H. Other Taxpayer Rights Provisions

1. Cataloging complaints

Present Law

The IRS is required to make an annual report to the Congress, beginning in 1997, on all categories of instances involving allegations of misconduct by IRS employees, arising either from internally identified cases or from taxpayer or third-party initiated complaints. The report must identify the nature of the misconduct or complaint, the number of instances received by category, and the disposition of the complaints.

Description of Proposal

The proposal would require that, in collecting data for this report, records of taxpayer complaints of misconduct by IRS employees shall be maintained on an individual employee basis. These individual records are not to be listed in the report.

Effective Date

The requirement would be effective on the date of enactment.

2. Archive of records of the IRS

Present Law

The IRS is obligated to transfer agency records to the National Archives and Records Administration ("NARA") for retention or disposal. The IRS is also obligated to protect confidential taxpayer records from disclosure. These two obligations have created conflict between NARA and the IRS.

Description of Proposal

The proposal would provide an exception to the disclosure rules to require IRS to disclose IRS records to officers or employees of NARA, upon written request from the U.S. Archivist, for purposes of the appraisal of such records for destruction or retention. The present-law prohibitions on and penalties for disclosure of tax information would generally apply to NARA.

Effective Date

The proposal would be effective for requests made by the Archivist after the date of enactment.

3. Payment of taxes

Present Law

The Code provides that it is lawful for the Secretary to accept checks or money orders as payment for taxes, to the extent and under the conditions provided in regulations prescribed by the Secretary (sec. 6311). Those regulations state that checks or money orders should be made payable to the Internal Revenue Service.

Description of Proposal

The proposal would require the Secretary or his delegate to establish such rules, regulations, and procedures as are necessary to allow payment of taxes by check or money order to be made payable to the United States Treasury.

Effective Date

The proposal would be effective on the date of enactment.

4. Clarification of authority of Secretary relating to the making of elections

Present Law

Except as otherwise provided, elections provided by the Code are to be made in such manner as the Secretary shall by regulations or forms prescribe.

Description of Proposal

The proposal would clarify that, except as otherwise provided, the Secretary may prescribe the manner of making of any election by any reasonable means.

Effective Date

The proposal would be effective as of the date of enactment.

I. Studies

1. Study of penalty administration

Present Law

The last major revision of the overall penalty structure in the Internal Revenue Code was the "Improved Penalty Administration and Compliance Tax Act," enacted as part of the Omnibus Budget Reconciliation Act of 1989.

Description of Proposal

The proposal would require the Joint Committee on Taxation and the Treasury to each conduct a separate study reviewing the administration and implementation of the penalty reform provisions of the Omnibus Budget Reconciliation Act of 1989, and making any legislative and administrative recommendations it deems appropriate to simplify penalty administration and reduce taxpayer burden.

Effective Date

The report must be provided not later than nine months after the date of enactment.

2. Study of confidentiality of tax return information

Present Law

The Internal Revenue Code prohibits disclosure of tax returns and return information, except to the extent specifically authorized by the Internal Revenue Code (sec. 6103). Unauthorized disclosure is a felony punishable by a fine not exceeding $5,000 or imprisonment of not more than five years, or both (sec. 7213). An action for civil damages also may be brought for unauthorized disclosure (sec. 7431). No tax information may be furnished by the IRS to another agency unless the other agency establishes procedures satisfactory to the IRS for safeguarding the tax information it receives (sec. 6103(p)).

Description of Proposal

The proposal would require the Joint Committee on Taxation and Treasury to each conduct a separate study on provisions regarding taxpayer confidentiality. The studies are to examine present-law protections of taxpayer privacy, the need for third parties to use tax return information, the ability to achieve greater levels of voluntary compliance by allowing the public to know who is legally required to file tax returns but does not do so, and the interrelationship of the taxpayer confidentiality provisions in the Internal Revenue Code with those elsewhere in the United States Code (such as the Freedom of Information Act).

Effective Date

The findings of the studies, along with any recommendations, are required to be reported to the Congress no later than one year after the date of enactment.

J. Limits on Seizure Authority

1. IRS to implement approval process for liens, levies, or seizures

Present Law

Supervisory approval of liens, levies or seizures is only required under certain circumstances. For example, a levy on a taxpayer's principal residence is only permitted upon the written approval of the District Director or Assistant District Director.

Description of Proposal

The proposal would require the IRS to develop and implement a review process under which, where appropriate, any lien, levy, or seizure would be reviewed by a supervisor before issuance. The review process could, if appropriate, encompass certification that the revenue officer has reviewed the taxpayer's information, verified that a balance is due, and affirmed that a lien, levy or seizure is appropriate given the taxpayer's circumstances, considering the amount due and the value of the asset. Failure to follow such procedures could result in disciplinary action against the supervisor and revenue officer.

In addition, the Treasury Inspector General would be required to collect information on the review process and annually report to the tax writing committees.

Effective Date

The proposal would be effective for collection actions commenced after date of enactment.

2. Prohibit sales of seized property at less than minimum bid

Present Law

Section 6335(e) requires that a minimum bid price be established for seized property offered for sale. To conserve the taxpayer's equity, the minimum bid price should normally be computed at 80 percent or more of the forced sale value of the property less encumbrances having priority over the Federal tax lien. If the group manager concurs, the minimum sales price may be set at less than 80 percent. The taxpayer is to receive notice of the minimum bid price within 10 days of the sale. The taxpayer has the opportunity to challenge the minimum bid price. The minimum bid price cannot be more than the tax liability plus the expenses of sale. Accordingly, if the minimum bid price is set at the tax liability plus the expenses of sale, the taxpayer's concurrence is not required. IRM 56(13)5.1(4). Section 6335 does not contemplate a sale of the seized property at less than the minimum bid price. Rather, if no person offers the minimum bid price, the IRS may buy the property at the minimum bid price or the property may be released to the owner. Code section 7433 provides civil damages for certain unauthorized collection actions.

Description of Proposal

The proposal would prohibit the IRS from selling seized property for less than the minimum bid price. The proposal would provide that the sale of property for less than the minimum bid price would constitute an unauthorized collection action, which would permit an affected person to sue for civil damages for certain unauthorized collection actions pursuant to section 7433.

Effective Date

The proposal would be effective for sales occurring after the date of enactment.

3. IRS to provide accounting and receipt to taxpayer for property seized and sold

Present Law

The IRS is authorized to seize and sell a taxpayer's property to satisfy an unpaid tax liability (sec. 6331(b)). The IRS is required to give written notice to the taxpayer before seizure of the property (sec. 6331(d)). The IRS must also give written notice to the taxpayer at least 10 days before the sale of the seized property.

The IRS is required to keep records of all sales of real property (sec. 6340). The records must set forth all proceeds and expenses of the sale. The IRS is required to apply the proceeds first against the expenses of the sale, then against a specific tax liability on the seized property, if any, and finally against any unpaid tax liability of the taxpayer (sec. 6342(a)). Any surplus proceeds are credited to the taxpayer or persons legally entitled to the proceeds.

Description of Proposal

The proposal would require the IRS to provide a written accounting of all sales of seized property, whether real or personal, to the taxpayer. The accounting must include a receipt for the amount credited to the taxpayer's account.

Effective Date

The proposal would be effective for seizures occurring after the date of enactment.