S. 3355 (112th): Taxpayer Bill of Rights Act of 2012

112th Congress, 2011–2013. Text as of Jun 28, 2012 (Introduced).

Status & Summary | PDF | Source: GPO

II

112th CONGRESS

2d Session

S. 3355

IN THE SENATE OF THE UNITED STATES

June 28, 2012

(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.

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.

I

Taxpayer Rights and Obligations

101.

Statement of taxpayer rights and obligations

(a)

In general

Chapter 77 is amended by adding at the end the following new section:

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.

II

Preparation of Tax Returns

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:

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.

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.

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:

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.

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.

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:

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.

III

Improving Taxpayer Services

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.

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.

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.

.

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.

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.

306.

Taxpayer advocate directives

(a)

In general

Subchapter A of chapter 80 is amended by adding at the end the following new section:

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.

.

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).

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).

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).

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.