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Week Ending May 21, 2004

HR 1528 Tax Administration Good Government Act. / Taxpayer Protection and IRS Accountability Act of 2003

BRIEF

   The bill makes numerous revisions in the way the Internal Revenue Service (IRS) handles individual taxpayers, its own procedures and the behavior of its employees. Generally, the bill aims to improve communications with taxpayers in the areas of filing returns and receiving refunds as well as resolving errors the IRS might make regarding a taxpayer’s filing or errors taxpayers might make in complying with the Code.

Sponsor: Representative Rob Portman (R-OH)

Vote: Passed House 252 – 179 (RC 293) Passed Senate by unanimous consent.

Cost to the taxpayer:

MORE INFORMATION

{HR 1528, as of this writing, has not yet been signed into law, therefore, the information in this report should not be acted on as though it were law. Even after passage, check with a tax professional before making any decisions or taking any actions on income tax or other tax compliance.}

   Here are some of the provisions of HR 1528;

THINGS AN IRS EMPLOYEE CAN NOT DO.

   Given a final administrative or judicial determination actions and activities of IRS employees that may result in disciplinary or personnel action by the Commissioner include:

   Willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets;

   Willfully providing a false statement under oath with respect to a material matter involving a taxpayer or taxpayer representative;

    The willful violation of the taxpayer's or taxpayer representative's rights under the Constitution such as Any civil right established under-- title VI or VII of the Civil Rights Act of 1964; title IX of the Education Amendments of 1972; the Age Discrimination in Employment Act of 1967; the Age Discrimination Act of 1975; section 501 or 504 of the Rehabilitation Act of 1973; or title I of the Americans with Disabilities Act of 1990; or the Internal Revenue Service policy on unauthorized inspection of returns or return information;

   Willfully falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or taxpayer representative;

    Assault or battery on a taxpayer or taxpayer representative, but only if there is a criminal conviction, or a final adverse judgment by a court in a civil case, with respect to the assault or battery;

    Willful violations of this title, Department of the Treasury regulations, or policies of the Internal Revenue Service (including the Internal Revenue Manual) for the purpose of retaliating against, or harassing, a taxpayer or taxpayer representative;

   Willful misuse of the provisions of section 6103 for the purpose of concealing information from a congressional inquiry;

   Willful failure to file any return of tax required under this title on or before the date prescribed therefore (including any extensions) when a tax is due and owing, unless such failure is due to reasonable cause and not due to willful neglect;

willful understatement of Federal tax liability, unless such understatement is due to reasonable cause and not due to willful neglect; and

   Threatening to audit a taxpayer, or to take other action under this title, for the purpose of extracting personal gain or benefit.

   Would forbid an IRS employee conducting an examination of a taxpayer from conducting an examination of the taxpayer representative's return solely on the basis of the representative's relationship to the taxpayer.

Privacy and other Protection

   The bill prohibits return or return information of a person not a party to a judicial or administrative proceeding from being disclosed until after the Secretary makes a reasonable effort to inform the person of the intended disclosure and of what parts of the return the person can withhold.

   Disclosure of the taxpayer's address and taxpayer identification number as part of the publicly available summaries of accepted offers in compromise would be prohibited..

    The IRS would be required to notify a taxpayer upon the Treasury Inspector General for Tax Administration's determination that a taxpayer's return or return information has been disclosed or inspected without authorization.

    The bill would require a State or Federal agency to conduct annual on-site reviews of all of its contractors receiving Federal returns and return information to assess their performance in safeguarding the confidentiality of such information. The State or Federal agency would be required to certify annually that its contractors are in compliance with requirements to safeguard such information.

   The bill would permit the IRS to disclose return information to local law enforcement authorities in response to imminent danger of death or physical injury (previously the IRS was allowed to disclose information only to Federal and State law enforcement)

   The IRS would be permitted to disclose taxpayer identity information through any means of mass communication to notify persons entitled to tax refunds.

   A taxpayer's consent to supply return information to a third party could be invalidated if the form turned in to the IRS does not designate a recipient or is not dated at the time of execution. Taxpayers would be required, under penalty of perjury, to verify when submitting a request to the IRS that the form contains the above information.

   The Office of the Taxpayer Advocate, if authorized by the National Taxpayer Advocate, would be permitted to withhold from the Internal Revenue Service and the Department of Justice any information provided by, or regarding contact with any taxpayer.

    Would permit the National Taxpayer Advocate to issue guidelines under which employees of the Office of the Taxpayer Advocate shall not disclose information obtained from a taxpayer.

Electronic filing deadline would be extended  

   Extend the filing deadline to April 30 for a taxpayer who files an electronic return and pays the entire balance owed electronically. Terminates this provision December 31, 2005.  

Husband and wife joint venture not treated as a partnership.

   The bill would provide that in the case of a qualified joint venture conducted by a husband and wife who file a joint return: (1) such joint venture shall not be treated as a partnership; (2) all items of income, gain, loss, deduction, and credit shall be divided between the spouses in accordance with their respective interests in the venture; (3) 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.

   The bill would eliminate the requirement for former spouses to make a written request for disclosure of collection activities with respect to a joint tax return.

Low-Income Taxpayer Clinics

   Progressively increases the annual allocation for low-income taxpayer clinics up to the figure of $15 million in 2006 and each year thereafter. Authorizes the Secretary to promote the use of such clinics. Prohibits grants being used for the general overhead expenses of any institution sponsoring a clinic. 

Terrorist Organizations

   Suspend the tax-exempt status of a designated terrorist organization (as defined by this Act). Denies: (1) deductions for contributions made to such an organization; and (2) administrative or judicial challenge to such suspension or denial. Provides for refund or credit in a case of erroneous designation.

Be sure to file on time and other rule changes

   Would direct the IRS to add an explanation of the consequences of failing to file a tax return on time to Publication 1 ("Your Rights as a Taxpayer"). Requires the IRS to add a similar warning to all Form 1040 packages.

   HR 1528 would raise the figure of adjusted income below which no penalty is incurred for underpayment of estimated taxes and excludes from gross income (for tax purposes) interest paid on overpayments of income tax, but disqualifies a taxpayer from benefiting if the Secretary of the Treasury determines the taxpayer purposely overpaid to earn interest.

   The $50,000 threshold for nullifying interest on refunds made in error and requires the Secretary to modify interest on underpayments when the reason for the underpayment is erroneous information supplied in written form by the Internal Revenue Service would be eliminated.

Underpayment and other error protection

   The bill would create a system whereby a taxpayer can deposit sums with the IRS that may subsequently be used as a buffer to avoid underpayment of taxes on income and other specified taxes. No underpayment interest would be charged on the portion of an underpayment paid from the funds on deposit. The bill would allow withdrawals from the fund unless the amount has been used to pay taxes or the Secretary believes that withdrawal will jeopardize tax payment.

   The IRS would be allowed to waive certain penalties for unintentional minor errors that are committed by a taxpayer with a history of tax compliance if that penalty would be grossly disproportionate to the action. The penalty the IRS will impose for filing a frivolous income tax return, unless the Secretary deems it appropriate to lessen the penalty, would be increased from $500 to $5,000. The penalty could be applied all taxpayers and to all types of Federal taxes.

   The bill would establish that the 10 percent penalty on required Federal tax deposits applies only to cases where an individual has failed to deposit for more than 15 days.

   The Fairness of Collection Procedures section stipulates that the IRS may enter into installment agreements with taxpayers that do not provide for full payment of liabilities. The bill would require the IRS to review partial payment installment agreements at least every two years. {Editor's Note: Under S 1637, the Jumpstart Our Business Economy Act-J.O.B.S. Act, should it become law, the IRS may be directed to demand complete payment of a tax debt, by installment payments in three years.)

    If the IRS errs and takes proceeds or properties incorrectly it would have two years to return them rather than the current nine months.

   The taxpayer would be authorized to deposit money in an IRA without regard to the normally applicable limits on IRA contributions and rollovers if the IRS has sent back the money being deposited due to a wrongful levy and it originally came from an IRA. Requires the contribution to be to the same type of IRA from which the amounts were withdrawn. Stipulates that in such a scenario any tax on the withdrawal from the IRA is abated. Interest paid by the IRS to the taxpayer is considered part of the original payment and is not counted as gross income.

   The bill would modify the suspension date of the statute of limitations for taxpayers suffering significant hardship by applying it only if the date of the decision by the National Taxpayer Advocate is at least seven days after the date of the taxpayer's application.

   The Secretary would be directed to study IRS practices concerning liens and levies.

   The Commissioner of the IRS would be required to issue guidelines for discipline, including for firing employees, and to take action for certain violations. Removes certain acts from the list of violations, and adds others. Declares that a ruling by the Commissioner is final, with no possibility of review.

Churches and Non-Profit organizations.

   The bill would permit the Secretary to disclose to an appropriate State officer information related to 501(c)(3) organizations, including: (1) a notice of proposed refusal to recognize an applicant as a 501(c)(3) organization; (2) a notice of proposed revocation of 501(c)(3) status; and (3) names, addresses, and taxpayer identification numbers of organizations applying for 501(c)(3) status. Allows return and return information to be disclosed in certain civil administrative and judicial proceedings pertaining to the enforcement of State laws regulating 501(c)(3) organizations in a manner prescribed by the Secretary.

   It is specified that the IRS would be allowed to provide information to churches related to the standards for tax exemption and the requirements related to unrelated business taxable income.

    Extension of declaratory judgment procedures currently reserved to 501(c)(3) organizations to all organizations that apply for tax-exempt status would be authorized. Jurisdiction over such cases to the United States Tax Court would be limited.

IRS accountability to Congress  

The Bill;  

   Would modify the semi-annual reporting requirement for the Treasury Inspector General for Tax Administration (TIGTA) to require that reports of complaints of serious IRS employee misconduct include a summary (by category) of the ten most common complaints made and the number of such common complaints.

   Require the TIGTA to submit an annual report to Congress on payments made by the IRS related to awarding of costs and certain fees.

   Require the TIGTA to submit an annual report to Congress on abatements of penalties.

   Obligate the TIGTA to submit a report to Congress on technological advances, such as e-mail and faxes, that may allow alternative means for the IRS to communicate with taxpayers.

OTHER CHANGES  

   Other sections of the law would establish that written opinions by the Office of the Chief Counsel supporting offers-in-compromise are only required if the Secretary of the Treasury calls for them (previously all such offers of $50,000 or more required written opinions).  

   Would permit, through 2004, State-based coverage to meet the definition of qualified health insurance eligible for the refundable health insurance tax credit for certain eligible individuals electing to waive the guaranteed issue and preexisting condition requirements for State-based coverage.

   Would permit the Treasury Borrowing Advisory Committee to disclose sooner than is currently allowed material relating to the securities to be auctioned.

   Would permit the issuance of regulations as necessary to regulate the conduct of enrolled agents in regards to their practice before the IRS.

   Would permit the Financial Management Service (FMS) to charge the IRS fees and the IRS to pay fees to the FMS to cover the cost of implementing a continuous levy program.

   Would establish Internal Revenue Service (IRS) service user fee authority through September 30, 2013. Sets forth program criteria and average fee requirements.

   Would allow payment of motor fuel excise tax refunds by electronic fund transfers if the payee makes an election and satisfies certain other requirements.

    Federal-State Unemployment Assistance Agreements -Amends the Temporary Extended Unemployment Compensation Act of 2002 to provide for its application to weeks of unemployment ending on June 1, 2003, (currently, May 31, 2003).## All Rights Reserved. No reproduction or distribution without written permission from TheWeekInCongress.com.