http://waysandmeans.house.gov/jct/pubs02.html

http://waysandmeans.house.gov/jct/x-20-02.pdf

TAXPAYER PROTECTION AND IRS ACCOUNTABILITY ACT OF 2002

JCX-18-02

I. REFORMING PENALTY AND INTEREST PROVISIONS

H. Frivolous Tax Returns and Submissions

Present Law

The Code provides that an individual who files a frivolous income tax return is subject to a penalty of $500 imposed by the IRS (sec. 6702). The Code also permits the Tax Court [28] to impose a penalty of up to $25,000 if a taxpayer has instituted or maintained proceedings primarily for delay or if the taxpayer’s position in the proceeding is frivolous or groundless (sec. 6673(a)).

[28] Because in general the Tax Court is the only pre-payment forum available to taxpayers, it deals with most of the frivolous, groundless, or dilatory arguments raised in tax cases.

Description of Proposal

The proposal would modify this IRS-imposed penalty by increasing the amount of the penalty to up to $5,000 and by applying it to all taxpayers and to all types of Federal taxes.

The proposal would also modify present law with respect to certain submissions that raise frivolous arguments or that are intended to delay or impede tax administration. The submissions to which this provision would apply would be requests for a collection due process hearing, installment agreements, offers-in-compromise, and taxpayer assistance orders. First, the proposal would permit the IRS to dismiss such requests. Second, the proposal would permit the IRS to impose a penalty of up to $5,000 for such requests, unless the taxpayer withdraws the request after being given an opportunity to do so.

The proposal would require the IRS to publish a list of positions, arguments, requests, and proposals determined to be frivolous for purposes of these provisions.

Effective Date

The proposal would be effective for submissions made and issues raised after the date on which the Secretary first prescribes the required list.

II. IMPROVING THE FAIRNESS OF IRS COLLECTION PROCEDURES

C. Extend Time Limit for Contesting IRS Levy

Present Law

The IRS is authorized to return property that has been wrongfully levied upon (sec. 6343). In general, monetary proceeds may be returned within 9 months of the date of the levy.

Description of Proposal

The proposal would extend this 9 month period to 2 years.

Effective Date

The proposal would be effective on the date of enactment.

E. Study of Liens and Levies

Present Law

To aid in the collection of tax liabilities, the IRS may impose liens and levies against property of the taxpayer.

Description of Proposal

The proposal would require the Treasury to conduct a study of the practices of the IRS concerning liens and levies. The study would examine the declining use of liens and levies by the IRS and the practicality of recording liens and levies against property in cases where the cost of such actions exceeds the amount to be realized from the property.

Effective Date

The study would be required to be submitted to the Congress not later than one year after the date of enactment.

III. IMPROVING THE EFFICIENCY OF TAX ADMINISTRATION

C. Consolidate Review of Collection Due Process Cases in the Tax Court

Present Law

In general, the IRS is required to notify taxpayers that they have a right to a fair and impartial hearing before levy may be made on any property or right to property (sec. 6330(a)). Similar rules apply with respect to liens (sec. 6320). The hearing is held by an impartial officer from the IRS Office of Appeals, who is required to issue a determination with respect to the issues raised by the taxpayer at the hearing. The taxpayer is entitled to appeal that determination to a court. That appeal must be brought to the United States Tax Court, unless the Tax Court does not have jurisdiction over the underlying tax liability. If that is the case, then the appeal must be brought in the district court of the United States (sec. 6330(d)). Special rules apply if the taxpayer files the appeal in the incorrect court.

The United States Tax Court is established under Article I of the United States Constitution [33] and is a court of limited jurisdiction.[34]

Description of Proposal

The proposal would consolidate all judicial review of these collection due process determinations in the United States Tax Court.

Effective Date

The proposal would apply to appeals filed after the date of enactment.

[33] Sec. 7441.

[34] Sec. 7442.

E. Study of Taxpayer Notification Alternatives

Present Law

The Code requires the IRS to mail a variety of notices to taxpayers. Some of these notices are statutorily required to be sent via certified or registered mail.[35]

The IRS is required by statute to send any notice relating to a joint return separately to each individual filing the joint return, wherever practicable.[36]

Description of Proposal

The proposal would require the Treasury to conduct a study of alternatives to the current methods of notifying taxpayers of determinations and other actions of the IRS. The study would examine the advantages and disadvantages of the use of certificates of mailing, of modifications to certified or registered mail requirements that eliminate the use of a return receipt, and of modifications with respect to dual notices to taxpayers filing joint returns residing at the same address.

Effective Date

The study would be required to be submitted to the Congress not later than one year after the date of enactment.

[35] The following provisions of the Code require that IRS send

notices by certified or registered mail: 534(b), 982(c)(1), 2011(c)

(3), 2058(b)(2)(C)(i), 6015(e)(1)(A)(i)(I), 6038A(e)(2)(C), 6038C(d)(2)©, 6110(f)(3)(B) and (f)(4)(B), 6164(d)(2), 6212 (a) and (b)(2),6234(a), 6245(b)(1), 6320(a)(2)(C), 6330(a)(2)(C), 6331(d)(2)(C), 6532 (a)(1) and (a)(4) and (c)(2), 7428(b)(3), 7430(f)(2), 7436(b) (2), 7476(b)(5), 7477(b)(3), 7478(b)(3), and 7479(b)(3). The following provision of the Code require that States send notices by certified or registered mail: 6402(e)(4)(A). The following provisions of the Code require that taxpayers send information to the IRS by certified or registered mail: 527(j)(2)(A)(II) and 7425(c)(1) and (3).

[36] Section 3201(d) of the IRS Restructuring and Reform Act of 1998

(Pub. L. No. 105-206; July 22, 1998).

IV. TAXPAYER INFORMATION CONFIDENTIALITY

B. Taxpayer Representatives Not Subject to Examination Without

Supervisor Approval

Present Law

Under section 6103(h)(1), returns and return information are, without written request, open to inspection by or disclosure to officers and employees of the Department of the Treasury, including IRS employees, whose official duties require such inspection or disclosure for tax administration purposes. The Office of Chief Counsel issued an opinion stating that it was appropriate for a local IRS employee to examine tax records to determine whether taxpayer representatives who submit Form 2848 (Power of Attorney) are current in their tax obligations.[39] The opinion concluded that section 6103(h)(1) permits local IRS employees to access the Integrated Data Retrieval System [40] to determine whether a taxpayer’s representative is current in his or her tax obligations.

Description of Proposal

The proposal would clarify that an IRS employee conducting an examination of a taxpayer is not authorized to inspect a taxpayer representative’s return or return information solely on the basis of the representative relationship to the taxpayer. Under the proposal, the supervisor of the IRS employee would be required to approve such inspection after making a determination that other grounds justified such an inspection. The proposal would not affect the ability of employees of the IRS Director of Practice, or other employees whose assigned duties concern the regulation of practice before the IRS, to access returns and return information of a representative.

Effective Date

The proposal would be effective on the date of enactment.

[39] Internal Revenue Service, IRS Legal Memorandum ILM 199

[40] The Integrated Data Retrieval System (commonly referred to as “IDRS”) is the IRS’ primary computer database for return information.

Dear Representative,

Please vote NO on HR 3991, inappropriately named the Taxpayer

Protection and IRS Accountability Act of 2002. This horrendous bill was written by the Internal Revenue Service, and is a blatant attempt to repeal the IRS 1998 Reform & Restructuring Act which was enacted as a result of the Roth hearings on IRS abuses in 1997. If you recall, witnesses testified from behind screens because they were so frightened of retaliation from this powerful agency. I watched those hearings and recall the admiration I felt for those folks who were brave enough to come forward to chronicle the abuses of the IRS. I was proud that Senator Roth held those hearings and was gratified when the new laws were passed. Now, with the passage of HR 3991, Congress will be telling the American people they care nothing about these abuses. The sacrifices these people made will be for naught, and it will be business as usual at the IRS.

This bill actually removes ordinary due process protection for the taxpayer, and makes the IRS even less accountable. IRS will be able to write, interpret, and enforce the rules, thereby destroying the separation of powers clauses of the Constitution. The taxpayer will be forced to petition Tax Court in increasing numbers, since the administrative remedies will be removed by this new bill. Incredibly, the IRS wins over 90% of these cases, which makes this administrative court nothing more than a rubber stamp.

Here are two of the more objectionable parts of HR 3991:

Raising the so-called frivolous penalty to $5,000 from $500. The ordinary citizen will be unable to rebut any position the IRS takes for fear of incurring this large penalty. IRS decides what is frivolous, and that will be anything that is contrary to its position. In fact, the taxpayer can be fined $5,000 just for asking for a hearing. The IRS will take whatever amount it wants by lien or levy, with no due process hearing as guaranteed by the Bill of Rights.

The consolidation of all cases in Tax Court:

In the guise of having “expertise” in tax matters, this court routinely favors the IRS over the taxpayer. In fact, this court has not even applied the newly enacted 1998 law fairly, instead choosing to ignore the plain language and intent of Congress. Please read the dissenting opinions in the Lunsford cases at 117 T.C.(2001) More and more, taxpayers will be forced to abide by the adverse decisions from this court or face a costly and lengthy appeal to the Federal Court of Appeals. By freeing the IRS of its duty to address issues of conflict administratively, the abuses will be even worse than before the 1997 hearings.

HR 3991 is a giant step backward in restoring our country to a constitutional government.

Please vote NO on HR 3991.

<http://www.nytimes.com/2002/03/26/business/26TAX.html?ex=1018165623&ei=1&en=e92795c7fa2f1ab7>

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