[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 606 Introduced in Senate (IS)]
<DOC>
115th CONGRESS
1st Session
S. 606
To amend the Internal Revenue Code of 1986 to prevent taxpayer identity
theft and tax refund fraud, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 9, 2017
Mr. Nelson (for himself, Mr. Blumenthal, Ms. Klobuchar, Mrs.
Gillibrand, Mr. Cardin, Mr. Casey, and Mr. Brown) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to prevent taxpayer identity
theft and tax refund fraud, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Identity Theft and
Tax Fraud Prevention Act of 2017''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Secretary.--In this Act, the term ``Secretary'' means the
Secretary of the Treasury or the Secretary's delegate.
(d) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--IDENTITY THEFT AND TAX REFUND FRAUD PREVENTION
Subtitle A--General Provisions
Sec. 101. Guidelines for stolen identity refund fraud cases.
Sec. 102. Criminal penalty for misappropriating taxpayer identity in
connection with tax fraud.
Sec. 103. Increased penalty for improper disclosure or use of
information by preparers of returns.
Sec. 104. Notification of suspected identity theft.
Sec. 105. Local law enforcement liaison.
Subtitle B--Administrative Authority To Prevent Identity Theft and Tax
Refund Fraud
Sec. 111. Authority to transfer Internal Revenue Service appropriations
to combat tax fraud.
Sec. 112. Streamlined critical pay authority for information technology
positions.
Sec. 113. Access to the National Directory of New Hires for tax
administration purposes.
Sec. 114. Use of information in Do Not Pay Initiative in prevention of
identity theft refund fraud.
Sec. 115. Minimum standards for professional tax preparers.
Sec. 116. Sense of the Senate on strengthened penalties and enforcement
for impersonating an IRS official or agent.
Subtitle C--Reports
Sec. 121. IRS Report on stolen identity refund fraud.
Sec. 122. Report on status of the Identity Theft Tax Refund Fraud
Information Sharing and Analysis Center.
Sec. 123. Report on IRS imposter phone scam.
TITLE II--IMPROVEMENTS TO ELECTRONIC FILING OF TAX RETURNS
Sec. 201. Study on feasibility of blocking electronically filed tax
returns.
Sec. 202. Enhancements to IRS PIN Program.
Sec. 203. Increasing electronic filing of returns.
Sec. 204. Internet platform for Form 1099 filings.
Sec. 205. Requirement that electronically prepared paper returns
include scannable code.
Sec. 206. Authentication of users of electronic services accounts.
TITLE I--IDENTITY THEFT AND TAX REFUND FRAUD PREVENTION
Subtitle A--General Provisions
SEC. 101. GUIDELINES FOR STOLEN IDENTITY REFUND FRAUD CASES.
(a) In General.--Not later than 6 months after the date of the
enactment of this Act, the Secretary, in consultation with the National
Taxpayer Advocate, shall develop and implement publicly available
guidelines for management of cases involving stolen identity refund
fraud in a manner that reduces the administrative burden on taxpayers
who are victims of such fraud.
(b) Standards and Procedures To Be Considered.--The guidelines
described in subsection (a) may include--
(1) standards for--
(A) the average length of time in which a case
involving stolen identity refund fraud should be
resolved,
(B) the maximum length of time, on average, a
taxpayer who is a victim of stolen identity refund
fraud and is entitled to a tax refund which has been
stolen should have to wait to receive such refund, and
(C) the maximum number of offices and employees
within the Internal Revenue Service with whom a
taxpayer who is a victim of stolen identity refund
fraud should be required to interact in order to
resolve a case,
(2) standards for opening, assigning, reassigning, or
closing a case involving stolen identity refund fraud, and
(3) procedures for implementing and accomplishing the
standards described in paragraphs (1) and (2), and measures for
evaluating such procedures and determining whether such
standards have been successfully implemented.
SEC. 102. CRIMINAL PENALTY FOR MISAPPROPRIATING TAXPAYER IDENTITY IN
CONNECTION WITH TAX FRAUD.
(a) In General.--Section 7206 is amended--
(1) by striking ``Any person'' and inserting the following:
``(a) In General.--Any person'', and
(2) by adding at the end the following new subsection:
``(b) Misappropriation of Identity.--Any person who willfully
misappropriates another person's taxpayer identity (as defined in
section 6103(b)(6)) for the purpose of making any list, return,
account, statement, or other document submitted to the Secretary under
the provisions of this title shall be guilty of a felony and, upon
conviction thereof, shall be fined not more than $250,000 ($500,000 in
the case of a corporation) or imprisoned not more than 5 years, or
both, together with the costs of prosecution.''.
(b) Identity Protection Personal Identification Number.--Section
6109 is amended by inserting after subsection (d) the following new
subsection:
``(e) Identity Protection Personal Identification Number.--
``(1) In general.--For purposes of this section, the term
`identifying number' shall include an identity protection
personal identification number, as defined in paragraph (2).
``(2) Definition.--The term `identity protection personal
identification number' means a number assigned by the Secretary
to a taxpayer to help prevent the misuse of the social security
account number of the taxpayer on fraudulent Federal income tax
returns and to assist the Secretary in verifying a taxpayer's
identity.''.
(c) Effective Date.--The amendments made by subsection (a) shall
apply to offenses committed on or after the date of the enactment of
this Act.
SEC. 103. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF
INFORMATION BY PREPARERS OF RETURNS.
(a) In General.--Section 6713 is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively, and
(2) by inserting after subsection (a) the following new
subsection:
``(b) Enhanced Penalty for Improper Use or Disclosure Relating to
Identity Theft.--
``(1) In general.--In the case of a disclosure or use
described in subsection (a) that is made in connection with a
crime relating to the misappropriation of another person's
taxpayer identity (as defined in section 6103(b)(6)), whether
or not such crime involves any tax filing, subsection (a) shall
be applied--
``(A) by substituting `$1,000' for `$250', and
``(B) by substituting `$50,000' for `$10,000'.
``(2) Separate application of total penalty limitation.--
The limitation on the total amount of the penalty under
subsection (a) shall be applied separately with respect to
disclosures or uses to which this subsection applies and to
which it does not apply.''.
(b) Criminal Penalty.--Section 7216(a) is amended by striking
``$1,000'' and inserting ``$1,000 ($100,000 in the case of a disclosure
or use to which section 6713(b) applies)''.
(c) Effective Date.--The amendments made by this section shall
apply to disclosures or uses on or after the date of the enactment of
this Act.
SEC. 104. NOTIFICATION OF SUSPECTED IDENTITY THEFT.
(a) In General.--Chapter 77 is amended by adding at the end the
following new section:
``SEC. 7529. NOTIFICATION OF SUSPECTED IDENTITY THEFT.
``If the Secretary determines that there has been or may have been
an unauthorized use of the identity of any individual, the Secretary
shall, without jeopardizing an investigation relating to tax
administration--
``(1) as soon as practicable, notify the individual of such
determination and provide--
``(A) instructions on how to file a report with law
enforcement regarding the unauthorized use of the
identity of the individual,
``(B) the identification of any forms necessary for
the individual to complete and submit to law
enforcement to permit access to personal information of
the individual during the investigation,
``(C) information regarding actions the individual
may take in order to protect the individual from harm
relating to such unauthorized use, and
``(D) an offer of identity protection measures to
be provided to the individual by the Internal Revenue
Service, such as the use of an identity protection
personal identification number (as defined in section
6109(e)), and
``(2) at the time the information described in paragraph
(1) is provided (or, if not available at such time, as soon as
practicable thereafter), issue additional notifications to such
individual (or such individual's designee) regarding--
``(A) whether an investigation has been initiated
in regards to such unauthorized use,
``(B) whether the investigation substantiated an
unauthorized use of the identity of the individual, and
``(C) whether--
``(i) any action has been taken against a
person relating to such unauthorized use, or
``(ii) any referral has been made for
criminal prosecution of such person and, to the
extent such information is available, whether
such person has been criminally charged by
indictment or information.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7529. Notification of suspected identity theft.''.
(c) Effective Date.--The amendments made by this section shall
apply to determinations made after the date of the enactment of this
Act.
SEC. 105. LOCAL LAW ENFORCEMENT LIAISON.
(a) Establishment.--The Commissioner of Internal Revenue shall
establish within the Criminal Investigation Division of the Internal
Revenue Service the position of Local Law Enforcement Liaison.
(b) Duties.--The Local Law Enforcement Liaison shall serve as the
primary source of contact for State and local law enforcement
authorities with respect to tax-related identity theft and other tax
fraud matters, having duties that shall include--
(1) receiving information from State and local law
enforcement authorities,
(2) responding to inquiries from State and local law
enforcement authorities,
(3) administering authorized information-sharing
initiatives with State or local law enforcement authorities and
reviewing the performance of such initiatives,
(4) ensuring any information provided through authorized
information-sharing initiatives with State or local law
enforcement authorities is used only for the prosecution of
identity theft-related crimes and not re-disclosed to third
parties, and
(5) any other duties as delegated by the Commissioner of
Internal Revenue.
Subtitle B--Administrative Authority To Prevent Identity Theft and Tax
Refund Fraud
SEC. 111. AUTHORITY TO TRANSFER INTERNAL REVENUE SERVICE APPROPRIATIONS
TO COMBAT TAX FRAUD.
(a) In General.--For any fiscal year, in addition to any other
authority to transfer amounts appropriated to an Internal Revenue
Service account, the Commissioner of Internal Revenue (referred to in
this section as the ``Commissioner'') may transfer not more than
$10,000,000 to any account of the Internal Revenue Service from amounts
appropriated to other Internal Revenue Service accounts. Any amounts so
transferred shall be used solely for the purposes of preventing,
detecting, and resolving potential cases of tax fraud, which may
include educating taxpayers about common tax fraud scams and how to
protect themselves from such scams.
(b) Limitation.--The Commissioner shall not transfer any amounts
described in subsection (a) unless the Commissioner has determined that
taxpayer services provided by the Internal Revenue Service to the
public (including telephone operations, forms and publications, and
similar types of taxpayer assistance) will not be impaired by such
transfer.
SEC. 112. STREAMLINED CRITICAL PAY AUTHORITY FOR INFORMATION TECHNOLOGY
POSITIONS.
(a) Authority.--Section 9503(a) of title 5, United States Code, is
amended--
(1) in the matter preceding paragraph (1), by striking
``the Secretary of the Treasury'' and all that follows through
``establish'' and inserting ``the Secretary of the Treasury
may, during the period beginning on the date of the enactment
of the Identity Theft and Tax Fraud Prevention Act of 2017 and
ending on September 30, 2022, establish'', and
(2) in paragraph (1)(B), by striking ``the Internal Revenue
Service's successful accomplishment of an important mission''
and inserting ``the functionality of the information technology
operations of the Internal Revenue Service''.
(b) Recruitment, Retention, Relocation Incentives, and Relocation
Expenses.--Section 9504 of title 5, United States Code, is amended--
(1) in subsection (a)--
(A) by striking ``Before September 30, 2013'' and
inserting ``During the period beginning on the date of
the enactment of the Identity Theft and Tax Fraud
Prevention Act of 2017 and ending on September 30,
2022'', and
(B) by inserting ``for employees holding positions
described in section 9503(a)(1)'' after ``incentives'',
and
(2) in subsection (b)--
(A) by striking ``Before September 30, 2013'' and
inserting ``During the period beginning on the date of
the enactment of the Identity Theft and Tax Fraud
Prevention Act of 2017 and ending on September 30,
2022'',
(B) by striking ``employees transferred or
reemployed'' and inserting ``employees holding
positions described in section 9503(a)(1) who are
transferred or reemployed during such period'', and
(C) by striking ``section 9502 or 9503 after June
1, 1998'' and inserting ``section 9503 during such
period''.
(c) Performance Awards for Senior Executives.--Section 9505(a) of
title 5, United States Code, is amended--
(1) by striking ``Before September 30, 2013'' and inserting
``During the period beginning on the date of the enactment of
the Identity Theft and Tax Fraud Prevention Act of 2017 and
ending on September 30, 2022'', and
(2) by striking ``significant functions'' and inserting
``the information technology operations''.
(d) Effective Date.--The amendments made by this section shall
apply to payments made on or after the date of the enactment of this
Act.
SEC. 113. ACCESS TO THE NATIONAL DIRECTORY OF NEW HIRES FOR TAX
ADMINISTRATION PURPOSES.
(a) In General.--Paragraph (3) of section 453(i) of the Social
Security Act (42 U.S.C. 653(i)) is amended to read as follows:
``(3) Administration of federal tax laws.--The Secretary of
the Treasury shall have access to the information in the
National Directory of New Hires solely for purposes of
administering the Internal Revenue Code of 1986.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 114. USE OF INFORMATION IN DO NOT PAY INITIATIVE IN PREVENTION OF
IDENTITY THEFT REFUND FRAUD.
The Secretary shall use the information available under the Do Not
Pay Initiative established under section 5 of the Improper Payments
Elimination and Recovery Improvement Act of 2012 (31 U.S.C. 3321 note)
to help prevent identity theft refund fraud.
SEC. 115. MINIMUM STANDARDS FOR PROFESSIONAL TAX PREPARERS.
(a) In General.--Subsection (a) of section 330 of title 31, United
States Code, is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) establish minimum standards regulating--
``(A) the practice of representatives of persons
before the Department of the Treasury; and
``(B) the practice of tax return preparers; and'',
and
(2) in paragraph (2)--
(A) by inserting ``or tax return preparer'' after
``representative'' each place it appears, and
(B) by inserting ``or in preparing their tax
returns, claims for refund, or documents in connection
with tax returns or claims for refund'' after ``cases''
in subparagraph (D).
(b) Authority To Sanction Regulated Tax Return Preparers.--
Subsection (b) of section 330 of title 31, United States Code, is
amended--
(1) by striking ``before the Department'',
(2) by inserting ``or tax return preparer'' after
``representative'' each place it appears, and
(3) in paragraph (4), by striking ``misleads or threatens''
and all that follows and inserting ``misleads or threatens--
``(A) any person being represented or any
prospective person being represented; or
``(B) any person or prospective person whose tax
return, claim for refund, or document in connection
with a tax return or claim for refund, is being or may
be prepared.''.
(c) Tax Return Preparer Defined.--Section 330 of title 31, United
States Code, is amended by adding at the end the following new
subsection:
``(e) Tax Return Preparer.--For purposes of this section--
``(1) In general.--The term `tax return preparer' has the
meaning given such term under section 7701(a)(36) of the
Internal Revenue Code of 1986.
``(2) Tax return.--The term `tax return' has the meaning
given to the term `return' under section 6696(e)(1) of the
Internal Revenue Code of 1986.
``(3) Claim for refund.--The term `claim for refund' has
the meaning given such term under section 6696(e)(2) of such
Code.''.
SEC. 116. SENSE OF THE SENATE ON STRENGTHENED PENALTIES AND ENFORCEMENT
FOR IMPERSONATING AN IRS OFFICIAL OR AGENT.
It is the sense of the Senate that the penalties under section 912
of title 18, United States Code, for impersonating an officer or
employee acting under the authority of the United States should be
amended to increase the penalties for impersonating an official or
agent of the Internal Revenue Service and enforced to the fullest
extent of the law.
Subtitle C--Reports
SEC. 121. IRS REPORT ON STOLEN IDENTITY REFUND FRAUD.
(a) In General.--Not later than September 30, 2018, and every even-
numbered calendar year thereafter through September 30, 2026, the
Secretary shall report to the Committee on Ways and Means of the House
of Representatives and the Committee on Finance of the Senate on the
extent and nature of stolen identity refund fraud under the Internal
Revenue Code of 1986, as based on the most recent data that is
available.
(b) Contents.--The report described in subsection (a) shall
include--
(1) a discussion of the detection, prevention, and
enforcement activities undertaken by the Internal Revenue
Service with respect to such fraud, including--
(A) efforts to combat stolen identity refund fraud,
including an update on the victims' assistance unit (or
any equivalent unit),
(B) an update on Internal Revenue Service efforts
and results associated with limiting multiple refunds
to the same financial account and physical address,
with appropriate exceptions, and
(C) Internal Revenue Service efforts associated
with other avenues for addressing stolen identity
refund fraud,
(2) information regarding the average and maximum amounts
of time that elapsed before resolution of a victim's case,
(3) an analysis of ways to accelerate information matching
in order to prevent stolen identity refund fraud,
(4) an update on the implementation of the relevant
provisions of this Act and the amendments made by this Act, and
(5) identification of any further legislation to protect
taxpayer resources and information, including preventing tax
refund fraud related to the Internal Revenue Service's e-
Services tools and electronic filing identification numbers.
(c) Additional Information for the First Report.--The first report
required under this section shall include--
(1) an assessment of the progress made by the Internal
Revenue Service on identity theft outreach and education to
individuals, businesses, State agencies, and other external
organizations, and
(2) the results of a study on the costs and benefits
relating to enhancement of the taxpayer authentication approach
employed by the Internal Revenue Service in the electronic tax
return filing process.
SEC. 122. REPORT ON STATUS OF THE IDENTITY THEFT TAX REFUND FRAUD
INFORMATION SHARING AND ANALYSIS CENTER.
Not later than 90 days after the date of the enactment of this Act,
the Secretary shall report to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the Senate
on--
(1) whether the Identity Theft Tax Refund Fraud Information
Sharing and Analysis Center (referred to in this section as the
``Center'') is fully operational,
(2) if the Center is not fully operational, what steps are
necessary for the Center to be fully operational and an
estimate of when the Center will be fully operational, and
(3) any challenges that remain for effective sharing of
information between the public and private sectors and efforts
that are being undertaken to address such challenges.
SEC. 123. REPORT ON IRS IMPOSTER PHONE SCAM.
(a) In General.--Not later than 1 year after the date of the
enactment of this Act, the Inspector General for Tax Administration, in
consultation with the Federal Communications Commission and the Federal
Trade Commission, shall submit a report to Congress regarding identity
theft phone scams under which individuals attempt to obtain personal
information over the phone from taxpayers by falsely claiming to be
calling from or on behalf the Internal Revenue Service.
(b) Contents of Report.--Such report shall include--
(1) a description of the nature and form of such scams,
(2) an estimate of the number of taxpayers contacted
pursuant to, and the number of taxpayers who have been victims
of, such scams,
(3) an estimate of the amount of wrongful payments obtained
from such scams, and
(4) details of potential solutions to combat and prevent
such scams, including best practices from the private sector
and technological solutions.
TITLE II--IMPROVEMENTS TO ELECTRONIC FILING OF TAX RETURNS
SEC. 201. STUDY ON FEASIBILITY OF BLOCKING ELECTRONICALLY FILED TAX
RETURNS.
Not later than 180 days after the date of the enactment of this
Act, the Secretary shall report to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of the Senate
on the feasibility of implementing a program under which a person who
has filed an identity theft affidavit with the Secretary may elect to
prevent the processing of any Federal tax return submitted in an
electronic format by anyone purporting to be such person, including a
recommendation on whether to implement such a program.
SEC. 202. ENHANCEMENTS TO IRS PIN PROGRAM.
Not later than July 1, 2019, the Secretary shall establish a
program to issue, upon request, an identity protection personal
identification number (as described in section 6109(e)(2) of the
Internal Revenue Code of 1986 (as added by section 102(b) of this Act))
to any individual after the individual's identity has been verified to
the satisfaction of the Secretary.
SEC. 203. INCREASING ELECTRONIC FILING OF RETURNS.
(a) In General.--Subparagraph (A) of section 6011(e)(2) is amended
by striking ``250'' and inserting ``the applicable number of''.
(b) Applicable Number.--Subsection (e) of section 6011 is amended
by adding at the end the following new paragraph:
``(5) Applicable number.--For purposes of paragraph (2)(A),
the applicable number is--
``(A) in the case of returns and statements
relating to calendar years before 2020, 250,
``(B) in the case of returns and statements
relating to calendar year 2020, 200,
``(C) in the case of returns and statements
relating to calendar year 2021, 150,
``(D) in the case of returns and statements
relating to calendar year 2022, 100,
``(E) in the case of returns and statements
relating to calendar year 2023, 50, and
``(F) in the case of returns and statements
relating to calendar years after 2023, 20.''.
(c) Returns Filed by a Tax Return Preparer.--
(1) In general.--Subparagraph (A) of section 6011(e)(3) is
amended to read as follows:
``(A) In general.--The Secretary shall require that
any individual income tax return which is prepared and
filed by a tax return preparer be filed on magnetic
media. The Secretary may waive the requirement of the
preceding sentence if the Secretary determines, on the
basis of an application by the tax return preparer,
that the preparer cannot meet such requirement based on
technological constraints (including lack of access to
the Internet).''.
(2) Conforming amendment.--Paragraph (3) of section 6011(e)
is amended by striking subparagraph (B) and by redesignating
subparagraph (C) as subparagraph (B).
(d) Effective Date.--The amendments made by this section shall
apply to returns the due date for which (determined without regard to
extensions) is after December 31, 2018.
SEC. 204. INTERNET PLATFORM FOR FORM 1099 FILINGS.
(a) In General.--Not later than January 1, 2022, the Secretary
shall make available an Internet website or other electronic media,
similar to the Business Services Online Suite of Services provided by
the Social Security Administration, that will provide taxpayers access
to resources and guidance provided by the Internal Revenue Service and
will allow taxpayers to--
(1) prepare and file Forms 1099,
(2) prepare Forms 1099 for distribution to recipients other
than the Internal Revenue Service, and
(3) create and maintain necessary taxpayer records.
(b) Early Implementation for Forms 1099-MISC.--Not later than
January 1, 2020, the Internet website under subsection (a) shall be
available in a partial form that will allow taxpayers to take the
actions described in such subsection with respect to Forms 1099-MISC
required to be filed or distributed by such taxpayers.
SEC. 205. REQUIREMENT THAT ELECTRONICALLY PREPARED PAPER RETURNS
INCLUDE SCANNABLE CODE.
(a) In General.--Subsection (e) of section 6011, as amended by
section 203(b) of this Act, is amended by adding at the end the
following new paragraph:
``(6) Special rule for returns prepared electronically and
submitted on paper.--The Secretary shall require that any
return of tax which is prepared electronically, but is printed
and filed on paper, bear a code which can, when scanned,
convert such return to electronic format.''.
(b) Conforming Amendment.--Paragraph (1) of section 6011(e) is
amended by striking ``paragraph (3)'' and inserting ``paragraphs (3)
and (6)''.
(c) Effective Date.--The amendments made by this section shall
apply to returns of tax the due date for which (determined without
regard to extensions) is after December 31, 2018.
SEC. 206. AUTHENTICATION OF USERS OF ELECTRONIC SERVICES ACCOUNTS.
Beginning 180 days after the date of the enactment of this Act, the
Secretary shall verify the identity of any individual opening an e-
Services account with the Internal Revenue Service before such
individual is able to use the e-Services tools.
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