amount is treated as a rollover 
        under paragraph (2), any tax imposed by chapter 1 on 
        such portion shall not be assessed, and if assessed 
        shall be abated, and if collected shall be credited or 
        refunded as an overpayment made on the due date for 
        filing the return of tax for such taxable year.
          ``(4) Interest.--Notwithstanding subsection (d), 
        interest shall be allowed under subsection (c) in a 
        case in which the Secretary makes a determination 
        described in subsection (d)(2)(A) with respect to a 
        levy upon an individual retirement plan.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to amounts paid under subsections (b), (c), and (d)(2)(A) 
of section 6343 of the Internal Revenue Code of 1986 after 
December 31, 2002.

SEC. 224. 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. 225. 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.

              Subtitle C--Efficiency of Tax Administration

SEC. 231. 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. 232. 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. 233. 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. 234. 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. 235. 15-DAY DELAY IN DUE DATE FOR ELECTRONICALLY FILED INDIVIDUAL 
                    INCOME TAX RETURNS.

  (a) In General.--Section 6072 (relating to time for filing 
income tax returns) is amended by adding at the end the 
following new subsection:
  ``(f) Electronically Filed Returns of Individuals.--
          ``(1) In general.--Returns of an individual under 
        section 6012 or 6013 (other than an individual to whom 
        subsection (c) applies) which are filed 
        electronically--
                  ``(A) in the case of returns filed on the 
                basis of a calendar year, shall be filed on or 
                before the 30th day of April following the 
                close of the calendar year, and
                  ``(B) in the case of returns filed on the 
                basis of a fiscal year, shall be filed on or 
                before the last day of the 4th month following 
                the close of the fiscal year.
          ``(2) Electronic filing.--Paragraph (1) shall not 
        apply to any return unless--
                  ``(A) such return is accepted by the 
                Secretary, and
                  ``(B) the balance due (if any) shown on such 
                return is paid electronically in a manner 
                prescribed by the Secretary.
          ``(3) Special rules.--
                  ``(A) Estimated tax.--If--
                          ``(i) paragraph (1) applies to an 
                        individual for any taxable year, and
                          ``(ii) there is an overpayment of tax 
                        shown on the return for such year which 
                        the individual allows against the 
                        individual's obligation under section 
                        6641,
                then, with respect to the amount so allowed, 
                any reference in section 6641 to the April 15 
                following such taxable year shall be treated as 
                a reference to April 30.
                  ``(B) References to due date.--Paragraph (1) 
                shall apply solely for purposes of determining 
                the due date for the individual's obligation to 
                file and pay tax and, except as otherwise 
                provided by the Secretary, shall be treated as 
                an extension of the due date for any other 
                purpose under this title.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2001.

               Subtitle D--Confidentiality and Disclosure

SEC. 241. 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. 242. 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. 243. 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. 244. 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. 245. 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. 246. 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
                  ``(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. 247. 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 245, 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. 248. 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. 249. 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.

                       Subtitle E--Miscellaneous

SEC. 251. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

  Subsection (i) of section 7611 (relating to section not to 
apply to criminal investigations, etc.) is amended by striking 
``or'' at the end of paragraph (4), by striking the period at 
the end of paragraph (5) and inserting ``, or'', and by 
inserting after paragraph (5) the following:
          ``(6) information provided by the Secretary related 
        to the standards for exemption from tax under this 
        title and the requirements under this title relating to 
        unrelated business taxable income.''.

SEC. 252. 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. 253. 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. 254. 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. 255. ANNUAL REPORT ON ABATEMENT OF PENALTIES.

  Not later than 6 months after the close of each Federal 
fiscal year after fiscal year 2001, the TreasuryInspector 
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. 256. 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. 257. 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. 258. 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. 259. 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. 260. 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 
ofamounts 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. 261. 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) 
(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) 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.

SEC. 262. ACCELERATION OF EFFECTIVE DATE FOR EXPANSION OF ADOPTION TAX 
                    CREDIT AND ADOPTION ASSISTANCE PROGRAMS.

  (a) In General.--Subsection (g) of section 202 of the 
Economic Growth and Tax Relief Reconciliation Act of 2001 is 
amended to read as follows:
  ``(g) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 
2001.''.
  (b) Technical Corrections.--Paragraph (3) of section 411(c) 
of the Job Creation and Worker Assistance Act of 2002 is 
amended to read as follows:
          ``(3) Effective date.--The amendments made by this 
        subsection shall apply to taxable years beginning after 
        December 31, 2001.''.

                Subtitle F--Low-Income Taxpayer Clinics

SEC. 271. 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.''.
    Amend the title so as to read: ``A bill to amend the 
Internal Revenue Code of 1986 to make permanent the tax 
reductions enacted by the Economic Growth and Tax Relief 
Reconciliation Act of 2001 and to protect taxpayers and ensure 
accountability of the Internal Revenue Service.''

                                  
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