Federal

Merchant Category Code Neutrality Act

Source: Congress.gov · 370 words in original text

What This Bill Does

This bill prevents tax audits (reviews of a person's or business's tax records by the government) based primarily on Merchant Category Codes. Merchant Category Codes are classification codes assigned by payment card companies to classify what goods or services a business provides. The bill also requires the government to publish an annual public report tracking how many audits it starts for each Merchant Category Code.

Who It Affects

Businesses and self-employed people who accept payment cards. The Secretary of the Treasury (the head of the tax collection agency).

Key Provisions

* The Secretary cannot take audit actions based primarily on Merchant Category Codes or similar classification codes used to describe what goods or services a business provides. (Sec. 2) * The Secretary must issue a public report each year showing how many audit actions were started for each Merchant Category Code during that year. (Sec. 2)

What Changes

If this becomes law, tax audits cannot be started mainly because of what type of business a person or company operates based on its Merchant Category Code classification.

Important Definitions

Merchant Category Code: Classification codes assigned by payment card companies to businesses that accept their cards. These codes describe what goods or services the business provides.

Effective Date

Not specified in bill text

II 118TH CONGRESS 1ST SESSION S. 898 To amend the Internal Revenue Code of 1986 to prohibit audits based on Merchant Category Codes. IN THE SENATE OF THE UNITED STATES MARCH 21, 2023 Mr. THUNE (for himself, Mrs. BLACKBURN, Mr. CASSIDY, Mr. CRAPO, Mr. DAINES, Mr. LANKFORD, and Mr. TILLIS) 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 prohibit audits based on Merchant Category Codes. 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 ‘‘Merchant Category 4 Code Neutrality Act’’. 5 SEC. 2. PROHIBITION ON AUDITS BASED ON MERCHANT 6 CATEGORY CODES. 7 Section 7602 of the Internal Revenue Code of 1986 8 is amended by adding at the end the following new sub- 9 section: 10 VerDate Sep 11 2014 01:56 Mar 31, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S898.IS S898 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 898 IS ‘‘(g) PROHIBITION OF AUDITS BASED ON MERCHANT 1 CATEGORY CODES.— 2 ‘‘(1) IN GENERAL.—The Secretary shall not 3 take any action described in paragraph (1), (2), or 4 (3) of subsection (a) based primarily on the Mer- 5 chant Category Codes, or other similar codes, used 6 to classify the goods or services provided or fur- 7 nished by the business of the respective taxpayer. 8 ‘‘(2) ANNUAL REPORT.—For each taxable year, 9 the Secretary shall issue a public report providing a 10 tally of each Merchant Category Code for any action 11 described in paragraph (1), (2), or (3) of subsection 12 (a) initiated in such year. 13 ‘‘(3) MERCHANT CATEGORY CODE.—The term 14 ‘Merchant Category Code’ means classification codes 15 assigned by payment card organizations to mer- 16 chants or payees that accept its payment cards to 17 classify the goods or services provided or furnished 18 by a merchant or payee.’’. 19 Æ VerDate Sep 11 2014 01:56 Mar 31, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6301 E:\BILLS\S898.IS S898 pbinns on DSKJLVW7X2PROD with $$_JOB

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