II 116TH CONGRESS 1ST SESSION S. 928 To amend the Internal Revenue Code of 1986 to modernize and improve the Internal Revenue Service, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 28, 2019 Mr. GRASSLEY (for himself and Mr. WYDEN) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to modernize and improve the Internal Revenue Service, 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; ETC. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Taxpayer First Act of 2019’’. 5 (b) AMENDMENT OF 1986 CODE.—Except as other- 6 wise expressly provided, whenever in this Act an amend- 7 ment or repeal is expressed in terms of an amendment 8 to, or repeal of, a section or other provision, the reference 9 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 2 •S 928 IS shall be considered to be made to a section or other provi- 1 sion of the Internal Revenue Code of 1986. 2 (c) TABLE OF CONTENTS.—The table of contents for 3 this Act is as follows: 4 Sec. 1. Short title; etc. TITLE I—PUTTING TAXPAYERS FIRST Subtitle A—Independent Appeals Process Sec. 1001. Establishment of Internal Revenue Service Independent Office of Appeals. Subtitle B—Improved Service Sec. 1101. Comprehensive customer service strategy. Sec. 1102. IRS Free File Program. Sec. 1103. Low-income exception for payments otherwise required in connection with a submission of an offer-in-compromise. Subtitle C—Sensible Enforcement Sec. 1201. Internal Revenue Service seizure requirements with respect to struc- turing transactions. Sec. 1202. Exclusion of interest received in action to recover property seized by the Internal Revenue Service based on structuring transaction. Sec. 1203. Clarification of equitable relief from joint liability. Sec. 1204. Modification of procedures for issuance of third-party summons. Sec. 1205. Private debt collection and special compliance personnel program. Sec. 1206. Reform of notice of contact of third parties. Sec. 1207. Modification of authority to issue designated summons. Sec. 1208. Limitation on access of non-Internal Revenue Service employees to returns and return information. Subtitle D—Organizational Modernization Sec. 1301. Office of the National Taxpayer Advocate. Sec. 1302. Modernization of Internal Revenue Service organizational structure. Subtitle E—Other Provisions Sec. 1401. Return preparation programs for applicable taxpayers. Sec. 1402. Provision of information regarding low-income taxpayer clinics. Sec. 1403. Notice from IRS regarding closure of taxpayer assistance centers. Sec. 1404. Rules for seizure and sale of perishable goods restricted to only per- ishable goods. Sec. 1405. Whistleblower reforms. Sec. 1406. Customer service information. Sec. 1407. Misdirected tax refund deposits. TITLE II—21ST CENTURY IRS Subtitle A—Cybersecurity and Identity Protection VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 3 •S 928 IS Sec. 2001. Public-private partnership to address identity theft refund fraud. Sec. 2002. Recommendations of Electronic Tax Administration Advisory Com- mittee regarding identity theft refund fraud. Sec. 2003. Information sharing and analysis center. Sec. 2004. Compliance by contractors with confidentiality safeguards. Sec. 2005. Report on electronic payments. Sec. 2006. Identity protection personal identification numbers. Sec. 2007. Single point of contact for tax-related identity theft victims. Sec. 2008. Notification of suspected identity theft. Sec. 2009. Guidelines for stolen identity refund fraud cases. Sec. 2010. Increased penalty for improper disclosure or use of information by preparers of returns. Subtitle B—Development of Information Technology Sec. 2101. Management of Internal Revenue Service information technology. Sec. 2102. Internet platform for Form 1099 filings. Sec. 2103. Streamlined critical pay authority for information technology posi- tions. Subtitle C—Modernization of Consent-Based Income Verification System Sec. 2201. Disclosure of taxpayer information for third-party income verifica- tion. Sec. 2202. Limit redisclosures and uses of consent-based disclosures of tax re- turn information. Subtitle D—Expanded Use of Electronic Systems Sec. 2301. Electronic filing of returns. Sec. 2302. Uniform standards for the use of electronic signatures for disclosure authorizations to, and other authorizations of, practitioners. Sec. 2303. Payment of taxes by debit and credit cards. Sec. 2304. Authentication of users of electronic services accounts. Subtitle E—Other Provisions Sec. 2401. Repeal of provision regarding certain tax compliance procedures and reports. Sec. 2402. Comprehensive training strategy. TITLE III—MISCELLANEOUS PROVISIONS Subtitle A—Reform of Laws Governing Internal Revenue Service Employees Sec. 3001. Prohibition on rehiring any employee of the Internal Revenue Serv- ice who was involuntarily separated from service for mis- conduct. Sec. 3002. Notification of unauthorized inspection or disclosure of returns and return information. Subtitle B—Provisions Relating to Exempt Organizations Sec. 3101. Mandatory e-filing by exempt organizations. Sec. 3102. Notice required before revocation of tax-exempt status for failure to file return. VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6211 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 4 •S 928 IS Subtitle C—Revenue Provision Sec. 3201. Increase in penalty for failure to file. TITLE I—PUTTING TAXPAYERS 1 FIRST 2 Subtitle A—Independent Appeals 3 Process 4 SEC. 1001. ESTABLISHMENT OF INTERNAL REVENUE SERV- 5 ICE INDEPENDENT OFFICE OF APPEALS. 6 (a) IN GENERAL.—Section 7803 is amended by add- 7 ing at the end the following new subsection: 8 ‘‘(e) INDEPENDENT OFFICE OF APPEALS.— 9 ‘‘(1) ESTABLISHMENT.—There is established in 10 the Internal Revenue Service an office to be known 11 as the ‘Internal Revenue Service Independent Office 12 of Appeals’. 13 ‘‘(2) CHIEF OF APPEALS.— 14 ‘‘(A) IN GENERAL.—The Internal Revenue 15 Service Independent Office of Appeals shall be 16 under the supervision and direction of an offi- 17 cial to be known as the ‘Chief of Appeals’. The 18 Chief of Appeals shall report directly to the 19 Commissioner of Internal Revenue and shall be 20 entitled to compensation at the same rate as 21 the highest rate of basic pay established for the 22 Senior Executive Service under section 5382 of 23 title 5, United States Code. 24 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 5 •S 928 IS ‘‘(B) APPOINTMENT.—The Chief of Ap- 1 peals shall be appointed by the Commissioner of 2 Internal Revenue without regard to the provi- 3 sions of title 5, United States Code, relating to 4 appointments in the competitive service or the 5 Senior Executive Service. 6 ‘‘(C) QUALIFICATIONS.—An individual ap- 7 pointed under subparagraph (B) shall have ex- 8 perience and expertise in— 9 ‘‘(i) administration of, and compliance 10 with, Federal tax laws, 11 ‘‘(ii) a broad range of compliance 12 cases, and 13 ‘‘(iii) management of large service or- 14 ganizations. 15 ‘‘(3) PURPOSES AND DUTIES OF OFFICE.—It 16 shall be the function of the Internal Revenue Service 17 Independent Office of Appeals to resolve Federal tax 18 controversies without litigation on a basis which— 19 ‘‘(A) is fair and impartial to both the Gov- 20 ernment and the taxpayer, 21 ‘‘(B) promotes a consistent application and 22 interpretation of, and voluntary compliance 23 with, the Federal tax laws, and 24 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 6 •S 928 IS ‘‘(C) enhances public confidence in the in- 1 tegrity and efficiency of the Internal Revenue 2 Service. 3 ‘‘(4) RIGHT OF APPEAL.—The resolution proc- 4 ess described in paragraph (3) shall be generally 5 available to all taxpayers. 6 ‘‘(5) LIMITATION ON DESIGNATION OF CASES 7 AS NOT ELIGIBLE FOR REFERRAL TO INDEPENDENT 8 OFFICE OF APPEALS.— 9 ‘‘(A) IN GENERAL.—If any taxpayer which 10 is in receipt of a notice of deficiency authorized 11 under section 6212 requests referral to the In- 12 ternal Revenue Service Independent Office of 13 Appeals and such request is denied, the Com- 14 missioner of Internal Revenue shall provide 15 such taxpayer a written notice which— 16 ‘‘(i) provides a detailed description of 17 the facts involved, the basis for the deci- 18 sion to deny the request, and a detailed ex- 19 planation of how the basis of such decision 20 applies to such facts, and 21 ‘‘(ii) describes the procedures pre- 22 scribed under subparagraph (C) for pro- 23 testing the decision to deny the request. 24 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 7 •S 928 IS ‘‘(B) REPORT TO CONGRESS.—The Com- 1 missioner of Internal Revenue shall submit a 2 written report to Congress on an annual basis 3 which includes the number of requests described 4 in subparagraph (A) which were denied and the 5 reasons (described by category) that such re- 6 quests were denied. 7 ‘‘(C) PROCEDURES FOR PROTESTING DE- 8 NIAL OF REQUEST.—The Commissioner of In- 9 ternal Revenue shall prescribe procedures for 10 protesting to the Commissioner of Internal Rev- 11 enue a denial of a request described in subpara- 12 graph (A). 13 ‘‘(D) NOT APPLICABLE TO FRIVOLOUS PO- 14 SITIONS.—This paragraph shall not apply to a 15 request for referral to the Internal Revenue 16 Service Independent Office of Appeals which is 17 denied on the basis that the issue involved is a 18 frivolous position (within the meaning of section 19 6702(c)). 20 ‘‘(6) STAFF.— 21 ‘‘(A) IN GENERAL.—All personnel in the 22 Internal Revenue Service Independent Office of 23 Appeals shall report to the Chief of Appeals. 24 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 8 •S 928 IS ‘‘(B) ACCESS TO STAFF OF OFFICE OF 1 THE CHIEF COUNSEL.—The Chief of Appeals 2 shall have authority to obtain legal assistance 3 and advice from the staff of the Office of the 4 Chief Counsel. The Chief Counsel shall ensure, 5 to the extent practicable, that such assistance 6 and advice is provided by staff of the Office of 7 the Chief Counsel who were not involved in the 8 case with respect to which such assistance and 9 advice is sought and who are not involved in 10 preparing such case for litigation. 11 ‘‘(7) ACCESS TO CASE FILES.— 12 ‘‘(A) IN GENERAL.—In any case in which 13 a conference with the Internal Revenue Service 14 Independent Office of Appeals has been sched- 15 uled upon request of a specified taxpayer, the 16 Chief of Appeals shall ensure that such tax- 17 payer is provided access to the nonprivileged 18 portions of the case file on record regarding the 19 disputed issues (other than documents provided 20 by the taxpayer to the Internal Revenue Serv- 21 ice) not later than 10 days before the date of 22 such conference. 23 ‘‘(B) TAXPAYER ELECTION TO EXPEDITE 24 CONFERENCE.—If the taxpayer so elects, sub- 25 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 9 •S 928 IS paragraph (A) shall be applied by substituting 1 ‘the date of such conference’ for ‘10 days before 2 the date of such conference’. 3 ‘‘(C) SPECIFIED TAXPAYER.—For pur- 4 poses of this paragraph— 5 ‘‘(i) IN GENERAL.—The term ‘speci- 6 fied taxpayer’ means— 7 ‘‘(I) in the case of any taxpayer 8 who is a natural person, a taxpayer 9 whose adjusted gross income does not 10 exceed $400,000 for the taxable year 11 to which the dispute relates, and 12 ‘‘(II) in the case of any other 13 taxpayer, a taxpayer whose gross re- 14 ceipts do not exceed $5,000,000 for 15 the taxable year to which the dispute 16 relates. 17 ‘‘(ii) AGGREGATION RULE.—Rules 18 similar to the rules of section 448(c)(2) 19 shall apply for purposes of clause (i)(II).’’. 20 (b) CONFORMING AMENDMENTS.— 21 (1) The following provisions are each amended 22 by striking ‘‘Internal Revenue Service Office of Ap- 23 peals’’ and inserting ‘‘Internal Revenue Service 24 Independent Office of Appeals’’: 25 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 10 •S 928 IS (A) Section 6015(c)(4)(B)(ii)(I). 1 (B) Section 6320(b)(1). 2 (C) Subsections (b)(1) and (d)(3) of sec- 3 tion 6330. 4 (D) Section 6603(d)(3)(B). 5 (E) Section 6621(c)(2)(A)(i). 6 (F) Section 7122(e)(2). 7 (G) Subsections (a), (b)(1), (b)(2), and 8 (c)(1) of section 7123. 9 (H) Subsections (c)(7)(B)(i) and (g)(2)(A) 10 of section 7430. 11 (I) Section 7522(b)(3). 12 (J) Section 7612(c)(2)(A). 13 (2) Section 7430(c)(2) is amended by striking 14 ‘‘Internal Revenue Service Office of Appeals’’ each 15 place it appears and inserting ‘‘Internal Revenue 16 Service Independent Office of Appeals’’. 17 (3) The heading of section 6330(d)(3) is 18 amended by inserting ‘‘INDEPENDENT’’ after ‘‘IRS’’. 19 (c) OTHER REFERENCES.—Any reference in any pro- 20 vision of law, or regulation or other guidance, to the Inter- 21 nal Revenue Service Office of Appeals shall be treated as 22 a reference to the Internal Revenue Service Independent 23 Office of Appeals. 24 VerDate Sep 11 2014 02:08 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S928.IS S928 kjohnson on DSK79L0C42 with BILLS 11 •S 928 IS (d) SAVINGS PROVISIONS.—Rules similar to the rules 1 of paragraphs (2) through (6) of section 1001(b) of the 2 Internal Revenue Service Restructuring and Reform Act 3 of 1998 shall apply for purposes of this section (and the 4 amendments made by this section). 5 (e) EFFECTIVE DATE.— 6 (1) IN GENERAL.—Except as otherwise pro- 7 vided in this subsection, the amendments made by 8 this section shall take effect on the date of the en- 9 actment of this Act. 10 (2) ACCESS TO CASE FILES.—Section 11 7803(e)(7) of the Internal Revenue Code of 1986, as 12 added by subsection (a), shall apply to conferences 13 occurring after the date which is 1 year after the 14 date of the enactment of this Act. 15 Subtitle B—Improved Service 16 SEC. 1101. 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