Restoring the IRS Act

II 117TH CONGRESS 1ST SESSION S. 1788 To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 24, 2021 Ms. WARREN introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes. 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. 3 This Act may be cited as the ‘‘Restoring the IRS 4 Act’’. 5 SEC. 2. SENSE OF CONGRESS. 6 It is the sense of Congress that— 7 (1) the Internal Revenue Service should be 8 given resources to increase audits and enforcement 9 of tax compliance of high-income, high-wealth indi- 10 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1788 IS viduals and corporations, with an emphasis on the 1 auditing and enforcement of tax compliance by indi- 2 viduals with gross income of not less than 3 $1,000,000 and of large corporations; 4 (2) priorities for actions and resources to im- 5 prove compliance with tax laws should be guided by 6 the relative revenue loss from non-compliance; 7 (3) the Internal Revenue Service should ensure 8 there are not racial disparities in its enforcement ac- 9 tivities; 10 (4) it should be the goal of the Internal Rev- 11 enue service that, by the tenth tax year after the 12 date of the enactment of this Act, the net tax gap 13 should be reduced by at least one-third, as compared 14 with the fraction estimated in the most recently In- 15 ternal Revenue Service study prior to such date of 16 enactment; and 17 (5) it should be the goal of the Internal Rev- 18 enue Service to provide quality, timely, and accurate 19 assistance to all taxpayers interacting with the In- 20 ternal Revenue Service. 21 SEC. 3. INTERNAL REVENUE SERVICE APPROPRIATIONS. 22 (a) IN GENERAL.—There is hereby appropriated to 23 each fiscal year ending after fiscal year 2021, out of any 24 moneys in the Treasury not otherwise appropriated, 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1788 IS $31,500,000,000, for necessary expenses for activities of 1 the Internal Revenue Service related to the following ac- 2 tivities: 3 (1) To provide taxpayer services, including pre- 4 filing assistance and education, filing and account 5 services, taxpayer advocacy services, other services 6 as authorized by 5 U.S.C. 3109, at such rates as 7 may be determined by the Commissioner, and other 8 related expenses, including the Tax Counseling for 9 the Elderly Program, low-income taxpayer clinic 10 grants, and the Taxpayer Advocate Service. 11 (2) Tax enforcement activities to determine and 12 collect owed taxes, to provide legal and litigation 13 support, to conduct criminal investigations, to en- 14 force criminal statutes related to violations of inter- 15 nal revenue laws and other financial crimes, to pur- 16 chase and hire passenger motor vehicles (31 U.S.C. 17 1343(b)), to increase audits of high-income tax- 18 payers, and to provide other services as authorized 19 by 5 U.S.C. 3109, at such rates as may be deter- 20 mined by the Commissioner. 21 (3) To support taxpayer services and enforce- 22 ment programs and activities, including rent pay- 23 ments; facilities services; printing; postage; physical 24 security; headquarters and other IRS-wide adminis- 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1788 IS tration activities; research and statistics of income; 1 telecommunications; information technology develop- 2 ment and support, enhancement, operations, mainte- 3 nance, and security; the hire of passenger motor ve- 4 hicles (31 U.S.C. 1343(b)); the operations of the In- 5 ternal Revenue Service Oversight Board; and other 6 services as authorized by 5 U.S.C. 3109, at such 7 rates as may be determined by the Commissioner. 8 (4) For the business systems modernization 9 program for the capital asset acquisition of informa- 10 tion technology systems, including management and 11 related contractual costs of said acquisitions, includ- 12 ing related Internal Revenue Service labor costs, and 13 contractual costs associated with operations author- 14 ized by 5 U.S.C. 3109. 15 (b) INFLATION ADJUSTMENT.— 16 (1) IN GENERAL.—In the case of any fiscal 17 year beginning after fiscal year 2022, the dollar 18 amount in subsection (a) shall be increased by an 19 amount equal to— 20 (A) such dollar amount, multiplied by 21 (B) the cost-of-living adjustment deter- 22 mined under section 1(f)(3) of the Internal 23 Revenue Code of 1986 for the calendar year in 24 which such fiscal year begins by substituting 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1788 IS ‘‘calendar year 2021’’ for ‘‘calendar year 2016’’ 1 in subparagraph (A)(ii) thereof. 2 (2) ROUNDING.—Any increase determined 3 under paragraph (1) shall be rounded to the nearest 4 multiple of $100. 5 (c) LIMITATION.—Of the amounts appropriated 6 under subsection (a)— 7 (1) not less than 50 percent of funds made 8 available for any fiscal year shall be used for pur- 9 poses described in subsection (a)(2) (or for activities 10 described in subsection (a)(3) that are related to ac- 11 tivities described in subsection (a)(2); and 12 (2) not less than 15 percent of funds made 13 available for any fiscal year shall be used for pur- 14 poses described in subsection (a)(1). 15 (d) ADMINISTRATIVE PROVISIONS.—None of the 16 funds made available in this section may be used to enter 17 into, renew, extend, administer, implement, or enforce any 18 qualified tax collection contract (as defined in section 19 6306 of the Internal Revenue Code of 1986). 20 SEC. 4. RETURNS RELATING TO CERTAIN BUSINESS TRANS- 21 ACTIONS. 22 (a) IN GENERAL.— 23 (1) RETURN REQUIREMENT.—Subpart B of 24 part III of subchapter A of chapter 61 of the Inter- 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1788 IS nal Revenue Code of 1986 is amended by adding at 1 the end the following new section: 2 ‘‘SEC. 6050Z. RETURNS RELATING TO ACCOUNT TRANS- 3 ACTIONS. 4 ‘‘(a) REQUIREMENT OF REPORTING.—Any covered 5 financial institution shall make the information return de- 6 scribed in subsection (b) at such time as the Secretary 7 may by regulations prescribe. 8 ‘‘(b) RETURN.—A return is described in this sub- 9 section if such return— 10 ‘‘(1) is in such form as the Secretary may pre- 11 scribe, and 12 ‘‘(2) contains, with respect to each account 13 maintained by the covered financial institution— 14 ‘‘(A) the name, address, and TIN of the 15 person on whose behalf the account is main- 16 tained, 17 ‘‘(B) the monthly gross inflows and out- 18 flows with respect to such account, 19 ‘‘(C) in the case of an account that is not 20 related to a trade or business, the amount of 21 such inflows and outflows that are related to— 22 ‘‘(i) cash transactions, 23 ‘‘(ii) foreign transactions, and 24 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1788 IS ‘‘(iii) transfers to related accounts, 1 and 2 ‘‘(D) such other information as the Sec- 3 retary may require for tax administration and 4 enforcement purposes. 5 ‘‘(c) STATEMENT TO BE FURNISHED TO TAXPAYERS 6 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 7 ‘‘(1) IN GENERAL.—Every covered financial in- 8 stitution that is required to make a return under 9 subsection (a) shall furnish to each person whose 10 identity is required to be set forth in such return a 11 written statement showing— 12 ‘‘(A) the name, address, and phone num- 13 ber of the information contact of the covered fi- 14 nancial institution required to make such a re- 15 turn, and 16 ‘‘(B) the information required to be shown 17 on such return with respect to such person. 18 ‘‘(2) FURNISHING OF INFORMATION.—The 19 written statement required under paragraph (1) 20 shall be furnished to the person on or before Janu- 21 ary 31 of the year following the calendar year for 22 which the return under subsection (a) is required to 23 be made. 24 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1788 IS ‘‘(d) COVERED FINANCIAL INSTITUTION.—For pur- 1 poses of this section, the term ‘covered financial institu- 2 tion’ means any financial institution (as determined under 3 regulations provided by the Secretary) which maintains an 4 account on behalf of another person.’’. 5 (2) REGULATIONS.— 6 (A) IN GENERAL.—Not later than 12 7 months after the date of the enactment of this 8 Act, the Secretary of the Treasury (or the Sec- 9 retary’s delegate) shall issue regulations on in- 10 formation reporting required under section 11 6050Z of the Internal Revenue Code of 1986 12 (as added by paragraph (1)), including regula- 13 tions specifying any other information required 14 to be reported under such section for purposes 15 of closing the tax gap (as defined in section 16 4(a)(2)). 17 (B) AVOIDANCE OF ADDITIONAL BUR- 18 DEN.—The regulations established under sub- 19 paragraph (A) shall minimize additional report- 20 ing burdens on taxpayers. 21 (b) PENALTIES.— 22 (1) RETURNS.—Section 6724(d)(1)(B) of the 23 Internal Revenue Code of 1986 is amended by strik- 24 ing ‘‘or’’ at the end of clause (xxv), by striking 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1788 IS ‘‘and’’ at the end of clause (xxvi), and by inserting 1 after clause (xxvi) the following new clause: 2 ‘‘(xxvii) section 6050Z (relating to in- 3 formation with respect to account trans- 4 actions),’’. 5 (2) STATEMENTS.—Section 6724(d)(2) of such 6 Code is amended— 7 (A) by striking ‘‘or’’ at the end of subpara- 8 graph (II), 9 (B) by striking the period at the end of the 10 first subparagraph (JJ) (relating to section 11 6035) and inserting a comma, 12 (C) by redesignating the second subpara- 13 graph (JJ) (relating to section 6050Y) as sub- 14 paragraph (KK), 15 (D) by striking the period at the end of 16 subparagraph (KK) (as redesignated by sub- 17 paragraph (C)) and inserting ‘‘, or’’, and 18 (E) by inserting after subparagraph (KK) 19 (as so redesignated) the following new subpara- 20 graph: 21 ‘‘(LL) section 6050Z 22 (relating to information with 23 respect to account trans- 24 actions).’’. 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1788 IS (c) CLERICAL AMENDMENT.—The table of sections 1 for subpart B of part III of subchapter A of chapter 61 2 of such Code is amended by adding at the end the fol- 3 lowing new item: 4 ‘‘Sec. 6050Z. Returns relating to account transactions.’’. (d) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxable years beginning after 6 December 31, 2022. 7 SEC. 5. REPORTS TO CONGRESS. 8 Not later than 1 year after the date of the enactment 9 of this Act and annually thereafter, the Commissioner of 10 the Internal Revenue Service, after consultation with the 11 Comptroller General, shall submit to Congress a report 12 containing the following: 13 (1) AUDIT PLAN.—A comprehensive description 14 of— 15 (A) a plan to— 16 (i) shift more of the auditing and en- 17 forcement assets of the Internal Revenue 18 Service toward high-income, high-wealth 19 tax filers and corporations, and 20 (ii) recruit and retain auditors with 21 the skills essential to audit high-income in- 22 dividuals, and 23 (B) the progress made in implementing 24 such plan. 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 11 •S 1788 IS (2) TAX GAP ANALYSIS.— 1 (A) IN GENERAL.—A comprehensive de- 2 scription of the tax gap, including— 3 (i) the amount attributed to high-in- 4 come, high-wealth tax filers and corpora- 5 tions, and 6 (ii) how other information reporting 7 improvements could reduce the tax gap, in- 8 cluding strengthened third-party reporting 9 on ownership of C-corporations and ulti- 10 mate ownership of partnerships. 11 (B) TAX GAP.—For purposes of this para- 12 graph, the term ‘‘tax gap’’ means, with respect 13 to any tax year, the difference between— 14 (i) the amount of taxes owed by tax- 15 payers under the Internal Revenue Code of 16 1986 for such tax year, and 17 (ii) the amount of revenue paid volun- 18 tarily and timely by taxpayers under such 19 Code for such tax year. 20 (3) RACIAL DISPARITIES ANALYSIS.—A com- 21 prehensive analysis and description of whether there 22 exist any racial disparities in the Internal Revenue 23 Service’s enforcement activities, including audits, 24 based on gross income, including a comprehensive 25 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on DSK79L0C42PROD with BILLS 12 •S 1788 IS description of any plans the Internal Revenue Serv- 1 ice has to address any such disparities in the coming 2 fiscal year. 3 SEC. 6. UNDERPAYMENT PENALTIES INCREASED FOR CER- 4 TAIN TAXPAYERS. 5 (a) IN GENERAL.—Subsection (a) of section 6662 of 6 the Internal Revenue Code of 1986 is amended to read 7 as follows: 8 ‘‘(a) IMPOSITION OF PENALTY.— 9 ‘‘(1) IN GENERAL.—If this section applies to 10 any portion of an underpayment of tax required to 11 be shown on a return, there shall be added to the 12 tax an amount equal to the applicable percentage of 13 the portion of the underpayment to which this sec- 14 tion applies. 15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 16 of paragraph (1), the term ‘applicable percentage’ 17 means— 18 ‘‘(A) in the case of a taxpayer with a tax- 19 able income of less than $2 million, 20 percent, 20 ‘‘(B) in the case of a taxpayer with a tax- 21 able income greater than $2 million but less 22 than $5 million, 30 percent, and 23 VerDate Sep 11 2014 05:04 Jun 09, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788 kjohnson on [Text truncated for display. Full text available on Congress.gov.]