John Lewis Taxpayer Protection Act

I 116TH CONGRESS 2D SESSION H. R. 8700 To amend the Internal Revenue Code of 1986 to reduce taxpayer burdens and enhance taxpayer protections, and for other purposes. IN THE HOUSE OF REPRESENTATIVES OCTOBER 27, 2020 Mr. VELA introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to reduce taxpayer burdens and enhance taxpayer protections, 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 ‘‘John Lewis Taxpayer Protection Act’’. 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 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 8700 IH shall be considered to be made to a section or other provi- 1 sion of the Internal Revenue Code of 1986, as amended. 2 (c) TABLE OF CONTENTS.—The table of contents for 3 this Act is as follows: 4 Sec. 1. Short title; etc. TITLE I—PROTECTION OF TAXPAYERS FROM ABUSIVE TAX COLLECTION PRACTICES Sec. 101. Repeal of rules relating to tax collection contracts. TITLE II—RELIEF FOR TAXPAYERS Sec. 201. De minimis exclusion from gross income for discharge of indebtedness of individuals. Sec. 202. Repeal suspension of statute of limitations during pending application for Taxpayer Assistance order. Sec. 203. Limitation on levy on retirement savings. Sec. 204. Tolling of limitation on levy recovery for disabled taxpayer. Sec. 205. Extension of period to withdraw frivolous submission. Sec. 206. Repeal of partial payment requirement on submissions of offers-in- compromise. TITLE III—ASSISTANCE LOW-INCOME TAXPAYERS Sec. 301. EITC outreach. TITLE IV—ENSURE TAXPAYER ACCESS TO COMPETENT TAX RETURN PREPARERS Sec. 401. Regulation of tax return preparers. Sec. 402. Tax information disclosure relating to tax return preparer mis- conduct. TITLE V—INCREASE FUNDING FOR SERVICES TO TAXPAYERS Sec. 501. Low-income taxpayer clinics. Sec. 502. Internal Revenue Service taxpayer services appropriations. TITLE I—PROTECTION OF TAX- 5 PAYERS FROM ABUSIVE TAX 6 COLLECTION PRACTICES 7 SEC. 101. REPEAL OF RULES RELATING TO TAX COLLEC- 8 TION CONTRACTS. 9 (a) IN GENERAL.—Sections 6306 and 6307 are here- 10 by repealed, and the table of sections for subchapter A 11 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 8700 IH of chapter 64 is amended by striking the items relating 1 to sections 6306 and 6307. 2 (b) CONFORMING AMENDMENTS.— 3 (1) Section 6103(k) is amended by striking 4 paragraph (12). 5 (2) Section 7433A(a) is amended by inserting 6 ‘‘, as in effect on the day before the date of the en- 7 actment of the John Lewis Taxpayer Protection 8 Act’’ after ‘‘as defined in section 6306(b)’’. 9 (3) Section 7809(a) is amended by striking 10 ‘‘6306,’’. 11 (4) Section 7811 is amended by striking sub- 12 section (g). 13 TITLE II—RELIEF FOR 14 TAXPAYERS 15 SEC. 201. DE MINIMIS EXCLUSION FROM GROSS INCOME 16 FOR DISCHARGE OF INDEBTEDNESS OF INDI- 17 VIDUALS. 18 (a) IN GENERAL.—Section 108(a)(1) is amended by 19 striking ‘‘or’’ at the end of subparagraph (D), by striking 20 the period at the end of subparagraph (E) and inserting 21 ‘‘, or’’, and by adding at the end the following new sub- 22 paragraph: 23 ‘‘(F) the indebtedness discharged is quali- 24 fied individual indebtedness.’’. 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 8700 IH (b) QUALIFIED INDIVIDUAL INDEBTEDNESS.—Sec- 1 tion 108 is amended by adding at the end the following 2 new subsection: 3 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED INDI- 4 VIDUAL INDEBTEDNESS.— 5 ‘‘(1) QUALIFIED INDIVIDUAL INDEBTEDNESS 6 DEFINED.—For purposes of this section, the term 7 ‘qualified individual indebtedness’ means any indebt- 8 edness of an individual other than indebtedness 9 which is— 10 ‘‘(A) discharged on account of services per- 11 formed for the lender, or 12 ‘‘(B) held at any time by a person related 13 to such individual. 14 For purposes of subparagraph (B), a person shall be 15 treated as related to another person if the relation- 16 ship between such persons would result in a dis- 17 allowance of losses under section 267 or 707(b). 18 ‘‘(2) DOLLAR LIMITATION.—The amount of 19 qualified individual indebtedness excluded from gross 20 income under subsection (a)(1)(F) with respect to 21 any individual for any taxable year shall not exceed 22 the excess of— 23 ‘‘(A) $10,000, over 24 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 8700 IH ‘‘(B) the aggregate amount excluded from 1 the gross income of such individual under sub- 2 section (a)(1) for such taxable year and all 3 prior taxable years (determined without regard 4 to any amount excludable from gross income 5 under subsection (a)(1)(F) for such taxable 6 year). 7 ‘‘(3) JOINT RETURNS.—In the case of a joint 8 return— 9 ‘‘(A) the dollar limitation under paragraph 10 (2) shall be applied separately to each spouse, 11 and 12 ‘‘(B) the taxpayer may elect to treat any 13 indebtedness of either spouse as indebtedness of 14 the other spouse.’’. 15 (c) COORDINATION.— 16 (1) IN GENERAL.—Section 108(a)(2) is amend- 17 ed by adding at the end the following new subpara- 18 graph: 19 ‘‘(D) PRECEDENCE OF INDIVIDUAL IN- 20 DEBTEDNESS EXCLUSION.— 21 ‘‘(i) INDIVIDUAL INDEBTEDNESS EX- 22 CLUSION TAKES PRECEDENCE OVER IN- 23 SOLVENCY EXCLUSION UNLESS ELECTED 24 OTHERWISE.—Paragraph (1)(B) shall not 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 8700 IH apply to a discharge to which paragraph 1 (1)(F) applies unless the taxpayer elects to 2 apply paragraph (1)(B) in lieu of para- 3 graph (1)(F). 4 ‘‘(ii) OTHER EXCLUSIONS TAKE PREC- 5 EDENCE.—Subparagraph (F) shall not 6 apply to a discharge to which subpara- 7 graph (C), (D), or (E) applies.’’. 8 (2) TITLE 11 EXCLUSION TAKES PRECE- 9 DENCE.—Section 108(a)(2)(A) is amended by strik- 10 ing ‘‘and (E)’’ and inserting ‘‘(E), and (F)’’. 11 (d) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to discharges of indebtedness after 13 the date of the enactment of this Act. 14 SEC. 202. REPEAL SUSPENSION OF STATUTE OF LIMITA- 15 TIONS DURING PENDING APPLICATION FOR 16 TAXPAYER ASSISTANCE ORDER. 17 (a) IN GENERAL.—Section 7811 is amended by strik- 18 ing subsection (d) and redesignating subsections (e), (f), 19 and (g) as subsections (d), (e), and (f), respectively. 20 (b) CONFORMING AMENDMENT.—Section 6306(k)(2) 21 is amended by striking ‘‘section 7811(g)’’ and inserting 22 ‘‘section 7811(f)’’. 23 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 8700 IH (c) EFFECTIVE DATE.—The amendment made by 1 this section shall take effect on the date of the enactment 2 of this Act. 3 SEC. 203. LIMITATION ON LEVY ON RETIREMENT SAVINGS. 4 (a) IN GENERAL.—Section 6334(a) is amended by 5 adding at the end the following new paragraph: 6 ‘‘(14) RETIREMENT SAVINGS.— 7 ‘‘(A) IN GENERAL.—Any individual’s inter- 8 est in a qualified retirement plan— 9 ‘‘(i) before such individual has at- 10 tained normal retirement age (or 65 in the 11 case of an individual retirement account or 12 a plan which does not specify a normal re- 13 tirement age), or 14 ‘‘(ii) after the attainment of such age 15 if the levy would create an economic hard- 16 ship due to the financial condition of the 17 taxpayer (within the meaning of 18 6343(a)(1)(D)). 19 ‘‘(B) QUALIFIED RETIREMENT PLAN.—For 20 purposes of this paragraph, the term ‘qualified 21 retirement plan’ means— 22 ‘‘(i) an individual retirement account, 23 or 24 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 8700 IH ‘‘(ii) a defined contribution plan 1 which— 2 ‘‘(I) is described in section 3 401(a) and which includes a trust ex- 4 empt from tax under section 501(a), 5 ‘‘(II) is described in subsection 6 (a) or (b) of section 403, or 7 ‘‘(III) is an eligible deferred com- 8 pensation plan (as defined in section 9 457(b)) of an eligible employer de- 10 scribed in section 457(e)(1)(A). 11 ‘‘(C) EXCEPTION FOR FLAGRANT ACTS.— 12 Subparagraph (A) shall not apply if the Sec- 13 retary determines that— 14 ‘‘(i) the taxpayer filed a fraudulent re- 15 turn, or 16 ‘‘(ii) the taxpayer acted with the in- 17 tent to evade or defeat any tax imposed by 18 this title or the collection or payment 19 thereof.’’. 20 (b) EFFECTIVE DATE.—The amendment made by 21 this section shall apply to levies issued after December 31, 22 2020. 23 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 8700 IH SEC. 204. TOLLING OF LIMITATION ON LEVY RECOVERY 1 FOR DISABLED TAXPAYER. 2 (a) IN GENERAL.—Section 6343(b) is amended by in- 3 serting after the third sentence: ‘‘In the case of an indi- 4 vidual, the running of such 9-month period shall be sus- 5 pended during any period of such individual’s life that 6 such individual is financially disabled (as defined in sec- 7 tion 6511(h)).’’. 8 (b) SUITS BY PERSONS OTHER THAN TAXPAYERS.— 9 Section 6532(c)(1) is amended by adding at the end the 10 following: ‘‘In the case of an individual, the running of 11 such 9-month period shall be suspended during any period 12 of such individual’s life that such individual is financially 13 disabled (as defined in section 6511(h)).’’. 14 SEC. 205. EXTENSION OF PERIOD TO WITHDRAW FRIVO- 15 LOUS SUBMISSION. 16 (a) IN GENERAL.—Section 6702(b)(3) is amended by 17 striking ‘‘30 days’’ and inserting ‘‘60 days’’. 18 (b) EFFECTIVE DATE.—The amendment made by 19 this section shall apply to notices provided after December 20 31, 2020. 21 SEC. 206. REPEAL OF PARTIAL PAYMENT REQUIREMENT 22 ON SUBMISSIONS OF OFFERS-IN-COM- 23 PROMISE. 24 (a) IN GENERAL.—Section 7122 is amended by strik- 25 ing subsection (c) and by redesignating subsections (d), 26 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 8700 IH (e), (f), and (g) as subsections (c), (d), (e), and (f), respec- 1 tively. 2 (b) CONFORMING AMENDMENTS.— 3 (1) Section 7122(d)(3) is amended by inserting 4 ‘‘and’’ at the end of the subparagraph (A), by strik- 5 ing ‘‘, and’’ at the end of subparagraph (B) and in- 6 serting a period, and by striking subparagraph (C). 7 (2) Section 7122, as amended by this section, 8 is amended by adding at the end the following new 9 subsection: 10 ‘‘(g) APPLICATION OF USER FEE.—In the case of 11 any assessed tax or other amounts imposed under this title 12 with respect to such tax which is the subject of an offer- 13 in-compromise, such tax or other amounts shall be reduced 14 by any user fee imposed under this title with respect to 15 such offer-in-compromise.’’. 16 (3) Section 6159(g) is amended by striking 17 ‘‘section 7122(e)’’ and inserting ‘‘section 7122(d)’’. 18 (c) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to offers submitted after the date 20 of the enactment of this Act. 21 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 8700 IH TITLE III—ASSISTANCE LOW- 1 INCOME TAXPAYERS 2 SEC. 301. EITC OUTREACH. 3 (a) IN GENERAL.—Section 32 is amended by adding 4 at the end the following new subsection: 5 ‘‘(n) NOTIFICATION OF POTENTIAL ELIGIBILITY FOR 6 CREDIT AND REFUND.— 7 ‘‘(1) IN GENERAL.—To the extent possible and 8 on an annual basis, the Secretary shall provide no- 9 tice to each taxpayer who— 10 ‘‘(A) did not claim the credit under sub- 11 section (a) for any preceding taxable year for 12 which credit or refund is not precluded by sec- 13 tion 6511, and 14 ‘‘(B) may be allowed such credit for any 15 such taxable year based on return or return in- 16 formation (as defined in section 6103(b)) avail- 17 able to the Secretary, 18 that such taxpayer may be eligible to claim such 19 credit and a refund for such taxable year. 20 ‘‘(2) NOTICE.—Notice provided under para- 21 graph (1) shall be in writing and sent to the last 22 known address of the taxpayer.’’. 23 (b) EFFECTIVE DATE.—The amendment made by 24 this section shall take effect on January 1, 2021. 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 8700 IH TITLE IV—ENSURE TAXPAYER 1 ACCESS TO COMPETENT TAX 2 RETURN PREPARERS 3 SEC. 401. REGULATION OF TAX RETURN PREPARERS. 4 (a) IN GENERAL.—Section 330(a) of title 31, United 5 States Code, is amended— 6 (1) by striking paragraph (1) and inserting the 7 following: 8 ‘‘(1) regulate— 9 ‘‘(A) the practice of representatives of per- 10 sons before the Department of the Treasury; 11 and 12 ‘‘(B) the practice of tax return preparers; 13 and’’, and 14 (2) in paragraph (2)— 15 (A) by inserting ‘‘or tax return preparer’’ 16 after ‘‘representative’’ each place it appears, 17 and 18 (B) by inserting ‘‘or in preparing their tax 19 returns, claims for refund, or documents in con- 20 nection with tax returns or claims for refund’’ 21 after ‘‘cases’’ in subparagraph (D). 22 (b) AUTHORITY TO SANCTION REGULATED TAX RE- 23 TURN PREPARERS.—Section 330(c) of title 31, United 24 States Code, is amended— 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H8700.IH H8700 pamtmann on DSKBC07HB2PROD with BILLS 13 •HR 8700 IH (1) by inserting ‘‘or tax return preparer’’ after 1 ‘‘representative’’ each place it appears, and 2 (2) in paragraph (4), by striking ‘‘misleads or 3 threatens’’ and all that follows and inserting the fol- 4 lowing: ‘‘misleads or threatens— 5 ‘‘(A) any person being represented or any 6 prospective person being represented; or 7 ‘‘(B) any person or prospective person 8 whose tax return, claim for refund, or document 9 [Text truncated for display. 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