RRA 1998 House Ways Report Page 5

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Report on HR 4297
Tax Reform Act of 2005
Tax Relief Act of 2005

Subtitle F --Procedure and Administration

CHAPTER 61 --INFORMATION AND RETURNS

Subchapter A --Returns and Records

PART II --TAX RETURNS OR STATEMENTS

Subpart B --Income Tax Returns

Sec. 6012. Persons required to make returns of income.

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Sec. 6015. Innocent spouse relief; petition to Tax Court.

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SEC. 6011. GENERAL REQUIREMENT OF RETURN, STATEMENT, OR LIST.

(a) ***

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(f) PROMOTION OF ELECTRONIC FILING. --

(1) IN GENERAL. --The Secretary is authorized to promote the benefits of and encourage the use of electronic tax administration programs, as they become available, through the use of mass communications and other means.

(2) INCENTIVES. --The Secretary may implement procedures to provide for the payment of appropriate incentives for electronically filed returns.

[(f)] (g) INCOME, ESTATE, AND GIFT TAXES. --For requirement that returns of income, estate, and gift taxes be made whether or not there is tax liability, see subparts B and C.

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SEC. 6013. JOINT RETURNS OF INCOME TAX BY HUSBAND AND WIFE.

(a) ***

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[(e) SPOUSE RELIEVED OF LIABILITY IN CERTAIN CASES. --

[(1) IN GENERAL. --Under regulations prescribed by the Secretary, if --

[(A) a joint return has been made under this section for a taxable year,

[(B) on such return there is a substantial understatement of tax attributable to grossly erroneous items of one spouse,

[(C) the other spouse establishes that in signing the return he or she did not know, and had no reason to know, that there was such substantial understatement, and

[(D) taking into account all the facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable year attributable to such substantial understatement, then the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such substantial understatement.

[(2) GROSSLY ERRONEOUS ITEMS. --For purposes of this subsection, the term "grossly erroneous items" means, with respect to any spouse --

[(A) any item of gross income attributable to such spouse which is omitted from gross income, and

[(B) any claim of a deduction, credit, or basis by such spouse in an amount for which there is no basis in fact or law.

[(3) SUBSTANTIAL UNDERSTATEMENT. --For purposes of this subsection, the term "substantial understatement" means any understatement (as defined in section 6662(d)(2)(A)) which exceeds $500.

[(4) UNDERSTATEMENT MUST EXCEED SPECIFIED PERCENTAGE OF SPOUSE'S INCOME. --

[(A) ADJUSTED GROSS INCOME OF $20,000 OR LESS. --If the spouse's adjusted gross income for the preadjustment year is $20,000 or less, this subsection shall apply only if the liability described in paragraph (1) is greater than 10 percent of such adjusted gross income.

[(B) ADJUSTED GROSS INCOME OF MORE THAN $20,000. --If the spouse's adjusted gross income for the preadjustment year is more than $20,000, subparagraph (A) shall be applied by substituting "25 percent" for "10 percent".

[(C) PREADJUSTMENT YEAR. --For purposes of this paragraph, the term "preadjustment year" means the most recent taxable year of the spouse ending before the date the deficiency notice is mailed.

[(D) COMPUTATION OF SPOUSE'S ADJUSTED GROSS INCOME. --If the spouse is married to another spouse at the close of the preadjustment year, the spouse's adjusted gross income shall include the income of the new spouse (whether or not they file a joint return).

[(E) EXCEPTION FOR OMISSIONS FROM GROSS INCOME. --This paragraph shall not apply to any liability attributable to the omission of an item from gross income.

[(5) SPECIAL RULE FOR COMMUNITY PROPERTY INCOME. --For purposes of this subsection, the determination of the spouse to whom items of gross income (other than gross income from property) are attributable shall be made without regard to community property laws.]

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SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.

(a) SPOUSE RELIEVED OF LIABILITY IN CERTAIN CASES. --

(1) IN GENERAL. --Under procedures prescribed by the Secretary, if --

(A) a joint return has been made under section 6013 for a taxable year,

(B) on such return there is an understatement of tax attributable to erroneous items of 1 spouse,

(C) the other spouse establishes that in signing the return he or she did not know, and had no reason to know, that there was such understatement,

(D) taking into account all the facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable year attributable to such understatement, and

(E) the other spouse claims (in such form as the Secretary may prescribe) the benefits of this subsection not later than the date which is 2 years after the date of the assessment of such deficiency, then the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement. (2) APPORTIONMENT OF RELIEF. --If a spouse who, but for paragraph (1)(C), would be relieved of liability under paragraph (1), establishes that in signing the return such spouse did not know, and had no reason to know, the extent of such understatement, then such spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent that such liability is attributable to the portion of such understatement of which such spouse did not know and had no reason to know.

(3) UNDERSTATEMENT. --For purposes of this subsection, the term "understatement" has the meaning given to such term by section 6662(d)(2)(A).

(4) SPECIAL RULE FOR COMMUNITY PROPERTY INCOME. --For purposes of this subsection, the determination of the spouse to whom items of gross income (other than gross income from property) are attributable shall be made without regard to community property laws.

(b) PETITION FOR REVIEW BY TAX COURT. --In the case of an individual who has filed a claim under subsection (a) within the period specified in subsection (a)(1)(E) --

(1) IN GENERAL. --Such individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine such claim if such petition is filed during the 90-day period beginning on the earlier of --

(A) the date which is 6 months after the date such claim is filed with the Secretary, or

(B) the date on which the Secretary mails by certified or registered mail a notice to such individual denying such claim. Such 90-day period shall be determined by not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day of such period.

(2) RESTRICTIONS APPLICABLE TO COLLECTION OF ASSESSMENT. --

(A) IN GENERAL. --Except as otherwise provided in section 6851 or 6861, no levy or proceeding in court for collection of any assessment to which such claim relates shall be made, begun, or prosecuted, until the expiration of the 90-day period described in paragraph (1), nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Rules similar to the rules of section 7485 shall apply with respect to the collection of such assessment.

(B) AUTHORITY TO ENJOIN COLLECTION ACTIONS. --Notwithstanding the provisions of section 7421(a), the beginning of such proceeding or levy during the time the prohibition under subparagraph (A) is in force may be enjoined by a proceeding in the proper court, including the Tax Court. The Tax Court shall have no jurisdiction to enjoin any action or proceeding under this paragraph unless a timely petition for a determination of such claim has been filed and then only in respect of the amount of the assessment to which such claim relates.

(C) JEOPARDY COLLECTION. --If the Secretary makes a finding that the collection of the tax is in jeopardy, nothing in this subsection shall prevent the immediate collection of such tax.

(c) SUSPENSION OF RUNNING OF PERIOD OF LIMITATIONS. --The running of the period of limitations in section 6502 on the collection of the assessment to which the petition under subsection (b) relates shall be suspended for the period during which the Secretary is prohibited by subsection (b) from collecting by levy or a proceeding in court and for 60 days thereafter.

(d) APPLICABLE RULES --

(1) ALLOWANCE OF APPLICATION. --Except as provided in paragraph (2), notwithstanding any other law or rule of law (other than section 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.

(2) RES JUDICATA. --In the case of any claim under subsection (a), the determination of the Tax Court in any prior proceeding for the same taxable periods in which the decision has become final, shall be conclusive except with respect to the qualification of the spouse for relief which was not an issue in such proceeding. The preceding sentence shall not apply if the Tax Court determines that the spouse participated meaningfully in such prior proceeding.

(3) LIMITATION ON TAX COURT JURISDICTION. --If a suit for refund is begun by either spouse pursuant to section 6532, the Tax Court shall lose jurisdiction of the spouse's action under this section to whatever extent jurisdiction is acquired by the district court or the United States Court of Federal Claims over the taxable years that are the subject of the suit for refund.

SEC. 6061. SIGNING OF RETURNS AND OTHER DOCUMENTS.

[Except as otherwise provided by]

(a) General Rule. --Except as otherwise provided by subsection (b) and sections 6062 and 6063, any return, statement, or other document required to be made under any provision of the internal revenue laws or regulations shall be signed in accordance with forms or regulations prescribed by the Secretary.

(b) ELECTRONIC SIGNATURES. --

(1) IN GENERAL. --The Secretary shall develop procedures for the acceptance of signatures in digital or other electronic form. Until such time as such procedures are in place, the Secretary may waive the requirement of a signature for all returns or classes of returns, or may provide for alternative methods of subscribing all returns, declarations, statements, or other documents required or permitted to be made or written under internal revenue laws and regulations.

(2) TREATMENT OF ALTERNATIVE METHODS. --Notwithstanding any other provision of law, any return, declaration, statement or other document filed without signature under the authority of this subsection or verified, signed or subscribed under any method adopted under paragraph (1) shall be treated for all purposes (both civil and criminal, including penalties for perjury) in the same manner as though signed and subscribed. Any such return, declaration, statement or other document shall be presumed to have been actually submitted and subscribed by the person on whose behalf it was submitted.

(3) PUBLISHED GUIDANCE. --The Secretary shall publish guidance as appropriate to define and implement any waiver of the signature requirements.

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PART V --TIME FOR FILING RETURNS AND OTHER DOCUMENTS

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SEC. 6071. TIME FOR FILING RETURNS AND OTHER DOCUMENTS.

(a) GENERAL RULE. --When not otherwise provided for by this title, the Secretary shall by regulations prescribe the time for filing any return, statement, or other document required by this title or by regulations.

(b) ELECTRONICALLY FILED INFORMATION RETURNS. --Returns made under subparts B and C of part III of this subchapter which are filed electronically shall be filed on or before March 31 of the year following the calendar year to which such returns relate.

[(b)] (c) SPECIAL TAXES. --For payment of special taxes before engaging in certain trades and businesses, see section 4901 and section 5142.

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Subchapter B --Miscellaneous Provisions

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SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN INFORMATION.

(a) ***

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(1) DISCLOSURE OF RETURNS AND RETURN INFORMATION FOR PURPOSES OTHER THAN TAX ADMINISTRATION. --

(1) ***

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(17) DISCLOSURE TO NATIONAL ARCHIVES AND RECORDS ADMINISTRATION. --The Secretary shall, upon written request from the Archivist of the United States, disclose or authorize the disclosure of returns and return information to officers and employees of the National Archives and Records Administration for purposes of, and only to the extent necessary in, the appraisal of records for destruction or retention. No such officer or employee shall, except to the extent authorized by subsections (f), (i)(7), or (p), disclose any return or return information disclosed under the preceding sentence to any person other than to the Secretary, or to another officer or employee of the National Archives and Records Administration whose official duties require such disclosure for purposes of such appraisal.

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(p) PROCEDURE AND RECORDKEEPING. --

(1) ***

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(3) RECORDS OF INSPECTION AND DISCLOSURE. --

(A) SYSTEM OF RECORDKEEPING. --Except as otherwise provided by this paragraph, the Secretary shall maintain a permanent system of standardized records or accountings of all requests for inspection or disclosure of returns and return information (including the reasons for and dates of such requests) and of returns and return information inspected or disclosed under this section. Notwithstanding the provisions of section 552a(c) of title 5, United States Code, the Secretary shall not be required to maintain a record or accounting of requests for inspection or disclosure of returns and return information, or of returns and return information inspected or disclosed, under the authority of subsections (c), (e), (h)(1), (3)(A), or (4), (i)(4), or (7)(A)(ii), (k)(1), (2), (6), or (8), (l)(1), (4)(B), (5), (7), (8), (9), (10), (11), (12), (13), (14), (15), [or (16)] (16), or (17), (m) or (n). The records or accountings required to be maintained under this paragraph shall be available for examination by the Joint Committee on Taxation or the Chief of Staff of such joint committee. Such record or accounting shall also be available for examination by such person or persons as may be, but only to the extent, authorized to make such examination under section 552a(c)(3) of title 5, United States Code.

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(4) SAFEGUARDS. --Any Federal agency described in subsection (h)(2), (h)(6), (i)(1), (2), (3), or (5), (j)(1) or (2), (k)(8), (l)(1), (2), (3), (5), (11), (13), [or (14)], (14), or (17) or (o)(1), the General Accounting Office, or any agency, body, or commission described in subsection (d), (i)(3)(B)(i) or (l)(6), (7), (8), (9), (10), (12) or (15) shall, as a condition for receiving returns or return information --

(A) ***

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(F) upon completion of use of such returns or return information --

(i) ***

(ii) in the case of an agency described in subsections (h)(2), (h)(6), (i)(1), (2), (3), or (5), (j)(1) or (2), (k)(8), (l)(1), (2), (3), (5), (10), (11), (12), (13), (14), [or (15)], (15) or (17) or (o)(1), or the General Accounting Office, either --

(I) ***

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CHAPTER 63 --ASSESSMENT

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Subchapter A --In General

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SEC. 6201. ASSESSMENT AUTHORITY.

(a) ***

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[(d) REQUIRED REASONABLE VERIFICATION OF INFORMATION RETURNS. --In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return filed with the Secretary under subpart B or C of part III of subchapter A of chapter 61 by a third party and the taxpayer has fully cooperated with the Secretary (including providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer as reasonably requested by the Secretary), the Secretary shall have the burden of producing reasonable and probative information concerning such deficiency in addition to such information return.]

[(e)] (d) DEFICIENCY PROCEEDINGS. --For special rules applicable to deficiencies of income, estate, gift, and certain excise taxes, see subchapter B.

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Subchapter B --Deficiency Procedures in the Case of Income, Estate, Gift, and Certain Excise Taxes

SEC. 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX COURT.

(a) TIME FOR FILING PETITION AND RESTRICTION ON ASSESSMENT. --Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court[, including the Tax Court.] including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection. The Tax Court shall have no jurisdiction [to enjoin any action or proceeding] to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition. Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.

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Subchapter C --Tax Treatment of Partnership Items

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SEC. 6230. ADDITIONAL ADMINISTRATIVE PROVISIONS.

(a) ***

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(c) CLAIMS ARISING OUT OF ERRONEOUS COMPUTATIONS, ETC. --

(1) ***

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(5) RULES FOR SEEKING INNOCENT SPOUSE RELIEF. --

(A) IN GENERAL. --The spouse of a partner may file a claim for refund on the ground that the Secretary failed to relieve the spouse under section [6013(e)] 6015 from a liability that is attributable to an adjustment to a partnership item.

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CHAPTER 64 --COLLECTION

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Subchapter D --Seizure of Property for Collection of Taxes

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SEC. 6344. CROSS REFERENCES.

(a) ***

(b) DELINQUENT COLLECTION OFFICERS. --

For distraint proceedings against delinquent internal revenue officers, see [section 7803(d)] section 7804(c).

CHAPTER 66 --LIMITATIONS

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Subchapter A --Limitations on Assessment and Collection

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SEC. 6501. LIMITATIONS ON ASSESSMENT AND COLLECTION.

(a) ***

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(c) EXCEPTIONS. --

(1) ***

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(4) EXTENSION BY AGREEMENT. --[Where]

(A) IN GENERAL. --Where, before the expiration of the time prescribed in this section for the assessment of any tax imposed by this title, except the estate tax provided in chapter 11, both the Secretary and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

(B) NOTICE TO TAXPAYER OF RIGHT TO REFUSE OR LIMIT EXTENSION. --The Secretary shall notify the taxpayer of the taxpayer's right to refuse to extend the period of limitations, or to limit such extension to particular issues, on each occasion when the taxpayer is requested to provide such consent.

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Subchapter B --Limitations on Credit or Refund

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SEC. 6511. LIMITATIONS ON CREDIT OR REFUND.

(a) ***

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(h) RUNNING OF PERIODS OF LIMITATION SUSPENDED WHILE TAXPAYER IS UNABLE TO MANAGE FINANCIAL AFFAIRS DUE TO DISABILITY.

(1) IN GENERAL. --In the case of an individual, the running of the periods specified in subsections (a), (b), and (c) shall be suspended during any period of such individual's life that such individual is financially disabled.

(2) FINANCIALLY DISABLED. --

(A) IN GENERAL. --For purposes of paragraph

(1), an individual is financially disabled if such individual is unable to manage his financial affairs by reason of his medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to have such an impairment unless proof of the existence thereof is furnished in such form and manner as the Secretary may require.

(B) EXCEPTION WHERE INDIVIDUAL HAS GUARDIAN, ETC. --An individual shall not be treated as financially disabled during any period that such individual's spouse or any other person is authorized to act on behalf of such individual in financial matters.

[(h)] (i) CROSS REFERENCES. --

(1) ***

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SEC. 6512. LIMITATIONS IN CASE OF PETITION TO TAX COURT.

(a) EFFECT OF PETITION TO TAX COURT. --If the Secretary has mailed to the taxpayer a notice of deficiency under section 6212(a) (relating to deficiencies of income, estate, gift, and certain excise taxes) and if the taxpayer files a petition with the Tax Court within the time prescribed in section 6213(a) (or 7481(c) with respect to a determination of statutory interest or section 7481(d) solely with respect to a determination of estate tax by the Tax Court), no credit or refund of income tax for the same taxable year, of gift tax for the same calendar year or calendar quarter, of estate tax in respect of the taxable estate of the same decedent, or of tax imposed by chapter 41, 42, 43, or 44 with respect to any act (or failure to act) to which such petition relates, in respect of which the Secretary has determined the deficiency shall be allowed or made and no suit by the taxpayer for the recovery of any part of the tax shall be instituted in any court except --

(1) ***

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(4) As to overpayments attributable to partnership items, in accordance with subchapter C of chapter 63[.], and

(5) As to any amount collected within the period during which the Secretary is prohibited from making the assessment or from collecting by levy or through a proceeding in court under the provisions of section 6213(a), and

(6) As to overpayments the Secretary is authorized to refund or credit pending appeal as provided in subsection (b).

(b) OVERPAYMENT DETERMINED BY TAX COURT. --

(1) JURISDICTION TO DETERMINE. --Except as provided by paragraph (3) and by section 7463, if the Tax Court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income tax for the same taxable year, of gift tax for the same calendar year, or calendar quarter, of estate tax in respect of the taxable estate of the same decedent, or of tax imposed by chapter 41, 42, 43, or 44 with respect to any act (or failure to act) to which such petition relates, in respect of which the Secretary determined the deficiency, or finds that there is a deficiency but that the taxpayer has made an overpayment of such tax, the Tax Court shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Tax Court has become final, be credited or refunded to the taxpayer. If a notice of appeal in respect of the decision of the Tax Court is filed under section 7483, the Secretary is authorized to refund or credit the overpayment determined by the Tax Court to the extent the overpayment is not contested on appeal.

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CHAPTER 67 --INTEREST

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Subchapter A --Interest on Overpayments

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SEC. 6601. INTEREST ON UNDERPAYMENT, NONPAYMENT, OR EXTENSIONS OF TIME FOR PAYMENT, OF TAX.

(a) ***

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(f) SATISFACTION BY CREDITS. --If any portion of a tax is satisfied by credit of an overpayment, then no interest shall be imposed under this section on the portion of the tax so satisfied for any period during which, if the credit had not been made, interest would have been allowable with respect to such overpayment. The preceding sentence shall not apply to the extent that section 6621(d) applies.

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Subchapter C --Determination on Interest Rate, Compounding of Interest

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SEC. 6621. DETERMINATION OF RATE OF INTEREST.

(a) GENERAL RULE. --

(1) OVERPAYMENT RATE. --The overpayment rate established under this section shall be the sum of --

(A) the Federal short-term rate determined under subsection (b), plus

[(B) 2 percentage points.]

(B) 3 percentage points (2 percentage points in the case of a corporation).

To the extent that an overpayment of tax by a corporation for any taxable period (as defined in subsection (c)(3), applied by substituting "overpayment" for "underpayment") exceeds $10,000, subparagraph (B) shall be applied by substituting "0.5 percentage point" for "2 percentage points".

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(d) ELIMINATION OF INTEREST ON OVERLAPPING PERIODS OF INCOME TAX OVERPAYMENTS AND UNDERPAYMENTS. --To the extent that, for any period, interest is payable under subchapter A and allowable under subchapter B on equivalent underpayments and overpayments by the same taxpayer of tax imposed by chapters 1 and 2, the net rate of interest under this section on such amounts shall be zero for such period.

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CHAPTER 68 --ADDITIONS TO THE TAX, ADDITIONAL AMOUNT, AND ASSESSABLE PENALTIES

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Subchapter A --Additions to the Tax and Additional Amounts

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PART I --GENERAL PROVISIONS

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SEC. 6651. FAILURE TO FILE TAX RETURN OR TO PAY TAX.

(a) *** ******

(h) LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO PAY FOR MONTHS DURING PERIOD OF INSTALLMENT AGREEMENT. --No addition to the tax shall be imposed under paragraph (2) or (3) of subsection (a) with respect to the tax liability of an individual for any month during which an installment agreement under section 6159 is in effect for the payment of such tax to the extent that imposing an addition to the tax under such paragraph for such month would result in the aggregate number of percentage points of such addition to the tax exceeding 9.5.

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CHAPTER 74 --CLOSING AGREEMENTS AND COMPROMISES

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SEC. 7122. COMPROMISES.

(a) ***

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(c) ALLOWANCES FOR BASIC LIVING EXPENSES. --The Secretary shall develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses.

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CHAPTER 75 --CRIMES, OTHER OFFENSES, AND FORFEITURES

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Subchapter A --Crimes

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PART I --GENERAL PROVISIONS

Sec. 7201. Attempt to evade or defeat tax.

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Sec. 7217. Prohibition on executive branch influence over taxpayer audits and other investigations.

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SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER AUDITS AND OTHER INVESTIGATIONS.

(a) PROHIBITION. --It shall be unlawful for any applicable person to request any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.

(b) REPORTING REQUIREMENT. --Any officer or employee of the Internal Revenue Service receiving any request prohibited by subsection (a) shall report the receipt of such request to the Chief Inspector of the Internal Revenue Service.

(c) EXCEPTIONS. --Subsection (a) shall not apply to --

(1) any request made to an applicable person by the taxpayer or a representative of the taxpayer and forwarded by such applicable person to the Internal Revenue Service,

(2) any request by an applicable person for disclosure of return or return information under section 6103 if such request is made in accordance with the requirements of such section, or

(3) any request by the Secretary of the Treasury as a consequence of the implementation of a change in tax policy.

(d) PENALTY. --Any person who willfully violates subsection (a) or fails to report under subsection (b) shall be punished upon conviction by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution.

(e) APPLICABLE PERSON. --For purposes of this section, the term "applicable person" means --

(1) the President, the Vice President, any employee of the executive office of the President, and any employee of the executive office of the Vice President, and

(2) any individual (other than the Attorney General of the United States) serving in a position specified in section 5312 of title 5, United States Code.

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CHAPTER 76 --JUDICIAL PROCEEDINGS

Subchapter A. Crimes.

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Subchapter E. Burden of proof.

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Subchapter B --Proceedings by Taxpayers and Third Parties

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SEC. 7422. CIVIL ACTIONS FOR REFUND.

(a) ***

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(j) SPECIAL RULE FOR ACTIONS WITH RESPECT TO ESTATES FOR WHICH AN ELECTION UNDER SECTION 6166 IS MADE. --

(1) IN GENERAL. --The district courts of the United States and the United States Court of Federal Claims shall have jurisdiction over any action brought by the representative of an estate to which this subsection applies to determine the correct amount of the estate tax liability of such estate (or for any refund with respect thereto) even if the full amount of such liability has not been paid.

(2) ESTATES TO WHICH SUBSECTION APPLIES. --This subsection shall apply to any estate if, as of the date the action is filed --

(A) an election under section 6166 is in effect with respect to such estate,

(B) no portion of the installments payable under such section have been accelerated, and

(C) all installments the due date for which is on or before the date the action is filed have been paid.

(3) PROHIBITION ON COLLECTION OF DISALLOWED LIABILITY. --If the court redetermines under paragraph

(1) the estate tax liability of an estate, no part of such liability which is disallowed by a decision of such court which has become final may be collected by the Secretary, and amounts paid in excess of the installments determined by the court as currently due and payable shall be refunded. [(j)] (k) CROSS REFERENCES. --

(1) ***

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SEC. 7430. AWARDING OF COSTS AND CERTAIN FEES.

(a) ***

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(c) DEFINITIONS. --For purposes of this section --

(1) REASONABLE LITIGATION COSTS. --The term "reasonable litigation costs" includes --

(A) reasonable court costs, and

(B) based upon prevailing market rates for the kind or quality of services furnished --

(i) ***

*******

(iii) reasonable fees paid or incurred for the services of attorneys in connection with the court proceeding, except that such fees shall not be in excess of $110 per hour unless the court determines that a special factor, such as the limited availability of qualified attorneys for such proceeding, the difficulty of the issues presented in the case, or the local availability of tax expertise, justifies a higher rate.

In the case of any calendar year beginning after 1996, the dollar amount referred to in clause (iii) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, by substituting "calendar year 1995" for "calendar year 1992" in subparagraph (B) thereof. If any dollar amount after being increased under the preceding sentence is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.

(2) REASONABLE ADMINISTRATIVE COSTS. --The term "reasonable administrative costs" means --

(A) any administrative fees or similar charges imposed by the Internal Revenue Service, and

(B) expenses, costs, and fees described in paragraph (1)(B), except that any determination made by the court under clause (ii) or (iii) thereof shall be made by the Internal Revenue Service in cases where the determination under paragraph (4)(C) of the awarding of reasonable administrative costs is made by the Internal Revenue Service.

[Such term shall only include costs incurred on or after the earlier of (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals, or (ii) the date of the notice of deficiency.] Such term shall only include costs incurred on or after whichever of the following is the earliest: (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals, (ii) the date of the notice of deficiency, or (iii) the date on which the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent.

[(3) ATTORNEY'S FEES. --For purposes of paragraphs (1) and (2), fees for the services of an individual (whether or not an attorney) who is authorized to practice before the Tax Court or before the Internal Revenue Service shall be treated as fees for the services of an attorney.]

(3) ATTORNEY'S FEES. --

(A) IN GENERAL. --For purposes of paragraphs (1) and (2), fees for the services of an individual

(whether or not an attorney) who is authorized to practice before the Tax Court or before the Internal Revenue Service shall be treated as fees for the services of an attorney.

(B) PRO BONO SERVICES. --In any case in which the court could have awarded attorney's fees under subsection (a) but for the fact that an individual is representing the prevailing party for no fee or for a fee which (taking into account all the facts and circumstances) is no more than a nominal fee, the court may also award a judgment or settlement for such amounts as the court determines to be appropriate (based on hours worked and costs expended) for services of such individual but only if such award is paid to such individual or such individual's employer.

(4) PREVAILING PARTY. --

(A) ***

(B) EXCEPTION IF UNITED STATES ESTABLISHES THAT ITS POSITION WAS SUBSTANTIALLY JUSTIFIED. --

(i) ***

*******

(iii) EFFECT OF LOSING ON SUBSTANTIALLY SIMILAR ISSUES. --In determining for purposes of clause (i) whether the position of the United States was substantially justified, the court shall take into account whether the United States has lost in courts of appeal for other circuits on substantially similar issues.

[(iii)] (iv) APPLICABLE PUBLISHED GUIDANCE. --For purposes of clause (ii), the term "applicable published guidance" means --

(I) regulations, revenue rulings, revenue procedures, information releases, notices, and announcements, and

(II) any of the following which are issued to the taxpayer: private letter rulings, technical advice memoranda, and determination letters. *******

SEC. 7433. CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED COLLECTION ACTIONS.

(a) IN GENERAL. --If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.

(b) DAMAGES. --In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000, in the case of negligence) or the sum of --

(1) actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent actions of the officer or employee, and

*******

(d) LIMITATIONS. --

[(1) AWARD FOR DAMAGES MAY BE REDUCED IF ADMINISTRATIVE REMEDIES NOT EXHAUSTED. --The amount of damages awarded under subsection (b) may be reduced if the court determines that the plaintiff has not exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.]

(1) REQUIREMENT THAT ADMINISTRATIVE REMEDIES BE EXHAUSTED. --A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.

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Subchapter C --The Tax Court

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PART II --PROCEDURE

Sec. 7451. Fee for filing petition.

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Sec. 7463. Disputes involving [$10,000]

$25,000 or less.

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SEC. 7463. DISPUTES INVOLVING [$10,000] $25,000 OR LESS.

(a) IN GENERAL. --In the case of any petition filed with the Tax Court for a redetermination of a deficiency where neither the amount of the deficiency placed in dispute, nor the amount of any claimed overpayment, exceeds --

(1) [$10,000] $25,000 for any one taxable year, in the case of the taxes imposed by subtitle A,

(2) [$10,000] $25,000, in the case of the tax imposed by chapter 11,

(3) [$10,000] $25,000 for any one calendar year, in the case of the tax imposed by chapter 12, or

(4) [$10,000] $25,000 for any 1 taxable period (or, if there is no taxable period, taxable event) in the case of any tax imposed by subtitle D which is described in section 6212(a) (relating to a notice of deficiency), at the option of the taxpayer concurred in by the Tax Court or a division thereof before the hearing of the case, proceedings in the case shall be conducted under this section. Notwithstanding the provisions of section 7453, such proceedings shall be conducted in accordance with such rules of evidence, practice, and procedure as the Tax Court may prescribe. A decision, together with a brief summary of the reasons therefor, in any such case shall satisfy the requirements of sections 7459(b) and 7460.

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PART IV --DECLARATORY JUDGMENTS

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SEC. 7479. DECLARATORY JUDGMENTS RELATING TO ELIGIBILITY OF ESTATE WITH RESPECT TO INSTALLMENT PAYMENTS UNDER SECTION 6166.

(a) ***

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(c) EXTENSION OF TIME TO FILE REFUND SUIT. --The 2-year period in section 6532(a)(1) for filing suit for refund after disallowance of a claim shall be suspended during the 90-day period after the mailing of the notice referred to in subsection (b)(3) and, if a pleading has been filed with the Tax Court under this section, until the decision of the Tax Court has become final.

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Subchapter E --Burden of Proof

Sec. 7491. Burden of proof.

SEC. 7491. BURDEN OF PROOF.

(a) GENERAL RULE. --The Secretary shall have the burden of proof in any court proceeding with respect to any factual issue relevant to ascertaining the income tax liability of a taxpayer.

(b) LIMITATIONS. --Subsection (a) shall only apply with respect to an issue if --

(1) the taxpayer asserts a reasonable dispute with respect to such issue,

(2) the taxpayer has fully cooperated with the Secretary with respect to such issue, including providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer, as reasonably requested by the Secretary, and

(3) in the case of a partnership, corporation, or trust, the taxpayer is described in section 7430(c)(4)(A)(ii)

(c) SUBSTANTIATION. --Nothing in this section shall be construed to override any requirement of this title to substantiate any item.

CHAPTER 77 --MISCELLANEOUS PROVISIONS

Sec. 7501. Liability for taxes withheld or collected. *******

Sec. 7525. Low income taxpayer clinics.

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SEC. 7502. TIMELY MAILING TREATED AS TIMELY FILING AND PAYING

(a) ***

*******

[(c) REGISTERED AND CERTIFIED MAILING. --

[(1) REGISTERED MAIL. --For purposes of this section, if any such return, claim, statement, or other document, or payment, is sent by United States registered mail --

[(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed, and

[(B) the date of registration shall be deemed the postmark date.

[(2) CERTIFIED MAIL. --The Secretary is authorized to provide by regulations the extent to which the provisions of paragraph (1) of this subsection with respect to prima facie evidence of delivery and the postmark date shall apply to certified mail.]

(c) REGISTERED AND CERTIFIED MAILING; ELECTRONIC FILING. --

(1) REGISTERED MAIL. --For purposes of this section, if any return, claim, statement, or other document, or payment, is sent by United States registered mail --

(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed, and

(B) the date of registration shall be deemed the postmark date.

(2) CERTIFIED MAIL; ELECTRONIC FILING. --The Secretary is authorized to provide by regulations the extent to which the provisions of paragraph (1) with respect to prima facie evidence of delivery and the postmark date shall apply to certified mail and electronic filing.

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SEC. 7525. LOW INCOME TAXPAYER CLINICS.

(a) IN GENERAL. --The Secretary shall make grants to provide matching funds for the development, expansion, or continuation of qualified low income taxpayer clinics.

(b) DEFINITIONS. --For purposes of this section. --

(1) QUALIFIED LOW INCOME TAXPAYER CLINIC. --

(A) IN GENERAL. --The term "qualified low income taxpayer clinic" means a clinic that --

(i) does not charge more than a nominal fee for its services (except for reimbursement of actual costs incurred), and

(ii)(I) represents low income taxpayers in controversies with the Internal Revenue Service, or

(II) operates programs to inform individuals for whom English is a second language about their rights and responsibilities under this title.

(B) REPRESENTATION OF LOW INCOME TAXPAYERS. --A clinic meets the requirements of subparagraph (A)(ii)(I) if --

(i) at least 90 percent of the taxpayers represented by the clinic 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, and

(ii) the amount in controversy for any taxable year generally does not exceed the amount specified in section 7463.

(2) CLINIC. --The term "clinic" includes --

(A) a clinical program at an accredited law school in which students represent low income taxpayers in controversies arising under this title, and

(B) an organization described in section 501(c) and exempt from tax under section 501(a) which satisfies the requirements of paragraph (1) through representation of taxpayers or referral of taxpayers to qualified representatives.

(3) QUALIFIED REPRESENTATIVE. --The term "qualified representative" means any individual (whether or not an attorney) who is authorized to practice before the Internal Revenue Service or the applicable court.

(c) SPECIAL RULES AND LIMITATIONS. --

(1) AGGREGATE LIMITATION. --Unless otherwise provided by specific appropriation, the Secretary shall not allocate more than $3,000,000 per year (exclusive of costs of administering the program) to grants under this section.

(2) LIMITATION ON ANNUAL GRANTS TO A CLINIC. --The aggregate amount of grants which may be made under this section to a clinic for a year shall not exceed $100,000.

(3) MULTI-YEAR GRANTS. --Upon application of a qualified low income taxpayer clinic, the Secretary is authorized to award a multi-year grant not to exceed 3 years.

(4) CRITERIA FOR AWARDS. --In determining whether to make a grant under this section, the Secretary shall consider --

(A) the numbers of taxpayers who will be served by the clinic, including the number of taxpayers in the geographical area for whom English is a second language,

(B) the existence of other low income taxpayer clinics serving the same population,

(C) the quality of the program offered by the low income taxpayer clinic, including the qualifications of its administrators and qualified representatives, and its record, if any, in providing service to low income taxpayers, and

(D) alternative funding sources available to the clinic, including amounts received from other grants and contributions, and the endowment and resources of the institution sponsoring the clinic.

(5) REQUIREMENT OF MATCHING FUNDS. --A low income taxpayer clinic must provide matching funds on a dollar for dollar basis for all grants provided under this section. Matching funds may include --

(A) the salary (including fringe benefits) of individuals performing services for the clinic, and

(B) the cost of equipment used in the clinic. Indirect expenses, including general overhead of the institution sponsoring the clinic, shall not be counted as matching funds.

CHAPTER 78 --DISCOVERY OF LIABILITY AND ENFORCEMENT OF TITLE

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Subchapter A --Examination and Inspection

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SEC. 7602. EXAMINATION OF BOOKS AND WITNESSES.

(a) ***

*******

(d) PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S DEALINGS WITH NON-ATTORNEYS AUTHORIZED TO PRACTICE BEFORE INTERNAL REVENUE SERVICE. --

(1) IN GENERAL. --In any noncriminal proceeding before the Internal Revenue Service, the taxpayer shall be entitled to the same common law protections of confidentiality with respect to tax advice furnished by any qualified individual (in a manner consistent with State law for such individual's profession) as the taxpayer would have if such individual were an attorney.

(2) QUALIFIED INDIVIDUAL. --For purposes of paragraph (1), the term "qualified individual" means any individual (other than an attorney) who is authorized to practice before the Internal Revenue Service.

(e) LIMITATION ON EXAMINATION ON UNREPORTED INCOME. --The Secretary shall not use financial status or economic reality examination techniques to determine the existence of unreported income of any taxpayer unless the Secretary has a reasonable indication that there is a likelihood of such unreported income.

(f) LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF COMPUTER SOURCE CODE. --

(1) IN GENERAL. --No summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons, to produce or examine any tax-related computer source code.

(2) EXCEPTION WHERE INFORMATION NOT OTHERWISE AVAILABLE TO VERIFY CORRECTNESS OF ITEM ON RETURN. --Paragraph (1) shall not apply to any portion of a tax-related computer source code if --

(A) the Secretary is unable to otherwise reasonably ascertain the correctness of any item on a return from --

(i) the taxpayer's books, papers, records, or other data, or

(ii) the computer software program and the associated data which, when executed, produces the output to prepare the return for the period involved, and

(B) the Secretary identifies with reasonable specificity such portion as to be used to verify the correctness of such item. The Secretary shall be treated as meeting the requirements of subparagraphs (A) and (B) after the 90th day after the Secretary makes a formal request to the taxpayer and the owner or developer of the computer software program for the material described in subparagraph (A)(ii) if such material is not provided before the close of such 90th day.

(3) OTHER EXCEPTIONS. --Paragraph (1) shall not apply to --

(A) any inquiry into any offense connected with the administration or enforcement of the internal revenue laws, and

(B) any tax-related computer source code developed by (or primarily for the benefit of) the taxpayer or a related person (within the meaning of section 267 or 707(b)) for internal use by the taxpayer or such person and not for commercial distribution.

(4) TAX-RELATED COMPUTER SOURCE CODE. --For purposes of this subsection, the term "tax-related computer source code" means --

(A) the computer source code for any computer software program for accounting, tax return preparation or compliance, or tax planning, or

(B) design and development materials related to such a software program (including program notes and memoranda).

(5) RIGHT TO CONTEST SUMMONS. --The determination of whether the requirements of subparagraphs (A) and

(B) of paragraph (2) are met or whether any exception under paragraph (3) applies may be contested in any proceeding under section 7604.

(6) PROTECTION OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION. --In any court proceeding to enforce a summons for any portion of a tax-related computer source code, the court may issue any order necessary to prevent the disclosure of trade secrets or other confidential information with respect to such source code, including providing that any information be placed under seal to be opened only as directed by the court.

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SEC. 7609. SPECIAL PROCEDURES FOR THIRD-PARTY SUMMONSES.

(a) NOTICE. --

(1) ***

*******

(3) THIRD-PARTY RECORDKEEPER DEFINED. --For purposes of this subsection, the term "third-party recordkeeper" means --

(A) ***

*******

(H) any regulated investment company (as defined in section 851) and any agent of such regulated investment company when acting as an agent thereof, [and]

(I) any enrolled agent[.], and

(J) any owner or developer of a tax-related computer source code (as defined in section 7602(f)(4)).

Subparagraph (J) shall apply only with respect to a summons requiring the production of the source code referred to in subparagraph (J) or the program and data described in section 7602(f)(2)(A)(ii) to which such source code relates.

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CHAPTER 80 --GENERAL RULES

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Subchapter A --Application of Internal Revenue Laws

Sec. 7801. Authority of Department of the Treasury.

[Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; Taxpayer Advocate.

[Sec. 7803. Effect of reorganization plans.

[Sec. 7804. Rules and regulations.]

Sec. 7802. Internal Revenue Service Oversight Board.

Sec. 7803. Commissioner of Internal Revenue; other officials.

Sec. 7804. Other personnel.

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[SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT.