H.R.5763 - Tax Administration Reform Act of 2002107th Congress (2001-2002)
Bill
Hide Overview| Sponsor: | Rep. Thomas, William M. [R-CA-21] (Introduced 11/22/2002) |
|---|---|
| Committees: | House - Ways and Means |
| Latest Action: | House - 11/22/2002 Referred to the House Committee on Ways and Means. (All Actions) |
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Introduced in House (11/22/2002)
[Congressional Bills 107th Congress]
[From the U.S. Government Printing Office]
[H.R. 5763 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 5763
To amend the Internal Revenue Code of 1986 to provide fairness in tax
collection procedures and improved administrative efficiency and
confidentiality and to reform its penalty and interest provisions.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 22, 2002
Mr. Thomas introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide fairness in tax
collection procedures and improved administrative efficiency and
confidentiality and to reform its penalty and interest provisions.
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 ``Tax Administration
Reform Act of 2002''.
(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) Table of Contents.--
Sec. 1. Short title; etc.
TITLE I--FAIRNESS IN TAX COLLECTION PROCEDURES
Sec. 101. Partial payment of tax liability in installment agreements.
Sec. 102. Extension of time for return of property.
Sec. 103. Individuals held harmless on wrongful levy, etc., on
individual retirement plan.
Sec. 104. Seven-day threshold on tolling of statute of limitations
during tax review.
Sec. 105. Study of liens and levies.
Sec. 106. Low-income taxpayer clinics.
TITLE II--IMPROVED ADMINISTRATIVE EFFICIENCY AND CONFIDENTIALITY
Subtitle A--Efficiency of Tax Administration
Sec. 201. Revisions relating to termination of employment of Internal
Revenue Service employees for misconduct.
Sec. 202. Confirmation of authority of Tax Court to apply doctrine of
equitable recoupment.
Sec. 203. Jurisdiction of Tax Court over collection due process cases.
Sec. 204. Office of Chief Counsel review of offers in compromise.
Sec. 205. 15-day delay in due date for electronically filed individual
income tax returns.
Subtitle B--Confidentiality and Disclosure
Sec. 211. Collection activities with respect to joint return
disclosable to either spouse based on oral
request.
Sec. 212. Taxpayer representatives not subject to examination on sole
basis of representation of taxpayers.
Sec. 213. Compliance by contractors with confidentiality safeguards.
Sec. 214. Higher standards for requests for and consents to disclosure.
Sec. 215. Notice to taxpayer concerning administrative determination of
browsing; annual report.
Sec. 216. Expanded disclosure in emergency circumstances.
Sec. 217. Disclosure to State officials of proposed actions related to
section 501(c)(3) organizations.
Subtitle C--Other Provisions
Sec. 221. Better means of communicating with taxpayers.
Sec. 222. Enrolled agents.
Sec. 223. Financial management service fees.
Sec. 224. Amendment to Treasury auction reforms.
TITLE III--REFORM OF PENALTY AND INTEREST PROVISIONS
Sec. 301. Failure to pay estimated tax penalty converted to interest
charge on accumulated unpaid balance.
Sec. 302. Exclusion from gross income for interest on overpayments of
income tax by individuals.
Sec. 303. Abatement of interest.
Sec. 304. Deposits made to suspend running of interest on potential
underpayments.
Sec. 305. Expansion of interest netting for individuals.
Sec. 306. Waiver of certain penalties for first-time unintentional
minor errors.
Sec. 307. Frivolous tax submissions.
Sec. 308. Clarification of application of Federal tax deposit penalty.
TITLE I--FAIRNESS IN TAX COLLECTION PROCEDURES
SEC. 101. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT AGREEMENTS.
(a) In General.--
(1) Section 6159(a) (relating to authorization of
agreements) is amended--
(A) by striking ``satisfy liability for payment
of'' and inserting ``make payment on'', and
(B) by inserting ``full or partial'' after
``facilitate''.
(2) Section 6159(c) (relating to Secretary required to
enter into installment agreements in certain cases) is amended
in the matter preceding paragraph (1) by inserting ``full''
before ``payment''.
(b) Requirement To Review Partial Payment Agreements Every Two
Years.--Section 6159 is amended by redesignating subsections (d) and
(e) as subsections (e) and (f), respectively, and inserting after
subsection (c) the following new subsection:
``(d) Secretary Required To Review Installment Agreements for
Partial Collection Every Two Years.--In the case of an agreement
entered into by the Secretary under subsection (a) for partial
collection of a tax liability, the Secretary shall review the agreement
at least once every 2 years.''.
(c) Effective Date.--The amendments made by this section shall
apply to agreements entered into on or after the date of the enactment
of this Act.
SEC. 102. EXTENSION OF TIME FOR RETURN OF PROPERTY.
(a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 (relating to return of property) is
amended by striking ``9 months'' and inserting ``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of section 6532
(relating to suits by persons other than taxpayers) is amended--
(1) in paragraph (1) by striking ``9 months'' and inserting
``2 years'', and
(2) in paragraph (2) by striking ``9-month'' and inserting
``2-year''.
(c) Effective Date.--The amendments made by this section shall
apply to--
(1) levies made after the date of the enactment of this
Act, and
(2) levies made on or before such date if the 9-month
period has not expired under section 6343(b) of the Internal
Revenue Code of 1986 (without regard to this section) as of
such date.
SEC. 103. INDIVIDUALS HELD HARMLESS ON WRONGFUL LEVY, ETC., ON
INDIVIDUAL RETIREMENT PLAN.
(a) In General.--Section 6343 (relating to authority to release
levy and return property) is amended by adding at the end the following
new subsection:
``(f) Individuals Held Harmless on Wrongful Levy, etc., on
Individual Retirement Plan.--
``(1) In general.--If the Secretary determines that an
individual retirement plan has been levied upon in a case to
which subsection (b) or (d)(2)(A) applies, an amount equal to
the sum of--
``(A) the amount of money returned by the Secretary
on account of such levy, and
``(B) interest paid under subsection (c) on such
amount of money,
may be deposited into an individual retirement plan (other than
an endowment contract) to which a rollover from the plan levied
upon is permitted.
``(2) Treatment as rollover.--The distribution on account
of the levy and any deposit under paragraph (1) with respect to
such distribution shall be treated for purposes of this title
as if such distribution and deposit were part of a rollover
described in section 408(d)(3)(A)(i); except that--
``(A) interest paid under subsection (c) shall be
treated as part of such distribution and as not
includible in gross income,
``(B) the 60-day requirement in such section shall
be treated as met if the deposit is made not later than
the 60th day after the day on which the individual
receives an amount under paragraph (1) from the
Secretary, and
``(C) such deposit shall not be taken into account
under section 408(d)(3)(B).
``(3) Refund, etc., of income tax on levy.--If any amount
is includible in gross income for a taxable year by reason of a
levy referred to in paragraph (1) and any portion of such
amount is treated as a rollover under paragraph (2), any tax
imposed by chapter 1 on such portion shall not be assessed, and
if assessed shall be abated, and if collected shall be credited
or refunded as an overpayment made on the due date for filing
the return of tax for such taxable year.
``(4) Interest.--Notwithstanding subsection (d), interest
shall be allowed under subsection (c) in a case in which the
Secretary makes a determination described in subsection
(d)(2)(A) with respect to a levy upon an individual retirement
plan.''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts paid under subsections (b), (c), and (d)(2)(A) of section
6343 of the Internal Revenue Code of 1986 after December 31, 2002.
SEC. 104. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF LIMITATIONS
DURING TAX REVIEW.
(a) In General.--Section 7811(d)(1) (relating to suspension of
running of period of limitation) is amended by inserting after
``application,'' the following: ``but only if the date of such decision
is at least 7 days after the date of the taxpayer's application''.
(b) Effective Date.--The amendment made by this section shall apply
to applications filed after the date of the enactment of this Act.
SEC. 105. STUDY OF LIENS AND LEVIES.
The Secretary of the Treasury, or the Secretary's delegate, shall
conduct a study of the practices of the Internal Revenue Service
concerning liens and levies. The study shall examine--
(1) the declining use of liens and levies by the Internal
Revenue Service, and
(2) the practicality of recording liens and levying against
property in cases in which the cost of such actions exceeds the
amount to be realized from such property.
Not later than 1 year after the date of the enactment of this Act, the
Secretary shall submit such study to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of the
Senate.
SEC. 106. LOW-INCOME TAXPAYER CLINICS.
(a) Limitation on Amount of Grants.--Paragraph (1) of section
7526(c) (relating to special rules and limitations) is amended by
striking ``$6,000,000 per year'' and inserting ``$9,000,000 for 2002,
$12,000,000 for 2003, and $15,000,000 for each year thereafter''.
(b) Promotion of Clinics.--Section 7526(c) is amended by adding at
the end the following new paragraph:
``(7) Promotion of clinics.--The Secretary is authorized to
promote the benefits of and encourage the use of low-income
taxpayer clinics through the use of mass communications,
referrals, and other means.''.
TITLE II--IMPROVED ADMINISTRATIVE EFFICIENCY AND CONFIDENTIALITY
Subtitle A--Efficiency of Tax Administration
SEC. 201. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF INTERNAL
REVENUE SERVICE EMPLOYEES FOR MISCONDUCT.
(a) In General.--Subchapter A of chapter 80 (relating to
application of internal revenue laws) is amended by inserting after
section 7804 the following new section:
``SEC. 7804A. DISCIPLINARY ACTIONS FOR MISCONDUCT.
``(a) Disciplinary Actions.--
``(1) In general.--Subject to subsection (c), the
Commissioner shall take an action in accordance with the
guidelines established under paragraph (2) against any employee
of the Internal Revenue Service if there is a final
administrative or judicial determination that such employee
committed any act or omission described under subsection (b) in
the performance of the employee's official duties or where a
nexus to the employee's position exists.
``(2) Guidelines.--The Commissioner shall issue guidelines
for determining the appropriate level of discipline, up to and
including termination of employment, for committing any act or
omission described under subsection (b).
``(b) Acts or Omissions.--The acts or omissions described under
this subsection are--
``(1) willful failure to obtain the required approval
signatures on documents authorizing the seizure of a taxpayer's
home, personal belongings, or business assets;
``(2) willfully providing a false statement under oath with
respect to a material matter involving a taxpayer or taxpayer
representative;
``(3) with respect to a taxpayer or taxpayer
representative, the willful violation of--
``(A) any right under the Constitution of the
United States;
``(B) any civil right established under--
``(i) title VI or VII of the Civil Rights
Act of 1964;
``(ii) title IX of the Education Amendments
of 1972;
``(iii) the Age Discrimination in
Employment Act of 1967;
``(iv) the Age Discrimination Act of 1975;
``(v) section 501 or 504 of the
Rehabilitation Act of 1973; or
``(vi) title I of the Americans with
Disabilities Act of 1990; or
``(C) the Internal Revenue Service policy on
unauthorized inspection of returns or return
information;
``(4) willfully falsifying or destroying documents to
conceal mistakes made by any employee with respect to a matter
involving a taxpayer or taxpayer representative;
``(5) assault or battery on a taxpayer or taxpayer
representative, but only if there is a criminal conviction, or
a final adverse judgment by a court in a civil case, with
respect to the assault or battery;
``(6) willful violations of this title, Department of the
Treasury regulations, or policies of the Internal Revenue
Service (including the Internal Revenue Manual) for the purpose
of retaliating against, or harassing, a taxpayer or taxpayer
representative;
``(7) willful misuse of the provisions of section 6103 for
the purpose of concealing information from a congressional
inquiry;
``(8) willful failure to file any return of tax required
under this title on or before the date prescribed therefor
(including any extensions) when a tax is due and owing, unless
such failure is due to reasonable cause and not due to willful
neglect;
``(9) willful understatement of Federal tax liability,
unless such understatement is due to reasonable cause and not
due to willful neglect; and
``(10) threatening to audit a taxpayer, or to take other
action under this title, for the purpose of extracting personal
gain or benefit.
``(c) Determinations of Commissioner.--
``(1) In general.--The Commissioner may take a personnel
action other than a disciplinary action provided for in the
guidelines under subsection (a)(2) for an act or omission
described under subsection (b).
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may not be delegated to any other officer. The
Commissioner, in his sole discretion, may establish a procedure
to determine if an individual should be referred to the
Commissioner for a determination by the Commissioner under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination of the Commissioner under this
subsection may not be reviewed in any administrative or
judicial proceeding. A finding that an act or omission
described under subsection (b) occurred may be reviewed.
``(d) Definition.--For the purposes of the provisions described in
clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a
program or activity regarding Federal financial assistance or an
education program or activity receiving Federal financial assistance
shall include any program or activity conducted by the Internal Revenue
Service for a taxpayer.
``(e) Annual Report.--The Commissioner shall submit to Congress
annually a report on disciplinary actions under this section.''.
(b) Clerical Amendment.--The table of sections for chapter 80 is
amended by inserting after the item relating to section 7804 the
following new item:
``Sec. 7804A. Disciplinary actions for
misconduct.''.
(c) Repeal of Superseded Section.--Section 1203 of the Internal
Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-
206; 112 Stat. 720) is repealed.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 202. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF
EQUITABLE RECOUPMENT.
(a) Confirmation of Authority of Tax Court To Apply Doctrine of
Equitable Recoupment.--Subsection (b) of section 6214 (relating to
jurisdiction over other years and quarters) is amended by adding at the
end the following new sentence: ``Notwithstanding the preceding
sentence, the Tax Court may apply the doctrine of equitable recoupment
to the same extent that it is available in civil tax cases before the
district courts of the United States and the United States Court of
Federal Claims.''.
(b) Effective Date.--The amendments made by this section shall
apply to any action or proceeding in the Tax Court with respect to
which a decision has not become final (as determined under section 7481
of the Internal Revenue Code of 1986) as of the date of the enactment
of this Act.
SEC. 203. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.
(a) In General.--Section 6330(d)(1) (relating to judicial review of
determination) is amended to read as follows:
``(1) Judicial review of determination.--The person may,
within 30 days of a determination under this section, appeal
such determination to the Tax Court (and the Tax Court shall
have jurisdiction with respect to such matter).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to judicial appeals filed after the date of the enactment of this
Act.
SEC. 204. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN COMPROMISE.
(a) In General.--Section 7122(b) (relating to record) is amended by
striking ``Whenever a compromise'' and all that follows through ``his
delegate'' and inserting ``If the Secretary determines that an opinion
of the General Counsel for the Department of the Treasury, or the
Counsel's delegate, is required with respect to a compromise, there
shall be placed on file in the office of the Secretary such opinion''.
(b) Conforming Amendments.--Section 7122(b) is amended by striking
the second and third sentences.
(c) Effective Date.--The amendments made by this section shall
apply to offers-in-compromise submitted or pending on or after the date
of the enactment of this Act.
SEC. 205. 15-DAY DELAY IN DUE DATE FOR ELECTRONICALLY FILED INDIVIDUAL
INCOME TAX RETURNS.
(a) In General.--Section 6072 (relating to time for filing income
tax returns) is amended by adding at the end the following new
subsection:
``(f) Electronically Filed Returns of Individuals.--
``(1) In general.--Returns of an individual under section
6012 or 6013 (other than an individual to whom subsection (c)
applies) which are filed electronically--
``(A) in the case of returns filed on the basis of
a calendar year, shall be filed on or before the 30th
day of April following the close of the calendar year,
and
``(B) in the case of returns filed on the basis of
a fiscal year, shall be filed on or before the last day
of the 4th month following the close of the fiscal
year.
``(2) Electronic filing.--Paragraph (1) shall not apply to
any return unless--
``(A) such return is accepted by the Secretary, and
``(B) the balance due (if any) shown on such return
is paid electronically in a manner prescribed by the
Secretary.
``(3) Special rules.--
``(A) Estimated tax.--If--
``(i) paragraph (1) applies to an
individual for any taxable year, and
``(ii) there is an overpayment of tax shown
on the return for such year which the
individual allows against the individual's
obligation under section 6641,
then, with respect to the amount so allowed, any
reference in section 6641 to the April 15 following
such taxable year shall be treated as a reference to
April 30.
``(B) References to due date.--Paragraph (1) shall
apply solely for purposes of determining the due date
for the individual's obligation to file and pay tax
and, except as otherwise provided by the Secretary,
shall be treated as an extension of the due date for
any other purpose under this title.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2001.
Subtitle B--Confidentiality and Disclosure
SEC. 211. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN
DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL REQUEST.
(a) In General.--Paragraph (8) of section 6103(e) (relating to
disclosure of collection activities with respect to joint return) is
amended by striking ``in writing'' the first place it appears.
(b) Effective Date.--The amendment made by this section shall apply
to requests made after the date of the enactment of this Act.
SEC. 212. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION ON SOLE
BASIS OF REPRESENTATION OF TAXPAYERS.
(a) In General.--Subsection (h) of section 6103 (relating to
disclosure to certain Federal officers and employees for purposes of
tax administration, etc.) is amended by adding at the end the following
new paragraph:
``(7) Taxpayer representatives.--Notwithstanding paragraph
(1), the return of the representative of a taxpayer whose
return is being examined by an officer or employee of the
Department of the Treasury shall not be open to inspection by
such officer or employee on the sole basis of the
representative's relationship to the taxpayer unless a
supervisor of such officer or employee has approved the
inspection of the return of such representative on a basis
other than by reason of such relationship.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 213. COMPLIANCE BY CONTRACTORS WITH CONFIDENTIALITY SAFEGUARDS.
(a) In General.--Section 6103(p) (relating to State law
requirements) is amended by adding at the end the following new
paragraph:
``(9) Disclosure to contractors.--Notwithstanding any other
provision of this section, no return or return information
shall be disclosed by any officer or employee of any Federal
agency or State to any contractor of such agency or State
unless such agency or State--
``(A) has requirements in effect which require each
contractor of such agency or State which would have
access to returns or return information to provide
safeguards (within the meaning of paragraph (4)) to
protect the confidentiality of such returns or return
information,
``(B) agrees to conduct an annual, on-site review
(mid-point review in the case of contracts of less than
1 year in duration) of each contractor to determine
compliance with such requirements,
``(C) submits the findings of the most recent
review conducted under subparagraph (B) to the
Secretary as part of the report required by paragraph
(4)(E), and
``(D) certifies to the Secretary for the most
recent annual period that all contractors are in
compliance with all such requirements.
The certification required by subparagraph (D) shall include
the name and address of each contractor, a description of the
contract of the contractor with the Federal agency or State,
and the duration of such contract.''.
(b) Conforming Amendment.--Subparagraph (B) of section 6103(p)(8)
is amended by inserting ``or paragraph (9)'' after ``subparagraph
(A)''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to disclosures made after December 31, 2002.
(2) Certifications.--The first certification under section
6103(p)(9)(D) of the Internal Revenue Code of 1986, as added by
subsection (a), shall be made with respect to calendar year
2003.
SEC. 214. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO DISCLOSURE.
(a) In General.--Subsection (c) of section 6103 (relating to
disclosure of returns and return information to designee of taxpayer)
is amended by adding at the end the following new paragraphs:
``(2) Requirements for valid requests and consents.--A
request for or consent to disclosure under paragraph (1) shall
only be valid for purposes of this section or sections 7213,
7213A, or 7431 if--
``(A) at the time of execution, such request or
consent designates a recipient of such disclosure and
is dated, and
``(B) at the time such request or consent is
submitted to the Secretary, the submitter of such
request or consent certifies, under penalty of perjury,
that such request or consent complied with subparagraph
(A).
``(3) Restrictions on persons obtaining information.--Any
person shall, as a condition for receiving return or return
information under paragraph (1)--
``(A) ensure that such return and return
information is kept confidential,
``(B) use such return and return information only
for the purpose for which it was requested, and
``(C) not disclose such return and return
information except to accomplish the purpose for which
it was requested, unless a separate consent from the
taxpayer is obtained.
``(4) Requirements for form prescribed by secretary.--For
purposes of this subsection, the Secretary shall prescribe a
form for requests and consents which shall--
``(A) contain a warning, prominently displayed,
informing the taxpayer that the form should not be
signed unless it is completed,
``(B) state that if the taxpayer believes there is
an attempt to coerce him to sign an incomplete or blank
form, the taxpayer should report the matter to the
Treasury Inspector General for Tax Administration, and
``(C) contain the address and telephone number of
the Treasury Inspector General for Tax
Administration.''.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Treasury Inspector General for Tax
Administration shall submit a report to the Congress on compliance with
the designation and certification requirements applicable to requests
for or consent to disclosure of returns and return information under
section 6103(c) of the Internal Revenue Code of 1986, as amended by
subsection (a). Such report shall--
(1) evaluate (on the basis of random sampling) whether--
(A) the amendment made by subsection (a) is
achieving the purposes of this section;
(B) requesters and submitters for such disclosure
are continuing to evade the purposes of this section
and, if so, how; and
(C) the sanctions for violations of such
requirements are adequate; and
(2) include such recommendations that the Treasury
Inspector General for Tax Administration considers necessary or
appropriate to better achieve the purposes of this section.
(c) Conforming Amendment.--Section 6103(c) is amended by striking
``Taxpayer.--The Secretary'' and inserting ``Taxpayer.--
``(1) In general.--The Secretary''.
(d) Effective Date.--The amendments made by this section shall
apply to requests and consents made after 3 months after the date of
the enactment of this Act.
SEC. 215. NOTICE TO TAXPAYER CONCERNING ADMINISTRATIVE DETERMINATION OF
BROWSING; ANNUAL REPORT.
(a) Notice to Taxpayer.--Subsection (e) of section 7431 (relating
to notification of unlawful inspection and disclosure) is amended by
adding at the end the following: ``The Secretary shall also notify such
taxpayer if the Treasury Inspector General for Tax Administration
determines that such taxpayer's return or return information was
inspected or disclosed in violation of any of the provisions specified
in paragraph (1), (2), or (3).''.
(b) Reports.--Subsection (p) of section 6103 (relating to procedure
and recordkeeping), as amended by section 245, is further amended by
adding at the end the following new paragraph:
``(10) Report on unauthorized disclosure and inspection.--
As part of the report required by paragraph (3)(C) for each
calendar year, the Secretary shall furnish information
regarding the unauthorized disclosure and inspection of returns
and return information, including the number, status, and
results of--
``(A) administrative investigations,
``(B) civil lawsuits brought under section 7431
(including the amounts for which such lawsuits were
settled and the amounts of damages awarded), and
``(C) criminal prosecutions.''.
(c) Effective Date.--
(1) Notice.--The amendment made by subsection (a) shall
apply to determinations made after the date of the enactment of
this Act.
(2) Reports.--The amendment made by subsection (b) shall
apply to calendar years ending after the date of the enactment
of this Act.
SEC. 216. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.
(a) In General.--Section 6103(i)(3)(B) (relating to danger of death
or physical injury) is amended by striking ``or State'' and inserting
``, State, or local''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 217. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS RELATED TO
SECTION 501(C)(3) ORGANIZATIONS.
(a) In General.--Subsection (c) of section 6104 is amended by
striking paragraph (2) and inserting the following new paragraphs:
``(2) Disclosure of proposed actions.--
``(A) Specific notifications.--In the case of an
organization to which paragraph (1) applies, the
Secretary may disclose to the appropriate State
officer--
``(i) a notice of proposed refusal to
recognize such organization as an organization
described in section 501(c)(3) or a notice of
proposed revocation of such organization's
recognition as an organization exempt from
taxation,
``(ii) the issuance of a letter of proposed
deficiency of tax imposed under section 507 or
chapter 41 or 42, and
``(iii) the names and taxpayer
identification numbers of organizations that
have applied for recognition as organizations
described in section 501(c)(3).
``(B) Additional disclosures.--Returns and return
information of organizations with respect to which
information is disclosed under subparagraph (A) may be
made available for inspection by or disclosed to an
appropriate State officer.
``(C) Procedures for disclosure.--Information may
be inspected or disclosed under subparagraph (A) or (B)
only--
``(i) upon written request by an
appropriate State officer, and
``(ii) for the purpose of, and only to the
extent necessary in, the administration of
State laws regulating such organizations.
Such information may only be inspected by or disclosed
to representatives of the appropriate State officer
designated as the individuals who are to inspect or to
receive the returns or return information under this
paragraph on behalf of such officer.
``(D) Disclosures other than by request.--The
Secretary may make available for inspection or disclose
returns and return information of an organization to
which paragraph (1) applies to an appropriate State
officer of any State if the Secretary determines that
such inspection or disclosure may facilitate the
resolution of State and Federal issues relating to such
organization.
``(3) Use in judicial and administrative proceedings.--
Returns and return information disclosed pursuant to this
subsection may be disclosed in civil administrative and
judicial proceedings pertaining to the enforcement of State
laws regulating such organizations in a manner prescribed by
the Secretary similar to that for tax administration
proceedings under section 6103(h)(4).
``(4) No disclosure if impairment.--Returns and return
information shall not be disclosed under this subsection, or in
any proceeding described in paragraph (3), to the extent that
the Secretary determines that such disclosure would seriously
impair Federal tax administration.
``(5) Definitions.--For purposes of this subsection--
``(A) Return and return information.--The terms
`return' and `return information' have the respective
meanings given to such terms by section 6103(b).
``(B) Appropriate state officer.--The term
`appropriate State officer' means--
``(i) the State attorney general, or
``(ii) the head of any State agency, body,
or commission which is charged under the laws
of such State with responsibility for
overseeing organizations of the type described
in section 501(c)(3).''.
(b) Conforming Amendments.--
(1) Subsection (a) of section 6103 is amended--
(A) by inserting ``or section 6104(c)'' after
``this section'' in paragraph (2), and
(B) by striking ``or subsection (n)'' in paragraph
(3) and inserting ``subsection (n), or section
6104(c)''.
(2) Subparagraph (A) of section 6103(p)(3) is amended by
inserting ``and section 6104(c)'' after ``section'' in the
first sentence.
(3) Paragraph (4) of section 6103(p) is amended--
(A) in the matter preceding subparagraph (A), by
striking ``(16) or any other person described in
subsection (l)(16)'' and inserting ``(16), any other
person described in subsection (l)(16), or any
appropriate State officer (as defined in section
6104(c))'', and
(B) in subparagraph (F), by striking ``or any other
person described in subsection (l)(16)'' and inserting
``any other person described in subsection (l)(16), or
any appropriate State officer (as defined in section
6104(c))''.
(4) Paragraph (2) of section 7213(a) is amended by
inserting ``or under section 6104(c)'' after ``6103''.
(5) Paragraph (2) of section 7213A(a) is amended by
inserting ``or 6104(c)'' after ``6103''.
(6) Paragraph (2) of section 7431(a) is amended by
inserting ``(including any disclosure in violation of section
6104(c))'' after ``6103''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act but shall not apply to
requests made before such date.
Subtitle C--Other Provisions
SEC. 221. BETTER MEANS OF COMMUNICATING WITH TAXPAYERS.
Not later than 18 months after the date of the enactment of this
Act, the Treasury Inspector General for Tax Administration shall submit
a report to Congress evaluating whether technological advances, such as
e-mail and facsimile transmission, permit the use of alternative means
for the Internal Revenue Service to communicate with taxpayers.
SEC. 222. ENROLLED AGENTS.
(a) In General.--Chapter 77 (relating to miscellaneous provisions)
is amended by adding at the end the following new section:
``SEC. 7527. ENROLLED AGENTS.
``(a) In General.--The Secretary may prescribe such regulations as
may be necessary to regulate the conduct of enrolled agents in regards
to their practice before the Internal Revenue Service.
``(b) Use of Credentials.--Any enrolled agents properly licensed to
practice as required under rules promulgated under section (a) herein
shall be allowed to use the credentials or designation as `enrolled
agent', `EA', or `E.A.'.''.
(b) Clerical Amendment.--The table of sections for chapter 77 is
amended by adding at the end the following new item:
``Sec. 7525. Enrolled agents.''.
(c) Prior Regulations.--Nothing in the amendments made by this
section shall be construed to have any effect on part 10 of title 31,
Code of Federal Regulations, or any other Federal rule or regulation
issued before the date of the enactment of this Act.
SEC. 223. FINANCIAL MANAGEMENT SERVICE FEES.
Notwithstanding any other provision of law, the Financial
Management Service may charge the Internal Revenue Service, and the
Internal Revenue Service may pay the Financial Management Service, a
fee sufficient to cover the full cost of implementing a continuous levy
program under subsection (h) of section 6331 of the Internal Revenue
Code of 1986. Any such fee shall be based on actual levies made and
shall be collected by the Financial Management Service by the retention
of a portion of amounts collected by levy pursuant to that subsection.
Amounts received by the Financial Management Service as fees under that
subsection shall be deposited into the account of the Department of the
Treasury under section 3711(g)(7) of title 31, United States Code, and
shall be collected and accounted for in accordance with the provisions
of that section. The amount credited against the taxpayer's liability
on account of the continuous levy shall be the amount levied, without
reduction for the amount paid to the Financial Management Service as a
fee.
SEC. 224. AMENDMENT TO TREASURY AUCTION REFORMS.
(a) In General.--Clause (i) of section 202(c)(4)(B) of the
Government Securities Act Amendments of 1993 (31 U.S.C. 3121 note) is
amended by inserting before the semicolon ``(or, if earlier, at the
time the Secretary releases the minutes of the meeting in accordance
with paragraph (2))''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to meetings held after the date of the enactment of this Act.
TITLE III--REFORM OF PENALTY AND INTEREST PROVISIONS
SEC. 301. FAILURE TO PAY ESTIMATED TAX PENALTY CONVERTED TO INTEREST
CHARGE ON ACCUMULATED UNPAID BALANCE.
(a) Penalty Moved to Interest Chapter of Code.--The Internal
Revenue Code of 1986 is amended by redesignating section 6654 as
section 6641 and by moving section 6641 (as so redesignated) from part
I of subchapter A of chapter 68 to the end of subchapter E of chapter
67 (as added by subsection (e)(1) of this section).
(b) Penalty Converted to Interest Charge.--The heading and
subsections (a) and (b) of section 6641 (as so redesignated) are
amended to read as follows:
``SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY ESTIMATED INCOME
TAX.
``(a) In General.--Interest shall be paid on any underpayment of
estimated tax by an individual for a taxable year for each day of such
underpayment. The amount of such interest for any day shall be the
product of the underpayment rate established under subsection (b)(2)
multiplied by the amount of the underpayment.
``(b) Amount of Underpayment; Interest Rate.--For purposes of
subsection (a)--
``(1) Amount.--The amount of the underpayment on any day
shall be the excess of--
``(A) the sum of the required installments for the
taxable year the due dates for which are on or before
such day, over
``(B) the sum of the amounts (if any) of estimated
tax payments made on or before such day on such
required installments.
``(2) Determination of interest rate.--
``(A) In general.--The underpayment rate with
respect to any day in an installment underpayment
period shall be the underpayment rate established under
section 6621 for the first day of the calendar quarter
in which such installment underpayment period begins.
``(B) Installment underpayment period.--For
purposes of subparagraph (A), the term `installment
underpayment period' means the period beginning on the
day after the due date for a required installment and
ending on the due date for the subsequent required
installment (or in the case of the 4th required
installment, the 15th day of the 4th month following
the close of a taxable year).
``(C) Daily rate.--The rate determined under
subparagraph (A) shall be applied on a daily basis and
shall be based on the assumption of 365 days in a
calendar year.
``(3) Termination of estimated tax interest.--No day after
the end of the installment underpayment period for the 4th
required installment specified in paragraph (2)(B) for a
taxable year shall be treated as a day of underpayment with
respect to such taxable year.''.
(c) Increase in Safe Harbor Where Tax is Small.--
(1) In general.--Clause (i) of section 6641(d)(1)(B) (as so
redesignated) is amended to read as follows:
``(i) the lesser of--
``(I) 90 percent of the tax shown
on the return for the taxable year (or,
if no return is filed, 90 percent of
the tax for such year), or
``(II) the tax shown on the return
for the taxable year (or, if no return
is filed, the tax for such year)
reduced (but not below zero) by $2,000,
or''.
(2) Conforming amendment.--Subsection (e) of section 6641
(as so redesignated) is amended by striking paragraph (1) and
redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(d) Conforming Amendments.--
(1) Paragraphs (1) and (2) of subsection (e) (as
redesignated by subsection (c)(2)) and subsection (h) of
section 6641 (as so designated) are each amended by striking
``addition to tax'' each place it occurs and inserting
``interest''.
(2) Section 167(g)(5)(D) is amended by striking ``6654''
and inserting ``6641''.
(3) Section 460(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(4) Section 3510(b) is amended--
(A) by striking ``section 6654'' in paragraph (1)
and inserting ``section 6641'';
(B) by amending paragraph (2)(B) to read as
follows:
``(B) no interest would be required to be paid (but
for this section) under 6641 for such taxable year by
reason of the $2,000 amount specified in section
6641(d)(1)(B)(i)(II).'';
(C) by striking ``section 6654(d)(2)'' in paragraph
(3) and inserting ``section 6641(d)(2)''; and
(D) by striking paragraph (4).
(5) Section 6201(b)(1) is amended by striking ``6654'' and
inserting ``6641''.
(6) Section 6601(h) is amended by striking ``6654'' and
inserting ``6641''.
(7) Section 6621(b)(2)(B) is amended by striking ``addition
to tax under section 6654'' and inserting ``interest required
to be paid under section 6641''.
(8) Section 6622(b) is amended--
(A) by striking ``Penalty for'' in the heading; and
(B) by striking ``addition to tax under section
6654 or 6655'' and inserting ``interest required to be
paid under section 6641 or addition to tax under
section 6655''.
(9) Section 6658(a) is amended--
(A) by striking ``6654, or 6655'' and inserting
``or 6655, and no interest shall be required to be paid
under section 6641,''; and
(B) by inserting ``or paying interest'' after ``the
tax'' in paragraph (2)(B)(ii).
(10) Section 6665(b) is amended--
(A) in the matter preceding paragraph (1) by
striking ``, 6654,''; and
(B) in paragraph (2) by striking ``6654 or''.
(11) Section 7203 is amended by striking ``section 6654 or
6655'' and inserting ``section 6655 or interest required to be
paid under section 6641''.
(e) Clerical Amendments.--
(1) Chapter 67 is amended by inserting after subchapter D
the following:
``Subchapter E--Interest on Failure by Individual to Pay Estimated
Income Tax
``Sec. 6641. Interest on failure by
individual to pay estimated
income tax.''.
(2) The table of subchapters for chapter 67 is amended by
adding at the end the following new items:
``Subchapter D. Notice requirements.
``Subchapter E. Interest on failure by
individual to pay estimated
income tax.''.
(3) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to section
6654.
(f) Effective Date.--The amendments made by this section shall
apply to installment payments for taxable years beginning after
December 31, 2002.
SEC. 302. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS OF
INCOME TAX BY INDIVIDUALS.
(a) In General.--Part III of subchapter B of chapter 1 (relating to
items specifically excluded from gross income) is amended by inserting
after section 139 the following new section:
``SEC. 139A. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS
OF INCOME TAX BY INDIVIDUALS.
``(a) In General.--In the case of an individual, gross income shall
not include interest paid under section 6611 on any overpayment of tax
imposed by this subtitle.
``(b) Exception.--Subsection (a) shall not apply in the case of a
failure to claim items resulting in the overpayment on the original
return if the Secretary determines that the principal purpose of such
failure is to take advantage of subsection (a).
``(c) Special Rule for Determining Modified Adjusted Gross
Income.--For purposes of this title, interest not included in gross
income under subsection (a) shall not be treated as interest which is
exempt from tax for purposes of sections 32(i)(2)(B) and 6012(d) or any
computation in which interest exempt from tax under this title is added
to adjusted gross income.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 is amended by inserting after the item
relating to section 139 the following new item:
``Sec. 139A. Exclusion from gross income
for interest on overpayments of
income tax by individuals.''.
(c) Effective Date.--The amendments made by this section shall
apply to interest received in calendar years beginning after the date
of the enactment of this Act.
SEC. 303. ABATEMENT OF INTEREST.
(a) Abatement of Interest With Respect to Erroneous Refund Check
Without Regard to Size of Refund.--Paragraph (2) of section 6404(e) is
amended by striking ``unless--'' and all that follows and inserting
``unless the taxpayer (or a related party) has in any way caused such
erroneous refund.''.
(b) Abatement of Interest to Extent Interest is Attributable to
Taxpayer Reliance on Written Statements of the IRS.--Subsection (f) of
section 6404 is amended--
(1) in the subsection heading, by striking ``Penalty or
Addition'' and inserting ``Interest, Penalty, or Addition'';
and
(2) in paragraph (1) and in subparagraph (B) of paragraph
(2), by striking ``penalty or addition'' and inserting
``interest, penalty, or addition''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to interest accruing on or after the date of the
enactment of this Act.
SEC. 304. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL
UNDERPAYMENTS.
(a) In General.--Subchapter A of chapter 67 (relating to interest
on underpayments) is amended by adding at the end the following new
section:
``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL
UNDERPAYMENTS, ETC.
``(a) Authority To Make Deposits Other Than As Payment of Tax.--A
taxpayer may make a cash deposit with the Secretary which may be used
by the Secretary to pay any tax imposed under subtitle A or B or
chapter 41, 42, 43, or 44 which has not been assessed at the time of
the deposit. Such a deposit shall be made in such manner as the
Secretary shall prescribe.
``(b) No Interest Imposed.--To the extent that such deposit is used
by the Secretary to pay tax, for purposes of section 6601 (relating to
interest on underpayments), the tax shall be treated as paid when the
deposit is made.
``(c) Return of Deposit.--Except in a case where the Secretary
determines that collection of tax is in jeopardy, the Secretary shall
return to the taxpayer any amount of the deposit (to the extent not
used for a payment of tax) which the taxpayer requests in writing.
``(d) Payment of Interest.--
``(1) In general.--For purposes of section 6611 (relating
to interest on overpayments), a deposit which is returned to a
taxpayer shall be treated as a payment of tax for any period to
the extent (and only to the extent) attributable to a
disputable tax for such period. Under regulations prescribed by
the Secretary, rules similar to the rules of section 6611(b)(2)
shall apply.
``(2) Disputable tax.--
``(A) In general.--For purposes of this section,
the term `disputable tax' means the amount of tax
specified at the time of the deposit as the taxpayer's
reasonable estimate of the maximum amount of any tax
attributable to disputable items.
``(B) Safe harbor based on 30-day letter.--In the
case of a taxpayer who has been issued a 30-day letter,
the maximum amount of tax under subparagraph (A) shall
not be less than the amount of the proposed deficiency
specified in such letter.
``(3) Other definitions.--For purposes of paragraph (2)--
``(A) Disputable item.--The term `disputable item'
means any item of income, gain, loss, deduction, or
credit if the taxpayer--
``(i) has a reasonable basis for its
treatment of such item, and
``(ii) reasonably believes that the
Secretary also has a reasonable basis for
disallowing the taxpayer's treatment of such
item.
``(B) 30-day letter.--The term `30-day letter'
means the first letter of proposed deficiency which
allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of
Appeals.
``(4) Rate of interest.--The rate of interest allowable
under this subsection shall be the Federal short-term rate
determined under section 6621(b), compounded daily.
``(e) Use of Deposits.--
``(1) Payment of tax.--Except as otherwise provided by the
taxpayer, deposits shall be treated as used for the payment of
tax in the order deposited.
``(2) Returns of deposits.--Deposits shall be treated as
returned to the taxpayer on a last-in, first-out basis.''.
(b) Clerical Amendment.--The table of sections for subchapter A of
chapter 67 is amended by adding at the end the following new item:
``Sec. 6603. Deposits made to suspend
running of interest on
potential underpayments,
etc.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to deposits made after the date of the enactment of this
Act.
(2) Coordination with deposits made under revenue procedure
84-58.--In the case of an amount held by the Secretary of the
Treasury or his delegate on the date of the enactment of this
Act as a deposit in the nature of a cash bond deposit pursuant
to Revenue Procedure 84-58, the date that the taxpayer
identifies such amount as a deposit made pursuant to section
6603 of the Internal Revenue Code (as added by this Act) shall
be treated as the date such amount is deposited for purposes of
such section 6603.
SEC. 305. EXPANSION OF INTEREST NETTING FOR INDIVIDUALS.
(a) In General.--Subsection (d) of section 6621 (relating to
elimination of interest on overlapping periods of tax overpayments and
underpayments) is amended by adding at the end the following: ``Solely
for purposes of the preceding sentence, section 6611(e) shall not apply
in the case of an individual.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to interest accrued after December 31, 2002.
SEC. 306. WAIVER OF CERTAIN PENALTIES FOR FIRST-TIME UNINTENTIONAL
MINOR ERRORS.
(a) In General.--Section 6651 (relating to failure to file tax
return or to pay tax) is amended by adding at the end the following new
subsection:
``(i) Treatment of First-Time Unintentional Minor Errors.--
``(1) In general.--In the case of a return of tax imposed
by subtitle A filed by an individual, the Secretary may waive
an addition to tax under subsection (a) if--
``(A) the individual has a history of compliance
with the requirements of this title,
``(B) it is shown that the failure is due to an
unintentional minor error,
``(C) the penalty would be grossly disproportionate
to the action or expense that would have been needed to
avoid the error, and imposing the penalty would be
against equity and good conscience,
``(D) waiving the penalty would promote compliance
with the requirements of this title and effective tax
administration, and
``(E) the taxpayer took all reasonable steps to
remedy the error promptly after discovering it.
``(2) Exceptions.--Paragraph (1) shall not apply if--
``(A) the Secretary has waived any addition to tax
under this subsection with respect to any prior failure
by such individual,
``(B) the failure is a mathematical or clerical
error (as defined in section 6213(g)(2)), or
``(C) the failure is the lack of a required
signature.''.
(b) Effective Date.--The amendment made by this section shall take
effect on January 1, 2003.
SEC. 307. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay
a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the
substantial correctness of the self-assessment may be
judged, or
``(B) contains information that on its face
indicates that the self-assessment is substantially
incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary
has identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term
`specified frivolous submission' means a specified
submission if any portion of such submission--
``(i) is based on a position which the
Secretary has identified as frivolous under
subsection (c), or
``(ii) reflects a desire to delay or impede
the administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to
notice and opportunity for hearing upon
filing of notice of lien), or
``(II) section 6330 (relating to
notice and opportunity for hearing
before levy), and
``(ii) an application under--
``(I) section 7811 (relating to
taxpayer assistance orders),
``(II) section 6159 (relating to
agreements for payment of tax liability
in installments), or
``(III) section 7122 (relating to
compromises).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a specified
frivolous submission and such person withdraws such submission
promptly after such notice, the penalty imposed under paragraph
(1) shall not apply with respect to such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which the
Secretary has identified as being frivolous for purposes of this
subsection. The Secretary shall not include in such list any position
that the Secretary determines meets the requirement of section
6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the amount of
any penalty imposed under this section if the Secretary determines that
such reduction would promote compliance with and administration of the
Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The penalties
imposed by this section shall be in addition to any other penalty
provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, etc.--Notwithstanding any
other provision of this section, if the Secretary determines that any
portion of a request for a hearing under this section or section 6320
meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A),
then the Secretary may treat such portion as if it were never submitted
and such portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first
sentence and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i)
or (ii) of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon Filing of
Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-Compromise
and Installment Agreements.--Section 7122 is amended by adding at the
end the following new subsection:
``(e) Frivolous Submissions, etc.--Notwithstanding any other
provision of this section, if the Secretary determines that any portion
of an application for an offer-in-compromise or installment agreement
submitted under this section or section 6159 meets the requirement of
clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial review.''.
(e) Clerical Amendment.--The table of sections for part I of
subchapter B of chapter 68 is amended by striking the item relating to
section 6702 and inserting the following new item:
``Sec. 6702. Frivolous tax
submissions.''.
(f) Effective Date.--The amendments made by this section shall
apply to submissions made and issues raised after the date on which the
Secretary first prescribes a list under section 6702(c) of the Internal
Revenue Code of 1986, as amended by subsection (a).
SEC. 308. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT PENALTY.
Nothing in section 6656 of the Internal Revenue Code of 1986 shall
be construed to permit the percentage specified in subsection
(b)(1)(A)(iii) thereof to apply other than in a case where the failure
is for more than 15 days.
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