Grassley and Thune Introduce Taxpayer Rights Legislation

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Many of our readers may be familiar with Senator Grassley and Senator Thune’s introduction of comprehensive taxpayer bill of rights legislation earlier this week. The Senate press release on the topic is here, a section-by-section summary is here, and the legislation itself is here.

The proposals have been getting a fair bit of press; a You Tube 17 minute video of the news conference is here. The news conference is interesting, with Senator Grassley starting off by generally talking about how no one likes to hear from the IRS but that that people need to have a “fair shake.” Pointing to IRS misconduct and the resulting threats to taxpayer confidence in the system, Senator Grassley discusses how the proposed legislation may help turn the tide on “systemic abuse of taxpayer rights.” Senator Grassley notes that he hopes the proposed legislation will spur further  dialogue on ways to improve the IRS. Senator Thune discusses how he believes that the Lois Lerner scandal and a likely imminent release of a Senate Finance report on the scandal would contribute to the attention being given to the proposals.

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The Senate press release summarizes some of the proposed legislation as well:

•    Significantly increases civil damages and criminal penalties for the unauthorized disclosure or inspection of tax return information and significantly increases civil damages for improper IRS collection activities.

•    Imposes an affirmative duty on the commissioner of the IRS to ensure that IRS employees are familiar with and act in accordance with all taxpayer protections.

•    Updates the “10 deadly sins” established by the IRS Restructuring and Reform Act of 1998, those actions by IRS employees that require mandatory termination, to include official actions taken for political purposes.

•    Permits the Treasury Department to provide status updates, and in certain instances require status updates, regarding investigations into misconduct by IRS employees — or in some circumstances third parties – to taxpayers who are the subject of the misconduct.

•    Puts the bite back into a provision, recently called a “toothless tiger” by Tax Notes, that permits taxpayers to bring a cause of action against the IRS for unauthorized collections actions.

•    Extends the declaratory judgment remedy currently available to 501(c)3 to other 501(c) groups, including 501(c)(4) social welfare organizations, in instances where the IRS fails to act on an application in a timely manner or makes a negative determination as to their tax-exempt status.

•    Prohibits IRS officers and employees from using personal email accounts to conduct official business.

•    Provides additional authority concerning the use of taxpayer information to the IRS for the purpose of locating taxpayers due a tax refund.

•    Requires tax-exempt organizations to file Form 990 electronically and mandates that the IRS make such information available in a timely manner.

•    Imposes new requirements on the IRS with respect to email retention consistent with the existing directive from the Office of Management and Budget and the National Archives.

Some of the proposals in the legislation were in a House bill passed last spring. There are six titles to the bill, listed below with each title having multiple sections. For those wanting to dig deeper I list the titles and provisions below.

Some of the other provisions that I wish to highlight, with a hat tip to Carl Smith for his advance flagging of issues:

Section 404: Requiring that Treasury submit regulations to the National Taxpayer Advocate for the NTA to review and comment on regulations’ impact on taxpayer rights and burdens in advance.

This is I believe important for a number of reasons. I proposed this in an article A New Paradigm for IRS Guidance in the Florida Tax Review a few years ago. It is especially important as Treasury regulations have a major impact on disadvantaged and low-resource taxpayers who have a very difficult time getting their voice heard in the rulemaking process. The use of proxies in rulemaking is an imperfect way to help generate participation and lead to better tax rules up front. The NTA is often the sole or primary voice for those taxpayers and institutionally adding to powers in that process is a step in the right direction

Section 302: Extend time period for contesting levy from 9 months to two years.

We have written previously on the short time frame and hardship that existing law creates. The description of the proposal notes that “[i]n many cases the 9 month period is insufficient for individuals and third parties to discover a wrongful or mistaken levy and seek to remedy it.”

Section 501: Allowing the IRS to tell a spouse of collection efforts against the other spouse on MFJ liabilities upon oral request.

As the summary describes, prior taxpayer rights legislation allowed for “former spouses to make a written request for information on collection activity on a filed joint return. This provision would do away with the written request requirement to allow for the disclosure upon an oral request.”

Section 602: Expand Appeals to have at least one Appeals and Settlement Officer in all states.

According to the summary there are 12 states without an Appeals Officer and 4 additional states have a permanent Appeals Officer but lack a Settlement Officer.

We will keep you posted, as taxpayer rights legislation can have a long shelf life, and some of these proposals may surface in separate pieces of legislation as well.

Taxpayer Bill of Rights Enhancement Act of 2015

TITLE I—TAXPAYER BILL OF RIGHTS AND INTERNAL REVENUE SERVICE ACCOUNTABILITY

Sec. 101. Duty to ensure that IRS employees are familiar with and act in accord with certain taxpayer rights.

Sec. 102. Revisions relating to termination of employment of IRS employees for misconduct.

Sec. 103. Codification of rules for retention of Internal Revenue Service emails.

TITLE II—THE RIGHT TO PRIVACY

Sec. 201. Criminal penalty for unauthorized disclosure or inspection.
Sec. 202. Civil damages for unauthorized disclosure or inspection.
Sec. 203. IRS employees prohibited from using personal email accounts for official business.
Sec. 204. Compliance by contractors with confidentiality safeguards.

TITLE III—THE RIGHT TO APPEAL IN AN INDEPENDENT FORUM AND TO CHALLENGE THE INTERNAL REVENUE SERVICE POSITION AND BE HEARD

Sec. 301. Increase in limitations on civil damages for certain unauthorized collection actions.

Sec. 302. Extension of time limit for contesting IRS levy.
Sec. 303. Expansion of declaratory judgment remedy to tax-exempt organizations.

TITLE IV—THE RIGHT TO A FAIR AND JUST TAX SYSTEM

Sec. 401. Waiver of user fee for installment agreements using automated withdrawals.

Sec. 402. Individuals held harmless on improper levy on individual retirement plan.

Sec. 403. Office of Chief Counsel review of offers-in-compromise.
Sec. 404. Authority of the National Taxpayer Advocate to comment on Treasury regulations.

Sec. 405. Individual estimated tax.

Sec. 406. Corporate estimated tax.

Sec. 407. Increase in large corporation threshold for estimated tax payments.

Sec. 408. Expansion of interest netting.
Sec. 409. Clarification of application of Federal tax deposit penalty.

TITLE V—THE RIGHT TO BE INFORMED

Sec. 501. Collection activities with respect to joint return disclosable to either spouse based on oral request.

Sec. 502. Disclosure of taxpayer identity for tax refund purposes.

Sec. 503. Release of information regarding the status of certain investigations.

Sec. 504. Mandatory electronic filing for annual returns of exempt organizations.

TITLE VI—THE RIGHT TO QUALITY SERVICE

Sec. 601. Free electronic filing.

Sec. 602. Access to appeals.

 

 

 

 

 

 

 

 

 

 

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. As expected, the bill seems seem calculated mainly to address the brouhaha over the denial of 501(c)(3) exemptions to political organizations — the controversy that just won’t seem to die. Others are toothless and will help almost no one. The one that seems like it may do the average delinquent some good is removing the requirement for a written Chief Counsel opinion on every OIC to be accepted. Perhaps we’ll see more than 3% of OICs accepted and average processing time shrink down below 18 months…

  2. Bracket Creep says:

    Russell Haynes, where did you obtain the 3 percent OIC acceptance rate? The 2014 IRS Data Book (Table 16) shows the IRS accepted 27,000 OICs from 68,000 applications. That’s an acceptance rate of approximately 40 percent. In fact, this is the highest acceptance rate since 1999. The increased acceptance rate is a result of provisions in the Fresh Start Initiative that the IRS implemented in early 2011.

    On a side note, taxpayers are also able to use the OIC pre-qualifier tool available on IRS.gov to determine their eligibility.

  3. Bob Kamman says:

    First Grassley and Thune vote for a budget that allows Appeals Officers on “campus” locations hundreds or thousands of miles from taxpayers whose cases they are assigned to avoid meeting in person and instead use phone or video connections, even when dozens of Appeals officers are available locally. Then they pretend it will make a difference if at least one Appeals officer must be available in each state. These guys are totally clueless.

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