TAXPAYER BILL OF RIGHTS 2000: H.R. 4163

TAXPAYER BILL OF RIGHTS 2000: H.R. 4163

Order Code RS20545
Updated April 13, 2000
CRS Report for Congress
Received through the CRS Web
Taxpayer Bill of Rights 2000: H.R. 4163
Marie B. Morris
Legislative Attorney
American Law Division
Summary
On April 11, 2000, the House of Representatives unanimously passed the Taxpayer
Bill of Rights 2000, H.R. 4163. The House-passed version of the bill is identical to that
adopted by the Committee on Ways and Means. The bill would simplify interest and
penalty provisions, clarify what information the IRS may disclose publicly, improve
communications from IRS to taxpayers, and require a number of reports from the
Treasury Inspector General for Tax Administration.
The House-passed version of the Taxpayer Bill of Rights 2000, H.R. 4163, is divided
into three titles. The first deals with simplifying provisions relating to interest and
penalties, the second clarifies what information the IRS may disclose publicly, and the third
contains miscellaneous provisions including such topics as church tax audits, and requires
a number of reports from the Treasury Inspector General for Tax Administration. For a
more complete description of each of the provisions, see the Joint Committee on Taxation
website [http://www.house.gov/jct/].
Title I of the Taxpayer Bill of Rights 2000 contains provisions designed to simplify
the payment of interest and penalties. Among the issues addressed by Title I are
proposals to simplify payment of estimated taxes. These proposals include converting the
penalty for underpaying estimated taxes into an interest provision; raising the safe harbor
for underpaying estimated taxes for taxpayers subject to wage withholding from $1,000
to $2,000 (other taxpayers would potentially remain liable for the entire amount of any
underpayment unless other safe harbors applied); amending the interest rate calculations
so that the interest rate on the underpayment would remain constant for a taxpayer even
if the federal interest rate changed during the middle of a quarter; permitting taxpayers to
cumulate their underpayments rather than having to do a separate calculation for each
quarter of underpayment; and deeming every year to have 365 days so that interest
calculations do not differ for leap years and non-leap years. Title I also proposes
permitting taxpayers who overpaid their taxes to exclude from income any interest paid
to them by the IRS on the overpayment, providing the taxpayer did not deliberately
overpay the taxes in order to be paid tax-free interest. A third part of title I covers
penalties for failing to pay tax on time. These are proposed to be eliminated for taxpayers
keeping current on an installment agreement; and penalties for other taxpayers would be
reduced by half. Taxpayers entering installment agreements which permit automated
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payments from their bank accounts would not have to pay the present-law fee ($43) to
implement the installment agreement. A fourth part of title I proposes to expand the
Secretary’s authority to abate interest in a number of situations including: where gross
injustice would otherwise result; when the delay is attributable to unreasonable IRS error
or delay; when the taxpayer is repaying an excessive refund; and when the taxpayer has
relied on written statements of the IRS.
A fifth part of title I would set up a mechanism whereby taxpayers could make
deposits to a qualified dispute reserve fund in order to stop the running of interest while
trying to resolve a dispute. This mechanism would permit taxpayers to still have access
to the Tax Court.
Title II covers disclosure by the IRS. It would clarify that the Internal Revenue
Code, and not the Privacy Act, governs the disclosure and inspection of income tax
returns. It would expand the types of IRS internal advice that would be available for
public disclosure; permit former spouses to make oral requests to get copies of joint
income tax returns which they filed; prohibit the IRS from inspecting the return of a
taxpayer’s lawyer or accountant just because the IRS is examining the taxpayer’s return;
limit the amount of disclosure made of non-party tax returns in judicial or administrative
tax proceedings; keep the taxpayer’s address and identification number confidential when
making public accepted offers-in-compromise; tighten up the rules for consenting to
disclosure of tax returns; require that States certify that their contractors comply with non-
disclosure provisions; require the IRS to notify taxpayers whose tax returns were inspected
or disclosed without authorization; and permit the IRS to list taxpayers it is unable to
locate who are due refunds on the internet.
Title III would permit the IRS to notify churches about laws governing tax-exempt
organizations without having to comply with the church tax inquiry procedures. Tax-
exempt organizations which do not obtain a determination of exempt status from the IRS
within 270 days would be permitted to sue for a declaratory judgment as to their exempt
status. Title III would require the Treasury Inspector General for Tax Administration to
prepare a number of additional reports, including requirements to list by category the 10
most common complaints of IRS employee misconduct and the number of such common
complaints; to publish annually statistics on the number of payments of damages and
attorneys fees made because of employee misconduct; to report annually to Congress on
penalty abatements and the criteria used for abatements; and to make a one-time report
evaluating whether the IRS could use email and faxes to communicate with taxpayers and
eliminate some of the inherent delays and lost communications when using mail or the
telephone. Title III would raise the threshold for Joint Committee review of large refunds
from $1 million to $2 million. Finally, title III would require the IRS to revise Publication
1, Your Rights as a Taxpayer, in order to clearly spell out how the statute of limitations
affect a taxpayer’s ability to receive a refund when taxpayers fail to file their returns on
time.