II
115th CONGRESS
2d Session
S. 3246
IN THE SENATE OF THE UNITED STATES
July 19, 2018
Mr. Hatch (for himself, Mr. Wyden, Mr. Grassley, Ms. Cantwell, Mr. Roberts, Mr. Cardin, Mr. Thune, Mr. Bennet, Mr. Isakson, Mr. Warner, Mr. Scott, Mr. Cassidy, and Mrs. McCaskill) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To provide enhanced protections for taxpayers from fraud and other illegal activities, and for other purposes.
Short title; etc
Short title
This Act may be cited as the Taxpayer First Act of 2018
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Amendment of 1986 Code
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Secretary
In this Act, the term Secretary means the Secretary of the Treasury or the Secretary's delegate.
Table of contents
The table of contents of this Act is as follows:
Sec. 1. Short title; etc.
TITLE I—Taxpayer Protection
Subtitle A—Protection of Taxpayer Rights
PART I—Assistance to Individual Taxpayers in Filing Returns
Sec. 1001. Return preparation programs for applicable taxpayers.
Sec. 1002. Limit redisclosures and uses of consent-based disclosures of tax return information.
Sec. 1003. Clarification of equitable relief from joint liability.
Sec. 1004. Notice from IRS regarding closure of Taxpayer Assistance Centers.
PART II—Whistleblower Protections
Sec. 1011. Whistleblower reforms.
PART III—Reform of Laws Governing Internal Revenue Service Employees
Sec. 1021. Electronic record retention.
Sec. 1022. Prohibition on rehiring former IRS employees who were involuntarily separated for misconduct.
Sec. 1023. Authority to remove or transfer senior IRS executives who fail in their performance or engage in serious misconduct.
Sec. 1024. Limitation on access of non-Internal Revenue Service employees to returns and return information.
Sec. 1025. Notification of unauthorized inspection or disclosure of returns and return information.
PART IV—Exempt Organizations
Sec. 1031. Mandatory e-filing by exempt organizations.
Sec. 1032. Prohibit the use of IRS funds for political targeting.
Sec. 1033. Notice required before revocation of tax exempt status for failure to file return.
PART V—IRS Audit Criteria
Sec. 1041. Report on IRS audit criteria.
Subtitle B—Protection of Taxpayers from Identity Theft and Tax Fraud
Sec. 1101. Single point of contact for tax-related identity theft victims.
Sec. 1102. Information on identity theft and tax scams.
Sec. 1103. Notification of suspected identity theft.
TITLE II—Stolen Identity Fraud Prevention
Subtitle A—Identity Theft and Tax Refund Fraud Prevention
PART I—General Provisions
Sec. 2001. Guidelines for stolen identity refund fraud cases.
Sec. 2002. Increased penalty for improper disclosure or use of information by preparers of returns.
PART II—Administrative Authority To Prevent Identity Theft and Tax Refund Fraud
Sec. 2011. Authority to transfer Internal Revenue Service appropriations to combat tax fraud.
Sec. 2012. Streamlined critical pay authority for information technology positions.
Sec. 2013. Access to the National Directory of New Hires to identify and prevent fraudulent tax return filings and claims for refund.
Sec. 2014. Repeal of provision regarding certain tax compliance procedures and reports.
Subtitle B—Improvements to Electronic Filing of Tax Returns
Sec. 2101. Identity protection personal identification numbers.
Sec. 2102. Electronic filing of returns.
Sec. 2103. Internet platform for Form 1099 filings.
Sec. 2104. Requirement that electronically prepared paper returns include scannable code.
Sec. 2105. Authentication of users of electronic services accounts.
Taxpayer Protection
Protection of Taxpayer Rights
Assistance to Individual Taxpayers in Filing Returns
Return preparation programs for applicable taxpayers
In general
Chapter 77 is amended by inserting after section 7526 the following new section:
Return preparation programs for applicable taxpayers
Establishment of Volunteer Income Tax Assistance Matching Grant Program
The Secretary shall establish a Community Volunteer Income Tax Assistance Matching Grant Program under which the Secretary may, subject to the availability of appropriated funds, make grants to provide matching funds for the development, expansion, or continuation of qualified return preparation programs assisting applicable taxpayers and members of underserved populations.
Use of funds
In general
Qualified return preparation programs may use grants received under this section for—
ordinary and necessary costs associated with program operation in accordance with cost principles under the applicable Office of Management and Budget circular, including—
wages or salaries of persons coordinating the activities of the program,
developing training materials, conducting training, and performing quality reviews of the returns prepared under the program,
equipment purchases, and
vehicle-related expenses associated with remote or rural tax preparation services,
outreach and educational activities described in subsection (c)(2)(B), and
services related to financial education and capability, asset development, and the establishment of savings accounts in connection with tax return preparation.
Requirement of matching funds
A qualified return preparation program must provide matching funds on a dollar-for-dollar basis for all grants provided under this section. Matching funds may include—
the salary (including fringe benefits) of individuals performing services for the program,
the cost of equipment used in the program, and
other ordinary and necessary costs associated with the program.
Application
In general
Each applicant for a grant under this section shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may reasonably require.
Priority
In awarding grants under this section, the Secretary shall give priority to applications which demonstrate—
assistance to applicable taxpayers, with emphasis on outreach to, and services for, such taxpayers,
taxpayer outreach and educational activities relating to eligibility and availability of income supports available through this title, including the earned income tax credit, and
specific outreach and focus on one or more underserved populations.
Amounts taken into account
In determining matching grants under this section, the Secretary shall only take into account amounts provided by the qualified return preparation program for expenses described in subsection (b).
Program adherence
In general
The Secretary shall establish procedures for, and shall conduct not less frequently than once every 5 calendar years during which a qualified return preparation program is operating under a grant under this section, periodic site visits—
to ensure the program is carrying out the purposes of this section, and
to determine whether the program meets such program adherence standards as the Secretary shall by regulation or other guidance prescribe.
Additional requirements for grant recipients not meeting program adherence standards
In the case of any qualified return preparation program which—
is awarded a grant under this section, and
is subsequently determined—
not to meet the program adherence standards described in paragraph (1)(B), or
not to be otherwise carrying out the purposes of this section,
Definitions
For purposes of this section—
Qualified return preparation program
The term qualified return preparation program means any program—
which provides assistance to individuals, not less than 90 percent of whom are applicable taxpayers, in preparing and filing Federal income tax returns,
which is administered by a qualified entity,
in which all volunteers who assist in the preparation of Federal income tax returns meet the training requirements prescribed by the Secretary, and
which uses a quality review process which reviews 100 percent of all returns.
Qualified entity
In general
The term qualified entity means any entity which—
is an eligible organization,
is in compliance with Federal tax filing and payment requirements,
is not debarred or suspended from Federal contracts, grants, or cooperative agreements, and
agrees to provide documentation to substantiate any matching funds provided pursuant to the grant program under this section.
Eligible organization
The term eligible organization means—
an institution of higher education which is described in section 102 (other than subsection (a)(1)(C) thereof) of the Higher Education Act of 1965 (20 U.S.C. 1002), as in effect on the date of the enactment of this section, and which has not been disqualified from participating in a program under title IV of such Act,
an organization described in section 501(c) and exempt from tax under section 501(a),
a local government agency, including—
a county or municipal government agency, and
an Indian tribe, as defined in section 4(13) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(13)), including any tribally designated housing entity (as defined in section 4(22) of such Act (25 U.S.C. 4103(22))), tribal subsidiary, subdivision, or other wholly owned tribal entity,
a local, State, regional, or national coalition (with one lead organization which meets the eligibility requirements of clause (i), (ii), or (iii) acting as the applicant organization), or
in the case of applicable taxpayers and members of underserved populations with respect to which no organizations described in the preceding clauses are available—
a State government agency, or
an office providing Cooperative Extension services (as established at the land-grant colleges and universities under the Smith-Lever Act of May 8, 1914).
Applicable taxpayers
The term applicable taxpayer means a taxpayer whose income for the taxable year does not exceed an amount equal to the completed phaseout amount under section 32(b) for a married couple filing a joint return with three or more qualifying children, as determined in a revenue procedure or other published guidance.
Underserved population
The term underserved population includes populations of persons with disabilities, persons with limited English proficiency, Native Americans, individuals living in rural areas, members of the Armed Forces and their spouses, and the elderly.
Special rules and limitations
Duration of grants
Upon application of a qualified return preparation program, the Secretary is authorized to award a multi-year grant not to exceed 3 years.
Aggregate limitation
Unless otherwise provided by specific appropriation, the Secretary shall not allocate more than $30,000,000 per fiscal year (exclusive of costs of administering the program) to grants under this section.
Promotion of programs
In general
The Secretary shall promote tax preparation through qualified return preparation programs through the use of mass communications and other means.
Provision of information regarding qualified return preparation programs
The Secretary may provide taxpayers information regarding qualified return preparation programs receiving grants under this section.
VITA grantee referral
Qualified return preparation programs receiving a grant under this section are encouraged, in appropriate cases, to—
advise taxpayers of the availability of, and eligibility requirements for receiving, advice and assistance from qualified low-income taxpayer clinics receiving funding under section 7526, and
provide information regarding the location of, and contact information for, such clinics.
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Clerical amendment
The table of sections for chapter 77 is amended by inserting after the item relating to section 7526 the following new item:
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Limit redisclosures and uses of consent-based disclosures of tax return information
In general
Section 6103(c) is amended by adding at the end the following: Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer.
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Application of penalties
Section 6103(a)(3) is amended by inserting subsection (c),
after return information under
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Effective date
The amendments made by this section shall apply to disclosures made after the date that is 6 months after the date of the enactment of this Act.
Clarification of equitable relief from joint liability
In general
Section 6015 is amended—
in subsection (e), by adding at the end the following new paragraph:
Standard and scope of review
Any review of a determination made under this section shall be reviewed de novo by the Tax Court and shall be based upon—
the administrative record established at the time of the determination, and
any additional newly discovered or previously unavailable evidence.
; and
by amending subsection (f) to read as follows:
Equitable relief
In general
Under procedures prescribed by the Secretary, if—
taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either), and
relief is not available to such individual under subsection (b) or (c),
Limitation
A request for equitable relief under this subsection may be made with respect to any portion of any liability that—
has not been paid, provided that such request is made before the expiration of the applicable period of limitation under section 6502, or
has been paid, provided that such request is made during the period in which the individual could submit a timely claim for refund or credit of such payment.
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Effective date
The amendments made by this section shall apply to petitions or requests filed or pending on or after the date of the enactment of this Act.
Notice from IRS regarding closure of Taxpayer Assistance Centers
Not later than 90 days before the date that a proposed closure of a Taxpayer Assistance Center would take effect, the Secretary shall—
make publicly available (including by non-electronic means) a notice which—
identifies the Taxpayer Assistance Center proposed for closure and the date of such proposed closure; and
identifies the relevant alternative sources of taxpayer assistance which may be utilized by taxpayers affected by such proposed closure; and
submit to Congress a written report that includes—
the information included in the notice described in paragraph (1);
the reasons for such proposed closure; and
such other information as the Secretary may determine appropriate.
Whistleblower Protections
Whistleblower reforms
Modifications to disclosure rules for whistleblowers
In general
Section 6103(k) is amended by adding at the end the following new paragraph:
Disclosure to whistleblowers
In general
The Secretary may disclose, to any individual providing information relating to any purpose described in paragraph (1) or (2) of section 7623(a), return information related to the investigation of any taxpayer with respect to whom the individual has provided such information, but only to the extent that such disclosure is necessary in obtaining information, which is not otherwise reasonably available, with respect to the correct determination of tax liability for tax, or the amount to be collected with respect to the enforcement of any other provision of this title.
Updates on whistleblower investigations
The Secretary shall disclose to an individual providing information relating to any purpose described in paragraph (1) or (2) of section 7623(a) the following:
Not later than 60 days after a case for which the individual has provided information has been referred for an audit or examination, a notice with respect to such referral.
Not later than 60 days after a taxpayer with respect to whom the individual has provided information has made a payment of tax with respect to tax liability to which such information relates, a notice with respect to such payment.
Subject to such requirements and conditions as are prescribed by the Secretary, upon a written request by such individual—
information on the status and stage of any investigation or action related to such information, and
in the case of a determination of the amount of any award under section 7623(b), the reasons for such determination.
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Conforming amendments
Confidentiality of information
Section 6103(a)(3) is amended by striking subsection (k)(10)
and inserting paragraph (10) or (13) of subsection (k)
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Penalty for unauthorized disclosure
Section 7213(a)(2) is amended by striking (k)(10)
and inserting (k)(10) or (13)
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Coordination with authority to disclose for investigative purposes
Section 6103(k)(6) is amended by adding at the end the following new sentence: This paragraph shall not apply to any disclosure to an individual providing information relating to any purpose described in paragraph (1) or (2) of section 7623(a) which is made under paragraph (13)(A).
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Protection against retaliation
Section 7623 is amended by adding at the end the following new subsection:
Civil action To protect against retaliation cases
Anti-retaliation whistleblower protection for employees
No employer or any officer, employee, contractor, subcontractor, or agent of such employer may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment (including through an act in the ordinary course of such employee's duties) in reprisal for any lawful act done by the employee—
to provide information, cause information to be provided, or otherwise assist in an investigation regarding underpayment of tax or any conduct which the employee reasonably believes constitutes a violation of the internal revenue laws or any provision of Federal law relating to tax fraud, when the information or assistance is provided to the Internal Revenue Service, the Secretary of Treasury, the Treasury Inspector General for Tax Administration, the Comptroller General of the United States, the Department of Justice, the United States Congress, a person with supervisory authority over the employee, or any other person working for the employer who has the authority to investigate, discover, or terminate misconduct, or
to testify, participate in, or otherwise assist in any administrative or judicial action taken by the Internal Revenue Service relating to an alleged underpayment of tax or any violation of the internal revenue laws or any provision of Federal law relating to tax fraud.
Enforcement action
In general
A person who alleges discharge or other reprisal by any person in violation of paragraph (1) may seek relief under paragraph (3) by—
filing a complaint with the Secretary of Labor, or
if the Secretary of Labor has not issued a final decision within 180 days of the filing of the complaint and there is no showing that such delay is due to the bad faith of the claimant, bringing an action at law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy.
Procedure
In general
An action under subparagraph (A)(i) shall be governed under the rules and procedures set forth in section 42121(b) of title 49, United States Code.
Exception
Notification made under section 42121(b)(1) of title 49, United States Code, shall be made to the person named in the complaint and to the employer.
Burdens of proof
An action brought under subparagraph (A)(ii) shall be governed by the legal burdens of proof set forth in section 42121(b) of title 49, United States Code, except that in applying such section—
behavior described in paragraph (1)
shall be substituted for behavior described in paragraphs (1) through (4) of subsection (a)
each place it appears in paragraph (2)(B) thereof, and
a violation of paragraph (1)
shall be substituted for a violation of subsection (a)
each place it appears.
Statute of limitations
A complaint under subparagraph (A)(i) shall be filed not later than 180 days after the date on which the violation occurs.
Jury trial
A party to an action brought under subparagraph (A)(ii) shall be entitled to trial by jury.
Remedies
In general
An employee prevailing in any action under paragraph (2)(A) shall be entitled to all relief necessary to make the employee whole.
Compensatory damages
Relief for any action under subparagraph (A) shall include—
reinstatement with the same seniority status that the employee would have had, but for the reprisal,
the sum of 200 percent of the amount of back pay and 100 percent of all lost benefits, with interest, and
compensation for any special damages sustained as a result of the reprisal, including litigation costs, expert witness fees, and reasonable attorney fees.
Rights retained by employee
Nothing in this section shall be deemed to diminish the rights, privileges, or remedies of any employee under any Federal or State law, or under any collective bargaining agreement.
Nonenforceability of certain provisions waiving rights and remedies or requiring arbitration of disputes
Waiver of rights and remedies
The rights and remedies provided for in this subsection may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement.
Predispute arbitration agreements
No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this subsection.
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Effective date
In general
The amendments made by subsection (a) shall apply to disclosures made after the date of the enactment of this Act.
Civil protection
The amendment made by subsection (b) shall take effect on the date of the enactment of this Act.
Reform of Laws Governing Internal Revenue Service Employees
Electronic record retention
Retention of records
In general
Email records of the Internal Revenue Service shall be retained in an appropriate electronic system that supports records management and litigation requirements, including the capability to identify, retrieve, and retain the records, in accordance with the requirements described in paragraph (2).
Requirements
Prior to certification
The Commissioner of Internal Revenue and the Chief Counsel for the Internal Revenue Service shall retain all email records generated on or after the date of the enactment of this Act and before the date on which the Treasury Inspector General for Tax Administration makes the certification under subsection (c)(1).
Principal officers and specified employees
Not later than December 31, 2019, the Commissioner of Internal Revenue and the Chief Counsel for the Internal Revenue Service shall maintain email records of all principal officers and specified employees of the Internal Revenue Service for a period of not less than 15 years beginning on the date such record was generated.
Transmission of records to the National Archives
Not later than the last day of the period described in subsection (a)(2)(B), the Commissioner of Internal Revenue and the Chief Counsel for the Internal Revenue Service shall transfer the email records of principal officers and specified employees of the Internal Revenue Service to the Archivist of the United States.
Compliance
Certification
On the date that the Treasury Inspector General for Tax Administration determines that the Internal Revenue Service has a program in place that complies with the requirements of subsections (a)(2)(B) and (b), the Treasury Inspector General for Tax Administration shall certify to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate that the Internal Revenue Service is in compliance with such requirements.
Reports
Interim report
Not later than December 31, 2019, the Treasury Inspector General for Tax Administration shall submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the steps being taken by the Commissioner of Internal Revenue and the Chief Counsel for the Internal Revenue Service to comply with the requirements of subsections (a)(2)(B) and (b).
Final report
Not later than April 1, 2020, the Treasury Inspector General for Tax Administration shall submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate describing whether the Internal Revenue Service is in compliance with the requirements of subsections (a)(2)(B) and (b).
Definitions
For purposes of this section—
Principal officer
The term principal officer means, with respect to the Internal Revenue Service—
any employee whose position is listed under the Internal Revenue Service in the most recent version of the United States Government Manual published by the Office of the Federal Register;
any employee who is a senior staff member reporting directly to the Commissioner of Internal Revenue or the Chief Counsel for the Internal Revenue Service; and
any associate counsel, deputy counsel, or division head in the Office of the Chief Counsel for the Internal Revenue Service.
Specified employee
The term specified employee means, with respect to the Internal Revenue Service, any employee who—
holds a Senior Executive Service position (as defined in section 3132 of title 5, United States Code) in the Internal Revenue Service or the Office of Chief Counsel for the Internal Revenue Service; and
is not a principal officer of the Internal Revenue Service.
Prohibition on rehiring former IRS employees who were involuntarily separated for misconduct
In general
Section 7804 is amended by adding at the end the following new subsection:
Prohibition on rehiring employees involuntarily separated
Notwithstanding any other provision of law, the Commissioner may not hire any individual previously employed by the Commissioner—
who was removed for misconduct or unacceptable performance under this subchapter, chapter 43 or chapter 75 of title 5, United States Code, or a similar provision of law,
who has voluntarily separated after receiving a notice of proposed action of removal for misconduct or unacceptable performance, or
whose employment was terminated under section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note).
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Effective Date
The amendment made by subsection (a) shall apply with respect to the hiring of employees after the date of the enactment of this Act.
Authority to remove or transfer senior IRS executives who fail in their performance or engage in serious misconduct
In general
Section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by adding at the end the following new subsection:
Removal of senior executives based on performance or misconduct
Removal or transfer
In general
The Commissioner of Internal Revenue (referred to in this subsection as the Commissioner) may remove an individual employed in a senior executive position at the Internal Revenue Service from the senior executive position if the Commissioner determines the performance or misconduct of the individual warrants such removal. If the Commissioner so removes such an individual, the Commissioner may—
remove the individual from the civil service (as defined in section 2101 of title 5, United States Code); or
in the case of an individual described in subparagraph (B), transfer the individual from the senior executive position to a General Schedule position at any grade of the General Schedule for which the individual is qualified and that the Commissioner determines is appropriate.
Individuals eligible for transfer
An individual described in this subparagraph is an individual who—
previously occupied a permanent position within the competitive service (as that term is defined in section 2102 of title 5, United States Code);
previously occupied a permanent position within the excepted service (as that term is defined in section 2103 of title 5, United States Code); or
prior to employment in a senior executive position at the Internal Revenue Service, did not occupy any position within the Federal Government.
Pay of transferred individuals
In general
Notwithstanding any other provision of law, including the requirements of section 3594 of title 5, United States Code, any individual transferred to a General Schedule position under paragraph (1)(A)(ii) shall, beginning on the date of such transfer, receive the annual rate of pay applicable to such position.
Paid leave during appeal
An individual so transferred may not be placed on administrative leave or any other category of paid leave during the period during which an appeal (if any) under this section is ongoing, and may only receive pay if the individual reports for duty. If an individual so transferred does not report for duty, such individual shall not receive pay or other benefits pursuant to paragraph (5)(E).
Notice to Congress
Not later than 30 days after removing or transferring an individual from a senior executive position under paragraph (1), the Commissioner shall submit written notice of such removal or transfer and the reason for such removal or transfer to—
the Committee on Finance of the Senate;
the Committee on Homeland Security and Governmental Affairs of the Senate;
the Committee on Ways and Means of the House of Representatives; and
the Committee on Oversight and Government Reform of the House of Representatives.
Procedure
In general
The procedures under section 7543(b) of title 5, United States Code, shall not apply to a removal or transfer under this section.
Appeal to Merit System Protection Board
In general
Subject to clause (ii) and paragraph (5), any removal or transfer under paragraph (1) may be appealed to the Merit Systems Protection Board under section 7701 of title 5, United States Code.
Deadline for appeal
An appeal under clause (i) of a removal or transfer may only be made if such appeal is made not later than 7 days after the date of such removal or transfer.
Expedited review by administrative law judge
In general
Upon receipt of an appeal under paragraph (4)(B)(i), the Merit Systems Protection Board shall refer such appeal to an administrative law judge pursuant to section 7701(b)(1) of title 5, United States Code. The administrative law judge shall expedite any such appeal under such section and, in any such case, shall issue a decision not later than 21 days after the date of the appeal.
Finality of decision
Notwithstanding any other provision of law, including section 7703 of title 5, United States Code, the decision of an administrative law judge under subparagraph (A) shall be final and shall not be subject to any further appeal.
Failure to reach decision
In any case in which the administrative law judge cannot issue a decision in accordance with the 21-day requirement under subparagraph (A), the removal or transfer is final. In such a case, the Merit Systems Protection Board shall, within 14 days after the date that such removal or transfer is final, submit to Congress and the Committees described in paragraph (3) a report that explains the reasons why a decision was not issued in accordance with such requirement.
Prohibition on stay of removal or transfer
The Merit Systems Protection Board or administrative law judge may not stay any removal or transfer under this subsection.
Period of review
During the period beginning on the date on which an individual appeals a removal from the civil service under paragraph (4) and ending on the date that the administrative law judge issues a final decision on such appeal, such individual may not receive any pay, awards, bonuses, incentives, allowances, differentials, student loan repayments, special payments, or benefits.
Relevant information to be provided
To the maximum extent practicable, the Commissioner shall provide to the Merit Systems Protection Board, and to any administrative law judge to whom an appeal under this section is referred, such information and assistance as may be necessary to ensure an appeal under this paragraph is expedited.
Relation to other provisions of law
In general
The authority provided by this subsection is in addition to, and shall not be construed to limit or diminish, the authority provided by—
subsections (a) and (c); and
section 3592 or subchapter V of chapter 75 of title 5, United States Code.
Removal from Senior Executive Service
Section 3592(b)(1) of title 5, United States Code, does not apply to an action to remove or transfer an individual under this subsection.
Definitions
For purposes of this subsection:
Individual
The term individual means a career appointee (as that term is defined in section 3132(a)(4) of title 5, United States Code).
Misconduct
In general
Subject to clause (ii), the term misconduct includes neglect of duty, malfeasance, or failure to accept a directed reassignment or to accompany a position in a transfer of function.
Exception
The term misconduct shall not include any act or omission described in subsection (b).
Senior executive position
The term senior executive position means a Senior Executive Service position (as such term is defined in section 3132(a)(2) of title 5, United States Code).
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Establishment of expedited review process
In general
Not later than 60 days after the date of the enactment of this Act, the Merit Systems Protection Board shall establish and put into effect a process to conduct expedited reviews in accordance with subsection (f) of section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998, as added by this Act.
Inapplicability of certain regulations
Section 1201.22 of title 5, Code of Federal Regulations, as in effect on the day before the date of the enactment of this Act, shall not apply to expedited reviews carried out under section 1203(f) of the Internal Revenue Service Restructuring and Reform Act of 1998, as added by this Act.
Waiver
The Merit Systems Protection Board may waive any other regulation in order to provide for the expedited review required under section 1203(f) of the Internal Revenue Service Restructuring and Reform Act of 1998, as added by this Act.
Review by Merit Systems Protection Board
Not later than 30 days after the date of the enactment of this Act, the Merit Systems Protection Board shall submit to the committees described in paragraph (3) of section 1203(f) of the Internal Revenue Service Restructuring and Reform Act of 1998, as added by this Act, a report on the actions the Board plans to take to conduct expedited reviews under such section. Such report shall include a description of the resources the Board determines will be necessary to conduct such reviews and a description of whether any resources will be necessary to conduct such reviews that were not available to the Board on the day before the date of the enactment of this Act.
Temporary exemption from certain limitation on initiation of removal from senior executive service
During the 120-day period beginning on the date of the enactment of this Act, an action to remove an individual from the Senior Executive Service at the Internal Revenue Service pursuant to section 7543 of title 5, United States Code, may be initiated, notwithstanding section 3592(b) of such title, or any other provision of law.
Construction
Nothing in this section or section 1203(f) of the Internal Revenue Service Restructuring and Reform Act of 1998, as added by this Act, shall be construed to apply to an appeal of a removal, transfer, or other personnel action that was pending before the date of the enactment of this Act.
Limitation on access of non-Internal Revenue Service employees to returns and return information
In general
Section 7602 is amended by adding at the end the following new subsection:
Limitation on access of persons other than Internal Revenue Service officers and employees
The Secretary shall not, under the authority of section 6103(n), provide any books, papers, records, or other data obtained pursuant to this section to any person authorized under section 6103(n), except when such person requires such information for the sole purpose of providing expert evaluation and assistance to the Internal Revenue Service. No person other than an officer or employee of the Internal Revenue Service or the Office of Chief Counsel may, on behalf of the Secretary, question a witness under oath whose testimony was obtained pursuant to this section.
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Effective date
In general
Except as provided in paragraph (2), the amendment made by this section shall take effect on the date of the enactment of this Act.
Application to contracts in effect
The amendment made by this section shall apply to any contract in effect under section 6103(n) of the Internal Revenue Code of 1986, pursuant to temporary Treasury Regulation section 301.7602–1T proposed in Internal Revenue Bulletin 2014–28, Treasury Regulation section 301.7602–1(b)(3), or any similar or successor regulation, that is in effect on the date of the enactment of this Act.
Notification of unauthorized inspection or disclosure of returns and return information
In general
Subsection (e) of section 7431 is amended by adding at the end the following new sentences: The Secretary shall also notify such taxpayer if the Internal Revenue Service or a Federal or State agency (upon notice to the Secretary by such Federal or State agency) proposes an administrative determination as to disciplinary or adverse action against an employee arising from the employee’s unauthorized inspection or disclosure of the taxpayer’s return or return information. The notice described in this subsection shall include the date of the unauthorized inspection or disclosure and the rights of the taxpayer under such administrative determination.
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Effective date
The amendment made by this section shall apply to determinations proposed after the date which is 180 days after the date of the enactment of this Act.
Exempt Organizations
Mandatory e-filing by exempt organizations
In general
Section 6033 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:
Mandatory electronic filing
Any organization required to file a return under this section shall file such return in electronic form.
.
Conforming amendment
Paragraph (7) of section 527(j) is amended by striking if the organization has
and all that follows through such calendar year
.
Inspection of electronically filed annual returns
Subsection (b) of section 6104 is amended by adding at the end the following: Any annual return required to be filed electronically under section 6033(n) shall be made available by the Secretary to the public as soon as practicable in a machine readable format.
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Effective date
In general
Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Transitional relief
Small organizations
In general
In the case of any small organizations, or any other organizations for which the Secretary of the Treasury or the Secretary’s delegate (hereafter referred to in this paragraph as the Secretary
) determines the application of the amendments made by this section would cause undue burden without a delay, the Secretary may delay the application of such amendments, but not later than taxable years beginning 2 years after the date of the enactment of this Act.
Small organization
For purposes of clause (i), the term small organization means any organization—
the gross receipts of which for the taxable year are less than $200,000; and
the aggregate gross assets of which at the end of the taxable year are less than $500,000.
Organizations filing form 990–T
In the case of any organization described in section 511(a)(2) of the Internal Revenue Code of 1986 which is subject to the tax imposed by section 511(a)(1) of such Code on its unrelated business taxable income, or any organization required to file a return under section 6033 of such Code and include information under subsection (e) thereof, the Secretary may delay the application of the amendments made by this section, but not later than taxable years beginning 2 years after the date of the enactment of this Act.
Prohibit the use of IRS funds for political targeting
None of the funds made available under any Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States.
Notice required before revocation of tax exempt status for failure to file return
In general
Section 6033(j)(1) is amended by striking If an organization
and inserting the following:
Notice
In general
After an organization described in subsection (a)(1) or (i) fails to file the annual return or notice required under either subsection for 2 consecutive years, the Secretary shall notify the organization—
that the Internal Revenue Service has no record of such a return or notice from such organization for 2 consecutive years, and
about the revocation that will occur under subparagraph (B) if the organization fails to file such a return or notice by the due date for the next such return or notice required to be filed.
Revocation
If an organization
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Effective date
The amendment made by this section shall apply to failures to file returns or notices for 2 consecutive years if the return or notice for the second year is required to be filed after December 31, 2018.
IRS Audit Criteria
Report on IRS audit criteria
Not later than 2 years after the date of the enactment of this Act, the Treasury Inspector General for Tax Administration shall submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate which contains the results of an audit of the criteria employed by the Internal Revenue Service for selecting tax returns for audit, assessment, criminal investigation, or any heightened scrutiny or review, including whether such criteria has been used to target taxpayers on the basis of political ideology, race, religion, or any other impermissible factor.
Protection of Taxpayers from Identity Theft and Tax Fraud
Single point of contact for tax-related identity theft victims
In general
The Secretary shall establish and implement procedures to ensure that any taxpayer whose return has been delayed or otherwise adversely affected due to tax-related identity theft has a single point of contact at the Internal Revenue Service throughout the processing of the taxpayer’s case. The single point of contact shall track the taxpayer’s case to completion and coordinate with other Internal Revenue Service employees to resolve case issues as quickly as possible.
Single point of contact
In general
For purposes of subsection (a), the single point of contact shall consist of a team or subset of specially trained employees who—
have the ability to work across functions to resolve the issues involved in the taxpayer's case; and
shall be accountable for handling the case until its resolution.
Team or subset
The employees included within the team or subset described in paragraph (1) may change as required to meet the needs of the Internal Revenue Service, provided that procedures have been established to—
ensure continuity of records and case history; and
notify the taxpayer when appropriate.
Information on identity theft and tax scams
The Secretary shall provide to any taxpayer who has been placed on hold during a telephone call to any Internal Revenue Service help line the following information:
Information about common tax scams.
Information on where and how to report tax scams.
Additional advice on how taxpayers can protect themselves from identity theft and tax scams.
Notification of suspected identity theft
In general
Chapter 77 is amended by adding at the end the following new section:
Notification of suspected identity theft
In general
If the Secretary determines that there has been or may have been an unauthorized use of the identity of any individual, the Secretary shall, without jeopardizing an investigation relating to tax administration—
as soon as practicable, notify the individual of such determination and provide—
instructions on how to file a report with law enforcement regarding the unauthorized use of the identity of the individual,
the identification of any forms necessary for the individual to complete and submit to law enforcement to permit access to personal information of the individual during the investigation,
information regarding actions the individual may take in order to protect the individual from harm relating to such unauthorized use, and
an offer of identity protection measures to be provided to the individual by the Internal Revenue Service, such as the use of an identity protection personal identification number, and
at the time the information described in paragraph (1) is provided (or, if not available at such time, as soon as practicable thereafter), issue additional notifications to such individual (or such individual's designee) regarding—
whether an investigation has been initiated in regards to such unauthorized use,
whether the investigation substantiated an unauthorized use of the identity of the individual, and
whether—
any action has been taken against a person relating to such unauthorized use, or
any referral has been made for criminal prosecution of such person and, to the extent such information is available, whether such person has been criminally charged by indictment or information.
Employment-Related identity theft
In general
For purposes of this section, the unauthorized use of the identity of an individual includes the unauthorized use of the identity of the individual to obtain employment.
Determination of employment-related identity theft
For purposes of this section, in making a determination as to whether there has been or may have been an unauthorized use of the identity of an individual to obtain employment, the Secretary shall review any information—
obtained from a statement described in section 6051 or an information return relating to compensation for services rendered other than as an employee, or
provided to the Internal Revenue Service by the Social Security Administration regarding any statement described in section 6051,
.
Additional measures
Examination of both paper and electronic statements and returns
The Secretary shall examine the statements, information returns, and tax returns described in section 7529(b)(2) of the Internal Revenue Code of 1986 (as added by subsection (a)) for any evidence of employment-related identity theft, regardless of whether such statements or returns are submitted electronically or on paper.
Improvement of effective return processing program with Social Security Administration
Section 232 of the Social Security Act (42 U.S.C. 432) is amended by inserting after the third sentence the following: For purposes of carrying out the return processing program described in the preceding sentence, the Commissioner of Social Security shall request, not less than annually, such information described in section 7529(b)(2) of the Internal Revenue Code of 1986 as may be necessary to ensure the accuracy of the records maintained by the Commissioner of Social Security related to the amounts of wages paid to, and the amounts of self-employment income derived by, individuals.
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Underreporting of income
The Secretary shall establish procedures to ensure that income reported in connection with the unauthorized use of a taxpayer's identity is not taken into account in determining any penalty for underreporting of income by the victim of identity theft.
Clerical amendment
The table of sections for chapter 77 is amended by adding at the end the following new item:
Sec. 7529. Notification of suspected identity theft.
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Effective date
The amendments made by this section shall apply to determinations made after the date that is 6 months after the date of the enactment of this Act.
Stolen Identity Fraud Prevention
Identity Theft and Tax Refund Fraud Prevention
General Provisions
Guidelines for stolen identity refund fraud cases
In general
Not later than 6 months after the date of the enactment of this Act, the Secretary, in consultation with the National Taxpayer Advocate, shall develop and implement publicly available guidelines for management of cases involving stolen identity refund fraud in a manner that reduces the administrative burden on taxpayers who are victims of such fraud.
Standards and procedures To be considered
The guidelines described in subsection (a) may include—
standards for—
the average length of time in which a case involving stolen identity refund fraud should be resolved;
the maximum length of time, on average, a taxpayer who is a victim of stolen identity refund fraud and is entitled to a tax refund which has been stolen should have to wait to receive such refund; and
the maximum number of offices and employees within the Internal Revenue Service with whom a taxpayer who is a victim of stolen identity refund fraud should be required to interact in order to resolve a case;
standards for opening, assigning, reassigning, or closing a case involving stolen identity refund fraud; and
procedures for implementing and accomplishing the standards described in paragraphs (1) and (2), and measures for evaluating such procedures and determining whether such standards have been successfully implemented.
Increased penalty for improper disclosure or use of information by preparers of returns
In general
Section 6713 is amended—
by redesignating subsections (b) and (c) as subsections (c) and (d), respectively; and
by inserting after subsection (a) the following new subsection:
Enhanced penalty for improper use or disclosure relating to identity theft
In general
In the case of a disclosure or use described in subsection (a) that is made in connection with a crime relating to the misappropriation of another person's taxpayer identity (as defined in section 6103(b)(6)), whether or not such crime involves any tax filing, subsection (a) shall be applied—
by substituting $1,000
for $250
, and
by substituting $50,000
for $10,000
.
Separate application of total penalty limitation
The limitation on the total amount of the penalty under subsection (a) shall be applied separately with respect to disclosures or uses to which this subsection applies and to which it does not apply.
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Criminal penalty
Section 7216(a) is amended by striking $1,000
and inserting $1,000 ($100,000 in the case of a disclosure or use to which section 6713(b) applies)
.
Effective date
The amendments made by this section shall apply to disclosures or uses on or after the date of the enactment of this Act.
Administrative Authority To Prevent Identity Theft and Tax Refund Fraud
Authority to transfer Internal Revenue Service appropriations to combat tax fraud
In general
For any fiscal year, in addition to any other authority to transfer amounts appropriated to an Internal Revenue Service account, the Commissioner of Internal Revenue (referred to in this section as the Commissioner) may transfer not more than $10,000,000 to any account of the Internal Revenue Service from amounts appropriated to other Internal Revenue Service accounts. Any amounts so transferred shall be used solely for the purposes of preventing, detecting, and resolving potential cases of tax fraud, which may include educating taxpayers about common tax fraud scams and how to protect themselves from such scams.
Limitation
The Commissioner shall not transfer any amounts described in subsection (a) unless the Commissioner has determined that taxpayer services provided by the Internal Revenue Service to the public (including telephone operations, forms and publications, and similar types of taxpayer assistance) will not be impaired by such transfer.
Streamlined critical pay authority for information technology positions
Authority
Section 9503(a) of title 5, United States Code, is amended—
in the matter preceding paragraph (1), by striking the Secretary of the Treasury
and all that follows through establish
and inserting the Secretary of the Treasury may, during the period beginning on October 1, 2018, and ending on September 30, 2023, establish
; and
in paragraph (1)(B), by striking the Internal Revenue Service's successful accomplishment of an important mission
and inserting the functionality of the information technology operations of the Internal Revenue Service
.
Recruitment, retention, relocation incentives, and relocation expenses
Section 9504 of title 5, United States Code, is amended—
in subsection (a)—
by striking Before September 30, 2013
and inserting During the period beginning on October 1, 2018, and ending on September 30, 2023
; and
by inserting for employees holding positions described in section 9503(a)(1)
after incentives
; and
in subsection (b)—
by striking Before September 30, 2013
and inserting During the period beginning on October 1, 2018, and ending on September 30, 2023
;
by striking employees transferred or reemployed
and inserting employees holding positions described in section 9503(a)(1) who are transferred or reemployed during such period
; and
by striking section 9502 or 9503 after June 1, 1998
and inserting section 9503 during such period
.
Performance awards for Senior Executives
Section 9505(a) of title 5, United States Code, is amended—
by striking Before September 30, 2013
and inserting During the period beginning on October 1, 2018, and ending on September 30, 2023
; and
by striking significant functions
and inserting the information technology operations
.
Effective date
The amendments made by this section shall apply to payments made on or after the date of the enactment of this Act.
Access to the National Directory of New Hires to identify and prevent fraudulent tax return filings and claims for refund
In general
Paragraph (3) of section 453(i) of the Social Security Act (42 U.S.C. 653(i)) is amended to read as follows:
Administration of Federal tax laws
The Secretary of the Treasury shall have access to the information in the National Directory of New Hires for the purposes of—
administering section 32 of the Internal Revenue Code of 1986,
verifying a claim with respect to employment in a tax return, and
identifying and preventing fraudulent tax return filings and claims for refund under the Internal Revenue Code of 1986.
.
Effective date
The amendment made by this section shall take effect on the date of the enactment of this Act.
Repeal of provision regarding certain tax compliance procedures and reports
Section 2004 of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 6012 note) is repealed.
Improvements to Electronic Filing of Tax Returns
Identity protection personal identification numbers
Not later than 5 years after the date of the enactment of this Act, the Secretary shall establish a program to issue, upon the request of any individual, a number which may be used in connection with such individual’s social security number (or other identifying information with respect to such individual as determined by the Secretary) to assist the Secretary in verifying such individual’s identity.
Electronic filing of returns
In general
Section 6011(e)(2)(A) is amended by striking 250
and inserting the applicable number of
.
Applicable number
Section 6011(e) is amended by striking paragraph (5) and inserting the following new paragraphs:
Applicable number
In general
For purposes of paragraph (2)(A), the applicable number shall be—
except as provided in subparagraph (B), in the case of calendar years before 2020, 250,
in the case of calendar year 2020, 100, and
in the case of calendar years after 2020, 10.
Special rule for partnerships for 2018 and 2019
In the case of a partnership, for any calendar year before 2020, the applicable number shall be—
in the case of calendar year 2018, 200, and
in the case of calendar year 2019, 150.
Partnerships required to file on magnetic media
Notwithstanding paragraph (2)(A), the Secretary shall require partnerships having more than 100 partners to file returns on magnetic media.
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Returns filed by a tax return preparer
Section 6011(e)(3) is amended by adding at the end the following new subparagraph:
Exception for certain preparers located in areas without internet access
The Secretary may waive the requirement of subparagraph (A) if the Secretary determines, on the basis of an application by the tax return preparer, that the preparer cannot meet such requirement by reason of being located in a geographic area which does not have access to internet service (other than dial-up or satellite service).
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Effective date
The amendments made by this section shall take effect on the date of the enactment of this Act.
Internet platform for Form 1099 filings
In general
Not later than January 1, 2023, the Secretary shall make available an Internet website or other electronic media, with a user interface and functionality similar to the Business Services Online Suite of Services provided by the Social Security Administration, that will provide access to resources and guidance provided by the Internal Revenue Service and will allow persons to—
prepare and file Forms 1099;
prepare Forms 1099 for distribution to recipients other than the Internal Revenue Service; and
maintain a record of completed and submitted Forms 1099.
Electronic services treated as supplemental; application of security standards
The Secretary shall ensure that the services described in subsection (a)—
are a supplement to, and not a replacement for, other services provided by the Internal Revenue Service to taxpayers; and
comply with applicable security standards and guidelines.
Requirement that electronically prepared paper returns include scannable code
In general
Subsection (e) of section 6011, as amended by section 2102(b) of this Act, is amended by adding at the end the following new paragraph:
Special rule for returns prepared electronically and submitted on paper
The Secretary shall require that any return of tax which is prepared electronically, but is printed and filed on paper, bear a code which can, when scanned, convert such return to electronic format.
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Conforming amendment
Paragraph (1) of section 6011(e) is amended by striking paragraph (3)
and inserting paragraphs (3) and (7)
.
Effective date
The amendments made by this section shall apply to returns of tax the due date for which (determined without regard to extensions) is after December 31, 2019.
Authentication of users of electronic services accounts
Beginning 180 days after the date of the enactment of this Act, the Secretary shall verify the identity of any individual opening an e-Services account with the Internal Revenue Service before such individual is able to use the e-Services tools.