II 117TH CONGRESS 1ST SESSION S. 1857 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 26, 2021 Mr. KING (for himself, Mr. BROWN, and Mr. KAINE) 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 ‘‘Stop Corporations and 4 High Earners from Avoiding Taxes and Enforce the Rules 5 Strictly Act’’ or the ‘‘Stop CHEATERS Act’’. 6 SEC. 2. POLICY OF CONGRESS. 7 It is the policy of Congress that— 8 (1) tax compliance, to raise revenue for national 9 needs, restore fairness, and protect the integrity of 10 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1857 IS the tax system, high-income United States citizens 1 and corporations should pay all of the taxes they 2 owe, 3 (2) tax compliance, as indicated by the fraction 4 of taxes due that are reported and paid, should be 5 comparable among groups of taxpayers regardless of 6 the legal entity, 7 (3) the Internal Revenue Service should be 8 given resources to increase audits and enforcement 9 of tax compliance of high-income individuals to re- 10 duce the tax gap, with an emphasis on the auditing 11 and enforcement of tax compliance by individuals 12 with gross income of not less than $1,000,000 and 13 of large corporations, and to modernize its tech- 14 nology in order to better serve taxpayers and enforce 15 the tax laws, 16 (4) pursuing non-filers is one of the most effi- 17 cient enforcement strategies of the Internal Revenue 18 Service because issuing non-filer notices can be a 19 cost-effective tool that requires little more than auto- 20 mated notices, 21 (5) priorities for actions and resources to im- 22 prove compliance should be guided by the relative 23 revenue loss from non-compliance, 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1857 IS (6) it should be the goal of the Internal Rev- 1 enue Service that, by the tenth tax year after the ef- 2 fective date of this statute, the net tax gap, as meas- 3 ured by the fraction of taxes that are due that are 4 not reported and paid, should be reduced by at least 5 one-third, as compared with the fraction estimated 6 in the most recent Internal Revenue Service study 7 prior to enactment of this statute, and 8 (7) it should be the goal of the Internal Rev- 9 enue Service to provide quality, timely, and accurate 10 assistance to all taxpayers interacting with the In- 11 ternal Revenue Service. 12 SEC. 3. ADDITIONAL APPROPRIATIONS FOR THE INTERNAL 13 REVENUE SERVICE. 14 (a) ENFORCEMENT.— 15 (1) IN GENERAL.—In addition to other 16 amounts, there is appropriated the following 17 amounts for necessary expenses to strengthen the 18 enforcement capacity of the Internal Revenue Serv- 19 ice by increasing audits annually to meet the audit 20 goals described in paragraph (2): 21 (A) For fiscal year 2022, $1,600,000,000. 22 (B) For fiscal year 2023, $3,200,000,000. 23 (C) For fiscal year 2024, $4,000,000,000. 24 (D) For fiscal year 2025, $6,400,000,000. 25 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1857 IS (E) For fiscal year 2026, $6,800,000,000. 1 (F) For fiscal year 2027, $6,800,000,000. 2 (G) For fiscal year 2028, $6,800,000,000. 3 (H) For fiscal year 2029, $6,800,000,000. 4 (I) For fiscal year 2030, $6,800,000,000. 5 (J) For fiscal year 2031, $6,800,000,000. 6 (2) GOALS.—The goals described in this sub- 7 paragraph are to annually audit by 2025 and each 8 year thereafter— 9 (A) in the case of the income tax returns 10 of individuals— 11 (i) 20 percent of such returns report- 12 ing an adjusted gross income of not less 13 than $1,000,000 but less than $5,000,000; 14 (ii) 33 percent of such returns report- 15 ing an adjusted gross income of not less 16 than $5,000,000 but less than 17 $10,000,000 and 18 (iii) 50 percent of such returns report- 19 ing an adjusted gross income of not less 20 than $10,000,000; 21 (B) 95 percent of the income tax returns 22 of corporations reporting more than 23 $20,000,000,000 in assets; 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1857 IS (C) 40 percent of the estate tax returns 1 having a gross estate valued at more than 2 $10,000,000; 3 (D) 1.2 percent of gift tax returns; and 4 (E) 0.22 percent of employment tax re- 5 turns filed by employers with respect to the 6 taxes imposed under chapters 21 or 22 of the 7 Internal Revenue Code of 1986. 8 (b) TAXPAYER SERVICES.—In addition to other 9 amounts, there are appropriated the following amounts to 10 provide taxpayer services, including pre-filing assistance 11 and education, filing and account services, taxpayer advo- 12 cacy services, and services related to the reporting re- 13 quired under section 6050Z of the Internal Revenue Code 14 of 1986 (as added by section 4): 15 (1) For fiscal year 2022, $800,000,000. 16 (2) For fiscal year 2023, $800,000,000. 17 (3) For fiscal year 2024, $800,000,000. 18 (4) For fiscal year 2025, $2,000,000,000. 19 (5) For fiscal year 2026, $2,000,000,000. 20 (6) For fiscal year 2027, $2,000,000,000. 21 (7) For fiscal year 2028, $2,000,000,000. 22 (8) For fiscal year 2029, $2,000,000,000. 23 (9) For fiscal year 2030, $2,000,000,000. 24 (10) For fiscal year 2031, $2,000,000,000. 25 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1857 IS (c) OPERATIONS SUPPORT.—There are appropriated 1 the following additional amounts for the ‘‘Department of 2 the Treasury—Internal Revenue Service—Operations 3 Support’’ account to overhaul outdated technology of the 4 Internal Revenue Service and improve the capacity of the 5 Internal Revenue Service to detect fraud related to income 6 from a trade or business: 7 (1) For fiscal year 2022, $800,000,000. 8 (2) For fiscal year 2023, $800,000,000. 9 (3) For fiscal year 2024, $800,000,000. 10 (4) For fiscal year 2025, $800,000,000. 11 (5) For fiscal year 2026, $800,000,000. 12 (6) For fiscal year 2027, $800,000,000. 13 (7) For fiscal year 2028, $800,000,000. 14 (8) For fiscal year 2029, $800,000,000. 15 (9) For fiscal year 2030, $800,000,000. 16 (10) For fiscal year 2031, $800,000,000. 17 (d) AVAILABILITY.—Each additional amount appro- 18 priated by this section shall remain available until ex- 19 pended. 20 SEC. 4. RETURNS RELATING TO CERTAIN BUSINESS TRANS- 21 ACTIONS. 22 (a) IN GENERAL.—Subpart B of part III of sub- 23 chapter A of chapter 61 of the Internal Revenue Code of 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1857 IS 1986 is amended by adding at the end the following new 1 section: 2 ‘‘SEC. 6050Z. RETURNS RELATING TO CERTAIN TRANS- 3 ACTIONS. 4 ‘‘(a) REQUIREMENT OF REPORTING.—Any covered 5 financial service provider shall make the information re- 6 turn described in subsection (b) at such time as the Sec- 7 retary 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 service pro- 14 vider— 15 ‘‘(A) the name, address, and TIN of the 16 person on whose behalf the account is main- 17 tained, 18 ‘‘(B) a summary report of total deposits 19 received and total withdrawals made in such ac- 20 count, and 21 ‘‘(C) such other information as the Sec- 22 retary may require. 23 ‘‘(c) STATEMENT TO BE FURNISHED TO TAXPAYERS 24 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 25 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1857 IS ‘‘(1) IN GENERAL.—Every covered financial 1 service provider that is required to make a return 2 under subsection (a) shall furnish to each person 3 whose identity is required to be set forth in such re- 4 turn a written statement showing— 5 ‘‘(A) the name, address, and phone num- 6 ber of the information contact of the covered fi- 7 nancial service provider required to make such 8 a return, and 9 ‘‘(B) the information required to be shown 10 on such return with respect to such person. 11 ‘‘(2) FURNISHING OF INFORMATION.—The 12 written statement required under paragraph (1) 13 shall be furnished to the person on or before Janu- 14 ary 31 of the year following the calendar year for 15 which the return under subsection (a) is required to 16 be made. 17 ‘‘(d) COVERED FINANCIAL SERVICE PROVIDER.— 18 For purposes of this section, the term ‘covered financial 19 service provider’ means any financial service provider (as 20 determined under regulations provided by the Secretary) 21 which maintains an account on behalf of another person. 22 ‘‘(e) REGULATIONS AND GUIDANCE.—The Secretary 23 may prescribe such regulations and other guidance as may 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 1857 IS be appropriate or necessary to carry out the purposes of 1 this section.’’. 2 (b) PENALTIES.— 3 (1) RETURNS.—Section 6724(d)(1)(B) of the 4 Internal Revenue Code of 1986 is amended by strik- 5 ing ‘‘or’’ at the end of clause (xxv), by striking 6 ‘‘and’’ at the end of clause (xxvi), and by inserting 7 after clause (xxvi) the following new clause: 8 ‘‘(xxvii) section 6050Z (relating to in- 9 formation with respect to certain trans- 10 actions),’’. 11 (2) STATEMENTS.—Section 6724(d)(2) of such 12 Code is amended— 13 (A) by striking ‘‘or’’ at the end of subpara- 14 graph (II), 15 (B) by striking the period at the end of the 16 first subparagraph (JJ) (relating to section 17 6035) and inserting a comma, 18 (C) by redesignating the second subpara- 19 graph (JJ) (relating to section 6050Y) as sub- 20 paragraph (KK), 21 (D) by striking the period at the end of 22 subparagraph (KK) (as redesignated by sub- 23 paragraph (C)) and inserting ‘‘, or’’, and 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 1857 IS (E) by inserting after subparagraph (KK) 1 (as so redesignated) the following new subpara- 2 graph: 3 ‘‘(LL) section 6050Z 4 (relating to information with 5 respect to certain trans- 6 actions).’’. 7 (c) CLERICAL AMENDMENT.—The table of sections 8 for subpart B of part III of subchapter A of chapter 61 9 of such Code is amended by adding at the end the fol- 10 lowing new item: 11 ‘‘Sec. 6050Z. Returns relating to certain transactions.’’. (d) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to calendar years beginning after 13 December 31, 2021. 14 SEC. 5. REPORTS TO CONGRESS. 15 Not later than 1 year after the date of the enactment 16 of this Act and every 2 years thereafter, the Commissioner 17 of the Internal Revenue Service, after consultation with 18 the Comptroller General, shall submit to Congress a report 19 containing— 20 (1) a comprehensive description of— 21 (A) a plan to— 22 (i) shift more of the auditing and en- 23 forcement assets of the Internal Revenue 24 Service toward high-income tax filers, and 25 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 1857 IS (ii) recruit and retain auditors with 1 the skills essential to audit high-income in- 2 dividuals, and 3 (B) the progress made in implementing 4 such plan, 5 (2) an estimate of revenue loss from offshore 6 tax evasion, and 7 (3) information with respect to revenue loss due 8 to such tax evasion, organized by groups of tax- 9 payers arranged by the true income level of such 10 taxpayers, as determined by the Secretary. 11 SEC. 6. IRS ENFORCEMENT PENALTIES INCREASED FOR 12 CERTAIN TAXPAYERS. 13 (a) IN GENERAL.—Subsection (a) of section 6662 of 14 the Internal Revenue Code of 1986 is amended to read 15 as follows: 16 ‘‘(a) IMPOSITION OF PENALTY.— 17 ‘‘(1) IN GENERAL.—If this section applies to 18 any portion of an underpayment of tax required to 19 be shown on a return, there shall be added to the 20 tax an amount equal to the applicable percentage of 21 the portion of the underpayment to which this sec- 22 tion applies. 23 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 1857 IS ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 1 of paragraph (1), the term ‘applicable percentage’ 2 means— 3 ‘‘(A) in the case of a taxpayer with a tax- 4 able income of less than $2 million, 20 percent, 5 ‘‘(B) in the case of a taxpayer with a tax- 6 able income greater than $2 million but less 7 than $5 million, 30 percent, and 8 ‘‘(C) in the case of a taxpayer with a tax- 9 able income greater than $5 million, 40 per- 10 cent.’’. 11 (b) CONFORMING AMENDMENTS.— 12 (1) GROSS VALUATION MISSTATEMENTS.—Sec- 13 tion 6662(h)(1) of such Code is amended by striking 14 ‘‘with respect to such portion by substituting’’ and 15 all that follows and inserting ‘‘with respect to such 16 portion— 17 ‘‘(A) by substituting ‘40 percent’ for ‘20 18 percent’ in paragraph (2)(A) thereof, and 19 ‘‘(B) by substituting ‘40 percent’ for ‘30 20 percent’ in paragraph (2)(B) thereof.’’. 21 (2) NONDISCLOSED NONECONOMIC SUBSTANCE 22 TRANSACTIONS.—Section 6662(i)(1) of such Code is 23 amended by striking ‘‘with respect to such portion 24 VerDate Sep 11 2014 00:29 Jun 19, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1857.IS S1857 pbinns on DSKJLVW7X2PROD with BILLS 13 •S 1857 IS by substituting’’ and all that follows and inserting 1 ‘‘with respect to such portion— 2 ‘‘(A) by substituting ‘40 percent’ for ‘20 3 percent’ in paragraph (2)(A) thereof, and 4 ‘‘(B) by substituting ‘40 percent’ for ‘30 5 percent’ in paragraph (2)(B) thereof.’’. 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