Small Business Taxpayer Bill of Rights Act of 2021

II 117TH CONGRESS 1ST SESSION S. 1656 To provide a taxpayer bill of rights for small businesses. IN THE SENATE OF THE UNITED STATES MAY 17, 2021 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Small Business Taxpayer Bill of Rights Act of 2021’’. 5 (b) TABLE OF CONTENTS.—The table of contents of 6 this Act is as follows: 7 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. VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1656 IS 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 mis- conduct. 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 1 COSTS AND CERTAIN FEES. 2 (a) SMALL BUSINESSES ELIGIBLE WITHOUT RE- 3 GARD TO NET WORTH.—Subparagraph (D) of section 4 7430(c)(4) of the Internal Revenue Code of 1986 is 5 amended by striking ‘‘and’’ at the end of clause (i)(II), 6 by striking the period at the end of clause (ii) and insert- 7 ing ‘‘, and’’, and by adding at the end the following new 8 clause: 9 ‘‘(iii) in the case of an eligible small 10 business, the net worth limitation in clause 11 (ii) of such section shall not apply.’’. 12 (b) ELIGIBLE SMALL BUSINESS.—Paragraph (4) of 13 section 7430(c) of the Internal Revenue Code of 1986 is 14 amended by adding at the end the following new subpara- 15 graph: 16 ‘‘(F) ELIGIBLE SMALL BUSINESS.— 17 ‘‘(i) IN GENERAL.—For purposes of 18 subparagraph (D)(iii), the term ‘eligible 19 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1656 IS small business’ means, with respect to any 1 proceeding commenced in a taxable year— 2 ‘‘(I) a corporation the stock of 3 which is not publicly traded, 4 ‘‘(II) a partnership, or 5 ‘‘(III) a sole proprietorship, 6 if the average annual gross receipts of such 7 corporation, partnership, or sole propri- 8 etorship for the 3-taxable-year period pre- 9 ceding such taxable year does not exceed 10 $50,000,000. For purposes of applying the 11 test under the preceding sentence, rules 12 similar to the rules of paragraphs (2) and 13 (3) of section 448(c) shall apply. 14 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 15 In the case of any calendar year after 16 2021, the $50,000,000 amount in clause 17 (i) shall be increased by an amount equal 18 to— 19 ‘‘(I) such dollar amount, multi- 20 plied by 21 ‘‘(II) the cost-of-living adjust- 22 ment determined under section 1(f)(3) 23 for such calendar year, determined by 24 substituting ‘calendar year 2020’ for 25 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1656 IS ‘calendar year 2016’ in subparagraph 1 (A)(ii) thereof. 2 If any amount as increased under the pre- 3 ceding sentence is not a multiple of $500, 4 such amount shall be rounded to the next 5 lowest multiple of $500.’’. 6 (c) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to proceedings commenced after 8 the date of the enactment of this Act. 9 SEC. 3. CIVIL DAMAGES ALLOWED FOR RECKLESS OR IN- 10 TENTIONAL DISREGARD OF INTERNAL REV- 11 ENUE LAWS. 12 (a) INCREASE IN AMOUNT OF DAMAGES.— 13 (1) IN GENERAL.—Section 7433(b) of the In- 14 ternal Revenue Code of 1986 is amended by striking 15 ‘‘$1,000,000 ($100,000, in the case of negligence)’’ 16 and inserting ‘‘$5,000,000 ($500,000, in the case of 17 negligence)’’. 18 (2) ADJUSTMENT FOR INFLATION.—Section 19 7433 of such Code is amended by adding at the end 20 the following new subsection: 21 ‘‘(f) ADJUSTMENT FOR INFLATION.—In the case of 22 any calendar year after 2021, the $5,000,000 and 23 $500,000 amounts in subsection (b) shall each be in- 24 creased by an amount equal to— 25 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1656 IS ‘‘(1) such dollar amount, multiplied by 1 ‘‘(2) the cost-of-living adjustment determined 2 under section 1(f)(3) for such calendar year, deter- 3 mined by substituting ‘calendar year 2020’ for ‘cal- 4 endar year 2016’ in subparagraph (A)(ii) thereof. 5 If any amount as increased under the preceding sentence 6 is not a multiple of $500, such amount shall be rounded 7 to the next lowest multiple of $500.’’. 8 (b) EXTENSION OF TIME TO BRING ACTION.—Sec- 9 tion 7433(d)(3) of the Internal Revenue Code of 1986 is 10 amended by striking ‘‘2 years’’ and inserting ‘‘5 years’’. 11 (c) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to actions of employees of the In- 13 ternal Revenue Service after the date of the enactment 14 of this Act. 15 SEC. 4. MODIFICATIONS RELATING TO CERTAIN OFFENSES 16 BY OFFICERS AND EMPLOYEES IN CONNEC- 17 TION WITH REVENUE LAWS. 18 (a) INCREASE IN PENALTY.—Section 7214 of the In- 19 ternal Revenue Code of 1986 is amended— 20 (1) by striking ‘‘$10,000’’ in subsection (a) and 21 inserting ‘‘$25,000’’, and 22 (2) by striking ‘‘$5,000’’ in subsection (b) and 23 inserting ‘‘$10,000’’. 24 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1656 IS (b) ADJUSTMENT FOR INFLATION.—Section 7214 of 1 the Internal Revenue Code of 1986, as amended by sub- 2 section (a), is amended by redesignating subsection (c) as 3 subsection (d) and by inserting after subsection (b) the 4 following new subsection: 5 ‘‘(c) ADJUSTMENT FOR INFLATION.—In the case of 6 any calendar year after 2021, the $25,000 amount in sub- 7 section (a) and the $10,000 amount in subsection (b) shall 8 each be increased by an amount equal to— 9 ‘‘(1) such dollar amount, multiplied by 10 ‘‘(2) the cost-of-living adjustment determined 11 under section 1(f)(3) for such calendar year, deter- 12 mined by substituting ‘calendar year 2020’ for ‘cal- 13 endar year 2016’ in subparagraph (A)(ii) thereof. 14 If any amount as increased under the preceding sentence 15 is not a multiple of $100, such amount shall be rounded 16 to the next lowest multiple of $100.’’. 17 (c) EFFECTIVE DATE.—The amendments made by 18 this section shall take effect on the date of the enactment 19 of this Act. 20 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1656 IS SEC. 5. MODIFICATIONS RELATING TO CIVIL DAMAGES FOR 1 UNAUTHORIZED INSPECTION OR DISCLO- 2 SURE OF RETURNS AND RETURN INFORMA- 3 TION. 4 (a) INCREASE IN AMOUNT OF DAMAGES.—Subpara- 5 graph (A) of section 7431(c)(1) of the Internal Revenue 6 Code of 1986 is amended by striking ‘‘$1,000’’ and insert- 7 ing ‘‘$10,000’’. 8 (b) ADJUSTMENT FOR INFLATION.—Section 7431 of 9 the Internal Revenue Code of 1986 is amended by adding 10 at the end the following new subsection: 11 ‘‘(i) ADJUSTMENT FOR INFLATION.—In the case of 12 any calendar year after 2021, the $10,000 amount in sub- 13 section (c)(1)(A) shall be increased by an amount equal 14 to— 15 ‘‘(1) such dollar amount, multiplied by 16 ‘‘(2) the cost-of-living adjustment determined 17 under section 1(f)(3) for such calendar year, deter- 18 mined by substituting ‘calendar year 2020’ for ‘cal- 19 endar year 2016’ in subparagraph (A)(ii) thereof. 20 If any amount as increased under the preceding sentence 21 is not a multiple of $100, such amount shall be rounded 22 to the next lowest multiple of $100.’’. 23 (c) PERIOD FOR BRINGING ACTION.—Subsection (d) 24 of section 7431 of the Internal Revenue Code of 1986 is 25 amended by striking ‘‘2 years’’ and inserting ‘‘5 years’’. 26 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1656 IS (d) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to inspections and disclosure occur- 2 ring on and after the date of the enactment of this Act. 3 SEC. 6. BAN ON EX PARTE DISCUSSIONS. 4 (a) IN GENERAL.—Notwithstanding section 5 1001(a)(4) of the Internal Revenue Service Restructuring 6 and Reform Act of 1998, the Internal Revenue Service 7 shall prohibit any ex parte communications between offi- 8 cers in the Internal Revenue Service Independent Office 9 of Appeals and other Internal Revenue Service employees 10 with respect to any matter pending before such officers. 11 (b) TERMINATION OF EMPLOYMENT FOR MIS- 12 CONDUCT.—Subject to subsection (c), the Commissioner 13 of Internal Revenue shall terminate the employment of 14 any employee of the Internal Revenue Service if there is 15 a final administrative or judicial determination that such 16 employee committed any act or omission prohibited under 17 subsection (a) in the performance of the employee’s official 18 duties. Such termination shall be a removal for cause on 19 charges of misconduct. 20 (c) DETERMINATION OF COMMISSIONER.— 21 (1) IN GENERAL.—The Commissioner of Inter- 22 nal Revenue may take a personnel action other than 23 termination for an act prohibited under subsection 24 (a). 25 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 1656 IS (2) DISCRETION.—The exercise of authority 1 under paragraph (1) shall be at the sole discretion 2 of the Commissioner of Internal Revenue and may 3 not be delegated to any other officer. At the sole dis- 4 cretion of the Commissioner of Internal Revenue, 5 such Commissioner may establish a procedure which 6 will be used to determine whether an individual 7 should be referred to the Commissioner of Internal 8 Revenue for a determination by the Commissioner 9 under paragraph (1). 10 (3) NO APPEAL.—Any determination of the 11 Commissioner of Internal Revenue under this sub- 12 section may not be appealed in any administrative or 13 judicial proceeding. 14 (d) TIGTA REPORTING OF TERMINATION OR MITI- 15 GATION.—Section 7803(d)(1)(E) of the Internal Revenue 16 Code of 1986 is amended by inserting ‘‘or section 6 of 17 the Small Business Taxpayer Bill of Rights Act of 2021’’ 18 after ‘‘1998’’. 19 SEC. 7. RIGHT TO INDEPENDENT CONFERENCE. 20 Section 1001 of the Internal Revenue Service Re- 21 structuring and Reform Act of 1998 is amended by redes- 22 ignating subsection (c) as subsection (d) and by inserting 23 after subsection (b) the following new subsection: 24 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 1656 IS ‘‘(c) RIGHT TO INDEPENDENT CONFERENCE.— 1 Under the organization plan of the Internal Revenue Serv- 2 ice, a taxpayer shall have the right to a conference with 3 the Internal Revenue Service Independent Office of Ap- 4 peals which does not include personnel from the Office of 5 Chief Counsel for the Internal Revenue Service or the 6 compliance functions of the Internal Revenue Service un- 7 less the taxpayer specifically consents to the participation 8 of such personnel.’’. 9 SEC. 8. ALTERNATIVE DISPUTE RESOLUTION PROCE- 10 DURES. 11 (a) IN GENERAL.—Section 7123 of the Internal Rev- 12 enue Code of 1986 is amended by adding at the end the 13 following new subsection: 14 ‘‘(d) AVAILABILITY OF DISPUTE RESOLUTIONS.— 15 ‘‘(1) IN GENERAL.—The procedures prescribed 16 under subsection (b)(1) and the pilot program estab- 17 lished under subsection (b)(2) shall provide that a 18 taxpayer may request mediation or arbitration in 19 any case unless the Secretary has specifically ex- 20 cluded the type of issue involved in such case or the 21 class of cases to which such case belongs as not ap- 22 propriate for resolution under such subsection. The 23 Secretary shall make any determination that ex- 24 cludes a type of issue or a class of cases public with- 25 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 1656 IS in 5 working days and provide an explanation for 1 each determination. 2 ‘‘(2) INDEPENDENT MEDIATORS.— 3 ‘‘(A) IN GENERAL.—The procedures pre- 4 scribed under subsection (b)(1) shall provide 5 the taxpayer an opportunity to elect to have the 6 mediation conducted by an independent, neutral 7 individual not employed by the Internal Rev- 8 enue Service Independent Office of Appeals. 9 ‘‘(B) COST AND SELECTION.— 10 ‘‘(i) IN GENERAL.—Any taxpayer 11 making an election under subparagraph 12 (A) shall be required— 13 ‘‘(I) to share the costs of such 14 independent mediator equally with the 15 Internal Revenue Service Independent 16 Office of Appeals, and 17 ‘‘(II) to limit the selection of the 18 mediator to a roster of recognized na- 19 tional or local neutral mediators. 20 ‘‘(ii) EXCEPTION.—Clause (i)(I) shall 21 not apply to any taxpayer who is an indi- 22 vidual or who was a small business in the 23 preceding calendar year if such taxpayer 24 had an adjusted gross income that did not 25 VerDate Sep 11 2014 03:41 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1656.IS S1656 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 1656 IS exceed 250 percent of the poverty level, as 1 determined in accordance with criteria es- 2 tablished by the Director of the [Text truncated for display. 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