Taxpayer Bill of Rights Act of 2012 - Amends the Internal Revenue Code to require the Secretary of the Treasury, in consultation with the National Taxpayer Advocate, to publish a summary statement of taxpayer rights and obligations.
Authorizes the Secretary to make grants to develop, expand, or continue volunteer income tax assistance programs to assist low-income taxpayers. Allows tax preparation program grant recipients to use grant funds to provide services related to financial literacy, asset development, and the establishment of savings accounts.
Increases the grant funding for low-income taxpayer clinics.
Requires the Secretary to: (1) prescribe regulations for the regulation of tax return preparers not otherwise regulated and to regulate the conduct of enrolled agents in their practice before the Internal Revenue Service (IRS); (2) require the annual registration of refund delivery product facilitators; and (3) furnish to the public the identity of any person who is an enrolled agent, attorney, or certified public accountant on file with the IRS, who is a tax return preparer, or who is registered as a refund delivery product facilitator.
Applies the penalty for understatements of taxpayer liability by tax return preparers to tax submissions other than tax returns or claims for refunds.
Prohibits the Secretary from filing a notice of lien with respect to any taxpayer unless: (1) the lien attaches to distrainable property, (2) the Secretary determines that the benefit to the government of filing outweighs the harm to the taxpayer and that the filing will not jeopardize the taxpayer's ability to comply with the internal revenue laws and to continue to secure funding to maintain business operations, (3) the Secretary notifies the taxpayer that the Secretary has determined to file such notice, and (4) the taxpayer is afforded an opportunity to appeal that determination. Requires the Secretary to consider specified factors in making such determination, including the amount due, the value of the taxpayer's equity in or rights to property, the taxpayer's compliance history, and the effect of the lien filing on the taxpayer's ability to obtain financing, generate future income, and pay current and future tax liabilities.
Prohibits persons licensed to practice before the Department of the Treasury from directly or indirectly offering or providing audit insurance.
Authorizes the National Taxpayer Advocate to issue Taxpayer Advocate directives for granting relief to taxpayers.
Expresses the sense of Congress that the IRS should take specified steps within two years to improve service to taxpayers.
Authorizes the Secretary to: (1) award demonstration project grants to provide accounts in federally insured depository institutions to taxpayers who do not currently have an account with a financial institution; (2) study the feasibility of, and establish a pilot program on, delivering tax refunds on debit cards or other electronic means for taxpayers who do not have access to financial accounts or institutions; (3) identify legislative and administrative changes that would enable the IRS to receive and process information reporting documents before it processes tax returns; and (4) assess the effectiveness of collection alternatives, especially offers in compromise, on long-term tax compliance.
Requires de novo review in U.S. Tax Court of any determination by the IRS with respect to a claim for equitable innocent spouse relief.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3355 Introduced in Senate (IS)]
112th CONGRESS
2d Session
S. 3355
To amend the Internal Revenue Code of 1986 to provide taxpayer
protection and assistance, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 28, 2012
Mr. Bingaman (for himself, Mr. Kerry, Mr. Akaka, Mr. Udall of New
Mexico, Mr. Brown of Ohio, Mr. Lieberman, Mr. Pryor, Mr. Menendez, and
Mr. Durbin) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide taxpayer
protection and assistance, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Taxpayer Bill of
Rights Act of 2012''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--TAXPAYER RIGHTS AND OBLIGATIONS
Sec. 101. Statement of taxpayer rights and obligations.
TITLE II--PREPARATION OF TAX RETURNS
Sec. 201. Programs for the benefit of low-income taxpayers.
Sec. 202. Regulation of Federal income tax return preparers.
Sec. 203. Refund delivery products.
Sec. 204. Preparer penalties with respect to preparation of returns and
other submissions.
Sec. 205. Clarification of enrolled agent credentials.
TITLE III--IMPROVING TAXPAYER SERVICES
Sec. 301. Modifications to lien notice filing procedures.
Sec. 302. Modification of requirements relating to tax lien information
contained in consumer credit reports.
Sec. 303. Ban on audit insurance.
Sec. 304. Public awareness.
Sec. 305. Clarification of taxpayer assistance order authority.
Sec. 306. Taxpayer advocate directives.
Sec. 307. Improved services for taxpayers.
Sec. 308. Taxpayer access to financial institutions.
Sec. 309. Additional studies.
Sec. 310. De novo tax court review of innocent spouse relief
determinations.
TITLE I--TAXPAYER RIGHTS AND OBLIGATIONS
SEC. 101. STATEMENT OF TAXPAYER RIGHTS AND OBLIGATIONS.
(a) In General.--Chapter 77 is amended by adding at the end the
following new section:
``SEC. 7529. STATEMENT OF TAXPAYER RIGHTS AND OBLIGATIONS.
``(a) In General.--The Secretary, in consultation with the National
Taxpayer Advocate, shall publish a summary statement of rights and
obligations arising under this title. Such statement shall provide
citations to the main provisions of this title which provide for the
right or obligation (as the case may be). This statement of rights and
obligations does not create or confer any rights or obligations not
otherwise provided for under this title.
``(b) Statement of Rights and Obligations.--The statement of rights
and obligations is as follows:
``(1) Taxpayer rights.--
``(A) Right to be informed (including adequate
legal and procedural guidance and information about
taxpayer rights).
``(B) Right to be assisted.
``(C) Right to be heard.
``(D) Right to pay no more than the correct amount
of tax.
``(E) Right of appeal (administrative and
judicial).
``(F) Right to certainty (including guidance,
periods of limitation, no second exam, and closing
agreements).
``(G) Right to privacy (including due process
considerations, least intrusive enforcement action, and
search and seizure protections).
``(H) Right to confidentiality.
``(I) Right to appoint a representative in matters
before the Internal Revenue Service.
``(J) Right to fair and just tax system (offer in
compromise, abatement, assistance from the Office of
the Taxpayer Advocate under section 7803(c), apology,
and other compensation payments).
``(2) Taxpayer obligations.--
``(A) Obligation to be honest.
``(B) Obligation to be cooperative.
``(C) Obligation to provide accurate information
and documents on time.
``(D) Obligation to keep records.
``(E) Obligation to pay taxes on time.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7529. Statement of taxpayer rights and obligations.''.
(c) Effective Date.--The amendments made by this section shall take
effect 180 days after the date of the enactment of this Act.
TITLE II--PREPARATION OF TAX RETURNS
SEC. 201. PROGRAMS FOR THE BENEFIT OF LOW-INCOME TAXPAYERS.
(a) Volunteer Income Tax Assistance Plus.--Chapter 77 is amended by
inserting after section 7526 the following new section:
``SEC. 7526A. VOLUNTEER INCOME TAX ASSISTANCE PLUS.
``(a) In General.--The Secretary may, subject to the availability
of appropriated funds, make grants to provide matching funds for the
development, expansion, or continuation of qualified return preparation
programs.
``(b) Definitions.--For purposes of this section--
``(1) Qualified return preparation program.--
``(A) In general.--The term `qualified return
preparation program' means a program--
``(i) which does not charge taxpayers for
its return preparation services,
``(ii) which operates programs which assist
low-income taxpayers, including those programs
that serve taxpayers for whom English is a
second language, in preparing and filing their
Federal income tax returns, including schedules
reporting sole proprietorship or farm income,
``(iii) in which all of the volunteers who
assist in the preparation of Federal income tax
returns meet the training requirements
prescribed by the Secretary, and
``(iv) which may establish procedures to--
``(I) provide taxpayers with
training on preparation of their own
returns, and
``(II) provide assistance from the
volunteers for taxpayers who prepare
and file their own tax returns using
computer equipment and tax preparation
software provided by the program.
``(B) Assistance to low-income taxpayers.--For
purposes of subparagraph (A), a program is treated as
assisting low-income taxpayers if at least 90 percent
of the taxpayers assisted by the program have incomes
which do not exceed 250 percent of the poverty level,
as determined in accordance with criteria established
by the Director of the Office of Management and Budget.
``(2) Program.--The term `program' includes--
``(A) a program at an institution of higher
education which--
``(i) is described in section 102 (other
than subsection (a)(1)(C) thereof) of the
Higher Education Act of 1965 (20 U.S.C. 1088),
as in effect on the date of the enactment of
this section, and which has not been
disqualified from participating in a program
under title IV of such Act, and
``(ii) satisfies the requirements of
paragraph (1) through student assistance of
taxpayers in return preparation and filing;
``(B) an organization described in section 501(c)
and exempt from tax under section 501(a) which
satisfies the requirements of paragraph (1);
``(C) a regional, State or local coalition (with
one lead organization, which meets the eligibility
requirements, acting as the applicant organization);
``(D) a county or municipal government agency;
``(E) an Indian tribe, as defined in section 4(12)
of the Native American Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C. 4103(12)), and
includes any tribally designated housing entity (as
defined in section 4(21) of such Act (25 U.S.C.
4103(21)), tribal subsidiary, subdivision, or other
wholly owned tribal entity;
``(F) a section 501(c)(5) organization;
``(G) a State government agency if no other
eligible organization is available to assist the
targeted population or community;
``(H) a Cooperative Extension Service office if no
other eligible organization is available to assist the
targeted population or community; and
``(I) a nonprofit Community Development Financial
Institution (CDFI) and federally and State-chartered
credit union that qualifies for a tax exemption under
sections 501(c)(1) and 501(c)(14), respectively.
``(c) Special Rules and Limitations.--
``(1) Aggregate limitation.--Unless otherwise provided by
specific appropriation, the Secretary shall not allocate more
than $35,000,000 per year (exclusive of costs of administering
the program) to grants under this section.
``(2) Use of grants for overhead expenses prohibited.--No
grant made under this section may be used for overhead expenses
that are not directly related to any program or that are
incurred by any institution sponsoring such program.
``(3) Other applicable rules.--Rules similar to the rules
under paragraphs (2) through (6) of section 7526(c) shall apply
with respect to the awarding of grants to qualified return
preparation programs.
``(4) Promotion of programs.--The Secretary is authorized
to promote the benefits of and encourage the use of qualified
VITA Plus through the use of mass communications, referrals,
and other means.
``(5) Services related to tax return preparation.--A
qualified return preparation program receiving a grant under
this section may use such grant to provide services related to
financial literacy, asset development, and the establishment of
savings accounts in connection with tax return preparation
services performed through the program.''.
(b) Low-Income Taxpayer Clinics.--
(1) Increase in authorized grants.--Paragraph (1) of
section 7526(c) is amended by striking ``$6,000,000'' and
inserting ``$20,000,000''.
(2) Use of grants for overhead expenses prohibited.--
(A) In general.--Section 7526(c) is amended by
adding at the end the following new paragraph:
``(6) Use of grants for overhead expenses prohibited.--No
grant made under this section may be used for the overhead
expenses that are not directly related to the clinic or that
are of any institution sponsoring such clinic.''.
(B) Conforming amendments.--Section 7526(c)(5) is
amended--
(i) by inserting ``qualified'' before
``low-income'', and
(ii) by striking the last sentence.
(3) Promotion of clinics.--Subsection (c) of section 7526,
as amended by paragraph (2), is amended by adding at the end
the following new paragraph:
``(7) Promotion of clinics.--The Secretary is authorized to
promote the benefits of and encourage the use of qualified low-
income taxpayer clinics through the use of mass communications,
referrals, and other means.''.
(4) IRS referrals to clinics.--Subsection (c) of section
7526, as amended by the preceding provisions of this
subsection, is amended by adding at the end the following new
paragraph:
``(8) IRS referrals.--Notwithstanding any other provision
of law, the Secretary may refer taxpayers to specific qualified
low-income taxpayer clinics receiving funding under this
section.''.
(5) Notice of availability of clinics in notice of
deficiency.--Subsection (a) of section 6212 is amended by
inserting ``, as well as notice regarding the availability of
low-income taxpayer clinics and information about how to
contact them'' before the period at the end.
(6) Notice of availability of clinics in notice of hearing
upon filing of notice of lien.--Subsection (a) of section 6320
is amended by adding at the end the following new sentence:
``Such notice shall include a notice to the taxpayer of the
availability of low-income taxpayer clinics and information about how
to contact them.''.
(7) Notice of availability of clinics in notice and
opportunity of hearing before levy.--Paragraph (3) of section
6330(a) is amended by adding at the end the following flush
sentence:
``Such notice shall include a notice to the taxpayer of the
availability of low-income taxpayer clinics and information
about how to contact them.''.
(c) Clerical Amendment.--The table of sections for chapter 77 is
amended by inserting after the item relating to section 7526 the
following new item:
``Sec. 7526A. Volunteer income tax assistance plus.''.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 202. REGULATION OF FEDERAL INCOME TAX RETURN PREPARERS.
(a) In General.--Section 330(a)(1) of title 31, United States Code,
is amended by inserting ``(including tax return preparers of Federal
tax returns, documents, and other submissions)'' after
``representatives''.
(b) Promulgation of Regulations.--The Secretary of the Treasury
shall prescribe regulations under section 330 of title 31, United
States Code, to regulate any tax return preparers not otherwise
regulated by the Secretary.
(c) Penalty for Unauthorized Preparation of Returns.--
(1) In general.--In promulgating the regulations pursuant
to subsection (b), the Secretary shall impose a penalty of
$1,000 for each Federal tax return, document, or other
submission prepared by a tax return preparer who is not in
compliance with the regulations promulgated under this section
or who is suspended or disbarred from practice before the
Department of the Treasury under such regulations. Such penalty
shall be in addition to any other penalty which may be imposed.
(2) Exception.--No penalty may be imposed under paragraph
(1) with respect to any failure if it is shown that such
failure is due to reasonable cause.
(d) Definitions.--For purposes of this section--
(1) Tax return preparer.--The term ``tax return preparer''
has the meaning given by section 7701(a)(36) of the Internal
Revenue Code of 1986, and includes any person requiring the
purchase of services, a financial product or goods in lieu of
or in addition to direct monetary payment.
(2) Secretary.--The terms ``Secretary of the Treasury'' and
``Secretary'' mean the Secretary of the Treasury or the
delegate of the Secretary.
(e) Public Awareness Campaign.--The Secretary shall conduct a
public information and consumer education campaign, utilizing paid
advertising--
(1) to encourage taxpayers to use for Federal tax matters
only professionals who establish their competency under the
regulations promulgated under section 330 of title 31, United
States Code, and
(2) to inform the public of the requirements that any
compensated preparer of tax returns, documents, and submissions
subject to the requirements under the regulations promulgated
under such section must sign the return, document, or
submission prepared for a fee and display notice of such
preparer's compliance under such regulations.
SEC. 203. REFUND DELIVERY PRODUCTS.
(a) In General.--Chapter 77, as amended by section 101, is amended
by adding at the end the following new section:
``SEC. 7530. REFUND DELIVERY PRODUCTS.
``(a) Registration.--
``(1) In general.--The Secretary shall by regulation
require each refund delivery product facilitator to register
annually with the Secretary.
``(2) Registration requirements.--A registration shall
under paragraph (1) shall include--
``(A) the name, address, and TIN of the refund
delivery product facilitator, and
``(B) the fee schedule of the facilitator for the
year.
``(3) Display of registration certificate.--The certificate
of registration under paragraph (1) shall be displayed in the
facility of the refund delivery product facilitator in the
manner required by the Secretary.
``(b) Disclosure Requirements.--
``(1) In general.--Each refund delivery product facilitator
registered with the Secretary shall be subject to the
requirements of paragraphs (2) through (5).
``(2) Taxpayer education.--The requirements of this
paragraph are that the refund delivery product facilitator
makes available to consumers an informational pamphlet that--
``(A) sets forth options available for receiving
tax refunds, presented from least expensive to most
expensive, and
``(B) discusses short-term credit alternatives to
utilizing refund delivery products.
``(3) Nature of the transaction.--The requirements of this
paragraph are that, at the time of application for the refund
delivery product, the refund delivery product facilitator
specifically state in writing--
``(A) in the case of a refund delivery product
which is a refund loan--
``(i) that the applicant is applying for a
loan based on the applicant's anticipated
income tax refund,
``(ii) the expected time within which the
loan will be paid to the applicant if such loan
is approved, and
``(iii) that there is no guarantee that a
refund will be paid in full or received within
a specified time period, and that the applicant
is responsible for the repayment of the loan
even if the refund is not paid in full or has
been delayed,
``(B) the time within which income tax refunds are
typically paid based upon the different filing options
available to the applicant, and
``(C) that the applicant may file an electronic
return without applying for a refund delivery product
and the fee for filing such an electronic return.
``(4) Fees, interest and amounts received.--The
requirements of this paragraph are that, at the time of
application for the refund delivery product, the refund
delivery product facilitator discloses to the applicant all
amounts to be received in connection with a refund delivery
product. Such disclosure shall include--
``(A) a copy of the fee schedule of the refund
delivery product facilitator,
``(B) in the case of a refund delivery product
which is a refund loan--
``(i) the typical fees and interest rates
(using annual percentage rates as defined by
section 107 of the Truth in Lending Act (15
U.S.C. 1606)) for several typical amounts of
such loans and of other types of consumer
credit, and
``(ii) that the loan may have substantial
fees and interest charges that may exceed those
of other sources of credit, and the applicant
should carefully consider--
``(I) whether such a loan is
appropriate for the applicant, and
``(II) other sources of credit,
``(C) typical fees and interest charges if a refund
is not paid or delayed,
``(D) the amount of a fee (if any) that will be
charged if the refund delivery product is not approved,
and
``(E) administrative costs and any other amounts.
``(5) Other information.--The requirements of this
paragraph are that the refund delivery product facilitator
discloses any other information required to be disclosed by the
Secretary.
``(6) Disclosure requirement.--A disclosure under any of
the preceding paragraphs of this subsection shall not be
treated as meeting the requirements of the respective paragraph
unless the disclosure is written in a manner calculated to be
understood by the average consumer of refund delivery products
and provides sufficient information (as determined in
accordance with regulations prescribed by the Secretary) to
allow the consumer to understand such options and credit
alternatives.
``(c) Penalty.--
``(1) In general.--There is hereby imposed a penalty on any
refund delivery product facilitator who fails to register with
the Secretary pursuant to subsection (a) or fails to meet a
disclosure requirement under subsection (b).
``(2) Amount of penalty.--The amount of the penalty imposed
by paragraph (1) shall be the greater of--
``(A) $1,000, and
``(B) three times the amount of the refund loan, if
applicable, and refund delivery product facilitator-
determined fees charged with respect to each refund
delivery product provided by the refund delivery
product facilitator during the period in which the
failure described in paragraph (1) occurred.
``(3) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the penalty imposed by
paragraph (1) to the extent that the payment of such penalty
would be excessive or otherwise inequitable relative to the
failure involved.
``(d) Conduct.--
``(1) Rules of conduct.--The Secretary shall prescribe
rules of conduct for refund delivery product facilitators which
are similar to the rules applicable to federally authorized tax
practitioners (as defined by section 7525(a)(3)(A)) under part
10 of title 31, Code of Federal Regulations.
``(2) Limitation on approval as refund delivery product
facilitator.--For such period as the Secretary (in his
discretion) determines reasonable, the Secretary may not
register any person as a refund delivery product facilitator
under subsection (a) who the Secretary determines has engaged
in any conduct that would warrant disciplinary action under the
rules of conduct prescribed under paragraph (1) or under part
10 of title 31, Code of Federal Regulations.
``(e) Other Limitations Relating to Refund Delivery Products.--In
any case in which a taxpayer has consented to the release of the
taxpayer's refund indicator to a refund delivery product facilitator,
the Secretary may only provide information related to the refund
indicator to a refund delivery product facilitator who is registered
under subsection (a). For purposes of the preceding sentence, the term
`refund indicator' means a notification provided through a tax return's
acknowledgment file regarding whether a refund will be paid. The
Secretary may issue a refund indicator only after the Secretary
determines that the taxpayer's refund would not be prevented by any
provision of this title, including any provision relating to refund
offset to repay debts for delinquent Federal or State taxes, student
loans, child support, or other Federal agency debt, whether the
taxpayer is claiming ineligible children for purposes of certain tax
benefits, and whether the refund will be held pending a fraud
investigation.
``(f) Definitions.--For purposes of this section--
``(1) Refund delivery product facilitator.--
``(A) In general.--The term `refund delivery
product facilitator' includes any electronic filing
service provider who--
``(i) solicits for, processes, receives, or
accepts delivery of an application for a refund
delivery product, or
``(ii) facilitates the making of a refund
delivery product in any other manner.
``(B) Electronic filing service provider.--The term
`electronic filing service provider' includes any
person who is an electronic return originator,
intermediate service provider, or transmitter.
``(C) Electronic return originator.--The term
`electronic return originator' includes a person who
originates the electronic submission of income tax
returns for another person.
``(D) Intermediate service provider.--The term
`intermediate service provider' includes a person who
assists with processing return information between an
electronic return originator (or the taxpayer in the
case of online filing) and a transmitter.
``(E) Transmitter.--The term `transmitter' includes
a person who sends the electronic return data directly
to the Internal Revenue Service.
``(2) Refund delivery product.--The term `refund delivery
product' includes a refund loan and any other product sold to a
taxpayer for a fee or any other thing of value for the purpose
of receiving the taxpayer's anticipated Federal tax refund.
``(3) Refund loan.--The term `refund loan' includes any
loan of money or any other thing of value to a taxpayer in
connection with the taxpayer's anticipated receipt of a Federal
tax refund. Such term includes a loan secured by the tax refund
or an arrangement to repay a loan from the tax refund.
``(g) Regulations.--
``(1) In general.--The Secretary may prescribe such
regulations as necessary to carry out this subchapter.
``(2) Burden of registration.--In promulgating such
regulations, the Secretary shall minimize the burden and cost
on the registrant.''.
(b) Public Awareness Campaign.--The Secretary of the Treasury shall
conduct a public information and consumer education campaign, utilizing
paid advertising, to educate the public on making sound financial
decisions with respect to refund delivery products (as defined by
section 7530 of the Internal Revenue Code of 1986), including--
(1) the need to compare the rates and fees of refund loans
with the rates and fees of conventional loans,
(2) the need to compare the amount of money received under
a refund delivery product after taking into consideration such
costs and fees with the total amount of the refund, and
(3) where and how taxpayers may lodge complaints concerning
refund delivery product facilitators.
(c) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7530. Refund delivery products.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
take effect on the date of the enactment of the Act.
(2) Regulations.--The regulations required by section
7530(g) of the Internal Revenue Code of 1986 shall be
prescribed not later than 2 years after the date of the
enactment of this Act.
(3) Full implementation.--The Secretary of the Treasury,
taking into consideration the complexity and magnitude of the
requirements set forth under this Act, may delay full
implementation of the regulations promulgated under such
section not later than 5 years after the enactment of this Act.
SEC. 204. PREPARER PENALTIES WITH RESPECT TO PREPARATION OF RETURNS AND
OTHER SUBMISSIONS.
(a) Inclusion of Other Submissions in Penalty Provisions.--
(1) Understatement of taxpayer's liability.--
(A) In general.--Section 6694 is amended by
striking ``return or claim of refund'' each place it
appears and inserting ``return, claim of refund, or
other submission''.
(B) Conforming amendments.--Section 6694, as
amended by paragraph (1), is amended by striking
``return or claim'' each place it appears and inserting
``return, claim, or other submission''.
(2) Increase in penalty in case of gross misconduct.--
Subsection (b) of section 6694 is amended by adding at the end
the following new paragraph:
``(4) Increase in penalty in case of gross misconduct.--In
the case of an understatement to which this section applies
that is attributable to the tax return preparer's making a
false or fraudulent return or claim for refund without the
taxpayer's knowledge, subsection (a) shall be applied by
substituting `100 percent of the amount of the understatement'
for `50 percent of the amount derived (or to be derived) by the
tax return preparer with respect to the return or claim'. This
penalty shall be in addition to any other penalties provided by
law.''.
(3) Other assessable penalties.--
(A) In general.--Section 6695 is amended by
striking ``return or claim of refund'' each place it
appears and inserting ``return, claim of refund, or
other submission''.
(B) Conforming amendments.--Section 6695, as
amended by paragraph (1), is amended by striking
``return or claim'' each place it appears and inserting
``return, claim, or other submission''.
(b) Increase in Certain Other Assessable Penalty Amounts.--
(1) In general.--Subsections (a), (b), and (c) of section
6695 are each amended by striking ``$50'' and inserting
``$1,000''.
(2) Removal of annual limitation.--Subsections (a), (b),
and (c) of section 6695 are each amended by striking the last
sentence thereof.
(c) Review by the Treasury Inspector General for Tax
Administration.--Subparagraph (A) of section 7803(d)(2) is amended by
striking ``and'' at the end of clause (iii), by striking the period at
the end of clause (iv) and inserting ``, and'', and by adding at the
end the following new clause:
``(v) a summary of the penalties assessed
and collected during the reporting period under
sections 6694 and 6695 and under the
regulations promulgated under section 330 of
title 31, United States Code, and a review of
the procedures by which violations are
identified and penalties are assessed under
those sections,''.
(d) Additional Certification on Documents Other Than Returns.--
(1) Identifying number required for all submissions to the
irs by tax return preparers.--The first sentence of paragraph
(4) of section 6109(a) is amended by striking ``return or claim
for refund'' and inserting ``return, claim for refund, or other
document''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to documents filed after the date of the enactment
of this Act.
(e) Coordination With Section 6060(a).--The Secretary of the
Treasury shall coordinate the requirements under the regulations
promulgated under section 330 of title 31, United States Code, with the
return requirements of section 6060 of the Internal Revenue Code of
1986.
(f) Effective Date.--The regulations required by this section shall
be prescribed not later than one year after the date of the enactment
of this Act.
SEC. 205. CLARIFICATION OF ENROLLED AGENT CREDENTIALS.
(a) In General.--Chapter 77, as amended by sections 101 and 203, is
amended by adding at the end the following new section:
``SEC. 7531. ENROLLED AGENTS.
``(a) In General.--The Secretary may prescribe such regulations as
may be necessary to regulate the conduct of enrolled agents in regards
to their practice before the Internal Revenue Service.
``(b) Use of Credentials.--Any enrolled agents properly licensed to
practice as required under rules promulgated under subsection (a) shall
be allowed to use the credentials or designation as `enrolled agent',
`EA', or `E.A.'.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7531. Enrolled agents.''.
(c) Prior Regulations.--The authorization to prescribe regulations
under the amendments made by this section may not be construed to have
any effect on part 10 of title 31, Code of Federal Regulations, or any
other related Federal rule or regulation issued before the date of the
enactment of this Act.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
TITLE III--IMPROVING TAXPAYER SERVICES
SEC. 301. MODIFICATIONS TO LIEN NOTICE FILING PROCEDURES.
(a) In General.--Section 6323 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(k) Required Procedures Before Filing Notice of Lien.--
``(1) Secretarial determination.--
``(A) In general.--The Secretary may not file a
notice of lien with respect to any taxpayer unless--
``(i) the lien attaches to distrainable
property, and
``(ii) weighing all facts and circumstances
pertaining to the collection of a taxpayer's
delinquent tax assessment, the Secretary
determines that--
``(I) the benefit to the Federal
Government of the filing outweighs the
harm to the taxpayer, and
``(II) the filing will not
jeopardize the taxpayer's prospective
ability--
``(aa) to comply with the
internal revenue laws, and
``(bb) if the taxpayer is
an otherwise viable business
taxpayer, to continue to secure
funding to maintain business
operations.
``(B) Factors to consider.--In making the
determination under subparagraph (A)(ii), the Secretary
shall consider--
``(i) the amount due,
``(ii) the lien filing fee,
``(iii) the value of the taxpayer's equity
in the property or rights to property,
``(iv) the taxpayer's tax compliance
history,
``(v) extenuating circumstances, if any,
that explain the delinquency, and
``(vi) the effect of the filing on the
taxpayer's ability to obtain financing,
generate future income, and pay current and
future tax liabilities.
``(2) Taxpayer appeal prior to filing.--
``(A) In general.--The Secretary may not file a
notice of lien with respect to any taxpayer unless--
``(i) the Secretary notifies the taxpayer
that the Secretary has determined to file such
a notice with respect to the taxpayer, and
``(ii) the taxpayer is afforded an
opportunity to appeal such determination to the
Internal Revenue Service Office of Appeals.
The Secretary shall make reasonable efforts to provide
the notice under subparagraph (A) by telephone or
direct personal contact.
``(B) Jeopardy notice of lien.--The Secretary may
file a notice of lien without regard to subparagraph
(A)(ii) if the Secretary finds that the collection of
the tax would be in jeopardy if the notice of lien is
not filed before the conclusion of such an appeal.
``(3) Supervisory approval required for liens in certain
cases.--
``(A) In general.--In any case to which this
paragraph applies, a notice of lien may not be filed
unless the immediate supervisor (or such higher level
official as the Secretary may designate) of the
individual making the initial determination under
paragraph (1) has individually reviewed and approved
such determination.
``(B) Cases to which paragraph applies.--This
paragraph shall apply in any case in which--
``(i) the collection of the liability would
create an economic hardship within the meaning
of section 6343(a)(1)(D),
``(ii) the taxpayer has no equity in
assets, or
``(iii) there has been no personal contact
with the taxpayer to discuss collection
alternatives, including an offer in compromise
and partial payment installment agreement.''.
(b) Jeopardy Notice of Lien.--
(1) In general.--Subparagraph (A) of section 7429(a)(1) of
such Code is amended by inserting after ``or 6862,'' the
following: ``no notice of lien may be filed pursuant to section
6323(k)(2)(B),''.
(2) Redetermination by secretary.--Paragraph (3) of section
7429(a) of such Code is amended by striking ``or'' at the end
of subparagraph (A), by redesignating subparagraph (B) as
subparagraph (C), and by inserting after subparagraph (A) the
following new subparagraph:
``(B) whether or not the filing of the notice of
lien pursuant to section 6323(k)(2)(B) is reasonable
under the circumstances, or''.
(3) Redetermination by tax court.--Paragraph (3) of section
7429(b) of such Code is amended by striking ``or'' at the end
of subparagraph (A), by redesignating subparagraph (B) as
subparagraph (C), and by inserting after subparagraph (A) the
following new subparagraph:
``(B) whether or not the filing of the notice of
lien pursuant to section 6323(k)(2)(B) is reasonable
under the circumstances, or''.
(4) Conforming amendments.--
(A) The heading for section 7429 of such Code is
amended by inserting ``, notice of lien filing,'' after
``levy''.
(B) Subparagraphs (A) and (B) of section 7429(a)(1)
of such Code are each amended by striking ``assessment
or levy'' each place it appears and inserting
``assessment, notice of lien filing, or levy''.
(C) Subparagraph (B) of section 7429(b)(2) of such
Code is amended by striking ``assessment or levy'' and
inserting ``assessment, notice of lien filing, or
levy''.
(D) Paragraph (4) of section 7429(b) of such Code
is amended--
(i) by inserting ``that the filing of such
notice of lien is unreasonable,'' after ``that
the making of such levy is unreasonable,'', and
(ii) by inserting ``to withdraw such notice
of lien,'' after ``to release such levy,''.
(E) Paragraph (1) of section 7429(g) of such Code
is amended--
(i) by inserting ``, the filing of a notice
of lien pursuant to section 6323(k)(2)(B),''
after ``the making of a levy described in
subsection (a)(1)'', and
(ii) by inserting ``notice of lien filing''
after ``Reasonableness of'' in the heading
thereof.
(c) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 302. MODIFICATION OF REQUIREMENTS RELATING TO TAX LIEN INFORMATION
CONTAINED IN CONSUMER CREDIT REPORTS.
(a) In General.--Paragraph (3) of section 605(a) of the Fair Credit
Reporting Act (15 U.S.C. 1681c(a)(3)) is amended to read as follows:
``(3) Tax liens.--The following tax liens:
``(A) Any tax lien released pursuant to section
6325(a) of the Internal Revenue Code of 1986 not more
than 2 years after the date that the notice of such
lien was filed.
``(B) Any tax lien released pursuant to section
6325(a) of such Code--
``(i) more than 2 years after the date that
the notice of such lien was filed, and
``(ii) more than 2 years before the report.
``(C) Any tax lien if--
``(i) the notice of such lien was not
refiled during the required refiling period (as
defined in section 6323(g)(3) of such Code),
and
``(ii) such period ends more than 6 years
before the report.
``(D) Any tax lien the notice of which is withdrawn
pursuant to section 6323(j)(1) of such Code.
``(E) Any tax lien released pursuant to section
6326(b) of such Code if the notice of such lien was
erroneously filed.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 303. BAN ON AUDIT INSURANCE.
Section 330 of title 31, United States Code, as amended by sections
202 and 205, is amended by adding at the end the following new
subsection:
``(g) Ban on Audit Insurance.--No person admitted to practice
before the Department of the Treasury may directly or indirectly offer
or provide insurance or other form of indemnification or reimbursement
to cover a taxpayer's assessment of Federal tax, penalties, or
interest.''.
SEC. 304. PUBLIC AWARENESS.
(a) In General.--Section 6103(k) is amended by adding at the end
the following new paragraph:
``(10) Disclosure of recognized, certified, or registered
persons; revocation of registration.--The Secretary shall
furnish to the public--
``(A) the identity of any person who--
``(i) is an enrolled agent or is an
attorney or certified public accountant who
either has a power of attorney on file with the
Internal Revenue Service or notifies the
Internal Revenue Service of their status as a
preparer of Federal tax returns,
``(ii) is certified under section 330(d) of
title 31, United States Code, as a tax return
preparer, or
``(iii) is registered as a refund delivery
product facilitator pursuant to section 7530,
and
``(B) information as to whether or not any person
who is otherwise suspended or disbarred is no longer so
recognized, certified, or registered (as the case may
be).''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect not later than two years after the date of enactment of
this Act.
SEC. 305. CLARIFICATION OF TAXPAYER ASSISTANCE ORDER AUTHORITY.
(a) In General.--Paragraph (2) of section 7811(b) is amended--
(1) by redesignating subparagraphs (C) and (D) as
subparagraphs (D) and (E), respectively, and
(2) by inserting after subparagraph (B) the following new
subparagraph:
``(C) chapter 74 (relating to closing agreements
and compromises),''.
(b) Effective Date.--The amendments made by this section shall
apply to orders issued after the date of the enactment of this Act.
SEC. 306. TAXPAYER ADVOCATE DIRECTIVES.
(a) In General.--Subchapter A of chapter 80 is amended by adding at
the end the following new section:
``SEC. 7812. TAXPAYER ADVOCATE DIRECTIVES.
``(a) Authority To Issue.--The National Taxpayer Advocate (but not
a delegate thereof) may issue a Taxpayer Advocate Directive to mandate
changes to improve the operation of a functional process or to grant
relief to groups of taxpayers (or all taxpayers) if, as a result of the
manner in which the internal revenue laws are being administered by the
Secretary, its implementation will protect the rights of taxpayers,
prevent undue burden, ensure equitable treatment, or provide an
essential service to taxpayers. The terms of a Taxpayer Advocate
Directive may require the Internal Revenue Service to implement it
within a specified period of time.
``(b) Authority To Modify or Rescind.--
``(1) Appeal.--An Internal Revenue Service division or
other function may appeal a Taxpayer Advocate Directive by
delivering a written explanation that facilitates a full and
fair consideration of the issues to the National Taxpayer
Advocate and Deputy Commissioner of Internal Revenue, either of
whom may modify or repeal such Taxpayer Advocate Directive.
Except as provided in paragraph (2), any decision of the Deputy
Commissioner with respect to such Taxpayer Advocate Directive
shall take precedence.
``(2) Final determination.--If any such decision of the
Deputy Commissioner modifies or repeals a Taxpayer Advocate
Directive, the National Taxpayer Advocate may appeal such
decision to the Commissioner of Internal Revenue for a final
determination. The Commissioner shall make a final
determination with respect to the Taxpayer Advocate Directive,
and provide a written explanation of such determination and the
reasons therefore, not later than 90 days after the submission
of such appeal.''.
(b) Annual Report.--
(1) In general.--Clause (ii) of section 7803(c)(2)(B) is
amended by redesignating subclauses (III) through (XI) as
subclauses (IV) through (XII), respectively, and by inserting
after subclause (II) the following new subclause:
``(III) contain Taxpayer Advocate
Directives issued under section
7812;''.
(2) Conforming amendments.--Clause (ii) of section
7803(c)(2)(B), as amended by paragraph (1), is amended--
(A) by striking ``subclauses (I), (II), and (III)''
in subclauses (V), (VI), and (VII) thereof and
inserting ``subclauses (I), (II), (III), and (IV)'',
and
(B) in subclause (VIII)--
(i) by inserting ``or Taxpayer Advocate
Directive'' after ``Taxpayer Assistance
Order'', and
(ii) by inserting ``or 7812(a)'' after
``section 7811(b)''.
(c) Clerical Amendment.--The table of sections for subchapter A of
chapter 80 is amended by inserting after the item relating to section
7811 the following new item:
``Sec. 7812. Taxpayer advocate directives.''.
SEC. 307. IMPROVED SERVICES FOR TAXPAYERS.
(a) In General.--It is the sense of Congress that the Internal
Revenue Service should within 2 years--
(1) reduce the time between receipt of an electronically
filed return and issuance of a refund,
(2) expand assistance to low-income taxpayers,
(3) allocate resources to assist low-income taxpayers in
establishing accounts at financial institutions that receive
direct deposits from the United States Treasury,
(4) deliver tax refunds on debit cards, prepaid cards, and
other electronic means to assist individuals that do not have
access to financial accounts or institutions,
(5) establish a pilot program for satellite walk-in centers
to be located in rural underserved communities without easy
access to Internal Revenue Service Taxpayer Assistance Centers
by using office facilities currently occupied by the Federal
Government, including United States Postal Service and Social
Security Administration facilities; such satellite walk-in
centers should have the capability to provide video-
conferencing services and scanning or other digitizing
functions to deliver, in an interactive manner, all service and
compliance functions currently available in Internal Revenue
Service Taxpayer Assistance Centers, and
(6) establish a pilot program for mobile tax return
preparation offices.
(b) Location of Service.--
(1) In general.--The mobile tax return filing offices
should be located in communities that the Secretary determines
have a high incidence of taxpayers claiming the earned income
tax credit, particularly in locations with few community
volunteer tax preparation clinics.
(2) Indian reservation.--At least one mobile tax return
filing office should be on or near an Indian reservation (as
defined in section 168(j)(6) of the Internal Revenue Code of
1986).
SEC. 308. TAXPAYER ACCESS TO FINANCIAL INSTITUTIONS.
(a) Establishment of Program.--The Secretary of the Treasury may
award demonstration project grants (including multiyear awards) to
eligible entities to provide accounts to individuals who currently do
not have an account with a financial institution. The account would be
held in a federally insured depository institution.
(b) Priority.--Priority shall be given to demonstration project
proposals that provide accounts at low or no cost and--
(1) that utilize new technologies such as the prepaid
product to expand access to financial services, in particular
for persons without bank accounts, with low access to financial
services, or low utilization of mainstream financial services,
(2) that promote the development of new financial products
and services that are adequate to improve access to wealth
building financial services, which help integrate more
Americans into the financial mainstream,
(3) that promote education for these persons and depository
institutions concerning the availability and use of financial
services for and by such persons, and
(4) that include other such activities and projects as the
Secretary may determine are consistent with the purpose of this
section.
(c) Eligible Entities.--
(1) In general.--An entity is eligible to receive a grant
under this section if such an entity is--
(A) an organization described in section 501(c)(3)
of the Internal Revenue Code of 1986 and exempt from
tax under section 501(a) of such Code,
(B) a federally insured depository institution,
(C) an agency of a State or local government,
(D) a community development financial institution,
(E) an Indian tribal organization,
(F) an Alaska Native Corporation,
(G) a Native Hawaiian organization,
(H) an organization described in 501(c)(5), and
exempt from tax under section 501(a), of such Code,
(I) a nonbank financial service provider, or
(J) a partnership comprised of 1 or more of the
entities described in the preceding subparagraphs.
(2) Definitions.--For purposes of this section--
(A) Federally insured depository institution.--The
term ``federally insured depository institution'' means
any insured depository institution (as defined in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813)) and any insured credit union (as defined
in section 101 of the Federal Credit Union Act (12
U.S.C. 1752)).
(B) Community development financial institution.--
The term ``community development financial
institution'' means any organization that has been
certified as such pursuant to section 1805.201 of title
12, Code of Federal Regulations.
(C) Alaska native corporation.--The term ``Alaska
Native Corporation'' has the same meaning as the term
``Native Corporation'' under section 3(m) of the Alaska
Native Claims Settlement Act (43 U.S.C. 1602(m)).
(D) Native hawaiian organization.--The term
``Native Hawaiian organization'' means any organization
that--
(i) serves and represents the interests of
Native Hawaiians, and
(ii) has as a primary and stated purpose
the provision of services to Native Hawaiians.
(E) Labor organization.--The term ``labor
organization'' means an organization--
(i) in which employees participate,
(ii) which exists for the purpose, in whole
or in part, of dealing with employers
concerning grievances, labor disputes, wages,
rates of pay, hours of employment, or
conditions of work, and
(iii) which is described in section
501(c)(5) of the Internal Revenue Code of 1986.
(F) Nonbank financial service provider.--The term
``nonbank financial service provider'' means an entity
that engages in financial services activities, as
authorized under the Federal Reserve Board, 12 Code of
Federal Regulations Part 225, Regulation Y.
(d) Application.--An eligible entity shall submit an application to
the Secretary of the Treasury in such form and containing such
information as the Secretary may require.
(e) Evaluation and Report.--For each fiscal year in which a grant
is awarded under this section, the Secretary of the Treasury shall
submit a report to Congress containing a description of the activities
funded, amounts distributed, and measurable results, as appropriate and
available.
(f) Power and Authority of the Secretary.--
(1) Assistance.--Subject to appropriations, the Secretary
of the Treasury may provide financial and technical assistance
to awardees for expanding the distribution of financial
services, including through financial services electronic
networks.
(2) Research and development.--The Secretary of the
Treasury may conduct or support such research and development
as the Secretary considers appropriate in order to further the
purpose of this section, including the collection of
information about access to financial services.
(3) Regulations.--The Secretary of the Treasury is
authorized to promulgate regulations to implement and
administer the program under this section.
(g) Study on Delivery of Tax Refunds.--
(1) In general.--The Secretary of the Treasury, in
consultation with the National Taxpayer Advocate, shall conduct
a study on the feasibility of delivering tax refunds on debit
cards, prepaid cards, and other electronic means to assist
individuals that do not have access to financial accounts or
institutions. This study shall evaluate the methodology and
results of the pilot program conducted by the Secretary during
the 2011 filing season.
(2) Pilot program.--The Secretary shall establish a pilot
program for delivering tax refunds on debit cards, prepaid
cards, or other electronic means and shall consult with the
National Taxpayer Advocate in the design and implementation of,
and evaluation of the results of, any such pilot program. In
designing this program the Secretary must take into
consideration the findings of the study conducted under
paragraph (1).
(3) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit a report to Congress containing the results of the study
conducted under paragraph (1).
SEC. 309. ADDITIONAL STUDIES.
(a) Study on Accelerated Processing of Information Returns.--
(1) Findings.--Congress finds the following:
(A) Under current procedures, the Internal Revenue
Service processes income tax returns before it
processes most information returns, including Forms W-
2, which report wages and tax withholding, and Forms
1099, which report interest, dividends, and other
payments.
(B) The sequence described in subparagraph (A)
makes little logical sense.
(C) From a taxpayer perspective, the sequence leads
to millions of cases where taxpayers inadvertently make
overclaims that the Internal Revenue Service does not
identify until months later, exposing the taxpayer not
only to a tax liability but to penalties and interest
charges as well.
(D) From the Federal Government's perspective, this
sequence creates opportunities for fraud and requires
the Internal Revenue Service to devote resources to
recovering refunds that should not have been paid and
that it often cannot recover.
(2) Study.--The Secretary of the Treasury, in consultation
with the National Taxpayer Advocate, shall conduct a study to
identify and recommend legislative and administrative changes
that would enable the Internal Revenue Service to receive and
process information reporting documents before it processes tax
returns. In conducting the study, the Secretary shall consider,
among other factors, the issues identified in the National
Taxpayer Advocate's 2011 Annual Report to Congress.
(3) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit a report to Congress describing the results of the study
conducted under paragraph (2).
(b) Study on the Effectiveness of Collection Alternatives.--
(1) In general.--The Secretary of the Treasury, in
consultation with the National Taxpayer Advocate, shall conduct
a study to assess the effectiveness of collection alternatives,
especially offers in compromise, on long-term tax compliance.
Such a study shall analyze a group of taxpayers who applied for
offers in compromise 5 or more years ago and compare the amount
of revenue collected from the taxpayers whose offers were
accepted with the amount of revenue collected from the
taxpayers whose offers were rejected, and compare, among the
taxpayers whose offers were rejected, the amount they offered
with the amounts collected.
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit a report to Congress containing the results of the study
conducted under paragraph (1).
SEC. 310. DE NOVO TAX COURT REVIEW OF INNOCENT SPOUSE RELIEF
DETERMINATIONS.
(a) In General.--Section 6015 is amended by redesignating
subsection (h) as subsection (i) and by inserting after subsection (g)
the following new subsection:
``(h) De Novo Review of Determinations.--Any review of a
determination made under this section shall be reviewed de novo by the
Tax Court.''.
(b) Effective Date.--The amendment made by this section shall apply
to petitions filed or pending before the Tax Court on and after the
date of the enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line