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H.R. 1200: Stop CHEATERS Act


The text of the bill below is as of Feb 22, 2021 (Introduced).


I

117th CONGRESS

1st Session

H. R. 1200

IN THE HOUSE OF REPRESENTATIVES

February 22, 2021

introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes.

1.

Short title

This Act may be cited as the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly Act or the Stop CHEATERS Act.

2.

Policy of Congress

It is the policy of Congress that—

(1)

tax compliance, to raise revenue for national needs, restore fairness, and protect the integrity of the tax system, high-income United States citizens and corporations should pay all of the taxes they owe,

(2)

tax compliance, as indicated by the fraction of taxes due that are reported and paid, should be comparable among groups of taxpayers regardless of the legal entity,

(3)

the Internal Revenue Service should be given resources to increase audits and enforcement of tax compliance of high-income individuals to reduce the tax gap, with an emphasis on the auditing and enforcement of tax compliance by individuals with gross income of not less than $1,000,000 and of large corporations, and to modernize its technology in order to better serve taxpayers and enforce the tax laws,

(4)

pursuing non-filers is one of the most efficient enforcement strategies of the Internal Revenue Service because issuing non-filer notices can be a cost-effective tool that requires little more than automated notices,

(5)

priorities for actions and resources to improve compliance should be guided by the relative revenue loss from non-compliance,

(6)

it should be the goal of the Internal Revenue Service that, by the tenth tax year after the effective date of this statute, the net tax gap, as measured by the fraction of taxes that are due that are not reported and paid, should be reduced by at least one-third, as compared with the fraction estimated in the most recent Internal Revenue Service study prior to enactment of this statute, and

(7)

it should be the goal of the Internal Revenue Service to provide quality, timely, and accurate assistance to all taxpayers interacting with the Internal Revenue Service.

3.

Additional appropriations for the Internal Revenue Service

(a)

Enforcement

(1)

There is appropriated each amount listed in paragraph (2) for additional amounts for the Department of the Treasury—Internal Revenue Service—Enforcement account for the salaries and expenses of additional staff to strengthen the enforcement capacity of the IRS and increase audits yearly until 2025 so that the following minimum targets are reached:

(A)

50 percent of individual tax returns with a disclosed total income of not less than $10,000,000.

(B)

33 percent of individual tax returns with a disclosed total income of not less than $5,000,000 and less than $10,000,000.

(C)

20 percent of individual tax returns with a disclosed total income of not less than $1,000,000 and less than $5,000,000.

(D)

95 percent of corporations with more than $20,000,000,000 in assets reported on Schedule L.

(E)

40 percent of returns reflecting taxes related to estates larger than $10,000,000.

(F)

1.2 percent of returns reflecting taxes related to gifts.

(G)

0.22 percent of tax returns filed by an employer with respect to employee compensation.

(2)

The amounts listed in this paragraph are the following:

(A)

For fiscal year 2022, $2,000,000,000.

(B)

For fiscal year 2023, $4,000,000,000.

(C)

For fiscal year 2024, $5,000,000,000.

(D)

For fiscal year 2025, $8,000,000,000.

(E)

For fiscal year 2026, $8,500,000,000.

(F)

For fiscal year 2027, $8,500,000,000.

(G)

For fiscal year 2028, $8,500,000,000.

(H)

For fiscal year 2029, $8,500,000,000.

(I)

For fiscal year 2030, $8,500,000,000.

(J)

For fiscal year 2031, $8,500,000,000.

(b)

Taxpayer services

There are appropriated the following additional amounts for the Department of the Treasury—Internal Revenue Service—Taxpayer Services account to carry out this Act:

(1)

For fiscal year 2022, $1,000,000,000.

(2)

For fiscal year 2023, $1,000,000,000.

(3)

For fiscal year 2024, $1,000,000,000.

(4)

For fiscal year 2025, $2,500,000,000.

(5)

For fiscal year 2026, $2,500,000,000.

(6)

For fiscal year 2027, $2,500,000,000.

(7)

For fiscal year 2028, $2,500,000,000.

(8)

For fiscal year 2029, $2,500,000,000.

(9)

For fiscal year 2030, $2,500,000,000.

(10)

For fiscal year 2031, $2,500,000,000.

(c)

Operations support

There are appropriated the following additional amounts for the Department of the Treasury—Internal Revenue Service—Operations Support account to overhaul outdated technology of the IRS and improve the capacity of the IRS to detect fraud related to income from a trade or business:

(1)

For fiscal year 2022, $1,000,000,000.

(2)

For fiscal year 2023, $1,000,000,000.

(3)

For fiscal year 2024, $1,000,000,000.

(4)

For fiscal year 2025, $1,000,000,000.

(5)

For fiscal year 2026, $1,000,000,000.

(6)

For fiscal year 2027, $1,000,000,000.

(7)

For fiscal year 2028, $1,000,000,000.

(8)

For fiscal year 2029, $1,000,000,000.

(9)

For fiscal year 2030, $1,000,000,000.

(10)

For fiscal year 2031, $1,000,000,000.

(d)

Availability

Each additional amount appropriated by this section shall remain available until expended.

4.

Returns relating to certain business transactions

(a)

In general

Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

6050Z.

Returns relating to certain transactions

(a)

Requirement of reporting

Any bank or other financial institution prescribed by the Secretary by regulation which, in the course of any calendar year, maintains an account for a covered taxpayer shall make the information return described in subsection (b) with respect to each such taxpayer at such time as the Secretary may by regulations prescribe.

(b)

Return

A return is described in this subsection if such return—

(1)

is in such form as the Secretary may prescribe, and

(2)

contains—

(A)

the name, address, and TIN of the covered taxpayer on behalf of whom such bank or financial institution managed an account,

(B)

a summary report of total deposits received and total withdrawals made in each such account of such covered taxpayer, and

(C)

such other information as the Secretary may require.

(c)

Covered account

(1)

In general

For purposes of this section, the term covered account means any account belonging to a covered taxpayer the Internal Revenue Service identifies to a bank or financial institution via electronic communication with such bank or financial institution.

(2)

Regulations and guidance

The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to facilitate—

(A)

the identification of a covered account by the Internal Revenue Service,

(B)

the exchange of electronic information between the Internal Revenue Service and a bank or financial institution, and

(C)

the reconciliation of covered accounts with the tax return of a covered taxpayer.

(d)

Covered taxpayer

For purposes of this section, the term covered taxpayer means—

(1)

an individual who, with respect to the applicable taxable year—

(A)

has an adjusted gross income of $400,000 or more, and

(B)

has any income that is not otherwise reported on any other return or statement submitted to the Internal Revenue Service by a third party, or

(2)

a pass-thru business entity, including a partnership or S corporation, in which an individual described in paragraph (1) has an ownership interest.

(e)

Statement To be furnished to taxpayers with respect to whom information is required

(1)

In general

Every bank or other financial institution prescribed by the Secretary by regulation that is required to make a return under subsection (a) shall furnish to a covered taxpayer whose identity is required to be set forth in such return a written statement showing the name, address, and phone number of the information contact of the qualified entity required to make such a return.

(2)

Furnishing of information

The written statement required under paragraph (1) shall be furnished to the taxpayer on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.

(f)

Applicable taxable year

For purposes of this section, the term applicable taxable year means the taxable year ending in the calendar year with respect to which a report is made under subsection (a).

(g)

Regulations and guidance

The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including guidance that facilitates the following objectives:

(1)

Annually on a date to be determined by the Secretary, banks and financial institutions will provide to the Internal Revenue Service an electronic file containing a complete list of the accounts of covered taxpayers and their corresponding taxpayer ID numbers.

(2)

The Secretary shall compare the files described in paragraph (1) with the tax returns of taxpayers and use such comparison to determine if a taxpayer is a covered taxpayer, and inform the proper bank or financial institution if such taxpayer is a covered taxpayer.

(3)

Banks and financial institutions shall issue a 1099 or other Form, as designated by the Secretary, to accounts identified under paragraph (2).

.

(b)

Clerical amendment

The table of sections for subchapter A of chapter 61 of such Code is amended by adding at the end the following new item:

Sec. 6050Z. Returns relating to certain transactions.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

5.

Reports to Congress

Not later than 1 year after the date of the enactment of this Act and every 2 years thereafter, the Commissioner of the Internal Revenue Service, after consultation with the Comptroller General, shall submit to Congress a report containing—

(1)

a comprehensive description of—

(A)

a plan to—

(i)

shift more of the auditing and enforcement assets of the Internal Revenue Service toward high-income tax filers, and

(ii)

recruit and retain auditors with the skills essential to audit high-income individuals, and

(B)

the progress made in implementing such plan,

(2)

an estimate of revenue loss from offshore tax evasion, and

(3)

information with respect to revenue loss due to such tax evasion, organized by groups of taxpayers arranged by the true income level of such taxpayers, as determined by the Secretary.

6.

IRS Enforcement penalties increased for certain taxpayers

(a)

In general

Subsection (a) of section 6662 of the Internal Revenue Code of 1986 is amended to read as follows:

(a)

Imposition of penalty

(1)

In general

If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to the applicable percentage of the portion of the underpayment to which this section applies.

(2)

Applicable percentage

For purposes of paragraph (1), the term applicable percentage means—

(A)

in the case of a taxpayer with a taxable income of less than $2 million, 20 percent,

(B)

in the case of a taxpayer with a taxable income greater than $2 million but less than $5 million, 30 percent, and

(C)

in the case of a taxpayer with a taxable income greater than $5 million, 40 percent.

.

(b)

Effective date

The amendment made by this section shall apply to returns on the due date which (determined without regard to extensions) is after December 31, 2022.