[House Report 110-84]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     110-84

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



 
                    TAXPAYER PROTECTION ACT OF 2007

                                _______
                                

 April 16, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Rangel, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1677]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1677) to amend the Internal Revenue Code of 1986 to 
enhance taxpayer protections and outreach, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

  The amendment is as follows:
  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 
Act of 2007''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
  (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Family business tax simplification.
Sec. 3. Taxpayer notification of suspected identity theft.
Sec. 4. Extension of time for return of property for wrongful levy.
Sec. 5. Individuals held harmless on wrongful levy, etc., on individual 
retirement plan.
Sec. 6. Clarification of IRS unclaimed refund authority.
Sec. 7. Prohibition on IRS debt indicators for predatory refund 
anticipation loans.
Sec. 8. Prohibition on misuse of Department of the Treasury names and 
symbols.
Sec. 9. EITC outreach.
Sec. 10. Modification of rules pertaining to FIRPTA nonforeign 
affidavits.
Sec. 11. Disclosure of prisoner return information to Federal Bureau of 
Prisons.

SEC. 2. FAMILY BUSINESS TAX SIMPLIFICATION.

  (a) In General.--Section 761 (defining terms for purposes of 
partnerships) is amended by redesignating subsection (f) as subsection 
(g) and by inserting after subsection (e) the following new subsection:
  ``(f) Qualified Joint Venture.--
          ``(1) In general.--In the case of a qualified joint venture 
        conducted by a husband and wife who file a joint return for the 
        taxable year, for purposes of this title--
                  ``(A) such joint venture shall not be treated as a 
                partnership,
                  ``(B) all items of income, gain, loss, deduction, and 
                credit shall be divided between the spouses in 
                accordance with their respective interests in the 
                venture, and
                  ``(C) each spouse shall take into account such 
                spouse's respective share of such items as if they were 
                attributable to a trade or business conducted by such 
                spouse as a sole proprietor.
          ``(2) Qualified joint venture.--For purposes of paragraph 
        (1), the term `qualified joint venture' means any joint venture 
        involving the conduct of a trade or business if--
                  ``(A) the only members of such joint venture are a 
                husband and wife,
                  ``(B) both spouses materially participate (within the 
                meaning of section 469(h) without regard to paragraph 
                (5) thereof) in such trade or business, and
                  ``(C) both spouses elect the application of this 
                subsection.''.
  (b) Net Earnings From Self-Employment.--
          (1) Subsection (a) of section 1402 (defining net earnings 
        from self-employment) is amended by striking ``, and'' at the 
        end of paragraph (15) and inserting a semicolon, by striking 
        the period at the end of paragraph (16) and inserting ``; 
        and'', and by inserting after paragraph (16) the following new 
        paragraph:
          ``(17) notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint venture shall be taken into account as provided 
        in section 761(f) in determining net earnings from self-
        employment of such spouse.''.
          (2) Subsection (a) of section 211 of the Social Security Act 
        (defining net earnings from self-employment) is amended by 
        striking ``and'' at the end of paragraph (14), by striking the 
        period at the end of paragraph (15) and inserting ``; and'', 
        and by inserting after paragraph (15) the following new 
        paragraph:
          ``(16) Notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint venture shall be taken into account as provided 
        in section 761(f) of the Internal Revenue Code of 1986 in 
        determining net earnings from self-employment of such 
        spouse.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2006.

SEC. 3. TAXPAYER NOTIFICATION OF SUSPECTED IDENTITY THEFT.

  (a) In General.--Chapter 77 (relating to miscellaneous provisions) is 
amended by adding at the end the following new section:

``SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.

  ``If, in the course of an investigation under section 7206 (relating 
to fraud and false statements) or 7207 (relating to fraudulent returns, 
statements, or other documents), the Secretary determines that there 
was or may have been an unauthorized use of the identity of the 
taxpayer or dependents, the Secretary shall--
          ``(1) as soon as practicable and without jeopardizing such 
        investigation, notify the taxpayer of such determination, and
          ``(2) if any person is criminally charged by indictment or 
        information under either of such sections, notify such taxpayer 
        as soon as practicable of such charge.''.
  (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7529. Notification of suspected identity theft.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to determinations made after the date of the enactment of this Act.

SEC. 4. EXTENSION OF TIME FOR RETURN OF PROPERTY FOR WRONGFUL LEVY.

  (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. 5. 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 such individual 
                retirement plan or any other individual retirement plan 
                (other than an endowment contract) to which a rollover 
                from the plan levied upon is permitted.
          ``(2) Treatment as rollover.--If amounts are deposited into 
        an individual retirement plan under paragraph (1) not later 
        than the 60th day after the date on which the individual 
        receives the amounts under paragraph (1)--
                  ``(A) such deposit shall be treated as a rollover 
                described in section 408(d)(3)(A)(i),
                  ``(B) to the extent the deposit includes interest 
                paid under subsection (c), such interest shall not be 
                includible in gross income, and
                  ``(C) such deposit shall not be taken into account 
                under section 408(d)(3)(B). For purposes of 
                subparagraph (B), an amount shall be treated as 
                interest only to the extent that the amount deposited 
                exceeds the amount of the levy.
          ``(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 the date of the 
enactment of this Act.

SEC. 6. CLARIFICATION OF IRS UNCLAIMED REFUND AUTHORITY.

  Section 6103(m)(1) (relating to tax refunds) is amended by inserting 
``, and through any other means of mass communication,'' after 
``media''.

SEC. 7. PROHIBITION ON IRS DEBT INDICATORS FOR PREDATORY REFUND 
                    ANTICIPATION LOANS.

  (a) In General.--Subsection (f) of section 6011 (relating to 
promotion of electronic filing) is amended by adding at the end the 
following new paragraph:
          ``(3) Prohibition on irs debt indicators for predatory refund 
        anticipation loans.--
                  ``(A) In general.--In carrying out any program under 
                this subsection, the Secretary shall not provide a debt 
                indicator to any person with respect to any refund 
                anticipation loan if the Secretary determines that the 
                business practices of such person involve refund 
                anticipation loans and related charges and fees that 
                are predatory.
                  ``(B) Refund anticipation loan.--For purposes of this 
                paragraph, the term `refund anticipation loan' means a 
                loan of money or of any other thing of value to a 
                taxpayer secured by the taxpayer's anticipated receipt 
                of a Federal tax refund.
                  ``(C) IRS debt indicator.--For purposes of this 
                paragraph, the term `debt indicator' means a 
                notification provided through a tax return's 
                acknowledgment file that a refund will be offset to 
                repay debts for delinquent Federal or State taxes, 
                student loans, child support, or other Federal agency 
                debt.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to determinations after the date of the enactment of this Act.

SEC. 8. PROHIBITION ON MISUSE OF DEPARTMENT OF THE TREASURY NAMES AND 
                    SYMBOLS.

  (a) In General.--Subsection (a) of section 333 of title 31, United 
States Code, is amended by inserting ``internet domain address,'' after 
``solicitation,'' both places it appears.
  (b) Penalty for Misuse by Electronic Means.--Subsections (c)(2) and 
(d)(1) of section 333 of such Code are each amended by inserting ``or 
any other mass communications by electronic means,'' after 
``telecast,''.
  (c) Effective Date.--The amendments made by this section shall apply 
with respect to violations occurring after the date of the enactment of 
this Act.

SEC. 9. EITC OUTREACH.

  (a) In General.--Section 32 (relating to earned income) is amended by 
adding at the end the following new subsection:
  ``(n) Notification of Potential Eligibility for Credit and Refund.--
          ``(1) In general.--To the extent possible and on an annual 
        basis, the Secretary shall provide to each taxpayer who--
                  ``(A) for any preceding taxable year for which credit 
                or refund is not precluded by section 6511, and
                  ``(B) did not claim the credit under subsection (a) 
                but may be allowed such credit for any such taxable 
                year based on return or return information (as defined 
                in section 6103(b)) available to the Secretary, notice 
                that such taxpayer may be eligible to claim such credit 
                and a refund for such taxable year.
          ``(2) Notice.--Notice provided under paragraph (1) shall be 
        in writing and sent to the last known address of the 
        taxpayer.''.
  (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 10. MODIFICATION OF RULES PERTAINING TO FIRPTA NONFOREIGN 
                    AFFIDAVITS.

  (a) In General.--Subsection (b) of section 1445 (relating to 
exemptions) is amended by adding at the end the following:
          ``(9) Alternative procedure for furnishing nonforeign 
        affidavit.--For purposes of paragraphs (2) and (7)--
                  ``(A) In general.--Paragraph (2) shall be treated as 
                applying to a transaction if, in connection with a 
                disposition of a United States real property interest--
                          ``(i) the affidavit specified in paragraph 
                        (2) is furnished to a qualified substitute, and
                          ``(ii) the qualified substitute furnishes a 
                        statement to the transferee stating, under 
                        penalty of perjury, that the qualified 
                        substitute has such affidavit in his 
                        possession.
                  ``(B) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary or appropriate to 
                carry out this paragraph.''.
  (b) Qualified Substitute.--Subsection (f) of section 1445 (relating 
to definitions) is amended by adding at the end the following new 
paragraph:
          ``(6) Qualified substitute.--The term `qualified substitute' 
        means, with respect to a disposition of a United States real 
        property interest--
                  ``(A) the person (including any attorney or title 
                company) responsible for closing the transaction, other 
                than the transferor's agent, and
                  ``(B) the transferee's agent.''.
  (c) Exemption Not To Apply if Knowledge or Notice That Affidavit or 
Statement Is False.--
          (1) In general.--Paragraph (7) of section 1445(b) (relating 
        to special rules for paragraphs (2) and (3)) is amended to read 
        as follows:
          ``(7) Special rules for paragraphs (2), (3), and (9).--
        Paragraph (2), (3), or (9) (as the case may be) shall not apply 
        to any disposition--
                  ``(A) if--
                          ``(i) the transferee or qualified substitute 
                        has actual knowledge that the affidavit 
                        referred to in such paragraph, or the statement 
                        referred to in paragraph (9)(A)(ii), is false, 
                        or
                          ``(ii) the transferee or qualified substitute 
                        receives a notice (as described in subsection 
                        (d)) from a transferor's agent, transferee's 
                        agent, or qualified substitute that such 
                        affidavit or statement is false, or
                  ``(B) if the Secretary by regulations requires the 
                transferee or qualified substitute to furnish a copy of 
                such affidavit or statement to the Secretary and the 
                transferee or qualified substitute fails to furnish a 
                copy of such affidavit or statement to the Secretary at 
                such time and in such manner as required by such 
                regulations.''.
          (2) Liability.--
                  (A) Notice.--Paragraph (1) of section 1445(d) 
                (relating to notice of false affidavit; foreign 
                corporations) is amended to read as follows:
          ``(1) Notice of false affidavit; foreign corporations.--If--
                  ``(A) the transferor furnishes the transferee or 
                qualified substitute an affidavit described in 
                paragraph (2) of subsection (b) or a domestic 
                corporation furnishes the transferee an affidavit 
                described in paragraph (3) of subsection (b), and
                  ``(B) in the case of--
                          ``(i) any transferor's agent--
                                  ``(I) such agent has actual knowledge 
                                that such affidavit is false, or
                                  ``(II) in the case of an affidavit 
                                described in subsection (b)(2) 
                                furnished by a corporation, such 
                                corporation is a foreign corporation, 
                                or
                          ``(ii) any transferee's agent or qualified 
                        substitute, such agent or substitute has actual 
                        knowledge that such affidavit is false, such 
                        agent or qualified substitute shall so notify 
                        the transferee at such time and in such manner 
                        as the Secretary shall require by 
                        regulations.''.
                  (B) Failure to furnish notice.--Paragraph (2) of 
                section 1445(d) (relating to failure to furnish notice) 
                is amended to read as follows:
          ``(2) Failure to furnish notice.--
                  ``(A) In general.--If any transferor's agent, 
                transferee's agent, or qualified substitute is required 
                by paragraph (1) to furnish notice, but fails to 
                furnish such notice at such time or times and in such 
                manner as may be required by regulations, such agent or 
                substitute shall have the same duty to deduct and 
                withhold that the transferee would have had if such 
                agent or substitute had complied with paragraph (1).
                  ``(B) Liability limited to amount of compensation.--
                An agent's or substitute's liability under subparagraph 
                (A) shall be limited to the amount of compensation the 
                agent or substitute derives from the transaction.''.
                  (C) Conforming amendment.--The heading for section 
                1445(d) is amended by striking ``or Transferee's 
                Agents'' and inserting ``, Transferee's Agents, or 
                Qualified Substitutes''.
  (d) Effective Date.--The amendments made by this section shall apply 
to dispositions of United States real property interests after the date 
of the enactment of this Act.

SEC. 11. DISCLOSURE OF PRISONER RETURN INFORMATION TO FEDERAL BUREAU OF 
                    PRISONS.

  (a) In General.--Subsection (k) of section 6103 (relating to 
disclosure of certain return and return information for tax 
administration purposes) is amended by adding at the end the following 
new paragraph:
          ``(10) Disclosure of certain return information of prisoners 
        to federal bureau of prisons.--
                  ``(A) In general.--Under such procedures as the 
                Secretary may prescribe, the Secretary may disclose to 
                the head of the Federal Bureau of Prisons any return 
                information with respect to individuals incarcerated in 
                Federal prison whom the Secretary has determined may 
                have filed or facilitated the filing of a false return 
                to the extent that the Secretary determines that such 
                disclosure is necessary to permit effective Federal tax 
                administration.
                  ``(B) Restriction on redisclosure.--Notwithstanding 
                subsection (n), the head of the Federal Bureau of 
                Prisons may not disclose any information obtained under 
                subparagraph (A) to any person other than an officer or 
                employee of such Bureau.
                  ``(C) Restriction on use of disclosed information.--
                Return information received under this paragraph shall 
                be used only for purposes of and to the extent 
                necessary in taking administrative action to prevent 
                the filing of false and fraudulent returns, including 
                administrative actions to address possible violations 
                of administrative rules and regulations of the prison 
                facility.
                  ``(D) Annual report.--In each of the calendar years 
                2007 through 2010, the Secretary shall submit to 
                Congress and make publicly available a report on the 
                filing of false and fraudulent returns by individuals 
                incarcerated in Federal and State prisons. Such report 
                shall include statistics on the number of false and 
                fraudulent returns associated with each Federal and 
                State prison.
                  ``(E) Termination.--No disclosure may be made under 
                this paragraph after December 31, 2010.''.
  (b) Recordkeeping.--Paragraph (4) of section 6103(p) is amended by 
striking ``(k)(8)'' both places it appears and inserting ``(k)(8) or 
(10)''.
  (c) Evaluation by Treasury Inspector General for Tax 
Administration.--Paragraph (3) of section 7803(d) is amended by 
striking ``and'' at the end of subparagraph (A), by striking the period 
at the end of subparagraph (B) and inserting ``; and'', and by adding 
at the end the following new subparagraph:
                  ``(C) not later than December 31, 2009, submit a 
                written report to Congress on the implementation of 
                section 6103(k)(10).''.
  (d) Effective Date.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to disclosures made 
        after December 31, 2007.
          (2) Annual report.--Section 6103(k)(10)(D) of the Internal 
        Revenue Code of 1986 (relating to annual reports), as added by 
        this section, shall apply to reports submitted after the date 
        of the enactment of this Act.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary


                                PURPOSE

    The bill, H.R. 1677, as amended, includes provisions to 
enhance taxpayer protections and outreach.

                                SUMMARY

    Effective for taxable years beginning after December 31, 
2006, the bill provides for certain family business 
simplification. Effective for determinations made after the 
date of enactment, if the IRS determines in the course of an 
investigation relating to either (1) fraud or false statements, 
or (2) fraudulent returns, statements, or other documents, that 
there was or may have been unauthorized use of a taxpayer's 
identity, the bill provides that the IRS notify the taxpayer of 
such determination and any criminal charges brought against any 
person in connection with such unauthorized use. Effective for 
levies made after the date of enactment and levies made on or 
before the date of enactment, provided the applicable nine-
month period has not expired as of the date of enactment, the 
bill extends from nine months to two years the time limits for 
returning money and the monetary proceeds from the sale of 
property that has been wrongfully levied upon, and for the 
period for bringing a civil action for wrongful levy, 
respectively. Effective for levied amounts and interest thereon 
returned to individuals after the date of enactment, the bill 
holds individuals harmless on the improper levy on an 
individual retirement plan. Effective on the date of enactment, 
the bill allows the IRS to use any means of mass communication, 
including the internet, to notify taxpayers of undelivered 
refunds. Effective with respect to determinations made after 
the date of enactment, the bill prohibits the IRS from 
providing a Debt Indicator to any person with respect to a 
refund anticipation loan determined by the Secretary to be 
predatory. The bill prohibits the misuse of Department of the 
Treasury names and symbols. Effective after the date of 
enactment, the bill expands IRS notice requirements relating to 
EIC outreach. Effective after the date of enactment, the bill 
also permits disclosure to officers and employees of the 
Federal Bureau of Prisons of return information with respect to 
prisoners whom the Secretary has determined may have filed or 
facilitated the filing of false or fraudulent tax returns. 
Finally, the bill provides that, under the Foreign Investment 
in Real Property Tax Act, sellers of certain property have the 
option of providing a nonforeign affidavit to an intermediary, 
who in most cases will be the person responsible for closing 
the transaction.

                 B. Background and Need for Legislation

    Oversight of IRS' administration of the tax laws often 
requires legislative action to provide taxpayer protections and 
facilitate IRS operations. The IRS, in administering the 
Federal tax laws, needs additional tools to assist and reach 
out to taxpayers. The internet also provides an opportunity for 
unscrupulous individuals to attempt to use the tax system to 
further criminal activities. The bill provides additional 
taxpayer protections and bolsters the outreach efforts of the 
IRS.

                         C. Legislative History


Background

    H.R. 1677 was introduced in the House of Representatives on 
March 26, 2007, and was referred to the Committee on Ways and 
Means.

Subcommittee action

    The Subcommittee on Oversight of the Committee on Ways and 
Means conducted a hearing on Earned Income Tax Credit outreach 
on February 13, 2007, and took testimony from invited 
witnesses. The Subcommittee also held a hearing on March 20, 
2007, on IRS operations, tax gap, and the filing season.

Committee action

    The Committee on Ways and Means marked up the bill on March 
28, 2007, and ordered the bill, as amended, favorably reported.

                      II. EXPLANATION OF THE BILL


A. Family Business Tax Simplification (Sec. 2 of the Bill and Sec. 761 
                              of the Code)


                              PRESENT LAW

    Under present law, a partnership is defined to include a 
syndicate, group, pool, joint venture, or other unincorporated 
organization through or by means of which any business, 
financial operation or venture is carried on, and which is not 
a trust or estate or a corporation (sec. 7701(a)(2)).\1\ A 
partnership is treated as a pass-through entity, and income 
earned by the partnership, whether distributed or not, is taxed 
to the partners. The income of a partnership and its partners 
is determined under subchapter K of the Code. An election not 
to be subject to the rules of subchapter K is provided for 
certain partnerships that meet specified criteria (i.e., the 
partnership is for investment purposes only, is for the joint 
production, extraction or use of property but not for selling 
services or property produced or extracted, or is used by 
securities dealers for short periods to underwrite, sell or 
distribute securities). Otherwise, the rules of subchapter K 
apply to a venture that is treated as a partnership for Federal 
tax purposes.
---------------------------------------------------------------------------
    \1\ Unless otherwise stated, all section references are to the 
Internal Revenue Code of 1986, as amended (the ``Code'').
---------------------------------------------------------------------------
    In the case of an individual with self-employment income, 
the income subject to self-employment tax is the net earnings 
from self-employment (sec. 1402(a)). Net earnings from self-
employment is the gross income derived by an individual from 
any trade or business carried on by the individual, less the 
deductions attributable to the trade or business that are 
allowed under the self-employment tax rules. If the individual 
is a partner in a partnership, the net earnings from self-
employment generally include his or her distributive share 
(whether or not distributed) of income or loss from any trade 
or business carried on by the partnership.

                           REASONS FOR CHANGE

    The Committee is concerned that certain business ventures 
whose sole members are a husband and wife filing a joint return 
may be subject to unnecessary complexity under present law.\2\ 
In the situation in which the spouses share all items of 
income, gain, loss, deduction and credit from the venture, the 
venture should not be required to file a partnership return if 
each of the two spouses' income can be accurately recorded on 
Schedule C (or F, in the case of a farm) filed with the joint 
return. The reported income would be the same on the joint 
return, whether or not a partnership return is filed. Further, 
the Committee is concerned that if only one spouse is treated 
as having net earnings from self-employment from the venture, 
when in fact both spouses materially participate in it, then 
both spouses (not just one) should be treated as having net 
earnings from self-employment from the venture in accordance 
with their respective interests. In this situation, both 
spouses, not just one, should receive credit for the 
appropriate net earnings from self-employment for purposes of 
Social Security benefits.
---------------------------------------------------------------------------
    \2\ See National Taxpayer Advocate, FY 2002 Annual Report to 
Congress, ``Married Couples as Business Co-owners,'' (Rev. 12-2002), at 
172, recommending a similar change for this reason as well as other 
reasons.
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

    The provision generally permits a qualified joint venture 
whose only members are a husband and wife filing a joint return 
not to be treated as a partnership. A qualified joint venture 
is a joint venture involving the conduct of a trade or 
business, if (1) the only members of the joint venture are a 
husband and wife, (2) both spouses materially participate in 
the trade or business, and (3) both spouses elect to have the 
provision apply.
    Under the provision, a qualified joint venture conducted by 
a husband and wife who file a joint return is not treated as a 
partnership for Federal income tax purposes. All items of 
income, gain, loss, deduction and credit are divided between 
the spouses in accordance with their respective interests in 
the venture. Each spouse takes into account his or her 
respective share of these items as a sole proprietor. Thus, it 
is anticipated that each spouse would account for his or her 
respective share on the appropriate form, such as Schedule C. 
The provision is not intended to change the determination under 
present law of whether an entity is a partnership for Federal 
income tax purposes (without regard to the election provided by 
the provision).
    For purposes of determining net earnings from self-
employment, each spouse's share of income or loss from a 
qualified joint venture is taken into account just as it is for 
Federal income tax purposes under the provision (i.e., in 
accordance with their respective interests in the venture). A 
corresponding change is made to the definition of net earnings 
from self-employment under the Social Security Act. The 
provision is not intended to prevent allocations or 
reallocations, to the extent permitted under present law, by 
courts or by the Social Security Administration of net earnings 
from self-employment for purposes of determining Social 
Security benefits of an individual.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2006.

  B. Taxpayer Notification of Suspected Identity Theft (Sec. 3 of the 
                 Bill and New Section 7529 of the Code)


                              PRESENT LAW

    Section 6103 provides that returns and return information 
are confidential and may not be disclosed by the Internal 
Revenue Service (``IRS''), other Federal employees, State 
employees, and certain others having access to the information 
except as provided in the Code.\3\ The definition of ``return 
information'' is very broad and includes any information 
gathered by the IRS with respect to a person's liability or 
possible liability under the Code for any tax, penalty, 
interest, fine, forfeiture, or other imposition or offense.\4\ 
Thus, information gathered by the IRS in connection with an 
investigation of a person for an offense under the Code, such 
as fraud, is return information of the person being 
investigated and is subject to the confidentiality restrictions 
of section 6103.
---------------------------------------------------------------------------
    \3\ Sec. 6103(a).
    \4\ Sec. 6103(b)(2). Return information is

       a taxpayer's identity, the nature, source, or amount of 
his income, payments, receipts, deductions, exemptions, credits, 
assets, liabilities, net worth, tax liability, tax withheld, 
deficiencies, overassessments, or tax payments, whether the taxpayer's 
return was, is being, or will be examined or subject to other 
investigation or processing, or any other data, received by, recorded 
by, prepared by, furnished to, or collected by the Secretary with 
respect to a return or with respect to the determination of the 
existence, or possible existence, of liability (or the amount thereof) 
of any person under this title for any tax, penalty, interest, fine, 
forfeiture, or other imposition, or offense,
       any part of any written determination or any background 
file document relating to such written determination (as such terms are 
defined in section 6110(b)) which is not open to public inspection 
under section 6110,
       any advance pricing agreement entered into by a taxpayer 
and the Secretary and any background information related to such 
agreement or any application for an advance pricing agreement, and
       any closing agreement under section 7121, and any 
similar agreement, and any background information related to such an 
agreement or request for such an agreement.

    Return information does not include data in a form which cannot be 
associated with, or otherwise identify, directly or indirectly, a 
particular taxpayer.
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                           REASONS FOR CHANGE

    Identity theft is a growing concern for the Committee. 
Identity thieves can use a taxpayer's identity, or the identity 
of their dependents, including their social security numbers, 
to file fraudulent tax returns and obtain fraudulent refunds, 
The Committee believes it is important for the IRS to promptly 
notify a taxpayer of potential identity theft so that the 
taxpayer can take preventive measures to prevent the misuse of 
his identity.

                        EXPLANATION OF PROVISION

    The provision provides that if, in the course of an 
investigation under section 7206 (relating to fraud and false 
statements) or section 7207 ( relating to fraudulent returns, 
statements or other documents), the Secretary determines that 
there was or may have been an unauthorized use of any 
information relating to the identity of the taxpayer or 
dependents, the Secretary shall (1) as soon as practicable and 
without jeopardizing such investigation, notify the taxpayer of 
such determination and (2) if any person is criminally charged 
by indictment or information under either of such sections, 
notify such taxpayer as soon as practicable of such charge.

                             EFFECTIVE DATE

    The provision applies to determinations made after the date 
of enactment.

  C. Extension of Time Limit for Return of Property for Wrongful Levy 
        (Sec. 4 of the Bill and Secs. 6343 and 6532 of the Code)


                              PRESENT LAW

    The IRS is authorized to return property that has been 
wrongfully levied upon.\5\ In general, monetary proceeds from 
the sale of levied property upon, or an amount equal to the 
amount of money levied upon, may be returned within nine months 
of the date of the levy.
---------------------------------------------------------------------------
    \5\ Sec. 6343.
---------------------------------------------------------------------------
    Generally, any person (other than the person against whom 
is assessed the tax out of which such levy arose) who claims an 
interest in levied property may bring a civil action for 
wrongful levy in a district court of the United States.\6\ 
Generally, an action for wrongful levy must be brought within 
nine months from the date of levy.\7\ However, if a claim for a 
return of property is made to the IRS, the nine-month period is 
extended for the shorter of a period of 12 months from the date 
of filing of such request or six months from the date of 
mailing of an IRS notice of disallowance of such request.\8\
---------------------------------------------------------------------------
    \6\ Sec. 7426(a)(1).
    \7\ Sec. 6532.
    \8\ Sec. 6532(c)(2).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee understands that in many cases the time 
period for bringing an action may be insufficient for third 
parties to discover a wrongful or mistaken levy and seek to 
remedy it. Accordingly, the Committee believes it is 
appropriate to provide for a longer period of time within which 
a person may contest a wrongful IRS levy.

                        EXPLANATION OF PROVISION

    The provision extends from nine months to two years the 
period for returning money and the monetary proceeds from the 
sale of property that has been wrongfully levied upon.
    The provision also extends from nine months to two years 
the period for bringing a civil action for wrongful levy.

                             EFFECTIVE DATE

    The provision is effective with respect to: (1) levies made 
after the date of enactment and (2) levies made on or before 
the date of enactment provided that the nine-month period has 
not expired as of the date of enactment.

D. Individuals Held Harmless on Improper Levy on Individual Retirement 
          Plan (Sec. 5 of the Bill and Sec. 6343 of the Code)


                              PRESENT LAW

    Distributions from an individual retirement arrangement 
(``IRA'') made on account of an IRS levy are includible in the 
gross income of the individual under the rules applicable to 
the IRA subject to the levy. Thus, in the case of a traditional 
IRA, the amount distributed as a result of a levy is includible 
in gross income except to the extent such amount represents a 
return of nondeductible contributions (i.e., basis). In the 
case of a Roth IRA, earnings on a distribution are excludable 
from gross income if the distribution is made: (1) after the 
five-taxable year period beginning with the first taxable year 
for which the individual made a contribution to a Roth IRA and 
(2) after attainment of age 59\1/2\ or on account of certain 
other circumstances. Amounts withdrawn from an IRA due to a 
levy are not subject to the 10-percent early withdrawal tax, 
regardless of whether the amount is includible in income.
    Present law provides rules under which the IRS returns 
amounts subject to an incorrect levy. For example, amounts 
withdrawn from an IRA pursuant to a levy are returned to the 
individual owning the IRA in the case of a wrongful levy or if 
the levy was not in accordance with IRS administrative 
procedures. In the case of a wrongful levy, the IRS is required 
to pay interest on the amount returned to the individual at the 
overpayment rate. The IRS is not required to pay interest if 
the levy was not in accordance with IRS administrative 
procedures.
    Present law does not provide special rules to allow an 
individual to recontribute to an IRA amounts withdrawn from an 
IRA pursuant to a levy and later returned to the individual by 
the IRS (or interest thereon). Thus, if an individual wishes to 
contribute such returned amounts to an IRA, the contribution is 
subject to the normally applicable rules for IRA contributions.

                           REASONS FOR CHANGE

    IRA assets provide an important source of retirement income 
for many Americans. Under present law, if the IRS improperly 
levies on an IRA, the individual owning the IRA may not be made 
whole, even if the IRS returns the amount levied, with 
interest, because the individual may lose the opportunity to 
have those funds accumulate on a tax-favored basis until 
retirement. The Committee believes that improper levies should 
not reduce retirement income security for IRA owners. Thus, the 
Committee bill provides that IRA funds that are withdrawn 
pursuant to an improper IRS levy and returned by the IRS may be 
recontributed to the IRA.

                        EXPLANATION OF PROVISION

    Under the provision, an individual is able to recontribute 
to an IRA amounts withdrawn pursuant to a levy and returned by 
the IRS (and any interest thereon) within 60 days of receipt by 
the individual, without regard to the normally applicable 
limits on IRA contributions and rollovers. The provision 
applies to levied amounts returned to the individual because 
the levy (1) was wrongful or (2) is determined to be premature 
or otherwise not in accordance with administrative procedures. 
The recontribution may be made to the same IRA or to any other 
individuated retirement plan (other than an endowment contract) 
to which a rollover from the IRA levied upon is permitted. That 
is, the recontribution may be made to the same IRA or to an IRA 
of the same type.
    Under the provision, the IRS is required to pay interest on 
amounts returned to the individual at the overpayment rate in 
the case of a levy that is determined to be premature or 
otherwise not in accordance with administrative procedures (as 
well as in the case of a wrongful levy under present law). 
Interest paid by the IRS on the amount returned to the 
individual is excludable from gross income if the interest is 
contributed to an IRA under the provision. An amount 
contributed to an IRA under the provision will only be treated 
as interest paid by the IRS to the extent the total amount 
contributed under the provision exceeds the amount of the levy.
    Any tax attributable to an amount distributed from an IRA 
by reason of a levy is abated if the amount is recontributed to 
an IRA pursuant to the provision.

                             EFFECTIVE DATE

    The provision is effective for levied amounts (and interest 
thereon) returned to individuals after the date of enactment.

E. Clarification of IRS Unclaimed Refund Authority (Sec. 6 of the Bill 
                       and Sec. 6103 of the Code)


                              PRESENT LAW

    When the IRS is unable to find a taxpayer due a refund, 
present law provides that the IRS may use ``the press or other 
media'' to notify the taxpayer of the refund. Section 6103(m) 
allows the IRS to give the press taxpayer identity information 
for this purpose. Taxpayer identity includes, among other 
items, name and mailing address.\9\
---------------------------------------------------------------------------
    \9\ Sec. 6103(b)(6).
---------------------------------------------------------------------------
    The IRS believes that the current statutory framework of 
``press and other media'' does not permit disclosures via the 
Internet on the IRS website (www.irs.gov). The legislative 
history of the present-law provision does not address the 
meaning of ``press and other media.'' At the time enactment of 
section 6103(m) in 1976, the press (newspapers and periodicals) 
and other traditional media were the only means available for 
the IRS to distribute undelivered refund information to the 
public. Thus, the IRS interprets the term ``other media'' to 
exclude the Internet.

                           REASONS FOR CHANGE

    In November 2006, the IRS announced that the IRS is seeking 
95,746 taxpayers whose income tax refund checks could not be 
delivered.\10\ These checks are worth a total of approximately 
$92.2 million. It is the understanding of the Committee that 
the current method of notifications, by newspaper, is 
ineffective. The Committee believes that the IRS should be able 
to use any method of mass communication, including the 
Internet, to reach a taxpayer who is due a refund.
---------------------------------------------------------------------------
    \10\ Internal Revenue Service, IRS Has Refund for 85,476 Taxpayers 
Whose Checks Could Not Be Delivered (IR-2006-178, November 16, 2006).
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

    The provision allows the IRS to use any means of ``mass 
communication,'' including the Internet, to notify the taxpayer 
of an undelivered refund.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

F. Prohibition on IRS Debt Indicators for Predatory Refund Anticipation 
          Loans (Sec. 7 of the Bill and Sec. 6011 of the Code)


                              PRESENT LAW

    A refund anticipation loan is a loan made by a commercial 
lender to a taxpayer based on the refund the taxpayer expects 
to receive. The loan is a private contract between the taxpayer 
and a commercial lender. The Code does not regulate the making 
of refund anticipation loans, but Consumer groups, the 
Commissioner of the IRS, and the National Taxpayer Advocate all 
have raised concerns over the high interest rates and fees 
associated with such loans.\11\
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    \11\ See e.g., National Taxpayer Advocate, 2005 Annual Report to 
Congress, Publication 2104 (Rev. 12-2005), at 162.
---------------------------------------------------------------------------
    Certain tax practitioners that file returns electronically 
and financial institutions may obtain a Debt Indicator from the 
IRS for their customer taxpayers. A Debt Indicator facilitates 
the making of refund anticipation loans because it tells 
whether or not a taxpayer has any scheduled offsets against a 
claimed refund. Thus, a Debt Indicator reduces the lender's 
risk of making a refund anticipation loan because it informs 
the Iender whether the taxpayer's refund will be paid or 
reduced for certain debts.

                           REASONS FOR CHANGE

    The Committee understands that the majority of refund 
anticipation loans are made to low-income families, including 
EIC claimants. The Committee also understands that the 
providers of refund anticipation loans often charge 
exorbitantly high fees and interest rates for such loans, at 
times in excess of 100 percent. The Committee is concerned that 
these high-cost, short-term loans unfairly siphon millions of 
dollars from low-income taxpayers. Moreover, the Committee is 
concerned that Debt Indicators are being used as a means to 
enable these predatory refund anticipation loans to taxpayers. 
The Committee believes that the Department of the Treasury 
should not be facilitating predatory refund anticipation loans 
by reducing the lender's risk of making such loans. Thus, the 
Committee believes that prohibiting Debt Indicators with 
respect to predatory refund anticipation loans will decrease 
the viability of such loans and provide additional protection 
to taxpayers.

                        EXPLANATION OF PROVISION

    The provision prohibits the Secretary from providing a Debt 
Indicator to any person with respect to any refund anticipation 
loan if the Secretary determines that the business practices of 
such person involve refund anticipation loans and related 
charges and fees that are predatory. Under the provision, a 
refund anticipation loan is any loan of money or any other 
thing of value to a taxpayer secured by the taxpayer's 
anticipated receipt of a Federal tax refund. For purposes of 
the provision, a Debt Indicator means a notification provided 
to a tax practitioner or financial institution pursuant to a 
program or procedure that a taxpayer's refund will be reduced 
or offset to repay debts for delinquent Federal or State taxes, 
student loans, child support, or other Federal agency debt.

                             EFFECTIVE DATE

    The provision is effective for determinations made after 
the date of enactment.

   G. Prohibition on Misuse of Department of the Treasury Names and 
         Symbols (Sec. 8 of the Bill and Sec. 333 of Title 31)


                              PRESENT LAW

    Section 333 of Title 31 of the United States Code prohibits 
the use, in connection with advertisements, solicitations, and 
other business activities, of the words, abbreviations, titles, 
letters, symbols, or emblems associated with the Department of 
the Treasury (and services, bureaus, offices, or subdivisions 
of the Department, including the IRS) in a manner which could 
reasonably be interpreted as conveying a connection with or 
approval by the Depai linent of the Treasury (or one of its 
bureaus, offices, or subdivisions) in the absence of such 
connection or approval.
    The provision provides for a civil penalty of not more than 
$5,000 per violation (or not more than $25,000 in the case of a 
broadcast or telecast). In addition, the provision provides a 
criminal penalty of not more than $10,000 (or not more than 
$50,000 in the case of a broadcast or telecast) or imprisonment 
of not more than one year, or both, in any case in which the 
prohibition is knowingly violated. Any determination of whether 
there is a violation is made without regard to the use of a 
disclaimer of affiliation with the Federal Government.
    The IRS recently issued warnings to taxpayers about 
Internet sites that resemble the official IRS site:
      Taxpayers may be confused by the proliferation of 
Internet sites that contain some form of the Internal Revenue 
Service name or IRS acronym with a .com, .net, .org or other 
designation in the address instead of .gov. Since many of these 
sites also bear a striking resemblance to the real IRS site, 
taxpayers may be misled into thinking that the site they have 
accessed is indeed the official IRS government site. These 
sites are not the official IRS Web site and have no connection 
to the official IRS site or to the IRS.\12\
---------------------------------------------------------------------------
    \12\ Internal Revenue Service, IRS Urges Caution about Internet 
Sites that Resemble the Official IRS Site (IR-2007-58, March 13, 2007).
---------------------------------------------------------------------------
    The IRS also warned consumers of an ongoing Internet scam 
in which consumers receive an e-mail informing them of a 
Federal tax refund.\13\ The e-mail claims to be from the IRS 
and directs the consumer to a link (often resembling the IRS 
website) that requests personal and financial information. The 
practice is called ``phishing'' for information. Once the 
information is obtained, it could be used in identity theft and 
stealing a taxpayer's financial assets.
---------------------------------------------------------------------------
    \13\ Id.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee is aware of, and is particularly concerned 
about, Internet domain names and websites that misuse the 
Department of Treasury and Internal Revenue Service names and 
abbreviations. The use of an Internet domain name or website in 
this manner is misleading and confusing to taxpayers who may 
believe that they will access, or may have accessed, the 
official Department of the Treasury or IRS Internet sites. In 
addition, the Committee is aware of the use of e-mail, 
purporting to be from the IRS, and websites resembling the IRS 
website to obtain personal or financial information from 
taxpayers. The Committee believes such practices should be 
subject to significant penalties to deter such conduct and that 
the statute should be clarified accordingly.

                        EXPLANATION OF PROVISION

    The provision clarifies that ``phishing,'' misleading 
websites, and other misleading mass communications by 
electronic means using the name or symbols of the Department of 
the Treasury (or its components), are subject to the civil 
penalty of $25,000 per violation and criminal penalty of 
$50,000 per violation. The provision reaffirms that the use of 
the words, abbreviations, titles, letters, symbols, or emblems 
associated with the Department of the Treasury (and services, 
bureaus, offices or subdivisions of the Department, including 
the IRS) in an Internet domain name is misleading and covered 
by section 333 of Title 31 of the United States Code.

                             EFFECTIVE DATE

    The provision is effective for violations occurring after 
the date of enactment.

H. Earned Income Credit Outreach (Sec. 9 of the Bill and Sec. 32 of the 
                                 Code)


                              PRESENT LAW

In general

    Low and moderate-income taxpayers may be eligible for the 
refundable earned income credit (``EIC'').\14\ Generally, the 
amount of the EIC is based on the presence and number of 
qualifying children in the taxpayer's family, as well as on 
adjusted gross income (``AGI'') and earned income.\15\ Other 
rules also apply.
---------------------------------------------------------------------------
    \14\ The EIC is a refundable credit, meaning that if the amount of 
the credit exceeds the taxpayer's Federal income tax liability, the 
excess is payable to the taxpayer as a direct transfer payment. Under 
an advance payment system, eligible taxpayers may elect to receive a 
portion of the credit in their paychecks, rather than waiting to claim 
a refund on their tax return filed by April 15 of the following year.
    \15\ Earned income is defined as (1) wages, salaries, tips, and 
other employee compensation, but only if such amounts are includible in 
gross income, plus (2) the amount of the taxpayer's net self-employment 
earnings.
---------------------------------------------------------------------------
    Three separate schedules apply in computing the taxpayer's 
EIC: (1) one schedule for taxpayers with no qualifying 
children; (2) one schedule for taxpayers with one qualifying 
child; and (3) one schedule for taxpayers with more than one 
qualifying child.\16\
---------------------------------------------------------------------------
    \16\ In general, a child is a qualifying child of a taxpayer if the 
child satisfies each of three tests: (1) the child has the same 
principal place of abode as the taxpayer for more than one-half of the 
taxable year; (2) the child has a specified relationship to the 
taxpayer; and (3) the child has not yet attained a specified age. A 
tie-breaking rule applies if more than one taxpayer claims a child as a 
qualifying child.
---------------------------------------------------------------------------
    The EIC generally equals a specified percentage of earned 
income up to a maximum dollar amount. The maximum amount 
applies over a certain income range and then diminishes to zero 
over a specified phaseout range. For taxpayers with earned 
income (or AGI, if greater) in excess of the beginning of the 
phaseout range, the maximum EIC amount is reduced by the 
phaseout rate multiplied by the amount of earned income (or 
AGI, if greater) in excess of the beginning of the phaseout 
range. For taxpayers with earned income (or AGI, if greater) in 
excess of the end of the phaseout range, no credit is allowed. 
All income thresholds are adjusted annually for inflation.

Wage withholding

    In general, the Code requires employers to withhold income 
tax on wages paid to employees, including wages and salaries of 
employees or elected officials of Federal, State, and local 
government units. Withholding rates vary depending on the 
amount of wages paid, the length of the payroll period, and the 
number of withholding allowances claimed by the employee. The 
Code also requires that employers report wage withholding 
information annually to the IRS and their employees (e.g., Form 
W-2 and Form W-3).\17\
---------------------------------------------------------------------------
    \17\ Information returns, such as Form W-2, are returns within the 
meaning of section 6103(b)(1).
---------------------------------------------------------------------------

EIC outreach and assistance

            Pre-tax return filing
    The IRS has developed an outreach effort to inform 
taxpayers potentially eligible for the EIC and their employers 
about the EIC and how to claim the credit. One such public 
notice, contained in IRS Notice 797 (Rev. 12-2006), explains 
the EIC, its eligibility rules, and how to claim the credit. In 
addition, the IRS works with employers, community groups and 
other stakeholders to inform eligible taxpayers of the EIC. The 
IRS also helps taxpayers below certain income levels compute 
their Federal income tax liability, including the amount of 
EIC, if any.
            Post-tax return filing
    The IRS sends out notice letters addressed to taxpayers who 
it has identified as potentially eligible for the EIC in the 
immediately prior taxable year.
    The notice letters are different depending on the presence 
of a qualifying child or children in the taxpayer's household. 
If the IRS identifies a taxpayer with one or more qualifying 
children as potentially eligible for the EIC, the notice letter 
informs the taxpayer that IRS records indicate that: (1) the 
taxpayer's income falls in the eligible range to receive the 
EIC; (2) the taxpayer has one or more dependents who may be an 
EIC qualifying child; and (3) the taxpayer did not claim the 
EIC for the applicable taxable year on his or her return filed 
with the IRS. If the IRS identifies a taxpayer without 
qualifying children as potentially eligible for the EIC, the 
notice letter informs the taxpayer that IRS records indicate 
that: (1) the taxpayer's income falls in the eligible range to 
receive the EIC and (2) the taxpayer did not claim the EIC for 
the applicable taxable year on his or her return filed with the 
IRS.
    In all cases, the notice letters ask the taxpayers to 
complete an ``EIC Eligibility Check-Sheet'' and, if the check-
sheet indicates eligibility for the EIC, to return it to the 
IRS. The EIC Eligibility Check-Sheet requests the taxpayer to 
provide all the information necessary to determine EIC 
eligibility. The EIC Eligibility Check-Sheet is completed under 
penalty of perjury by the taxpayer (and the taxpayer's spouse 
in the case of a joint return). The IRS reviews the information 
submitted by the taxpayer and either: (1) sends any applicable 
refund within eight weeks (net of any other amounts the IRS is 
required to collect), or (2) sends an explanation to the 
taxpayer stating why the taxpayer does not qualify for the EIC.
    The notice letters also provide information to help 
eligible taxpayers correctly claim the EIC in future taxable 
years.
    Under present law, these notice letters are sent by the IRS 
only to individuals who have filed a tax return for the 
applicable taxable year. The absence of the taxpayer's filed 
tax return, notwithstanding the receipt by the IRS of return 
information or an information return (e.g., Form W-2 indicating 
wage withholding on the taxpayer) from the taxpayer's employer 
does not trigger a notice letter to the taxpayer.

Limitations on credits and refunds

    Under section 6511, a claim for credit or refund of 
overpayment of tax with respect to which a return must be filed 
must be made within the later of: (1) three years from the time 
the return was filed or (2) two years from the time the tax was 
paid. If no return was filed by the taxpayer, then the 
applicable time period ends two years after the tax was paid.

                           REASONS FOR CHANGE

    The Committee believes that all taxpayers who are eligible 
for the EIC should receive it. The IRS estimates that 20-25 
percent of taxpayers eligible for the EIC do not claim the 
credit. The IRS needs to enhance its efforts to identify and 
contact taxpayers who are eligible for the EIC, particularly in 
the case of taxpayers who have had taxes withheld on their 
wages but who have not filed a tax return. In some instances, 
taxpayers who have incomes below tax filing thresholds and may 
not realize that they are eligible for the EIC. The Committee 
realizes that improving EIC outreach is an important component 
in ensuring that those who are eligible can claim the credit.

                        EXPLANATION OF PROVISION

    The provision requires that the IRS expand its notice 
requirements relating to potential eligibility for the EIC. 
Specifically, the IRS is required to provide annually, and to 
the extent possible,\18\ notice to all taxpayers who have been 
identified based on return or return information as being 
potentially eligible for the EIC in any taxable year for which 
a claim for credit or refund is not barred by the limitation 
period under section 6511. Such notice must be in writing, 
address all open tax years, and be sent to the last known 
address of such taxpayers: (1) who did not file a claim for the 
EIC for such taxable year, and (2) who the IRS identified as 
potentially eligible for the EIC for such taxable year based on 
a return or return information (as defined in sec. 6103(b)).
---------------------------------------------------------------------------
    \18\ It is anticipated that the type of available return 
information and available IRS resources will affect the IRS' ability to 
issue the additional notice letters contemplated under this provision.
---------------------------------------------------------------------------
    Upon receipt of this notice letter, the taxpayer who had 
filed a return for the applicable taxable years would complete 
the applicable EIC Eligibility Check-Sheet for each of the 
applicable taxable years. It is anticipated that this Check-
Sheet would ask for all the information relating to the 
taxpayer's eligibility for the EIC (e.g., earned income, AGI, 
presence and number of qualifying children, and taxpayer 
identification numbers). If eligible for the EIC, in one or 
more of the applicable taxable years, the taxpayer would return 
the EIC Eligibility Check-Sheet to the IRS for any refund 
(including wages withheld by the taxpayer's employer). In the 
case of taxpayers who had not filed a return for the applicable 
taxable years, the IRS will expand its outreach efforts to 
notify them of the EIC and any unclaimed withholdings.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

 I. Clarification of Reporting Requirements on Dispositions of United 
 States Real Property Interests (Sec. 10 of the Bill and Sec. 1445 of 
                               the Code)


                              PRESENT LAW

    In general, nonresident aliens and foreign corporations are 
not taxed on capital gains.\19\ However, such foreign persons 
must take into account gains and losses from the disposition of 
an interest in United States real property (``USRPI''), as if 
such persons were engaged in a trade or business in the United 
States during the taxable year, and such gain or loss were 
effectively connected with such trade or business.\20\
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    \19\ Nonresident aliens present in the United States for a period 
or period aggregating 183 days or more during a taxable year are taxed 
at a flat 30 percent on their net U.S. source capital gains. Sec. 
871(a)(2).
    \20\ Sec. 897(a)(1).
---------------------------------------------------------------------------
    Although tax is imposed upon such dispositions on a net 
basis, in the case of any disposition of a USRPI by a foreign 
person, the transferee is generally required to deduct and 
withhold a tax equal to ten percent of the amount realized.\21\ 
The transferee is exempt from this withholding requirement if:
---------------------------------------------------------------------------
    \21\ Sec. 1445(a).
---------------------------------------------------------------------------
          1. In general, if the transferred interest is not a 
        USRPI;
          2. The transferee receives a ``qualifying statement'' 
        from the Secretary of the Treasury (or his delegate) 
        that states that the transferor is exempt from the tax 
        on the disposition of the USRPI or has reached 
        agreement with the Secretar for payment of such tax, 
        and that any withholding tax has been satisfied or 
        secured;
          3. The USRPI is acquired by the transferee for use by 
        him as a residence and the amount realized does not 
        exceed $300,000; or
          4. The transferor furnishes to the transferee an 
        affidavit by the transferor stating, under penalties of 
        perjury, the transferor's United States taxpayer 
        identification number and that the transferor is not a 
        foreign person. However, this rule does not apply if 
        the transferee has actual knowledge that such affidavit 
        is false or if the transferee receives a notice from a 
        transferor's agent or a transferee's agent that such 
        affidavit is false, or if the transferee fails to meet 
        the Secretary's requirement that the transferee furnish 
        a copy of such affidavit to the Secretary.\22\ 
        Regulations require the transferee to retain the 
        transferor's affidavit until the end of the fifth 
        taxable year following the taxable year in which the 
        transfer takes place.\23\
---------------------------------------------------------------------------
    \22\ Sec. 1445(b).
    \23\ Treas. Reg. sec. 1.1445-2(b)(3).
---------------------------------------------------------------------------
    In certain circumstances, agents may be liable for some or 
all of the withholding tax. In general, if the transferor's 
agent or the transferee's agent has actual knowledge that the 
affidavit is false, then such agent is required to notify the 
transferee pursuant to regulations.\24\ An agent that is 
required to notify the transferee pursuant to regulations yet 
fails to do so is under the same duty to deduct and withhold 
that the transferee would have been under if such agent had 
properly given such notice.\25\ However, an agent's liability 
under these circumstances is limited to the amount of the 
agent's compensation from the transaction.\26\
---------------------------------------------------------------------------
    \24\ Sec. 1445(d)(1).
    \25\ Sec. 1445(d)(2)(A).
    \26\ Sec. 1445(d)(2)(B).
---------------------------------------------------------------------------
    In the case of a real estate transaction, a ``real estate 
reporting person'' is required to file an information return 
and to furnish certain written statements to customers.\27\ A 
real estate reporting person means the person (including any 
attorney or title company) responsible for closing the 
transaction, if there is such a person.\28\
---------------------------------------------------------------------------
    \27\ Sec. 6045(e)(1). There is an exception to this requirement for 
a sale or exchange of a residence for $250,000 or less ($500,000 if the 
seller is married), if certain conditions are met. Sec. 6045(e)(5).
    \28\ If there is no such person, then the real estate reporting 
person with respect to that transaction is either the mortgage lender, 
seller's broker, buyer's broker, or other person designated under 
regulations, in that order. Sec. 6045(e)(2).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that U.S. persons generally are 
hesitant to provide their social security numbers to persons 
with whom they do not have an ongoing business relationship. 
The Committee believes that offering transferors of USRPIs the 
option of providing nonforeign affidavits solely to the person 
responsible for closing the transaction should better protect 
the social security numbers of transferors and provide 
assurance to transferors that their private information will be 
secure.

                        EXPLANATION OF PROVISION

    The provision provides an alternate procedure with respect 
to the nonforeign affidavit. Under this procedure, in lieu of 
furnishing a nonforeign affidavit to the transferee, a 
transferor may furnish such affidavit to a ``qualified 
substitute.'' Such qualified substitute is then required to 
furnish a statement to the transferee stating, under penalties 
of perjury, that the qualified substitute has such affidavit in 
his or her possession. With respect to a disposition of a 
USRPI, the term ``qualified substitute'' means (1) the person, 
including any attorney or title company, responsible for 
closing the transaction, other than the transferor's agent, and 
(2) the transferee's agent.
    This exemption does not apply if the transferee or 
qualified substitute has actual knowledge that such affidavit 
or statement is false, if the transferee or qualified 
substitute receives a notice from a transferor's agent, 
transferee's agent, or qualified substitute that such affidavit 
or statement is false, or if the transferee or qualified 
substitute fails to meet a regulatory requirement that the 
transferee or qualified substitute furnish a copy of such 
affidavit or statement to the Secretary.
    Moreover, if the transferor's agent, the transferee's 
agent, or the qualified substitute has actual knowledge that 
the affidavit or statement is false, then such agent or 
qualified substitute is required to notify the transferee. As 
under present law, the time and manner of such notice is to be 
specified by regulations. An agent or qualified substitute that 
is required to notify the transferee pursuant to regulations 
yet fails to do so has the same duty to deduct and withhold 
that the transferee would have had if such agent or qualified 
substitute had properly given such notice. An agent's or 
qualified substitute's liability under these circumstances is 
limited to the amount of the compensation that such agent or 
qualified substitute derives from the transaction.
    The Secretary of the Treasury is required to prescribe such 
regulations as may be necessary or appropriate to carry out 
this provision. It is intended that such rules will require the 
qualified substitute and transferee to retain the documentation 
for a period commensurate with the period required under the 
present-law regulations.

                             EFFECTIVE DATE

    The provision is effective for dispositions after the date 
of enactment.

   J. Disclosure of Prisoner Return Information to Federal Bureau of 
      Prisons (Sec. 11 of the Bill, Sec. 6103(k)(10) of the Code)


                              present law

    Section 6103 provides that returns and return information 
are confidential and may not be disclosed by the IRS, other 
Federal employees, State employees, and certain others having 
access to the information except as provided in the Code.\29\ A 
``return'' is any tax or information return, declaration of 
estimated tax, or claim for refund required by, or permitted 
under, the Code, that is filed with the Secretary by, on behalf 
of, or with respect to any person.\30\ ``Return'' also includes 
any amendment or supplement thereto, including supporting 
schedules, attachments, or lists which are supplemental to, or 
part of, the return so filed.
---------------------------------------------------------------------------
    \29\ Sec. 6103(a).
    \30\ Sec. 6103(b)(1).
---------------------------------------------------------------------------
    The definition of ``return information'' is very broad and 
includes any information gathered by the IRS with respect to a 
person's liability or possible liability under the Code.\31\ 
However, data in a form that cannot be associated with, or 
otherwise identify, directly or indirectly a particular 
taxpayer is not ``return information'' for section 6103 
purposes.
---------------------------------------------------------------------------
    \31\ Sec. 6103(b)(2). Return information is:

         a taxpayer's identity, the nature, source, or 
      amount of his income, payments, receipts, deductions, 
      exemptions, credits, assets, liabilities, net worth, tax 
      liability, tax withheld, deficiencies, overassessments, or 
      tax payments, whether the taxpayer's return was, is being, 
      or will be examined or subject to other investigation or 
      processing, or any other data, received by, recorded by, 
      prepared by, furnished to, or collected by the Secretary 
      with respect to a return or with respect to the 
      determination of the existence, or possible existence, of 
      liability (or the amount thereof) of any person under this 
      title for any tax, penalty, interest, fine, forfeiture, or 
      other imposition, or offense,
         any part of any written determination or any 
      background file document relating to such written 
      determination (as such terms are defined in section 
      6110(b)) which is not open to public inspection under 
      section 6110,
         any advance pricing agreement entered into by a 
      taxpayer and the Secretary and any background information 
      related to such agreement or any application for an advance 
      pricing agreement, and
         any closing agreement under section 7121, and 
      any similar agreement, and any background information 
      related to such an agreement or request for such an 
      agreement.
    Section 6103 contains a number of exceptions to the general 
rule of confidentiality, which permit disclosure in 
specifically identified circumstances when certain conditions 
are satisfied.\32\ For example, the IRS is permitted to make 
investigative disclosures to the third parties to the extent 
such disclosure is necessary in obtaining information which is 
not otherwise reasonably available, with respect to the correct 
determination of tax, liability for tax, the amount to be 
collected or with respect to the enforcement of any other 
provision of the Code.
---------------------------------------------------------------------------
    \32\ Sec. 6103(c)-(o). Such exceptions include disclosures by 
consent of the taxpayer, disclosures to State tax officials, 
disclosures to the taxpayer and persons having a material interest, 
disclosures to Committees of Congress, disclosures to the President, 
disclosures to Federal employees for tax administration purposes, 
disclosures to Federal employees for nontax criminal law enforcement 
purposes and to the Government Accountability Office, disclosures for 
statistical purposes, disclosures for miscellaneous tax administration 
purposes, disclosures for purposes other than tax administration, 
disclosures of taxpayer identity information, disclosures to tax 
administration contractors and disclosures with respect to wagering 
excise taxes.
---------------------------------------------------------------------------
    None of the exceptions permit the IRS to refer the tax-
related misconduct of specific inmates to prison officials for 
imposition of administrative sanctions against such 
individuals. The IRS does publicize information from 
prosecutions which has been made part of the public record of 
such proceedings.

                           REASONS FOR CHANGE

    The Committee believes it is appropriate to allow the IRS 
to better coordinate its efforts to combat tax fraud in prisons 
through the sharing of information and to alert prison 
officials of possible fraudulent activity going on within their 
facilities. In 2004, the IRS identified 18,000 false prisoner 
returns claiming $68 million in refunds. The IRS was able to 
stop the issuance of 78 percent of these refunds.\33\ The 
schemes ranged from false wage and self-employment reports to 
complex transactions involving outside co-conspirators, stolen 
identities, and sophisticated financial transactions to 
disguise the true source of funds.
---------------------------------------------------------------------------
    \33\ Statement of Nancy J. Jardini, Chief, Criminal Investigation, 
Internal Revenue Service, Testimony before the Subcommittee on 
Oversight of the House Committee on Ways and Means (June 29, 2005).
---------------------------------------------------------------------------
    The Committee recognizes the sensitivity associated with 
the disclosure of return information. The Committee believes 
that it is an appropriate and cautious first step to allow 
disclosure of certain taxpayer-specific return information to 
the Federal Bureau of Prisons on a trial basis, while providing 
general notification to the State prisons through the issuance 
of a statistical annual report by the IRS on a prison-by-prison 
basis. The Committee notes that the IRS can continue to share, 
with both Federal and State prisons, general information that 
cannot be associated with a particular taxpayer consistent with 
section 6103(b)(2) of the Code.

                        EXPLANATION OF PROVISION

    The provision permits disclosure to officers and employees 
of the Federal Bureau of Prisons of return information with 
respect to prisoners whom the Secretary has determined may have 
filed or facilitated the filing of false or fraudulent tax 
returns. The Secretary may disclose only such information as is 
necessary to permit effective tax administration with respect 
to prisoners. The provision also requires the IRS to publish an 
annual report containing statistics relating to the number of 
false and fraudulent returns associated with each Federal and 
State prison and such other information as the Secretary deems 
appropriate.\34\ The provision terminates after December 31, 
2010.
---------------------------------------------------------------------------
    \34\ It is assumed that the report will include, to the extent 
possible, the most current data available.
---------------------------------------------------------------------------
    The Treasury Inspector General for Tax Administration is to 
report to Congress on the implementation of the provision not 
later than December 31, 2009. It is expected that such report 
will include a description of how the provision has been 
implemented, an analysis of the effectiveness of the 
disclosures in preventing or reducing Federal tax fraud by 
prisoners, and such other information as the Inspector General 
deems appropriate.

                             EFFECTIVE DATE

    In general, the proposal is effective for disclosures made 
after December 31, 2007. The requirement for the IRS to provide 
an annual report is effective for reports submitted after the 
date of enactment.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 1677, the ``Taxpayer Protection 
Act of 2007.''
    The bill, H.R. 1677, as amended, was ordered favorably 
reported by voice vote (with a quorum being present). The 
Committee accepted an amendment by Congressman Ramstad to 
permit disclosure to officers and employees of the Federal 
Bureau of Prisons of return information with respect to 
prisoners whom Secretary has determined may have filed or 
facilitated the filing of false or fraudulent tax returns. The 
Committee accepted an amendment by Congressman Thompson that 
provides that, under the Foreign Investment in Real Property 
Tax Act, sellers of certain property have the option of 
providing a nonforeign affidavit to an intermediary, who in 
most cases will be the person responsible for closing the 
transaction.

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of the rule XIII of the 
Rules of the House of Representatives, the following statement 
is made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 1677 as reported.
    The bill is estimated to have the following effects on 
Federal budget receipts for fiscal years 2007-2017:

                                                ESTIMATED REVENUE EFFECTS OF A MODIFICATION TO H.R. 1677, THE ``TAXPAYER PROTECTION ACT OF 2007''
                                                                        [Fiscal Years 2007-2017, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               Provision                Effective     2007       2008       2009       2010       2011       2012       2013       2014       2015       2016       2017     2007-12    2007-17
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A. Family Business Tax Simplication--    tyba 12/  .........  .........  .........  .........  .........     Negligible revenue effect     .........  .........  .........  .........  .........
 Allow Both Spouses in a Sole               31/06
 Proprietorship to Pay Social Security
 and Medicare Taxes \1\...............
B. Taxpayer Notification of Suspected     dma DOE  .........  .........  .........  .........  .........         No revenue effect         .........  .........  .........  .........  .........
 Identity Theft.......................
C. Extension of time for Return of          (\2\)  .........  .........  .........  .........  .........     Negligible revenue effect     .........  .........  .........  .........  .........
 Property for Wrongful Levy...........
D. Individuals Held Harmless on            lartia  .........  .........  .........  .........  .........     Negligible revenue effect     .........  .........  .........  .........  .........
 Wrongful Levies on IRAs..............        DOE
E. Clarification of IRS Unclaimed             DOE  .........  .........  .........  .........  .........         No revenue effect         .........  .........  .........  .........  .........
 Refund Authority.....................
F. Prohibition on IRS Debt Indicators     dma DOE  .........  .........  .........  .........  .........         No revenue effect         .........  .........  .........  .........  .........
 for Predatory Refund Anticipation
 Loans................................
G. Prohibition on Misuse of Department    voa DOE  .........  .........  .........  .........  .........         No revenue effect         .........  .........  .........  .........  .........
 of Treasury Names and Symbols \3\....
H. Earned Income Credit Outreach......        DOE      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)
I. Modification of Rules Pertaining to   doUSrpia      (\4\)         -1         -1         -1         -2         -2         -2         -2         -2         -2         -2         -7        -17
 FIRPTA Non Foreign Affidavits........        DOE
J. Disclosure of Prisoner Return        Dma 12/31/ .........  .........      (\5\)      (\5\)      (\5\)  .........  .........  .........  .........  .........  .........          1          1
 Information to Federal Bureau of        07 & rsa
 Prisons and Annual Statistical Report        DOE
 on Fraudulent Activity in State and
 Federal Prisons (sunset 12/31/10)....
K. Increase in Penalty for Bad Checks      comora          2          2          2          2          2          2          2          2          2          2          2         12         22
 and Money Orders.....................        DOE
                                                  ==============================================================================================================================================
      Net total.......................          2          1          1          1      (\6\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)      (\4\)          6          6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The estimate does not include any outlay effects, which will be provided by the Congressional Budget Office.
\2\ Levies made after the date of enactment and levies made on or before the date of enactment provided that the nine-month period has not expired as of the date of enactment.
\3\ The provision reaffirms that misleading internet domain names using the names of the Department of the Treasury or associated agencies are subject to present law penalties and clarifies
  that mass communications by electronic means are subject to the higher civil/criminal penalties under present law ($25,000/$50,000)
\4\ Loss of less than $500,000.
\5\ Gain of less than $500,000.
\6\ Negligible revenue effect.

Legend for ``Effective'' column: comora = checks or money orders received after; DOE = date of enactment; doUSrpia = dispositions of United States real property interests after; dma =
  determinations made after; Dma = disclosures made after; lartia = levied amounts returned to individuals after; rsa = reports submitted after; tyba = taxable years beginning after voa =
  violations occurring after.

Note: Details may not add to totals due to rounding. Date of enactment is assumed to be July 1, 2007.

Source: Joint Committee on Taxation.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provisions involve increased tax expenditures. (See amounts in 
table in Part IV.A., above.)

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

H.R. 1677--Taxpayer Protection Act

    Summary: H.R. 1677 would make several changes to tax law. 
It would allow the Internal Revenue Service (IRS) to disclose 
the return information of federal inmates to the head of the 
Federal Bureau of Prisons in certain circumstances and it would 
modify reporting requirements on dispositions of U.S. real 
property interests. It also would prohibit the IRS from giving 
providers of refund anticipation loans debt indicators if the 
providers are deemed predatory. The bill also would simplify 
tax reporting for couples who operate a joint business venture, 
prohibit the misuse of Treasury names and symbols on the 
Internet, and require the IRS to notify taxpayers who may be 
eligible for the earned income tax credit (EITC).
    The Joint Committee on Taxation (JCT) estimates that 
enacting H.R. 1677 would decrease revenues by less than 
$500,000 in 2007, by $6 million over the 2007-2012 period, and 
by $16 million over the 2007-2017 period. The Congressional 
Budget Office (CBO) estimates that enacting the bill could 
increase federal revenues and direct spending as a result of 
the collection of additional civil and criminal penalties 
assessed for misuse of Treasury names and symbols. CBO 
estimates, however, that any additional revenues and direct 
spending that would result from the penalty provisions would 
not be significant. CBO also estimates that implementing the 
bill would cost $2 million to $3 million annually, subject to 
appropriation of the necessary amounts.
    JCT reviewed the tax provisions of the bill and determined 
that they contain no private-sector or intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
CBO has reviewed the non-tax provisions of H.R. 1677 and 
determined that they contain no intergovernmental mandates as 
defined in UMRA. Those provisions would impose no costs on 
state, local, or tribal governments. CBO has also determined 
that the non-tax provisions of H.R. 1677 contain a private-
sector mandate as defined in the UMRA. The bill would prohibit 
anyone from using words, abbreviations, titles, or letters 
associated with the Department of the Treasury (or one of its 
bureaus, offices, or subdivisions) as a part of an Internet 
domain address in a manner which could be reasonably 
interpreted as conveying the false impression that the domain 
address is connected to or authorized by the department. Based 
on information from government and industry sources, CBO 
expects the total direct cost of the mandate would fall below 
the annual threshold established by UMRA ($131 million in 2007, 
adjusted annually for inflation) in the first five years the 
mandate is in effect.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the bill over the 2007-2017 period is shown 
in the following table. The budgetary impact of this 
legislation falls within function 800 (general government).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017   2007-2012  2007-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Estimated Revenues........................       *      -1      -1      -1      -2      -2      -2      -2      -2       2      -2        -6        -16

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level.............       0       3       3       3       2       2       2       2       2       2       2        13         23
Estimated Outlays.........................       0       3       3       3       2       2       2       2       2       2       2        13        23
--------------------------------------------------------------------------------------------------------------------------------------------------------
* = loss of less than $500,000.
Notes: Numbers may not sum to totals because of rounding.

    Basis of estimate: For this estimate, CBO and JCT assume 
that the bill will be enacted by July 1, 2007.
            Revenues and direct spending
    The legislation would make several tax law changes related 
to taxpayer protection. CBO and JCT estimate that enacting H.R. 
1677 would reduce revenues by less than $500,000 in 2007, by $6 
million over the 2007-2012 period, and by $16 million over the 
2007-2017 period.
    H.R. 1677 would amend reporting requirements on 
dispositions of U.S. real estate. When foreign citizens sell 
their holdings of U.S. real estate, they are subject to income 
tax withholding under the Foreign Investment in Real Property 
Tax Act of 1980 (FIRPTA). Currently, the seller must identify 
that he or she is a U.S. citizen in order to avoid the 
requirement that the buyer withhold some payments from the 
seller and remit them to the Treasury as tax withholding. The 
bill would give the seller the option to give proof of identity 
to an intermediary. JCT estimates that this provision would 
reduce compliance with the tax laws and result in a revenue 
loss of less than $500,000 in 2007, $7 million over the 2007-
2012 period, and $17 million over the 2007-2017 period.
    The bill would authorize the IRS to disclose an 
individual's tax return to the head of the Federal Bureau of 
Prisons if the IRS believes that an incarcerated individual may 
have filed a false return. JCT estimates that this provision, 
which would be in effect for three years, would increase 
revenues by $1 million over the 2009-2011 period and would have 
no impact after 2011.
    The bill also would require the IRS to notify taxpayers of 
potential eligibility for the EITC. Taxpayers would be informed 
that they may be eligible for the EITC if they did not claim 
the credit for any preceding year (unless certain limitations 
apply) and their returns show that they are potentially 
eligible. JCT estimates that this would reduce revenues and 
increase outlays by less than $500,000 in total over the 2007-
2017 period.
    H.R. 1677 would establish a new federal crime for the 
misuse of Treasury names and symbols on the Internet. The bill 
also would apply and increase civil and criminal penalties 
(that are already levied on misuse of Treasury names in other 
mediums) to such Internet misuse. Enacting the provision could 
increase federal revenues and direct spending as a result of 
the collection of additional civil and criminal penalties. 
(Collections of criminal penalties are recorded in the budget 
as revenues, deposited in the Crime Victims Fund, and later 
spent without further appropriation.) CBO estimates, however, 
that any additional revenues and direct spending that would 
result from enacting the bill would not be significant because 
of the relatively small number of cases likely to be involved.
    Additionally, H.R. 1677 would simplify tax filing for 
married couples who file jointly and who both participate in a 
joint business venture. Under current law, such couples are 
required to file a partnership income tax return and divide 
income from the venture between the spouses according to their 
respective interests in the venture. Under the proposal, 
couples would each report their share of income on Form 1040, 
Schedule C as income from a sole proprietorship.
    There is anecdotal evidence that some couples who operate 
joint ventures may already use Schedule C (intended to be used 
only by sole proprietors) and attribute all the income from the 
joint venture to one spouse. That attribution could affect the 
Social Security taxes the couple pays as well as the benefits 
they receive. JCT has determined that the proposal would have a 
negligible effect on revenues.
    Social Security benefits are calculated by a formula that 
is based on lifetime earnings. Some people may also collect 
benefits based on their spouses' lifetime earnings. Depending 
on each couple's full earnings history, a change in which 
spouse reports income could raise or lower the combined benefit 
the couple would receive. Because of limited data on the 
earnings of the couples potentially affected by this change, 
CBO cannot determine whether the proposal would raise or lower 
spending in the Social Security program, but any such effect is 
likely to be small.
            Spending subject to appropriation
    H.R. 1677 would require the IRS to notify any taxpayer that 
the agency determines has been a victim of identify theft and 
when any criminal charges have been filed. The bill also would 
require, to the extent possible, that the IRS annually provide 
written notice to taxpayers who may qualify for an earned 
income tax credit or refund. In addition, H.R 1677 would allow 
the IRS to share prisoners' tax information with prison 
officials over the next three years if necessary to investigate 
fraudulent tax filings. Under the bill, the IRS would report to 
the Congress on the effectiveness of this information sharing 
program. Based on information from the IRS, and assuming the 
appropriation of the necessary amounts, CBO estimates that 
implementing those provisions would cost $2 million to $3 
million annually.
    Intergovernmental and private-sector impact: JCT reviewed 
the tax provisions of the bill and determined that they contain 
no private-sector or intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act. CBO has reviewed the non-tax 
provisions and determined that they contain no 
intergovernmental mandates as defined in UMRA. Those provisions 
would impose no costs on state, local, or tribal governments.
    However, CBO has determined that the non-tax provisions of 
H.R.1677 contain a private-sector mandate as defined in UMRA. 
The bill would prohibit anyone from using words, abbreviations, 
titles, or letters associated with the Department of the 
Treasury (or one of its bureaus, offices, or subdivisions) as a 
part of an Internet domain address in a manner which could be 
reasonably interpreted as conveying the false impression that 
the domain address is connected to or authorized by the 
department.
    The costs of the mandate would be the expenditures incurred 
to bring the Internet domain address into compliance added to 
any loss of net income associated with those changes. Current 
law already prohibits the use of words or symbols related to 
the department of Treasury in connection with advertisements, 
solicitations, or other business activities in such a manner. 
Based on information from government and industry sources, CBO 
expects the total direct cost of the mandate would fall below 
the annual threshold established by UMRA ($131 million in 2007, 
adjusted annually for inflation).
    Estimate prepared by: Federal Revenues: Emily Schlect; 
Federal Spending: Matthew Pickford and Sheila Dacey; Impact on 
State, Local, and Tribal Governments: Teri Gullo; Impact on the 
Private Sector: Amy Petz.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis; Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    D. Macroeconomic Impact Analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: the effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

                             E. PAY-GO Rule

    In compliance with clause 10 of the rule XXI of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 1677, as reported: the provisions 
of the bill affecting revenues have the net effect of 
increasing the deficit or reducing the surplus for either: (1) 
the period comprising the current fiscal year and the five 
fiscal years beginning with the fiscal year that ends in the 
following calendar year; and (2) the period comprising the 
current fiscal year and the ten fiscal years beginning with the 
fiscal year that ends in the following calendar year.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the Senate Committee on 
Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses.

                        G. Limited Tax Benefits

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, the Ways and Means Committee has determined 
that the bill as reported contains no congressional earmarks, 
limited tax benefits, or limited tariff benefits within the 
meaning of that Rule.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE  RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it is appropriate and timely to 
enact the revenue provisions included in the bill as reported.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)( 4) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of the rule XIII of the 
Rules of the House of Representatives (relating to 
Constitutional Authority), the Committee states that the 
Committee's action in reporting this bill is derived from 
Article I of the Constitution, Section 8 (``The Congress shall 
have Power To lay and collect Taxes, Duties, Imposts and 
Excises . . . ''), and from the 16th Amendment to the 
Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4).
    The Committee has determined that the revenue provisions of 
the bill contain no Federal private sector mandates or Federal 
intergovernmental mandates on State, local, or tribal 
governments.

                E. Applicability of House Rule XXI 5(b)

    Clause 5 of rule XXI of the Rules of the House of 
Representatives provides, in part, that ``A bill or joint 
resolution, amendment, or conference report carrying a Federal 
income tax rate increase may not be considered as passed or 
agreed to unless so determined by a vote of not less than 
three-fifths of the Members voting, a quorum being present.'' 
The Committee has carefully reviewed the provisions of the 
bill, and states that the provisions of the bill do not involve 
any Federal income tax rate increases within the meaning of the 
rule.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


Subpart C--Refundable Credits

           *       *       *       *       *       *       *


SEC. 32. EARNED INCOME.

  (a) * * *

           *       *       *       *       *       *       *

  (n) Notification of Potential Eligibility for Credit and 
Refund.--
          (1) In general.--To the extent possible and on an 
        annual basis, the Secretary shall provide to each 
        taxpayer who--
                  (A) for any preceding taxable year for which 
                credit or refund is not precluded by section 
                6511, and
                  (B) did not claim the credit under subsection 
                (a) but may be allowed such credit for any such 
                taxable year based on return or return 
                information (as defined in section 6103(b)) 
                available to the Secretary,
        notice that such taxpayer may be eligible to claim such 
        credit and a refund for such taxable year.
          (2) Notice.--Notice provided under paragraph (1) 
        shall be in writing and sent to the last known address 
        of the taxpayer.

           *       *       *       *       *       *       *


Subchapter K--Partners and Partnerships

           *       *       *       *       *       *       *


PART III--DEFINITIONS

           *       *       *       *       *       *       *


SEC. 761. TERMS DEFINED.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Qualified Joint Venture.--
          (1) In general.--In the case of a qualified joint 
        venture conducted by a husband and wife who file a 
        joint return for the taxable year, for purposes of this 
        title--
                  (A) such joint venture shall not be treated 
                as a partnership,
                  (B) all items of income, gain, loss, 
                deduction, and credit shall be divided between 
                the spouses in accordance with their respective 
                interests in the venture, and
                  (C) each spouse shall take into account such 
                spouse's respective share of such items as if 
                they were attributable to a trade or business 
                conducted by such spouse as a sole proprietor.
          (2) Qualified joint venture.--For purposes of 
        paragraph (1), the term ``qualified joint venture'' 
        means any joint venture involving the conduct of a 
        trade or business if--
                  (A) the only members of such joint venture 
                are a husband and wife,
                  (B) both spouses materially participate 
                (within the meaning of section 469(h) without 
                regard to paragraph (5) thereof) in such trade 
                or business, and
                  (C) both spouses elect the application of 
                this subsection.
  [(f)] (g) Cross Reference.--
          For rules in the case of the sale, exchange, liquidation, 
        orreduction of a partner's interest, see sections 704(b) and 
        706(c)(2).

           *       *       *       *       *       *       *


CHAPTER 2--TAX ON SELF-EMPLOYMENT INCOME

           *       *       *       *       *       *       *


SEC. 1402. DEFINITIONS.

  (a) The term ``net earnings from self-employment'' means the 
gross income derived by an individual from any trade or 
business carried on by such individual, less the deductions 
allowed by this subtitle which are attributable to such trade 
or business, plus his distributive share (whether or not 
distributed) of income or loss described in section 702(a)(8) 
from any trade or business carried on by a partnership of which 
he is a member; except that in computing such gross income and 
deductions and such distributive share of partnership ordinary 
income or loss--
          (1) * * *

           *       *       *       *       *       *       *

          (15) in the case of a member of an Indian tribe, the 
        special rules of section 7873 (relating to income 
        derived by Indians from exercise of fishing rights) 
        shall apply[, and];
          (16) the deduction provided by section 199 shall not 
        be allowed[.]; and
          (17) notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from 
        a qualified joint venture shall be taken into account 
        as provided in section 761(f) in determining net 
        earnings from self-employment of such spouse.

           *       *       *       *       *       *       *


    CHAPTER 3--WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN 
CORPORATIONS

           *       *       *       *       *       *       *


Subchapter A--Nonresident Aliens and Foreign Corporations

           *       *       *       *       *       *       *


SEC. 1445. WITHHOLDING OF TAX ON DISPOSITIONS OF UNITED STATES REAL 
                    PROPERTY INTERESTS.

  (a) * * *
  (b) Exemptions.--
          (1) * * *

           *       *       *       *       *       *       *

          [(7) Special rules for paragraphs (2) and (3).--
        Paragraph (2) or (3) (as the case may be) shall not 
        apply to any disposition--
                  [(A) if--
                          [(i) the transferee has actual 
                        knowledge that the affidavit referred 
                        to in such paragraph is false, or
                          [(ii) the transferee receives a 
                        notice (as described in subsection (d)) 
                        from a transferor's agent or a 
                        transferee's agent that such affidavit 
                        is false, or
                  [(B) if the Secretary by regulations requires 
                the transferee to furnish a copy of such 
                affidavit to the Secretary and the transferee 
                fails to furnish a copy of such affidavit to 
                the Secretary at such time and in such manner 
                as required by such regulations.]
          (7) Special rules for paragraphs (2), (3), and (9).--
        Paragraph (2), (3), or (9) (as the case may be) shall 
        not apply to any disposition--
                  (A) if--
                          (i) the transferee or qualified 
                        substitute has actual knowledge that 
                        the affidavit referred to in such 
                        paragraph, or the statement referred to 
                        in paragraph (9)(A)(ii), is false, or
                          (ii) the transferee or qualified 
                        substitute receives a notice (as 
                        described in subsection (d)) from a 
                        transferor's agent, transferee's agent, 
                        or qualified substitute that such 
                        affidavit or statement is false, or
                  (B) if the Secretary by regulations requires 
                the transferee or qualified substitute to 
                furnish a copy of such affidavit or statement 
                to the Secretary and the transferee or 
                qualified substitute fails to furnish a copy of 
                such affidavit or statement to the Secretary at 
                such time and in such manner as required by 
                such regulations.

           *       *       *       *       *       *       *

          (9) Alternative procedure for furnishing nonforeign 
        affidavit.--For purposes of paragraphs (2) and (7)--
                  (A) In general.--Paragraph (2) shall be 
                treated as applying to a transaction if, in 
                connection with a disposition of a United 
                States real property interest--
                          (i) the affidavit specified in 
                        paragraph (2) is furnished to a 
                        qualified substitute, and
                          (ii) the qualified substitute 
                        furnishes a statement to the transferee 
                        stating, under penalty of perjury, that 
                        the qualified substitute has such 
                        affidavit in his possession.
                  (B) Regulations.--The Secretary shall 
                prescribe such regulations as may be necessary 
                or appropriate to carry out this paragraph.

           *       *       *       *       *       *       *

  (d) Liability of Transferor's Agents [or Transferee's 
Agents], Transferee's Agents, or Qualified Substitutes.--
          [(1) Notice of false affidavit; foreign 
        corporations.--If--
                  [(A) the transferor furnishes the transferee 
                an affidavit described in paragraph (2) of 
                subsection (b) or a domestic corporation 
                furnishes the transferee an affidavit described 
                in paragraph (3) of subsection (b), and
                  [(B) in the case of--
                          [(i) any transferor's agent
                                  [(I) such agent has actual 
                                knowledge that such affidavit 
                                is false, or
                                  [(II) in the case of an 
                                affidavit described in 
                                subsection (b)(2) furnished by 
                                a corporation, such corporation 
                                is a foreign corporation, or
                          [(ii) any transferee's agent, such 
                        agent has actual knowledge that such 
                        affidavit is false,
        such agent shall so notify the transferee at such time 
        and in such manner as the Secretary shall require by 
        regulations.
          [(2) Failure to furnish notice.--
                  [(A) In general.--If any transferor's agent 
                or transferee's agent is required by paragraph 
                (1) to furnish notice, but fails to furnish 
                such notice at such time or times and in such 
                manner as may be required by regulations, such 
                agent shall have the same duty to deduct and 
                withhold that the transferee would have had if 
                such agent had complied with paragraph (1).
                  [(B) Liability limited to amount of 
                compensation.--An agent's liability under 
                subparagraph (A) shall be limited to the amount 
                of compensation the agent derives from the 
                transaction.]
          (1) Notice of false affidavit; foreign 
        corporations.--If--
                  (A) the transferor furnishes the transferee 
                or qualified substitute an affidavit described 
                in paragraph (2) of subsection (b) or a 
                domestic corporation furnishes the transferee 
                an affidavit described in paragraph (3) of 
                subsection (b), and
                  (B) in the case of--
                          (i) any transferor's agent--
                                  (I) such agent has actual 
                                knowledge that such affidavit 
                                is false, or
                                  (II) in the case of an 
                                affidavit described in 
                                subsection (b)(2) furnished by 
                                a corporation, such corporation 
                                is a foreign corporation, or
                          (ii) any transferee's agent or 
                        qualified substitute, such agent or 
                        substitute has actual knowledge that 
                        such affidavit is false,
                such agent or qualified substitute shall so 
                notify the transferee at such time and in such 
                manner as the Secretary shall require by 
                regulations.
          (2) Failure to furnish notice.--
                  (A) In general.--If any transferor's agent, 
                transferee's agent, or qualified substitute is 
                required by paragraph (1) to furnish notice, 
                but fails to furnish such notice at such time 
                or times and in such manner as may be required 
                by regulations, such agent or substitute shall 
                have the same duty to deduct and withhold that 
                the transferee would have had if such agent or 
                substitute had complied with paragraph (1).
                  (B) Liability limited to amount of 
                compensation.--An agent's or substitute's 
                liability under subparagraph (A) shall be 
                limited to the amount of compensation the agent 
                or substitute derives from the transaction.

           *       *       *       *       *       *       *

  (f) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Qualified substitute.--The term ``qualified 
        substitute'' means, with respect to a disposition of a 
        United States real property interest--
                  (A) the person (including any attorney or 
                title company) responsible for closing the 
                transaction, other than the transferor's agent, 
                and
                  (B) the transferee's agent.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART II--TAX RETURNS OR STATEMENTS

           *       *       *       *       *       *       *


                     Subpart A--General Requirement

SEC. 6011. GENERAL REQUIREMENT OF RETURN, STATEMENT, OR LIST.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Promotion of Electronic Filing.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Prohibition on irs debt indicators for predatory 
        refund anticipation loans.--
                  (A) In general.--In carrying out any program 
                under this subsection, the Secretary shall not 
                provide a debt indicator to any person with 
                respect to any refund anticipation loan if the 
                Secretary determines that the business 
                practices of such person involve refund 
                anticipation loans and related charges and fees 
                that are predatory.
                  (B) Refund anticipation loan.--For purposes 
                of this paragraph, the term ``refund 
                anticipation loan'' means a loan of money or of 
                any other thing of value to a taxpayer secured 
                by the taxpayer's anticipated receipt of a 
                Federal tax refund.
                  (C) IRS debt indicator.--For purposes of this 
                paragraph, the term ``debt indicator'' means a 
                notification provided through a tax return's 
                acknowledgment file that a refund will be 
                offset to repay debts for delinquent Federal or 
                State taxes, student loans, child support, or 
                other Federal agency debt.

           *       *       *       *       *       *       *


Subchapter B--Miscellaneous Provisions

           *       *       *       *       *       *       *


SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN 
                    INFORMATION.

  (a) * * *

           *       *       *       *       *       *       *

  (k) Disclosure of Certain Returns and Return Information for 
Tax Administration Purposes.--
          (1) * * *

           *       *       *       *       *       *       *

          (10) Disclosure of certain return information of 
        prisoners to federal bureau of prisons.--
                  (A) In general.--Under such procedures as the 
                Secretary may prescribe, the Secretary may 
                disclose to the head of the Federal Bureau of 
                Prisons any return information with respect to 
                individuals incarcerated in Federal prison whom 
                the Secretary has determined may have filed or 
                facilitated the filing of a false return to the 
                extent that the Secretary determines that such 
                disclosure is necessary to permit effective 
                Federal tax administration.
                  (B) Restriction on redisclosure.--
                Notwithstanding subsection (n), the head of the 
                Federal Bureau of Prisons may not disclose any 
                information obtained under subparagraph (A) to 
                any person other than an officer or employee of 
                such Bureau.
                  (C) Restriction on use of disclosed 
                information.--Return information received under 
                this paragraph shall be used only for purposes 
                of and to the extent necessary in taking 
                administrative action to prevent the filing of 
                false and fraudulent returns, including 
                administrative actions to address possible 
                violations of administrative rules and 
                regulations of the prison facility.
                  (D) Annual report.--In each of the calendar 
                years 2007 through 2010, the Secretary shall 
                submit to Congress and make publicly available 
                a report on the filing of false and fraudulent 
                returns by individuals incarcerated in Federal 
                and State prisons. Such report shall include 
                statistics on the number of false and 
                fraudulent returns associated with each Federal 
                and State prison.
                  (E) Termination.--No disclosure may be made 
                under this paragraph after December 31, 2010.

           *       *       *       *       *       *       *

  (m) Disclosure of Taxpayer Identity Information.--
          (1) Tax refunds.--The Secretary may disclose taxpayer 
        identity information to the press and other media, and 
        through any other means of mass communication, for 
        purposes of notifying persons entitled to tax refunds 
        when the Secretary, after reasonable effort and lapse 
        of time, has been unable to locate such persons.

           *       *       *       *       *       *       *

  (p) Procedure and Recordkeeping.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Safeguards.--Any Federal agency described in 
        subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or 
        (7), (j)(1), (2), or (5), [(k)(8)] (k)(8) or (10), 
        (l)(1), (2), (3), (5), (10), (11), (13), (14), or (17) 
        or (o)(1), the Government Accountability Office, the 
        Congressional Budget Office, or any agency, body, or 
        commission described in subsection (d), (i)(3)(B)(i) or 
        7(A)(ii), or (l)(6), (7), (8), (9), (12), (15), or 
        (16), any appropriate State officer (as defined in 
        section 6104(c)), or any other person described in 
        subsection (l)(16), (18), (19), or (20) shall, as a 
        condition for receiving returns or return information--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) upon completion of use of such returns or 
                return information--
                          (i) * * *
                          (ii) in the case of an agency 
                        described in subsections 2 (h)(2), 
                        (h)(5), (i)(1), (2), (3), (5) or (7), 
                        (j)(1), (2), or (5), [(k)(8)] (k)(8) or 
                        (10), (l)(1), (2), (3), (5), (10), 
                        (11), (12), (13), (14), (15), or (17), 
                        or (o)(1), the Government 
                        Accountability Office, or the 
                        Congressional Budget Office, either--
                                  (I) * * *

           *       *       *       *       *       *       *


CHAPTER 64--COLLECTION

           *       *       *       *       *       *       *


Subchapter D--Seizure of Property for Collection of Taxes

           *       *       *       *       *       *       *


PART II--LEVY

           *       *       *       *       *       *       *


SEC. 6343. AUTHORITY TO RELEASE LEVY AND RETURN PROPERTY.

  (a) * * *
  (b) Return of Property.--If the Secretary determines that 
property has been wrongfully levied upon, it shall be lawful 
for the Secretary to return--
          (1) * * *

           *       *       *       *       *       *       *

Property may be returned at any time. An amount equal to the 
amount of money levied upon or received from such sale may be 
returned at any time before the expiration of [9 months] 2 
years from the date of such levy. For purposes of paragraph 
(3), if property is declared purchased by the United States at 
a sale pursuant to section 6335(e) (relating to manner and 
conditions of sale), the United States shall be treated as 
having received an amount of money equal to the minimum price 
determined pursuant to such section or (if larger) the amount 
received by the United States from the resale of such property.

           *       *       *       *       *       *       *

  (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 such individual retirement plan 
        or any other individual retirement plan (other than an 
        endowment contract) to which a rollover from the plan 
        levied upon is permitted.
          (2) Treatment as rollover.--If amounts are deposited 
        into an individual retirement plan under paragraph (1) 
        not later than the 60th day after the date on which the 
        individual receives the amounts under paragraph (1)--
                  (A) such deposit shall be treated as a 
                rollover described in section 408(d)(3)(A)(i),
                  (B) to the extent the deposit includes 
                interest paid under subsection (c), such 
                interest shall not be includible in gross 
                income, and
                  (C) such deposit shall not be taken into 
                account under section 408(d)(3)(B).
        For purposes of subparagraph (B), an amount shall be 
        treated as interest only to the extent that the amount 
        deposited exceeds the amount of the levy.
          (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.

CHAPTER 66--LIMITATIONS

           *       *       *       *       *       *       *


Subchapter D--Periods of Limitation in Judicial Proceedings

           *       *       *       *       *       *       *


SEC. 6532. PERIODS OF LIMITATION ON SUITS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Suits by Persons Other Than Taxpayers.--
          (1) General rule.--Except as provided by paragraph 
        (2), no suit or proceeding under section 7426 shall be 
        begun after the expiration of [9 months] 2 years from 
        the date of the levy or agreement giving rise to such 
        action.
          (2) Period when claim is filed.--If a request is made 
        for the return of property described in section 
        6343(b), the [9-month] 2-year period prescribed in 
        paragraph (1) shall be extended for a period of 12 
        months from the date of filing of such request or for a 
        period of 6 months from the date of mailing by 
        registered or certified mail by the Secretary to the 
        person making such request of a notice of disallowance 
        of the part of the request to which the action relates, 
        whichever is shorter.

           *       *       *       *       *       *       *


                  CHAPTER 77--MISCELLANEOUS PROVISIONS

Sec. 7501. Liability for taxes withheld or collected.
     * * * * * * *
Sec. 7529. Notification of suspected identity theft.

           *       *       *       *       *       *       *


SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.

  If, in the course of an investigation under section 7206 
(relating to fraud and false statements) or 7207 (relating to 
fraudulent returns, statements, or other documents), the 
Secretary determines that there was or may have been an 
unauthorized use of the identity of the taxpayer or dependents, 
the Secretary shall--
          (1) as soon as practicable and without jeopardizing 
        such investigation, notify the taxpayer of such 
        determination, and
          (2) if any person is criminally charged by indictment 
        or information under either of such sections, notify 
        such taxpayer as soon as practicable of such charge.

           *       *       *       *       *       *       *


CHAPTER 80--GENERAL RULES

           *       *       *       *       *       *       *


Subchapter A--Application of Internal Revenue Laws

           *       *       *       *       *       *       *


SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Additional Duties of the Treasury Inspector General for 
Tax Administration.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Other responsibilities.--The Treasury Inspector 
        General for Tax Administration shall--
                  (A) conduct periodic audits of a 
                statistically valid sample of the total number 
                of determinations made by the Internal Revenue 
                Service to deny written requests to disclose 
                information to taxpayers on the basis of 
                section 6103 of this title or section 552(b)(7) 
                of title 5, United States Code; [and]
                  (B) establish and maintain a toll-free 
                telephone number for taxpayers to use to 
                confidentially register complaints of 
                misconduct by Internal Revenue Service 
                employees and incorporate the telephone number 
                in the statement required by section 6227 of 
                the Omnibus Taxpayer Bill of Rights (Internal 
                Revenue Service Publication No. 1)[.]; and
                  (C) not later than December 31, 2009, submit 
                a written report to Congress on the 
                implementation of section 6103(k)(10).

           *       *       *       *       *       *       *

                              ----------                              


                 SECTION 211 OF THE SOCIAL SECURITY ACT

                            SELF-EMPLOYMENT

Sec. 211. For the purposes of this title--

                   Net Earnings From Self-Employment

  (a) The term ``net earnings from self-employment'' means the 
gross income, as computed under subtitle A of the Internal 
Revenue Code of 1986, derived by an individual from any trade 
or business carried on by such individual, less the deductions 
allowed under such subtitle which are attributable to such 
trade or business, plus his distributive share (whether or not 
distributed) of the ordinary net income or loss, as computed 
under section 702(a)(8) of such Code, from any trade or 
business carried on by a partnership of which he is a member; 
except that in computing such gross income and deductions and 
such distributive share of partnership ordinary net income or 
loss--
          (1) * * *

           *       *       *       *       *       *       *

          (14) There shall be excluded income excluded from 
        taxation under section 7873 of the Internal Revenue 
        Code of 1986 (relating to income derived by Indians 
        from exercise of fishing rights); [and]
          (15) The deduction under section 162(l) (relating to 
        health insurance costs of self-employed individuals) 
        shall not be allowed[.]; and
          (16) Notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from 
        a qualified joint venture shall be taken into account 
        as provided in section 761(f) of the Internal Revenue 
        Code of 1986 in determining net earnings from self-
        employment of such spouse.

           *       *       *       *       *       *       *

                              ----------                              


              SECTION 333 OF TITLE 31, UNITED STATES CODE

Sec. 333. Prohibition of misuse of Department of the Treasury names, 
                    symbols, etc

  (a) General Rule.--No person may use, in connection with, or 
as a part of, any advertisement, solicitation, internet domain 
address, business activity, or product, whether alone or with 
other words, letters, symbols, or emblems--
          (1) * * *

           *       *       *       *       *       *       *

in a manner which could reasonably be interpreted or construed 
as conveying the false impression that such advertisement, 
solicitation, internet domain address, business activity, or 
product is in any manner approved, endorsed, sponsored, or 
authorized by, or associated with, the Department of the 
Treasury or any entity referred to in paragraph (1) or any 
officer or employee thereof.

           *       *       *       *       *       *       *

  (c) Civil Penalty.--
          (1) * * *
          (2) Amount of penalty.--The amount of the civil 
        penalty imposed by paragraph (1) shall not exceed 
        $5,000 for each use of any material in violation of 
        subsection (a). If such use is in a broadcast or 
        telecast, or any other mass communications by 
        electronic means, the preceding sentence shall be 
        applied by substituting ``$25,000'' for ``$5,000''.

           *       *       *       *       *       *       *

  (d) Criminal Penalty.--
          (1) In general.--If any person knowingly violates 
        subsection (a), such person shall, upon conviction 
        thereof, be fined not more than $10,000 for each such 
        use or imprisoned not more than 1 year, or both. If 
        such use is in a broadcast or telecast, or any other 
        mass communications by electronic means, the preceding 
        sentence shall be applied by substituting ``$50,000'' 
        for ``$10,000''.

           *       *       *       *       *       *       *


                                  
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