[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1386 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1386
To provide a taxpayer bill of rights for small businesses.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 9, 2025
Mr. Cornyn introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide a taxpayer bill of rights for small businesses.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business
Taxpayer Bill of Rights Act of 2025''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Modification of standards for awarding of costs and certain
fees.
Sec. 3. Civil damages allowed for reckless or intentional disregard of
internal revenue laws.
Sec. 4. Modifications relating to certain offenses by officers and
employees in connection with revenue laws.
Sec. 5. Modifications relating to civil damages for unauthorized
inspection or disclosure of returns and
return information.
Sec. 6. Ban on ex parte discussions.
Sec. 7. Right to independent conference.
Sec. 8. Alternative dispute resolution procedures.
Sec. 9. Increase in monetary penalties for certain unauthorized
disclosures of information.
Sec. 10. Ban on raising new issues on appeal.
Sec. 11. Limitation on enforcement of liens against principal
residences.
Sec. 12. Additional provisions relating to mandatory termination for
misconduct.
Sec. 13. Review by the Treasury Inspector General for Tax
Administration.
Sec. 14. Deduction for expenses relating to certain audits.
Sec. 15. Term limit for National Taxpayer Advocate.
Sec. 16. Release of IRS levy due to economic hardship for business
taxpayers.
Sec. 17. Repeal of partial payment requirement on submissions of
offers-in-compromise.
SEC. 2. MODIFICATION OF STANDARDS FOR AWARDING OF COSTS AND CERTAIN
FEES.
(a) Small Businesses Eligible Without Regard to Net Worth.--
Subparagraph (D) of section 7430(c)(4) of the Internal Revenue Code of
1986 is amended by striking ``and'' at the end of clause (i)(II), by
striking the period at the end of clause (ii) and inserting ``, and'',
and by adding at the end the following new clause:
``(iii) in the case of an eligible small
business, the net worth limitation in clause
(ii) of such section shall not apply.''.
(b) Eligible Small Business.--Paragraph (4) of section 7430(c) of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new subparagraph:
``(F) Eligible small business.--
``(i) In general.--For purposes of
subparagraph (D)(iii), the term `eligible small
business' means, with respect to any proceeding
commenced in a taxable year--
``(I) a corporation the stock of
which is not publicly traded,
``(II) a partnership, or
``(III) a sole proprietorship,
if the average annual gross receipts of such
corporation, partnership, or sole
proprietorship for the 3-taxable-year period
preceding such taxable year does not exceed
$50,000,000. For purposes of applying the test
under the preceding sentence, rules similar to
the rules of paragraphs (2) and (3) of section
448(c) shall apply.
``(ii) Adjustment for inflation.--In the
case of any calendar year after 2025, the
$50,000,000 amount in clause (i) shall be
increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for such calendar year,
determined by substituting `calendar
year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding
sentence is not a multiple of $500, such amount
shall be rounded to the next lowest multiple of
$500.''.
(c) Effective Date.--The amendments made by this section shall
apply to proceedings commenced after the date of the enactment of this
Act.
SEC. 3. CIVIL DAMAGES ALLOWED FOR RECKLESS OR INTENTIONAL DISREGARD OF
INTERNAL REVENUE LAWS.
(a) Increase in Amount of Damages.--
(1) In general.--Section 7433(b) of the Internal Revenue
Code of 1986 is amended by striking ``$1,000,000 ($100,000, in
the case of negligence)'' and inserting ``$5,000,000 ($500,000,
in the case of negligence)''.
(2) Adjustment for inflation.--Section 7433 of such Code is
amended by adding at the end the following new subsection:
``(f) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $5,000,000 and $500,000 amounts in subsection (b) shall
each be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2023' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $500, such amount shall be rounded to the next lowest
multiple of $500.''.
(b) Extension of Time To Bring Action.--Section 7433(d)(3) of the
Internal Revenue Code of 1986 is amended by striking ``2 years'' and
inserting ``5 years''.
(c) Effective Date.--The amendments made by this section shall
apply to actions of employees of the Internal Revenue Service after the
date of the enactment of this Act.
SEC. 4. MODIFICATIONS RELATING TO CERTAIN OFFENSES BY OFFICERS AND
EMPLOYEES IN CONNECTION WITH REVENUE LAWS.
(a) Increase in Penalty.--Section 7214 of the Internal Revenue Code
of 1986 is amended--
(1) by striking ``$10,000'' in subsection (a) and inserting
``$25,000'', and
(2) by striking ``$5,000'' in subsection (b) and inserting
``$10,000''.
(b) Adjustment for Inflation.--Section 7214 of the Internal Revenue
Code of 1986, as amended by subsection (a), is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b)
the following new subsection:
``(c) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $25,000 amount in subsection (a) and the $10,000 amount
in subsection (b) shall each be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $100, such amount shall be rounded to the next lowest
multiple of $100.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 5. MODIFICATIONS RELATING TO CIVIL DAMAGES FOR UNAUTHORIZED
INSPECTION OR DISCLOSURE OF RETURNS AND RETURN
INFORMATION.
(a) Increase in Amount of Damages.--Subparagraph (A) of section
7431(c)(1) of the Internal Revenue Code of 1986 is amended by striking
``$1,000'' and inserting ``$10,000''.
(b) Adjustment for Inflation.--Section 7431 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
subsection:
``(i) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $10,000 amount in subsection (c)(1)(A) shall be
increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $100, such amount shall be rounded to the next lowest
multiple of $100.''.
(c) Period for Bringing Action.--Subsection (d) of section 7431 of
the Internal Revenue Code of 1986 is amended by striking ``2 years''
and inserting ``5 years''.
(d) Effective Date.--The amendment made by this section shall apply
to inspections and disclosure occurring on and after the date of the
enactment of this Act.
SEC. 6. BAN ON EX PARTE DISCUSSIONS.
(a) In General.--Notwithstanding section 1001(a)(4) of the Internal
Revenue Service Restructuring and Reform Act of 1998, the Internal
Revenue Service shall prohibit any ex parte communications between
officers in the Internal Revenue Service Independent Office of Appeals
and other Internal Revenue Service employees with respect to any matter
pending before such officers.
(b) Termination of Employment for Misconduct.--Subject to
subsection (c), the Commissioner of Internal Revenue shall terminate
the employment of any employee of the Internal Revenue Service if there
is a final administrative or judicial determination that such employee
committed any act or omission prohibited under subsection (a) in the
performance of the employee's official duties. Such termination shall
be a removal for cause on charges of misconduct.
(c) Determination of Commissioner.--
(1) In general.--The Commissioner of Internal Revenue may
take a personnel action other than termination for an act
prohibited under subsection (a).
(2) Discretion.--The exercise of authority under paragraph
(1) shall be at the sole discretion of the Commissioner of
Internal Revenue and may not be delegated to any other officer.
At the sole discretion of the Commissioner of Internal Revenue,
such Commissioner may establish a procedure which will be used
to determine whether an individual should be referred to the
Commissioner of Internal Revenue for a determination by the
Commissioner under paragraph (1).
(3) No appeal.--Any determination of the Commissioner of
Internal Revenue under this subsection may not be appealed in
any administrative or judicial proceeding.
(d) TIGTA Reporting of Termination or Mitigation.--Section
7803(d)(1)(E) of the Internal Revenue Code of 1986 is amended by
inserting ``or section 6 of the Small Business Taxpayer Bill of Rights
Act of 2025'' after ``1998''.
SEC. 7. RIGHT TO INDEPENDENT CONFERENCE.
Section 1001 of the Internal Revenue Service Restructuring and
Reform Act of 1998 is amended by redesignating subsection (c) as
subsection (d) and by inserting after subsection (b) the following new
subsection:
``(c) Right to Independent Conference.--Under the organization plan
of the Internal Revenue Service, a taxpayer shall have the right to a
conference with the Internal Revenue Service Independent Office of
Appeals which does not include personnel from the Office of Chief
Counsel for the Internal Revenue Service or the compliance functions of
the Internal Revenue Service unless the taxpayer specifically consents
to the participation of such personnel.''.
SEC. 8. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.
(a) In General.--Section 7123 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(d) Availability of Dispute Resolutions.--
``(1) In general.--The procedures prescribed under
subsection (b)(1) and the pilot program established under
subsection (b)(2) shall provide that a taxpayer may request
mediation or arbitration in any case unless the Secretary has
specifically excluded the type of issue involved in such case
or the class of cases to which such case belongs as not
appropriate for resolution under such subsection. The Secretary
shall make any determination that excludes a type of issue or a
class of cases public within 5 working days and provide an
explanation for each determination.
``(2) Independent mediators.--
``(A) In general.--The procedures prescribed under
subsection (b)(1) shall provide the taxpayer an
opportunity to elect to have the mediation conducted by
an independent, neutral individual not employed by the
Internal Revenue Service Independent Office of Appeals.
``(B) Cost and selection.--
``(i) In general.--Any taxpayer making an
election under subparagraph (A) shall be
required--
``(I) to share the costs of such
independent mediator equally with the
Internal Revenue Service Independent
Office of Appeals, and
``(II) to limit the selection of
the mediator to a roster of recognized
national or local neutral mediators.
``(ii) Exception.--Clause (i)(I) shall not
apply to any taxpayer who is an individual or
who was a small business in the preceding
calendar year if such taxpayer had an adjusted
gross income that did 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, in the
taxable year preceding the request.
``(iii) Small business.--For purposes of
clause (ii), the term `small business' has the
meaning given such term under section
41(b)(3)(D)(iii).
``(3) Availability of process.--The procedures prescribed
under subsection (b)(1) and the pilot program established under
subsection (b)(2) shall provide the opportunity to elect
mediation or arbitration at the time when the case is first
filed with the Internal Revenue Service Independent Office of
Appeals and at any time before deliberations in the appeal
commence.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 9. INCREASE IN MONETARY PENALTIES FOR CERTAIN UNAUTHORIZED
DISCLOSURES OF INFORMATION.
(a) In General.--Paragraphs (1), (2), (3), and (4) of section
7213(a) of the Internal Revenue Code of 1986 are each amended by
striking ``$5,000'' and inserting ``$10,000''.
(b) Adjustment for Inflation.--Subsection (a) of section 7213 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(6) Adjustment for inflation.--In the case of any
calendar year after 2025, the $10,000 amounts in paragraphs
(1), (2), (3), and (4) shall each be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year,
determined by substituting `calendar year 2023' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not
a multiple of $100, such amount shall be rounded to the next
lowest multiple of $100.''.
(c) Effective Date.--The amendments made by this section shall
apply to disclosures made after the date of the enactment of this Act.
SEC. 10. BAN ON RAISING NEW ISSUES ON APPEAL.
(a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 7531. PROHIBITION ON INTERNAL REVENUE SERVICE RAISING NEW ISSUES
IN AN INTERNAL APPEAL.
``(a) In General.--In reviewing an appeal of any determination
initially made by the Internal Revenue Service, the Internal Revenue
Service Independent Office of Appeals may not consider or decide any
issue that is not within the scope of the initial determination.
``(b) Certain Issues Deemed Outside of Scope of Determination.--For
purposes of subsection (a), the following matters shall be considered
to be not within the scope of a determination:
``(1) Any issue that was not raised in a notice of
deficiency or an examiner's report which is the subject of the
appeal.
``(2) Any deficiency in tax which was not included in the
initial determination.
``(3) Any theory or justification for a tax deficiency
which was not considered in the initial determination.
``(c) No Inference With Respect to Issues Raised by Taxpayers.--
Nothing in this section shall be construed to provide any limitation in
addition to any limitations in effect on the date of the enactment of
this section on the right of a taxpayer to raise an issue, theory, or
justification on an appeal from a determination initially made by the
Internal Revenue Service that was not within the scope of the initial
determination.''.
(b) Clerical Amendment.--The table of sections for chapter 77 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new item:
``Sec. 7531. Prohibition on Internal Revenue Service raising new issues
in an internal appeal.''.
(c) Effective Date.--The amendments made by this section shall
apply to matters filed or pending with the Internal Revenue Service
Independent Office of Appeals on or after the date of the enactment of
this Act.
SEC. 11. LIMITATION ON ENFORCEMENT OF LIENS AGAINST PRINCIPAL
RESIDENCES.
(a) In General.--Section 7403(a) of the Internal Revenue Code of
1986 is amended--
(1) by striking ``In any case'' and inserting the
following:
``(1) In general.--In any case''; and
(2) by adding at the end the following new paragraph:
``(2) Limitation with respect to principal residence.--
``(A) In general.--Paragraph (1) shall not apply to
any property used as the principal residence of the
taxpayer (within the meaning of section 121) unless the
Secretary of the Treasury makes a written determination
that--
``(i) all other property of the taxpayer,
if sold, is insufficient to pay the tax or
discharge the liability, and
``(ii) such action will not create an
economic hardship for the taxpayer.
``(B) Delegation.--For purposes of this paragraph,
the Secretary of the Treasury may not delegate any
responsibilities under subparagraph (A) to any person
other than--
``(i) the Commissioner of Internal Revenue,
or
``(ii) a district director or assistant
district director of the Internal Revenue
Service.''.
(b) Effective Date.--The amendments made by this section shall
apply to actions filed after the date of the enactment of this Act.
SEC. 12. ADDITIONAL PROVISIONS RELATING TO MANDATORY TERMINATION FOR
MISCONDUCT.
(a) Termination of Unemployment for Inappropriate Review of Tax-
Exempt Status.--Section 1203(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended
by striking ``and'' at the end of paragraph (9), by striking the period
at the end of paragraph (10) and inserting ``; and'', and by adding at
the end the following new paragraph:
``(11) in the case of any review of an application for tax-
exempt status by an organization described in section 501(c) of
the Internal Revenue Code of 1986, developing or using any
methodology that applies disproportionate scrutiny to any
applicant based on the ideology expressed in the name or
purpose of the organization.''.
(b) Mandatory Unpaid Administrative Leave for Misconduct.--
Paragraph (1) of section 1203(c) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended
by adding at the end the following new sentence: ``Notwithstanding the
preceding sentence, if the Commissioner of Internal Revenue takes a
personnel action other than termination for an act or omission
described in subsection (b), the Commissioner shall place the employee
on unpaid administrative leave for a period of not less than 90
days.''.
(c) Limitation on Alternative Punishment.--Paragraph (1) of section
1203(c) of the Internal Revenue Service Restructuring and Reform Act of
1998 (26 U.S.C. 7804 note) is amended by striking ``The Commissioner''
and inserting ``Except in the case of an act or omission described in
subsection (b)(3)(A), the Commissioner''.
SEC. 13. REVIEW BY THE TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION.
(a) Review.--Subsection (k)(1) of section 412 of title 5, United
States Code, is amended--
(1) in subparagraph (C), by striking ``and'' at the end;
(2) by redesignating subparagraph (D) as subparagraph (E);
(3) by inserting after subparagraph (C) the following new
subparagraph:
``(D) shall--
``(i) review any criteria employed by the
Internal Revenue Service to select tax returns
(including applications for recognition of tax-
exempt status) for examination or audit,
assessment or collection of deficiencies,
criminal investigation or referral, refunds for
amounts paid, or any heightened scrutiny or
review in order to determine whether the
criteria discriminates against taxpayers on the
basis of race, religion, or political ideology;
and
``(ii) consult with the Internal Revenue
Service on recommended amendments to such
criteria in order to eliminate any
discrimination identified pursuant to the
review described in clause (i); and''; and
(4) in subparagraph (E), as so redesignated, by striking
``and (C)'' and inserting ``(C), and (D)''.
(b) Semiannual Report.--Subsection (g) of section 412 of title 5,
United States Code, is amended by adding at the end the following new
paragraph:
``(3) Semiannual reports.--Any semiannual report made by
the Treasury Inspector General for Tax Administration that is
required pursuant to section 405(b) shall include--
``(A) a statement affirming that the Treasury
Inspector General for Tax Administration has reviewed
the criteria described in subsection (k)(1)(D) and
consulted with the Internal Revenue Service regarding
such criteria; and
``(B) a description and explanation of any such
criteria that was identified as discriminatory by the
Treasury Inspector General for Tax Administration.''.
SEC. 14. DEDUCTION FOR EXPENSES RELATING TO CERTAIN AUDITS.
(a) In General.--Subsection (a) of section 62 of the Internal
Revenue Code of 1986 is amended by inserting after paragraph (21) the
following new paragraph:
``(22) Expenses relating to certain audits.--The deduction
allowed by section 224.''.
(b) Deduction for Expenses Relating to Certain Audits.--Part VII of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by redesignating section 224 as section 225 and by inserting
after section 223 the following new section:
``SEC. 224. EXPENSES RELATING TO CERTAIN AUDITS.
``(a) Allowance of Deduction.--In the case of an individual, there
shall be allowed as a deduction for the taxable year an amount equal to
so much of the qualified NRP expenses paid or incurred during the
taxable year as does not exceed $5,000.
``(b) Qualified NRP Expenses.--For purposes of this section, the
term `qualified NRP expenses' means amounts which but for subsection
(c) would be allowed as a deduction under section 162 or 212(3) in
connection with an audit of the taxpayer's return of the tax imposed by
this chapter for any taxable year under the National Research Program,
but only if such audit results in no increase in the tax liability of
the taxpayer for such taxable year.
``(c) Denial of Double Benefit.--No deduction shall be allowed
under any other provision of this chapter for any amount for which a
deduction is allowed under this section.''.
(c) Clerical Amendment.--The table of sections for part VII of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by striking the item relating to section 224 and by inserting
after the item relating to section 223 the following new items:
``Sec. 224. Expenses relating to certain audits.
``Sec. 225. Cross reference.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 15. TERM LIMIT FOR NATIONAL TAXPAYER ADVOCATE.
(a) In General.--Subparagraph (B) of section 7803(c)(1) of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new clause:
``(v) Term.--The term of the National
Taxpayer Advocate shall be a 10-year term,
beginning with a term to commence on the date
which is 18 months after the date of the
enactment of the Small Business Taxpayer Bill
of Rights Act of 2025. Each subsequent term
shall begin on the day after the date on which
the previous term expires. The National
Taxpayer Advocate may be appointed to serve
more than 1 term.''.
(b) Effective Date.--The term of any individual serving as the
National Taxpayer Advocate under section 7803(c) of the Internal
Revenue Code of 1986 as of the date of the enactment of this Act shall
end as of the day before the date which is 18 months after such date of
enactment, unless such individual is reappointed as the National
Taxpayer Advocate for a subsequent term pursuant to section
7803(c)(1)(B)(v) of such Code.
SEC. 16. RELEASE OF IRS LEVY DUE TO ECONOMIC HARDSHIP FOR BUSINESS
TAXPAYERS.
(a) In General.--Subparagraph (D) of section 6343(a)(1) of the
Internal Revenue Code of 1986 is amended by striking ``or'' and
inserting ``including the financial condition of the taxpayer's viable
trade or business, or''.
(b) Determination of Economic Hardship.--Subsection (a) of section
6343 of the Internal Revenue Code of 1986 is amended by adding at the
end the following new paragraph:
``(4) Determination of economic hardship to business
taxpayer.--In determining whether to release any levy under
paragraph (1)(D), the Secretary shall consider--
``(A) the economic viability of the business,
``(B) the nature and extent of the hardship created
by the levy (including whether the taxpayer has
exercised ordinary business care and prudence), and
``(C) the potential harm to individuals if the
business is liquidated.''.
(c) Effective Date.--The amendments made by this section shall
apply to levies made after the date of the enactment of this Act.
SEC. 17. REPEAL OF PARTIAL PAYMENT REQUIREMENT ON SUBMISSIONS OF
OFFERS-IN-COMPROMISE.
(a) In General.--Section 7122 of the Internal Revenue Code of 1986
is amended by striking subsection (c) and by redesignating subsections
(d), (e), (f), and (g) as subsections (c), (d), (e), and (f),
respectively.
(b) Conforming Amendments.--
(1) Paragraph (3) of section 7122(c) of the Internal
Revenue Code of 1986, as redesignated by subsection (a), is
amended by inserting ``and'' at the end of subparagraph (A), by
striking ``, and'' at the end of subparagraph (B) and inserting
a period, and by striking subparagraph (C).
(2) Section 7122 of such Code, as amended by this section,
is amended by adding at the end the following new subsection:
``(g) Application of User Fee.--In the case of any assessed tax or
other amounts imposed under this title with respect to such tax which
is the subject of an offer-in-compromise, such tax or other amounts
shall be reduced by any user fee imposed under this title with respect
to such offer-in-compromise.''.
(3) Section 6159(g) of such Code is amended by striking
``section 7122(e)'' and inserting ``section 7122(d)''.
(c) Effective Date.--The amendments made by this section shall
apply to offers-in-compromise submitted after the date of the enactment
of this Act.
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