Home > 106th Congressional Bills > H.R. 4163 (rh) To amend the Internal Revenue Code of 1986 to provide for increased fairness to taxpayers. [Reported in House] ...

H.R. 4163 (rh) To amend the Internal Revenue Code of 1986 to provide for increased fairness to taxpayers. [Reported in House] ...


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106th CONGRESS
  2d Session
                                H. R. 4163


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 12, 2000

     Received, read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 AN ACT


 
  To amend the Internal Revenue Code of 1986 to provide for increased 
                         fairness to taxpayers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Taxpayer Bill of 
Rights 2000''.
    (b) 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.
    (c) Table of Contents.--

Sec. 1. Short title; etc.
                    TITLE I--PENALTIES AND INTEREST

Sec. 101. Failure to pay estimated tax penalty converted to interest 
                            charge on accumulated unpaid balance.
Sec. 102. Exclusion from gross income for interest on overpayments of 
                            income tax by individuals.
Sec. 103. Reductions of penalty for failure to pay tax.
Sec. 104. Abatement of interest.
Sec. 105. Deposits made to stop the running of interest on potential 
                            underpayments.
Sec. 106. Expansion of interest netting for individuals.
                TITLE II--CONFIDENTIALITY AND DISCLOSURE

Sec. 201. Disclosure and privacy rules relating to returns and return 
                            information.
Sec. 202. Expansion of type of advice available for public inspection.
Sec. 203. Collection activities with respect to joint return 
                            disclosable to either spouse based on oral 
                            request.
Sec. 204. Taxpayer representatives not subject to examination on sole 
                            basis of representation of taxpayers.
Sec. 205. Disclosure in judicial or administrative tax proceedings of 
                            return and return information of persons 
                            who are not party to such proceedings.
Sec. 206. Prohibition of disclosure of taxpayer identification 
                            information with respect to disclosure of 
                            accepted offers-in-compromise.
Sec. 207. Compliance by State contractors with confidentiality 
                            safeguards.
Sec. 208. Higher standards for requests for and consents to disclosure.
Sec. 209. Notice to taxpayer concerning administrative determination of 
                            browsing; annual report.
Sec. 210. Disclosure of taxpayer identity for tax refund purposes.
                     TITLE III--OTHER REQUIREMENTS

Sec. 301. Clarification of definition of church tax inquiry.
Sec. 302. Expansion of declaratory judgment remedy to tax-exempt 
                            organizations.
Sec. 303. Employee misconduct report to include summary of complaints 
                            by category.
Sec. 304. Increase in threshold for Joint Committee reports on refunds 
                            and credits.
Sec. 305. Annual report on awards of costs and certain fees in 
                            administrative and court proceedings.
Sec. 306. Annual report on abatement of penalties.
Sec. 307. Better means of communicating with taxpayers.
Sec. 308. Explanation of statute of limitations and consequences of 
                            failure to file.

                    TITLE I--PENALTIES AND INTEREST

SEC. 101. FAILURE TO PAY ESTIMATED TAX PENALTY CONVERTED TO INTEREST 
              CHARGE ON ACCUMULATED UNPAID BALANCE.

    (a) Penalty Moved to Interest Chapter of Code.--The Internal 
Revenue Code of 1986 is amended by redesignating section 6654 as 
section 6641 and by moving section 6641 (as so redesignated) from part 
I of subchapter A of chapter 68 to the end of subchapter E of chapter 
67 (as added by subsection (e)(1) of this section).
    (b) Penalty Converted to Interest Charge.--The heading and 
subsections (a) and (b) of section 6641 (as so redesignated) are 
amended to read as follows:

``SEC. 6641. INTEREST ON FAILURE BY INDIVIDUAL TO PAY ESTIMATED INCOME 
              TAX.

    ``(a) In General.--Interest shall be paid on any underpayment of 
estimated tax by an individual for a taxable year for each day of such 
underpayment. The amount of such interest for any day shall be the 
product of the underpayment rate established under subsection (b)(2) 
multiplied by the amount of the underpayment.
    ``(b) Amount of Underpayment; Interest Rate.--For purposes of 
subsection (a)--
            ``(1) Amount.--The amount of the underpayment on any day 
        shall be the excess of--
                    ``(A) the sum of the required installments for the 
                taxable year the due dates for which are on or before 
                such day, over
                    ``(B) the sum of the amounts (if any) of estimated 
                tax payments made on or before such day on such 
                required installments.
            ``(2) Determination of interest rate.--
                    ``(A) In general.--The underpayment rate with 
                respect to any day in an installment underpayment 
                period shall be the underpayment rate established under 
                section 6621 for the first day of the calendar quarter 
                in which such installment underpayment period begins.
                    ``(B) Installment underpayment period.--For 
                purposes of subparagraph (A), the term `installment 
                underpayment period' means the period beginning on the 
                day after the due date for a required installment and 
                ending on the due date for the subsequent required 
                installment (or in the case of the 4th required 
                installment, the 15th day of the 4th month following 
                the close of a taxable year).
                    ``(C) Daily rate.--The rate determined under 
                subparagraph (A) shall be applied on a daily basis and 
                shall be based on the assumption of 365 days in a 
                calendar year.
            ``(3) Termination of estimated tax interest.--No day after 
        the end of the installment underpayment period for the 4th 
        required installment specified in paragraph (2)(B) for a 
        taxable year shall be treated as a day of underpayment with 
        respect to such taxable year.''.
    (c) Increase in Safe Harbor Where Tax is Small.--
            (1) In general.--Clause (i) of section 6641(d)(1)(B) (as so 
        redesignated) is amended to read as follows:
                            ``(i) the lesser of--
                                    ``(I) 90 percent of the tax shown 
                                on the return for the taxable year (or, 
                                if no return is filed, 90 percent of 
                                the tax for such year), or
                                    ``(II) the tax shown on the return 
                                for the taxable year (or, if no return 
                                is filed, the tax for such year) 
                                reduced (but not below zero) by $2,000, 
                                or''.
            (2) Conforming amendment.--Subsection (e) of section 6641 
        (as so redesignated) is amended by striking paragraph (1) and 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
    (d) Conforming Amendments.--
            (1) Paragraphs (1) and (2) of subsection (e) (as 
        redesignated by subsection (c)(2)) and subsection (h) of 
        section 6641 (as so designated) are each amended by striking 
        ``addition to tax'' each place it occurs and inserting 
        ``interest''.
            (2) Section 167(g)(5)(D) is amended by striking ``6654'' 
        and inserting ``6641''.
            (3) Section 460(b)(1) is amended by striking ``6654'' and 
        inserting ``6641''.
            (4) Section 3510(b) is amended--
                    (A) by striking ``section 6654'' in paragraph (1) 
                and inserting ``section 6641'';
                    (B) by amending paragraph (2)(B) to read as 
                follows:
                    ``(B) no interest would be required to be paid (but 
                for this section) under 6641 for such taxable year by 
                reason of the $2,000 amount specified in section 
                6641(d)(1)(B)(i)(II).'';
                    (C) by striking ``section 6654(d)(2)'' in paragraph 
                (3) and inserting ``section 6641(d)(2)''; and
                    (D) by striking paragraph (4).
            (5) Section 6201(b)(1) is amended by striking ``6654'' and 
        inserting ``6641''.
            (6) Section 6601(h) is amended by striking ``6654'' and 
        inserting ``6641''.
            (7) Section 6621(b)(2)(B) is amended by striking ``addition 
        to tax under section 6654'' and inserting ``interest required 
        to be paid under section 6641''.
            (8) Section 6622(b) is amended--
                    (A) by striking ``Penalty for'' in the heading; and
                    (B) by striking ``addition to tax under section 
                6654 or 6655'' and inserting ``interest required to be 
                paid under section 6641 or addition to tax under 
                section 6655''.
            (9) Section 6658(a) is amended--
                    (A) by striking ``6654, or 6655'' and inserting 
                ``or 6655, and no interest shall be required to be paid 
                under section 6641,''; and
                    (B) by inserting ``or paying interest'' after ``the 
                tax'' in paragraph (2)(B)(ii).
            (10) Section 6665(b) is amended--
                    (A) in the matter preceding paragraph (1) by 
                striking ``, 6654,''; and
                    (B) in paragraph (2) by striking ``6654 or''.
            (11) Section 7203 is amended by striking ``section 6654 or 
        6655'' and inserting ``section 6655 or interest required to be 
        paid under section 6641''.
    (e) Clerical Amendments.--
            (1) Chapter 67 is amended by inserting after subchapter D 
        the following:

  ``Subchapter E--Interest on Failure by Individual to Pay Estimated 
                               Income Tax

                              ``Sec. 6641. Interest on failure by 
                                        individual to pay estimated 
                                        income tax.''.
            (2) The table of subchapters for chapter 67 is amended by 
        adding at the end the following new items:

                              ``Subchapter D. Notice requirements.
                              ``Subchapter E. Interest on failure by 
                                        individual to pay estimated 
                                        income tax.''.
            (3) The table of sections for part I of subchapter A of 
        chapter 68 is amended by striking the item relating to section 
        6654.
    (f) Effective Date.--The amendments made by this section shall 
apply to installment payments for taxable years beginning after 
December 31, 2000.

SEC. 102. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS OF 
              INCOME TAX BY INDIVIDUALS.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by 
redesignating section 139 as section 139A and by inserting after 
section 138 the following new section:

``SEC. 139. EXCLUSION FROM GROSS INCOME FOR INTEREST ON OVERPAYMENTS OF 
              INCOME TAX BY INDIVIDUALS.

    ``(a) In General.--In the case of an individual, gross income shall 
not include interest paid under section 6611 on any overpayment of tax 
imposed by this subtitle.
    ``(b) Exception.--Subsection (a) shall not apply in the case of a 
failure to claim items resulting in the overpayment on the original 
return if the Secretary determines that the principal purpose of such 
failure is to take advantage of subsection (a).
    ``(c) Special Rule for Determining Modified Adjusted Gross 
Income.--For purposes of this title, interest not included in gross 
income under subsection (a) shall not be treated as interest which is 
exempt from tax for purposes of sections 32(i)(2)(B) and 6012(d) or any 
computation in which interest exempt from tax under this title is added 
to adjusted gross income.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 139 and inserting the following new items:

                              ``Sec. 139. Exclusion from gross income 
                                        for interest on overpayments of 
                                        income tax by individuals.
                              ``Sec. 139A. Cross references to other 
                                        Acts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest received in calendar years beginning after the date 
of the enactment of this Act.

SEC. 103. REDUCTIONS OF PENALTY FOR FAILURE TO PAY TAX.

    (a) Reductions of Penalty for Failure To Pay Tax.--
            (1) Reduction of penalty by 50 percent.--
                    (A) In general.--Paragraphs (2) and (3) of section 
                6651(a) are each amended by striking ``0.5'' each place 
                it appears and inserting ``0.25''.
                    (B) Conforming amendment.--Paragraph (1) of section 
                6651(d) is amended by striking ``by substituting `1 
                percent' for `0.5 percent''' and inserting ``by 
                substituting `0.5 percent' for `0.25 percent'''.
            (2) Reduction of penalty to zero during period of 
        installment agreement.--Subsection (h) of section 6651 is 
        amended by striking ``by substituting `0.25' for `0.5''' and 
        inserting ``by substituting `zero' for `0.25'''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply for purposes of determining additions to tax for 
        months beginning after December 31, 2000.
    (b) Prohibition of Fee for Installment Agreements Using Automated 
Withdrawals.--
            (1) In general.--Section 6159 (relating to agreements for 
        payment of tax liability in installments) is amended by 
        redesignating subsection (e) as subsection (f) and by inserting 
        after subsection (d) the following new subsection:
    ``(e) Prohibition of Fee for Installment Agreements Using Automated 
Withdrawals.--The Secretary may not charge a taxpayer a fee for 
entering into an agreement with the Secretary under this section only 
for so long as payments under such agreement are made by means of 
electronic transfer or by similar automated means.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to installment agreements entered into more than 30 

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