[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Proposed Rules]
[Pages 68242-68244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33791]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[Reg-251502-96]
RIN 1545-AU68
Civil Cause of Action for Certain Unauthorized Collection Actions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations relating to civil
causes of action for damages caused by unlawful collection actions of
officers and employees of the Internal Revenue Service (IRS). The
proposed regulations reflect amendments made by the Taxpayer Bill of
Rights 2. The proposed regulations affect all taxpayers who file civil
actions for damages caused by unlawful collection actions of officers
or employees of the IRS.
DATES: Written comments and requests for a public hearing must be
received by March 2, 1998.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (Reg-251502-96), Room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered between the
hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (Reg-251502-96), Courier's
Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,
Washington DC. Alternatively, taxpayers may submit comments
electronically via the Internet by selecting the ``Tax Regs'' option on
the IRS Home Page, or by submitting comments directly to the IRS
Internet site at http://www.irs.ustreas.gov/prod/tax____regs/
comments.html.
FOR FURTHER INFORMATION CONTACT: Kevin B. Connelly, (202) 622-3640 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed amendments to the Procedure and
Administration Regulations (26 CFR part 301) relating to civil actions
for damages caused by unlawful collection actions of officers or
employees of the IRS. The Taxpayer Bill of Rights 2 (TBOR2), Public Law
104-168, 110 Stat. 1465 (1996), amended section 7433 of the Internal
Revenue Code of 1986 (Code) by raising the cap on the amount a taxpayer
may be awarded for damages caused by unlawful collection actions from
$100,000 to $1,000,000. Under
[[Page 68243]]
prior law, a suit for damages could not be brought unless the taxpayer
first exhausted administrative remedies available within the IRS. TBOR2
eliminated this jurisdictional prerequisite but authorized federal
district courts to reduce damage awards if the taxpayer fails to
exhaust administrative remedies. The proposed regulations reflect these
changes.
Explanation of Provision
Section 801 of TBOR2 amended section 7433(a) of the Code by
increasing from $100,000 to $1,000,000 the cap on the amount of damages
that a taxpayer may recover in Federal district court from the United
States for damages caused by any unauthorized collection actions of an
officer or employee of the IRS occurring after July 30, 1996. Section
802 of TBOR2 amended section 7433(d)(1) of the Code by providing that a
taxpayer's failure to exhaust administrative remedies available within
the IRS shall only be a factor that the court may consider in
determining whether to reduce the amount of an award. In actions filed
prior to the enactment of TBOR2, the failure to exhaust administrative
remedies was a jurisdictional bar to an action. The proposed
regulations reflect the changes made by TBOR 2.
The regulations that are being amended by these proposed
regulations currently provide that administrative remedies shall be
considered exhausted on the earlier of: (1) the date the decision is
rendered by the IRS on an administrative claim for damages filed in
accordance with the manner and form set forth in the regulations; or
(2) the date six months after the date an administrative claim is filed
in accordance with the manner and form set forth in the regulations. 26
CFR Sec. 301.7433-1(d). An exception to this rule is provided with
respect to civil actions filed in federal district court prior to July
31, 1996. Under this exception, if an administrative claim is filed
during the last six months of the period of limitations for filing a
civil action for damages under section 7433 of the Code, administrative
remedies shall be considered exhausted on the date the administrative
claim is filed. The exception was included in the current regulations
because, prior to the enactment of TBOR2, the failure to exhaust
administrative remedies was a jurisdictional bar to an action. Without
the exception, if a taxpayer filed an administrative claim during the
last six months of the period of limitations and the IRS did not
consider the claim before the limitations period expired, the taxpayer
automatically would have been barred from filing suit. These provisions
still apply to actions that were filed on or before July 30, 1996, the
enactment date of TBOR2.
With respect to actions filed after July 30, 1996, the proposed
regulations do not contain the exception for administrative claims
filed during the last six months of the period of limitation because
the failure to exhaust administrative remedies is no longer a bar to an
action. Since the enactment of TBOR2, the failure to exhaust
administrative remedies is just one factor the court may consider in
determining whether to reduce an award of damages. Pursuant to the
notice of proposed rulemaking, if a taxpayer waits until the last six
months of the period of limitations to file an administrative claim,
the IRS does not reach a determination before the limitations period
expires, and the taxpayer files a timely action under section 7433, the
court may consider the facts and circumstances of the case and decide
what effect the late filing of the claim should have on the amount of
damages awarded.
The proposed manner and form for filing an administrative claim for
damages remain the same as those set forth in the current regulations
at 26 CFR 301.7433-1(e)(1) and (2). The claim must be sent in writing
to the district director (marked for the attention of the Chief,
Special Procedures Function) of the district in which the taxpayer
resides. The claim must include: (1) The name, current address, current
home and work telephone numbers and any convenient times to be
contacted, and taxpayer identification number of the taxpayer making
the claim; (2) the grounds, in reasonable detail, for the claim
(include copies of any available substantiating documentation or
correspondence with the Internal Revenue Service); (3) a description of
the injuries incurred by the taxpayer filing the claim (include copies
of any available substantiating documentation or evidence); (4) the
dollar amount of the claim, including any damages that have not yet
been incurred but which are reasonably foreseeable (include copies of
any available substantiating documentation or evidence); and (5) the
signature of the taxpayer or duly authorized representative.
The notice of proposed rulemaking does not have a new effective
date paragraph because amended paragraphs (a), (d), and (e) set forth
the effective dates of the new statutory provisions as well as the
statutory provisions they are replacing.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866. Therefore,
a regulatory assessment is not required. It also has been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regulations, and because the
regulation does not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, this
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments that are submitted
timely (a signed original and eight (8) copies) to the IRS. All
comments will be available for public inspection and copying. A public
hearing may be scheduled if requested in writing by a person that
timely submits written comments. If a public hearing is scheduled,
notice of the date, time, and place for the hearing will be published
in the Federal Register.
Drafting Information
The principal author of these regulations is Kevin B. Connelly,
Office of Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS.
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordingkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 continues to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In Sec. 301.7433-1, paragraphs (a), (d), (e), and (f)
are revised to read as follows:
[[Page 68244]]
Sec. 301.7433 Civil cause of action for certain unauthorized
collection actions.
(a) In general. If, in connection with the collection of a federal
tax with respect to a taxpayer, an officer or an employee of the
Internal Revenue Service recklessly or intentionally disregards any
provision of the Internal Revenue Code or any regulation promulgated
under the Internal Revenue Code, such taxpayer may bring a civil action
for damages against the United States in federal district court. The
taxpayer has a duty to mitigate damages. The total amount of damages
recoverable is the lesser of $1,000,000 ($100,000 if the act giving
rise to damages occurred before July 31, 1996) or the sum of--
(1) The actual, direct economic damages sustained as a proximate
result of the reckless or intentional actions of the officer or
employee; and
(2) Costs of the action.
* * * * *
(d) Exhaustion of administrative remedies in suits brought prior to
July 31, 1996--(1) General. With respect to civil actions filed in
federal district court prior to July 31, 1996, no action may be
maintained before the exhaustion of administrative remedies.
Administrative remedies are exhausted on the earlier of the following
dates--
(i) The date the decision is rendered on an administrative claim
filed in accordance with paragraph (f) of this section; or
(ii) The date six months after the date an administrative claim is
filed in accordance with paragraph (f) of this section.
(2) Exception. If an administrative claim is filed in accordance
with paragraph (f) of this section during the last six months of the
period of limitations described in paragraph (g) of this section, the
taxpayer may file an action in federal district court any time after
the administrative claim is filed and before the expiration of the
period of limitations.
(3) No action in federal district court for any sum in excess of
the dollar amount sought in the administrative claim. With respect to
civil actions filed in federal district court prior to July 31, 1996,
no action may be instituted for any sum in excess of the amount
(already incurred and estimated) of the administrative claim filed
under paragraph (f) of this section, except where the increased amount
is based upon newly discovered evidence not reasonably discoverable at
the time the administrative claim was filed, or upon allegation and
proof of intervening facts relating to the amount of the claim.
(e) Exhaustion of administrative remedies in suits brought after
July 30, 1996--(1) General. With respect to civil actions filed in
federal district court after July 30, 1996, the amount of damages
awarded under paragraph (a) of this section may be reduced if the court
determines that the taxpayer has not exhausted the administrative
remedies available within the Internal Revenue Service.
(2) Administrative remedies exhausted. Administrative remedies
shall be considered exhausted on the earlier of--
(i) The date the decision is rendered on a claim filed in
accordance with paragraph (f) of this section; or
(ii) The date six months after the date an administrative claim is
filed in accordance with paragraph (f) of this section.
(f) Procedures for an administrative claim--(1) Manner. An
administrative claim for damages shall be sent in writing to the
district director (marked for the attention of the Chief, Special
Procedures Function) of the district in which the taxpayer resides.
(2) Form. The administrative claim shall include--
(i) The name, current address, current home and work telephone
numbers and any convenient times to be contacted, and taxpayer
identification number of the taxpayer making the claim;
(ii) The grounds, in reasonable detail, for the claim (include
copies of any available substantiating documentation or correspondence
with the Internal Revenue Service);
(iii) A description of the injuries incurred by the taxpayer filing
the claim (include copies of any available substantiating documentation
or evidence);
(iv) The dollar amount of the claim, including any damages that
have not yet been incurred but which are reasonably foreseeable
(include copies of any available substantiating documentation or
evidence); and
(v) The signature of the taxpayer or the taxpayer's duly authorized
representative as defined in paragraph (f)(3) of this section.
(3) Duly authorized representative. For purposes of paragraph
(f)(2)(v) of this section, a duly authorized representative is any
attorney, certified public accountant, enrolled actuary, or any other
person permitted to represent the taxpayer before the Internal Revenue
Service who is not disbarred or suspended from practice before the
Internal Revenue Service and who has a written power of attorney
executed by the taxpayer.
* * * * *
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
[FR Doc. 97-33791 Filed 12-30-97; 8:45 am]
BILLING CODE 4830-01-U