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S. 949 (114th): Small Business Taxpayer Bill of Rights Act of 2015


The text of the bill below is as of Apr 15, 2015 (Introduced). The bill was not enacted into law.


II

114th CONGRESS

1st Session

S. 949

IN THE SENATE OF THE UNITED STATES

April 15, 2015

(for himself, Mr. Heller, and Mr. Roberts) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide a taxpayer bill of rights for small businesses.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Small Business Taxpayer Bill of Rights Act of 2015.

(b)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Modification of standards for awarding of costs and certain fees.

Sec. 3. Civil damages allowed for reckless or intentional disregard of internal revenue laws.

Sec. 4. Modifications relating to certain offenses by officers and employees in connection with revenue laws.

Sec. 5. Modifications relating to civil damages for unauthorized inspection or disclosure of returns and return information.

Sec. 6. Interest abatement reviews.

Sec. 7. Ban on ex parte discussions.

Sec. 8. Alternative dispute resolution procedures.

Sec. 9. Extension of time for contesting IRS levy.

Sec. 10. Waiver of installment agreement fee.

Sec. 11. Suspension of running of period for filing petition of spousal relief and collection cases.

Sec. 12. Venue for appeal of spousal relief and collection cases.

Sec. 13. Increase in monetary penalties for certain unauthorized disclosures of information.

Sec. 14. De novo tax court review of claims for equitable innocent spouse relief.

Sec. 15. Ban on raising new issues on appeal.

Sec. 16. Limitation on enforcement of liens against principal residences.

Sec. 17. Additional provisions relating to mandatory termination for misconduct.

Sec. 18. Extension of declaratory judgment procedures to social welfare organizations.

Sec. 19. Review by the Treasury Inspector General for Tax Administration.

2.

Modification of standards for awarding of costs and certain fees

(a)

Small businesses eligible without regard to net worth

Subparagraph (D) of section 7430(c)(4) of the Internal Revenue Code of 1986 is amended by striking and at the end of clause (i)(II), by striking the period at the end of clause (ii) and inserting , and, and by adding at the end the following new clause:

(iii)

in the case of an eligible small business, the net worth limitation in clause (ii) of such section shall not apply.

.

(b)

Eligible small business

Paragraph (4) of section 7430(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

(F)

Eligible small business

For purposes of subparagraph (D)(iii), the term eligible small business means, with respect to any proceeding commenced in a taxable year—

(i)

a corporation the stock of which is not publicly traded,

(ii)

a partnership, or

(iii)

a sole proprietorship,

if the average annual gross receipts of such corporation, partnership, or sole proprietorship for the 3-taxable-year period preceding such taxable year does not exceed $50,000,000. For purposes of applying the test under the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply.

.

(c)

Effective date

The amendments made by this section shall apply to proceedings commenced after the date of the enactment of this Act.

3.

Civil damages allowed for reckless or intentional disregard of internal revenue laws

(a)

Increase in amount of damages

Section 7433(b) of the Internal Revenue Code of 1986 is amended by striking $1,000,000 ($100,000, in the case of negligence) and inserting $3,000,000 ($300,000, in the case of negligence).

(b)

Extension of time To bring action

Section 7433(d)(3) of the Internal Revenue Code of 1986 is amended by striking 2 years and inserting 5 years.

(c)

Effective date

The amendments made by this section shall apply to actions of employees of the Internal Revenue Service after the date of the enactment of this Act.

4.

Modifications relating to certain offenses by officers and employees in connection with revenue laws

(a)

Increase in penalty

Section 7214 of the Internal Revenue Code of 1986 is amended—

(1)

by striking $10,000 in subsection (a) and inserting $25,000, and

(2)

by striking $5,000 in subsection (b) and inserting $10,000.

(b)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

5.

Modifications relating to civil damages for unauthorized inspection or disclosure of returns and return information

(a)

Increase in amount of damages

Subparagraph (A) of section 7431(c)(1) of the Internal Revenue Code of 1986 is amended by striking $1,000 and inserting $10,000.

(b)

Effective date

The amendment made by this section shall apply to inspections and disclosure occurring on and after the date of the enactment of this Act.

6.

Interest abatement reviews

(a)

Filing period for interest abatement cases

(1)

In general

Subsection (h) of section 6404 of the Internal Revenue Code of 1986 is amended—

(A)

by striking Review of denial in the heading and inserting Judicial review, and

(B)

by striking if such action is brought and all that follows in paragraph (1) and inserting

if such action is brought—

(A)

at any time after the earlier of—

(i)

the date of the mailing of the Secretary's final determination not to abate such interest, or

(ii)

the date which is 180 days after the date of the filing with the Secretary (in such form as the Secretary may prescribe) of a claim for abatement under this section, and

(B)

not later than the date which is 180 days after the date described in subparagraph (A)(i).

.

(2)

Effective date

The amendments made by this subsection shall apply to claims for abatement of interest filed with the Secretary after the date of the enactment of this Act.

(b)

Small tax case election for interest abatement cases

(1)

In general

Subsection (f) of section 7463 of the Internal Revenue Code of 1986 is amended—

(A)

by striking and at the end of paragraph (1),

(B)

by striking the period at the end of paragraph (2) and inserting , and, and

(C)

by adding at the end the following new paragraph:

(3)

a petition to the Tax court under section 6404(h) in which the amount of interest abatement sought does not exceed $50,000.

.

(2)

Effective date

The amendments made by this subsection shall apply to—

(A)

cases pending as of the day after the date of the enactment of this Act, and

(B)

cases commenced after such date of enactment.

7.

Ban on ex parte discussions

(a)

In general

Notwithstanding section 1001(a)(4) of the Internal Revenue Service Restructuring and Reform Act of 1998, the Internal Revenue Service shall prohibit any ex parte communications between officers in the Internal Revenue Service Office of Appeals and other Internal Revenue Service employees with respect to any matter pending before such officers.

(b)

Termination of employment for misconduct

Subject to subsection (c), the Commissioner of Internal Revenue shall terminate the employment of any employee of the Internal Revenue Service if there is a final administrative or judicial determination that such employee committed any act or omission prohibited under subsection (a) in the performance of the employee’s official duties. Such termination shall be a removal for cause on charges of misconduct.

(c)

Determination of commissioner

(1)

In general

The Commissioner of Internal Revenue may take a personnel action other than termination for an act prohibited under subsection (a).

(2)

Discretion

The exercise of authority under paragraph (1) shall be at the sole discretion of the Commissioner of Internal Revenue and may not be delegated to any other officer. At the sole discretion of the Commissioner of Internal Revenue, such Commissioner may establish a procedure which will be used to determine whether an individual should be referred to the Commissioner of Internal Revenue for a determination by the Commissioner under paragraph (1).

(3)

No appeal

Any determination of the Commissioner of Internal Revenue under this subsection may not be appealed in any administrative or judicial proceeding.

(d)

TIGTA reporting of termination or mitigation

Section 7803(d)(1)(E) of the Internal Revenue Code of 1986 is amended by inserting or section 7 of the Small Business Taxpayer Bill of Rights Act of 2015 after 1998.

8.

Alternative dispute resolution procedures

(a)

In general

Section 7123 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(c)

Availability of dispute resolutions

(1)

In general

The procedures prescribed under subsection (b)(1) and the pilot program established under subsection (b)(2) shall provide that a taxpayer may request mediation or arbitration in any case unless the Secretary has specifically excluded the type of issue involved in such case or the class of cases to which such case belongs as not appropriate for resolution under such subsection. The Secretary shall make any determination that excludes a type of issue or a class of cases public within 5 working days and provide an explanation for each determination.

(2)

Independent mediators

(A)

In general

The procedures prescribed under subsection (b)(1) shall provide the taxpayer an opportunity to elect to have the mediation conducted by an independent, neutral individual not employed by the Internal Revenue Service Office of Appeals.

(B)

Cost and selection

(i)

In general

Any taxpayer making an election under subparagraph (A) shall be required—

(I)

to share the costs of such independent mediator equally with the Internal Revenue Service Office of Appeals, and

(II)

to limit the selection of the mediator to a roster of recognized national or local neutral mediators.

(ii)

Exception

Clause (i)(I) shall not apply to any taxpayer who is an individual or who was a small business in the preceding calendar year if such taxpayer had an adjusted gross income that did 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, in the taxable year preceding the request.

(iii)

Small business

For purposes of clause (ii), the term small business has the meaning given such term under section 41(b)(3)(D)(iii).

(3)

Availability of process

The procedures prescribed under subsection (b)(1) and the pilot program established under subsection (b)(2) shall provide the opportunity to elect mediation or arbitration at the time when the case is first filed with the Office of Appeals and at any time before deliberations in the appeal commence.

.

(b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act.

9.

Extension of time for contesting IRS levy

(a)

Extension of time for return of property subject to levy

Subsection (b) of section 6343 of the Internal Revenue Code of 1986 is amended by striking 9 months and inserting 3 years.

(b)

Period of limitation on suits

Subsection (c) of section 6532 of the Internal Revenue Code of 1986 is amended—

(1)

in paragraph (1) by striking 9 months and inserting 3 years, and

(2)

in paragraph (2) by striking 9-month and inserting 3-year.

(c)

Effective date

The amendments made by this section shall apply to—

(1)

levies made after the date of the enactment of this Act, and

(2)

levies made on or before such date if the 9-month period under section 6343(b) of the Internal Revenue Code of 1986 (without regard to this section) has not expired as of such date.

10.

Waiver of installment agreement fee

(a)

In general

Section 6159 of the Internal Revenue Code of 1986 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

(f)

Waiver of installment agreement fee

The Secretary shall waive the fees imposed on installment agreements under this section for any taxpayer with an adjusted gross income that does 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, and who has agreed to make payments under the installment agreement by electronic payment through a debit instrument.

.

(b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act.

11.

Suspension of running of period for filing petition of spousal relief and collection cases

(a)

Petitions for spousal relief

(1)

In general

Subsection (e) of section 6015 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(6)

Suspension of running of period for filing petition in title 11 cases

In the case of a person who is prohibited by reason of a case under title 11, United States Code, from filing a petition under paragraph (1)(A) with respect to a final determination of relief under this section, the running of the period prescribed by such paragraph for filing such a petition with respect to such final determination shall be suspended for the period during which the person is so prohibited from filing such a petition, and for 60 days thereafter.

.

(2)

Effective date

The amendment made by this subsection shall apply to petitions filed under section 6015(e) of the Internal Revenue Code of 1986 after the date of the enactment of this Act.

(b)

Collection proceedings

(1)

In general

Subsection (d) of section 6330 of the Internal Revenue Code of 1986 is amended—

(A)

by striking appeal such determination to the Tax Court in paragraph (1) and inserting petition the Tax Court for review of such determination,

(B)

by striking Judicial review of determination in the heading of paragraph (1) and inserting Petition for review by Tax Court,

(C)

by redesignating paragraph (2) as paragraph (3), and

(D)

by inserting after paragraph (1) the following new paragraph:

(2)

Suspension of running of period for filing petition in title 11 cases

In the case of a person who is prohibited by reason of a case under title 11, United States Code, from filing a petition under paragraph (1) with respect to a determination under this section, the running of the period prescribed by such subsection for filing such a petition with respect to such determination shall be suspended for the period during which the person is so prohibited from filing such a petition, and for 30 days thereafter.

.

(2)

Conforming amendment

Subsection (c) of section 6320 of such Code is amended by striking (2)(B) and inserting (3)(B).

(3)

Effective date

The amendments made by this subsection shall apply to petitions filed under section 6330 of the Internal Revenue Code of 1986 after the date of the enactment of this Act.

12.

Venue for appeal of spousal relief and collection cases

(a)

In general

Paragraph (1) of section 7482(b) of the Internal Revenue Code of 1986 is amended—

(1)

by striking or at the end of subparagraph (E),

(2)

by striking the period at the end of subparagraph (F)(ii) and inserting a comma, and

(3)

by inserting after subparagraph (F) the following new subparagraphs:

(G)

in the case of a petition under section 6015(e), the legal residence of the petitioner, or

(H)

in the case of a petition under section 6320 or 6330—

(i)

the legal residence of the petitioner if the petitioner is an individual, and

(ii)

the principal place of business or principal office or agency if the petitioner is an entity other than an individual.

.

(b)

Effective date

The amendments made by this section shall apply to petitions filed after the date of enactment of this Act.

13.

Increase in monetary penalties for certain unauthorized disclosures of information

(a)

In general

Paragraphs (1), (2), (3), and (4) of section 7213(a) of the Internal Revenue Code of 1986 are each amended by striking $5,000 and inserting $10,000.

(b)

Effective date

The amendments made by this section shall apply to disclosures made after the date of the enactment of this Act.

14.

De novo tax court review of claims for equitable innocent spouse relief

(a)

In general

Subparagraph (A) of section 6015(e)(1) of the Internal Revenue Code of 1986 is amended by adding at the end the following new flush sentence:

Any review of a determination by the Secretary with respect to a claim for equitable relief under subsection (f) 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.

15.

Ban on raising new issues on appeal

(a)

In general

Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

7529.

Prohibition on Internal Revenue Service raising new issues in an internal appeal

(a)

In general

In reviewing an appeal of any determination initially made by the Internal Revenue Service, the Internal Revenue Service Office of Appeals may not consider or decide any issue that is not within the scope of the initial determination.

(b)

Certain issues deemed outside of scope of determination

For purposes of subsection (a), the following matters shall be considered to be not within the scope of a determination:

(1)

Any issue that was not raised in a notice of deficiency or an examiner's report which is the subject of the appeal.

(2)

Any deficiency in tax which was not included in the initial determination.

(3)

Any theory or justification for a tax deficiency which was not considered in the initial determination.

(c)

No inference with respect to issues raised by taxpayers

Nothing in this section shall be construed to provide any limitation in addition to any limitations in effect on the date of the enactment of this section on the right of a taxpayer to raise an issue, theory, or justification on an appeal from a determination initially made by the Internal Revenue Service that was not within the scope of the initial determination.

.

(b)

Clerical amendment

The table of sections for chapter 77 of such Code is amended by adding at the end the following new item:

Sec. 7529. Prohibition on Internal Revenue Service raising new issues in an internal appeal.

.

(c)

Effective date

The amendments made by this section shall apply to matters filed or pending with the Internal Revenue Service Office of Appeals on or after the date of the enactment of this Act.

16.

Limitation on enforcement of liens against principal residences

(a)

In general

Section 7403(a) of the Internal Revenue Code of 1986 is amended—

(1)

by striking In any case and inserting the following:

(1)

In general

In any case

, and

(2)

by adding at the end the following new paragraph:

(2)

Limitation with respect to principal residence

(A)

In general

Paragraph (1) shall not apply to any property used as the principal residence of the taxpayer (within the meaning of section 121) unless the Secretary of the Treasury makes a written determination that—

(i)

all other property of the taxpayer, if sold, is insufficient to pay the tax or discharge the liability, and

(ii)

such action will not create an economic hardship for the taxpayer.

(B)

Delegation

For purposes of this paragraph, the Secretary of the Treasury may not delegate any responsibilities under subparagraph (A) to any person other than—

(i)

the Commissioner of Internal Revenue, or

(ii)

a district director or assistant district director of the Internal Revenue Service.

.

(b)

Effective date

The amendments made by this section shall apply to actions filed after the date of the enactment of this Act.

17.

Additional provisions relating to mandatory termination for misconduct

(a)

Termination of unemployment for inappropriate review of tax-Exempt status

Section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking and at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting ; and, and by adding at the end the following new paragraph:

(11)

in the case of any review of an application for tax-exempt status by an organization described in section 501(c) of the Internal Revenue Code of 1986, developing or using any methodology that applies disproportionate scrutiny to any applicant based on the ideology expressed in the name or purpose of the organization.

.

(b)

Mandatory unpaid administrative leave for misconduct

Paragraph (1) of Section 1203(c) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by adding at the end the following new sentence: Notwithstanding the preceding sentence, if the Commissioner of Internal Revenue takes a personnel action other than termination for an act or omission described in subsection (b), the Commissioner shall place the employee on unpaid administrative leave for a period of not less than 30 days..

(c)

Limitation on alternative punishment

Paragraph (1) of section 1203(c) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking The Commissioner and inserting Except in the case of an act or omission described in subsection (b)(3)(A), the Commissioner.

18.

Extension of declaratory judgment procedures to social welfare organizations

(a)

In general

Section 7428(a)(1) of the Internal Revenue Code of 1986 is amended by striking or at the end of subparagraph (C) and by adding at the end the following new subparagraph:

(E)

with respect to the initial classification or continuing classification of an organization described in section 501(c)(4) which is exempt from tax under section 501(a), or

.

(b)

Effective date

The amendments made by this section shall apply with respect to pleading filed after the date of the enactment of this Act.

19.

Review by the Treasury Inspector General for Tax Administration

(a)

Review

Subsection (k)(1) of section 8D of the Inspector General Act of 1978 (5 U.S.C. App.) is amended—

(1)

in subparagraph (C), by striking and at the end;

(2)

by redesignating subparagraph (D) as subparagraph (E);

(3)

by inserting after subparagraph (C) the following new subparagraph:

(D)

shall—

(i)

review any criteria employed by the Internal Revenue Service to select tax returns (including applications for recognition of tax-exempt status) for examination or audit, assessment or collection of deficiencies, criminal investigation or referral, refunds for amounts paid, or any heightened scrutiny or review in order to determine whether the criteria discriminates against taxpayers on the basis of race, religion, or political ideology; and

(ii)

consult with the Internal Revenue Service on recommended amendments to such criteria in order to eliminate any discrimination identified pursuant to the review described in clause (i); and

; and

(4)

in subparagraph (E), as so redesignated, by striking and (C) and inserting (C), and (D).

(b)

Semiannual Report

Subsection (g) of such section is amended by adding at the end the following new paragraph:

(3)

Any semiannual report made by the Treasury Inspector General for Tax Administration that is required pursuant to section 5(a) shall include—

(A)

a statement affirming that the Treasury Inspector General for Tax Administration has reviewed the criteria described in subsection (k)(1)(D) and consulted with the Internal Revenue Service regarding such criteria; and

(B)

a description and explanation of any such criteria that was identified as discriminatory by the Treasury Inspector General for Tax Administration.

.