S.Amdt. 2132

SA 2132. Mr. REID submitted an amendment intended to be proposed by him to the bill H.R. 3058, making appropriations for the Departments of Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia, and independent agencies for the fiscal year ending September 30, 2006, and for other purposes; which was ordered to lie on the table; as follows:

On page 290, between lines 14 and 15, insert the following:

Sec. 209A.(a) The Senate makes the following findings:

(1) For a voluntary, self-reporting tax system to work, taxpayers must believe that all taxpayers pay their fair share of taxes.

(2) Many States base State income tax liability on amounts reported with respect to Federal income taxes, with the result that amounts not collected with respect to Federal income taxes are also not collected with respect to State income taxes at a time when many States are hard-pressed to meet their many financial demands.

(3) A study conducted by the National Research Program of the Internal Revenue Service determined that taxpayer non-compliance costs the Federal Government over $300,000,000,000 each year in uncollected taxes.

(4) The National Research Program study estimates that the tax shortfall attributable to individual income taxes is as high as $100,000,000,000 with respect to business income and more than $50,000,000,000 with respect to non-business income.

(5) An analysis published in 2005 by tax law Professors Joseph Dodge and Jay Soled estimated that the loss of Federal income tax revenue associated with the under reporting of capital gains is $250,000,000,000 over the coming decade.

(6) Non-compliance places an unfair burden on all taxpayers.

(7) Prior to launching the National Research Program, the Internal Revenue Service did not have in place an automated system to verify and audit capital gains information reported on Schedule D of Federal income tax returns, and now only examines Schedule D information when it is part of a larger tax audit.

(8) The reliance on random audits has created an impression in the investment community that enforcement of capital gains is limited or, worse, non-existent, and has also created an environment of inaccuracy and non-compliance with respect to Schedule D.

(9) Internal Revenue Service efforts to reduce the tax gap focus on increasing field examinations and audits, particularly of high-income taxpayers.

(10) One of the key components of National Research Program was the introduction, on a pilot basis, of a “smart” process to assist with the determination of the correct cost basis of capital gains and losses reported on Schedule D.

(b) It is the sense of the Senate that the Internal Revenue Service should utilize processes and technological tools that assist with the independent verification of taxpayer data, including the cost basis information of capital gains and losses reported on Schedule D, that will comply with all of the applicable rules and methods of the Internal Revenue Code of 1986 to ensure that all taxpayers pay their fair share of Federal income tax and to decrease the shortfall in tax revenues to the benefit of all taxpayers.