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Title VI — Tax administration and compliance

H.R. 1 · 113th Congress · Dec 10, 2014 · Lineage

VI Tax administration and compliance

A IRS Investigation-Related Reforms

Sec. 6001 Organizations required to notify Secretary of intent to operate as 501(c)(4)

(a)
In general— Part I of subchapter F of chapter 1 is amended by adding at the end the following new section:

“506. Organizations required to notify Secretary of intent to operate as 501(c)(4)

“(a) In general—An organization described in section 501(c)(4) shall, not later than 60 days after the organization is established, notify the Secretary (in such manner as the Secretary shall by regulation prescribe) that it is operating as such.

“(b) Contents of notice—The notice required under subsection (a) shall include the following information:

“(1) The name, address, and taxpayer identification number of the organization.

“(2) The date on which, and the State under the laws of which, the organization was organized.

“(3) A statement of the purpose of the organization.

“(c) Acknowledgment of receipt—Not later than 60 days after receipt of such a notice, the Secretary shall send to the organization an acknowledgment of such receipt.

“(d) Extension for reasonable cause—The Secretary may, for reasonable cause, extend the 60-day period described in subsection (a).

“(e) User fee—The Secretary shall impose a reasonable user fee for submission of the notice under subsection (a).

“(f) Request for determination—Upon request by an organization to be treated as an organization described in section 501(c)(4), the Secretary may issue a determination with respect to such treatment. Such request shall be treated for purposes of section 6104 as an application for exemption from taxation under section 501(a).”

(b)
Supporting information with first return— Paragraph (1) of section 6033(f) is amended—
(1)
by striking the period at the end and inserting “, and”,
(2)
by striking “include on the return required under subsection (a) the information” and inserting the following:

“(1) the information”

(3)
by adding at the end the following new paragraph:

“(2) in the case of the first such return filed by such an organization after submitting a notice to the Secretary under section 506(a), such information as the Secretary shall by regulation require in support of the organization’s treatment as an organization described in section 501(c)(4).”

(c)
Failure To file initial notification— Subsection (c) of section 6652 is amended by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively, and by inserting after paragraph (3) the following new paragraph:

“(4) Notices under section 506

“(A) Penalty on organization—In the case of a failure to submit a notice required under section 506(a) (relating to organizations required to notify Secretary of intent to operate as 501(c)(4)) on the date and in the manner prescribed therefor, there shall be paid by the organization failing to so submit $20 for each day during which such failure continues, but the total amount imposed under this subparagraph on any organization for failure to submit any one notice shall not exceed $5,000.

“(B) Managers—The Secretary may make written demand on an organization subject to penalty under subparagraph (A) specifying in such demand a reasonable future date by which the notice shall be submitted for purposes of this subparagraph. If such notice is not submitted on or before such date, there shall be paid by the person failing to so submit $20 for each day after the expiration of the time specified in the written demand during which such failure continues, but the total amount imposed under this subparagraph on all persons for failure to submit any one notice shall not exceed $5,000.”

(d)
Clerical amendment— The table of sections for part I of subchapter F of chapter 1 is amended by adding at the end the following new item:
(e)
Effective date—
(1)
In general— The amendments made by this section shall apply to organizations which are described in section 501(c)(4) of the Internal Revenue Code of 1986 and organized after December 31, 2014.
(2)
Certain existing organizations— In the case of any other organization described in section 501(c)(4) of such Code, the amendments made by this section shall apply to such organization only if, on or before the date of the enactment of this Act—
(A)
such organization has not applied for a written determination of recognition as an organization described in section 501(c)(4) of such Code, and
(B)
such organization has not filed at least one annual return or notice required under subsection (a)(1) or (i) (as the case may be) of section 6033 of such Code.

Sec. 6002 Declaratory judgments for 501(c)(4) organizations

(a)
In general— Paragraph (1) of section 7428(a) is amended by striking “or” at the end of subparagraph (C) and by inserting after subparagraph (D) the following new subparagraph:

“(E) with respect to the initial classification or continuing classification of an organization described in section 501(c)(4) which is exempt from tax under section 501(a), or”

(b)
Effective date— The amendments made by this section shall apply to pleadings filed after the date of the enactment of this Act.

Sec. 6003 Restriction on donation reporting for certain 501(c)(4) organizations

(a)
In general— Subsection (f) of section 6033, as amended by this Act, is amended—
(1)
by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and by moving such subparagraphs 2 ems to the right,
(2)
by striking “in section 501(c)(4).—Every organization” and inserting the following:

“(1) In general—Every organization”

(3)
by adding at the end the following new paragraph:

“(2) Restriction on donation reporting—In the case of any such organization, information relating to contributions and gifts may only be required to be included on a return required under subsection (a) if the contribution or gift is made by an officer or director of the organization (or an individual having powers or responsibilities similar to those of officers or directors) or any covered employee (as defined in section 4960(c)(2)) of the organization.”

(b)
Effective date— The amendments made by this section shall apply to returns for taxable years beginning after December 31, 2013.

Sec. 6004 Mandatory electronic filing for annual returns of exempt organizations

(a)
In general— Section 6033, as amended by the preceding provisions of this Act, is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

“(m) Mandatory electronic filing—Any organization required to file a return under this section shall file such return in electronic form.”

(b)
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(m) shall be made available by the Secretary to the public in machine readable format as soon as practicable.”.
(c)
Effective date—
(1)
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.
(2)
Transitional relief—
(A)
Small organizations—
(i)
In general— In the case of any small organizations, or any other organizations for which the Secretary determines the application of the amendments made by subsection (a) 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.
(ii)
Small organization— For purposes of clause (i), the term “small organization” means any organization—
(I)
the gross receipts of which for the taxable year are less than $200,000, and
(II)
the aggregate gross assets of which at the end of the taxable year are less than $500,000.
(B)
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.

Sec. 6005 Duty to ensure that IRS employees are familiar with and act in accord with certain taxpayer rights

Section 7803(a) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

“(3) Execution of Duties in Accord with Taxpayer Rights—In discharging his duties, the Commissioner shall ensure that employees of the Internal Revenue Service are familiar with and act in accord with taxpayer rights as afforded by other provisions of this title, including—

“(A) the right to be informed,

“(B) the right to be assisted,

“(C) the right to be heard,

“(D) the right to pay no more than the correct amount of tax,

“(E) the right of appeal,

“(F) the right to certainty,

“(G) the right to privacy,

“(H) the right to confidentiality,

“(I) the right to representation, and

“(J) the right to a fair and just tax system.”

Sec. 6006 Termination of employment of IRS employees for taking official actions for political purposes

Paragraph (10) of section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 is amended to read as follows:

“(10) performing, delaying, or failing to perform (or threatening to perform, delay, or fail to perform) any official action (including any audit) with respect to a taxpayer for purpose of extracting personal gain or benefit or for a political purpose.”

Sec. 6007 Release of information regarding the status of certain investigations

(a)
In general— Subsection (e) of section 6103 is amended by adding at the end the following new paragraph:

“(11) Disclosure of information regarding status of investigation of violation of this section—In the case of a person who provides to the Secretary information indicating a violation of section 7213, 7213A, or 7214 with respect to any return or return information of such person, the Secretary may disclose to such person (or such person’s designee)—

“(A) whether an investigation based on the person’s provision of such information has been initiated and whether it is open or closed,

“(B) whether any such investigation substantiated such a violation by any individual, and

“(C) whether any action has been taken with respect to such individual (including whether a referral has been made for prosecution of such individual).”

(b)
Effective date— The amendment made by this section shall take effect on the date of the enactment of this Act.

Sec. 6008 Review of IRS examination selection procedures

(a)
In general— The Comptroller General of the United States shall conduct a study of each Internal Revenue Service operating division to assess the process used for determining how enforcement cases are selected and processed. Such study shall include a review of the following:
(1)
The standards each such operating division has established for enforcement case selection (including any automated or discretionary selection processes) and case work, and whether such standards meet the objectives of impartiality, objectivity, compliance, and minimizing taxpayer burden.
(2)
The extent to which any cases are initiated by referrals or complaints from inside or outside of the operating division (including from outside of the Internal Revenue Service).
(3)
The Internal Revenue Service controls (including management reviews and regular updates) for assuring that its standards for enforcement cases (and handling of referrals and complaints) in each operating division are sufficient for achieving the objectives described in paragraph (1).
(4)
The Internal Revenue Service controls (including training, monitoring, and quality assessments) for assuring that its standards are adhered to by all division personnel and the effectiveness of such controls.
(5)
Whether the existing standards and controls provide reasonable assurance that each division’s enforcement processes meet the Internal Revenue Service objectives of impartiality, objectivity, compliance, and minimizing taxpayer burden.
(b)
Initial report— Not later than 1 year after the date of the enactment of this section, the Comptroller General shall submit to the Committee on Ways and Means of the House of Representatives, the Committee on Finance of the Senate, and the Secretary of the Treasury a report on the results of such study. Such report shall include such recommendations as the Comptroller General may deem advisable.
(c)
Follow-Up on recommendations— Not later than 180 days after a report is submitted with respect to an operating division under subsection (b), the Comptroller General shall conduct a follow-up study, and submit to the Committee on Ways and Means of the House of Representatives, the Committee on Finance of the Senate, and the Secretary of the Treasury a report, on whether any recommendations to improve case selection and case work processes have been implemented and are working as intended.
(d)
Continuing case management studies and reports—
(1)
In general— After a report is submitted under subsection (b), the Comptroller General shall conduct follow-up studies and reports in the same manner as provided in subsections (a) and (b) with respect to each operating division of the Internal Revenue Service and shall include in such study and report a review of whether any previous recommendations to improve case selection and case work processes have been implemented and are working as intended.
(2)
Frequency— Each such report with respect to an operating division shall be submitted not later than 4 years after the date the most recent report was submitted with respect to such operating division under subsection (b) or this subsection. The Comptroller General shall submit no fewer than 1 such report each year.

Sec. 6009 IRS employees prohibited from using personal email accounts for official business

No officer or employee of the Internal Revenue Service may use a personal email account to conduct any official business of the Government.

Sec. 6010 Moratorium on IRS conferences

The Internal Revenue Service shall not hold any conference until the Treasury Inspector General for Tax Administration submits a report to Congress—
(1)
certifying that the Internal Revenue Service has implemented all of the recommendations set out in such Inspector General’s report titled Review of the August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California, and
(2)
describing such implementation.

Sec. 6011 Applicable standard for determinations of whether an organization is operated exclusively for the promotion of social welfare

(a)
In general— The standard and definitions as in effect on January 1, 2010, which are used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code of 1986 shall apply for purposes of determining the status of organizations under section 501(c)(4) of the Internal Revenue Code of 1986 after the date of the enactment of this Act.
(b)
Prohibition on modification of standard— The Secretary of the Treasury may not (nor may any delegate of such Secretary) issue, revise, or finalize any regulation (including the proposed regulations published at 78 Fed. Reg. 71535 (November 29, 2013)), revenue ruling, or other guidance not limited to a particular taxpayer relating to the standard and definitions specified in subsection (a).
(c)
Application to organizations— Except as provided in subsection (d), this section shall apply with respect to any organization claiming tax exempt status under section 501(c)(4) of the Internal Revenue Code of 1986 which was created on, before, or after the date of the enactment of this Act.
(d)
Sunset— This section shall not apply after the one-year period beginning on the date of the enactment of this Act.

B Taxpayer Protection and Service Reforms

Sec. 6101 Extension of IRS authority to require truncated Social Security numbers on Form W–2

(a)
In general— Paragraph (2) of section 6051(a) is amended by striking “his social security number” and inserting “an identifying number for the employee”.
(b)
Effective date— The amendment made by this section shall take effect on the date of the enactment of this Act.

Sec. 6102 Free electronic filing

(a)
In general— The Secretary of the Treasury shall, in cooperation with the private sector technology industry, maintain a program that provides free individual income tax preparation and electronic filing services to low-income taxpayers and elderly taxpayers.
(b)
Requirements of program— The Secretary shall by regulation or other guidance prescribe with respect to the program—
(1)
the qualifications, selection process, and contract term for businesses participating in the program,
(2)
a process for periodic review of businesses participating in the program,
(3)
procedures for terminating business participation in the program for failure to comply with any program requirements, and
(4)
such other procedures as the Secretary determines are necessary or appropriate to carry out the purposes of the program.
(c)
Free File program— The Internal Revenue Service Free File program, as set forth in the notice published in the Federal Register on November 4, 2002 (67 Fed. Reg. 67247), shall be treated as meeting the requirements of subsection (a).

Sec. 6103 Pre-populated returns prohibited

Except to the extent provided in section 6014, 6020, or 6201(d) of the Internal Revenue Code of 1986, the Secretary of the Treasury shall not provide to any person a proposed final return or statement for use by such person to satisfy a filing or reporting requirement under such Code.

Sec. 6104 Form 1040SR for seniors

(a)
In general— The Secretary of the Treasury (or the Secretary’s delegate) shall make available a form, to be known as “Form 1040SR”, for use by individuals to file the return of tax imposed by chapter 1 of the Internal Revenue Code of 1986. Such form shall be as similar as practicable to Form 1040EZ, except that—
(1)
the form shall be available to individuals who have attained age 65 as of the close of the taxable year,
(2)
the form may be used even if income for the taxable year includes—
(A)
social security benefits (as defined in section 86(d) of the Internal Revenue Code of 1986),
(B)
distributions from qualified retirement plans (as defined in section 4974(c) of such Code), annuities or other such deferred payment arrangements,
(C)
interest and dividends, or
(D)
capital gains and losses taken into account in determining the deduction for adjusted net capital gain under section 169 of such Code, and
(3)
the form shall be available without regard to the amount of any item of taxable income or the total amount of taxable income for the taxable year.
(b)
Effective date— The form required by subsection (a) shall be made available for taxable years beginning after December 31, 2014.

Sec. 6105 Increased refund and credit threshold for Joint Committee on Taxation review of C corporation return

(a)
In general— Subsections (a) and (b) of section 6405 are each amended by inserting “($5,000,000 in the case of a C corporation)” after “$2,000,000”.
(b)
Effective date— The amendment made by this section shall take effect on the date of the enactment of this Act, except that such amendment shall not apply with respect to any refund or credit with respect to a report that has been made before such date under section 6405 of the Internal Revenue Code of 1986.

C Tax return due date simplification

Sec. 6201 Due dates for returns of partnerships, S corporations, and C corporations

(a)
Partnerships and S corporations—
(1)
In general— So much of subsection (b) of 6072 as precedes the second sentence thereof is amended to read as follows:

“(b) Returns of partnerships and S corporations—Returns of partnerships under section 6031 and returns of S corporations under sections 6012 and 6037 made on the basis of the calendar year shall be filed on or before the 15th day of March following the close of the calendar year, and such returns made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year.”

(2)
Conforming amendment— Section 6072(a) is amended by striking “6017, or 6031” and inserting “or 6017”.
(b)
Conforming amendments relating to C corporation due date of 15th day of fourth month following taxable year—
(1)
Section 170(a)(3)(B), as redesignated by the preceding provisions of this Act, is amended by striking “third month” and inserting “fourth month”.
(2)
Section 563 is amended by striking “third month” each place it appears and inserting “fourth month”.
(3)
Section 1354(d)(1)(B)(i) is amended by striking “3d month” and inserting “4th month”.
(4)
Subsection (a) and (c) of section 6167 are each amended by striking “third month” and inserting “fourth month”.
(5)
Section 6425(a)(1) is amended by striking “third month” and inserting “fourth month”.
(6)
Subsections (b)(2)(A), (g)(3), and (h)(1) of section 6655 are each amended by striking “3rd month” and inserting “4th month”.
(c)
Effective dates—
(1)
In general— Except as provided in paragraph (2), the amendments made by this section shall apply to returns for taxable years beginning after December 31, 2014.
(2)
Special rule for c corporations with fiscal years ending on June 30— In the case of any C corporation with a fiscal year ending on June 30, the amendments made by this section shall not apply to any taxable year beginning in 2022.

Sec. 6202 Modification of due dates by regulation

In the case of returns for taxable years beginning after December 31, 2014, the Secretary of the Treasury, or the Secretary's designee, shall modify appropriate regulations to provide as follows:
(1)
The maximum extension for the returns of partnerships filing Form 1065 shall be a 6-month period ending on September 15 for calendar year taxpayers.
(2)
The maximum extension for the returns of trusts filing Form 1041 shall be a 5½-month period ending on September 30 for calendar year taxpayers.
(3)
The maximum extension for the returns of employee benefit plans filing Form 5500 shall be an automatic 3½-month period ending on November 15 for calendar year plans.
(4)
The maximum extension for the returns of organizations exempt from income tax filing Form 990 shall be an automatic 6-month period ending on November 15 for calendar year filers.
(5)
The due date of Form 3520–A (relating to the Annual Information Return of Foreign Trust with a United States Owner) for calendar year filers shall be April 15 with a maximum extension for a 6-month period ending on October 15.
(6)
The due date of Form TD F 90–22.1 (relating to Report of Foreign Bank and Financial Accounts) shall be April 15 with a maximum extension for a 6-month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081–5. For any taxpayer required to file such Form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.

Sec. 6203 Corporations permitted statutory automatic 6-month extension of income tax returns

(a)
In general— Section 6081(b) is amended by striking “3 months” and inserting “6 months”.
(b)
Effective date— The amendments made by this section shall apply to returns for taxable years beginning after December 31, 2014.

D Compliance Reforms

Sec. 6301 Penalty for failure to file

(a)
In general— Section 6651(a) is amended by striking “$135” in the flush material at the end and inserting “$400”.
(b)
Effective date— The amendments made by this section shall apply to returns the due date for the filing of which (including extension) is after December 31, 2014.

Sec. 6302 Penalty for failure to file correct information returns and provide payee statements

(a)
In general— Section 6721(a)(1) is amended—
(1)
by striking “$100” and inserting “$250”, and
(2)
by striking “$1,500,000” and inserting “$3,000,000”.
(b)
Reduction where correction in specified period—
(1)
Correction within 30 days— Section 6721(b)(1) is amended—
(A)
by striking “$30” and inserting “$50”,
(B)
by striking “$100” and inserting “$250”, and
(C)
by striking “$250,000” and inserting “$500,000”.
(2)
Failures corrected on or before August 1— Section 6721(b)(2) is amended—
(A)
by striking “$60” and inserting “$100”,
(B)
by striking “$100” (prior to amendment by subparagraph (A)) and inserting “$250”, and
(C)
by striking “$500,000” and inserting “$1,500,000”.
(c)
Lower limitation for persons with gross receipts of not more than $5,000,000— Section 6721(d)(1) is amended—
(1)
in subparagraph (A)—
(A)
by striking “$500,000” and inserting “$1,000,000”, and
(B)
by striking “$1,500,000” and inserting “$3,000,000”,
(2)
in subparagraph (B)—
(A)
by striking “$75,000” and inserting “$175,000”, and
(B)
by striking “$250,000” and inserting “$500,000”, and
(3)
in subparagraph (C)—
(A)
by striking “$200,000” and inserting “$500,000”, and
(B)
by striking “$500,000” (prior to amendment by subparagraph (A)) and inserting “$1,500,000”.
(d)
Penalty in case of intentional disregard— Section 6721(e) is amended—
(1)
by striking “$250” in paragraph (2) and inserting “$500”, and
(2)
by striking “$1,500,000” in paragraph (3)(A) and inserting “$3,000,000”.
(e)
Failure To furnish correct payee statements—
(1)
In general— Section 6722(a)(1) is amended—
(A)
by striking “$100” and inserting “$250”, and
(B)
by striking “$1,500,000” and inserting “$3,000,000”.
(2)
Reduction where correction in specified period—
(A)
Correction within 30 days— Section 6722(b)(1) is amended—
(i)
by striking “$30” and inserting “$50”,
(ii)
by striking “$100” and inserting “$250”, and
(iii)
by striking “$250,000” and inserting “$500,000”.
(B)
Failures corrected on or before August 1— Section 6722(b)(2) is amended—
(i)
by striking “$60” and inserting “$100”,
(ii)
by striking “$100” (prior to amendment by clause (i)) and inserting “$250”, and
(iii)
by striking “$500,000” and inserting “$1,500,000”.
(3)
Lower limitation for persons with gross receipts of not more than $5,000,000— Section 6722(d)(1) is amended—
(A)
in subparagraph (A)—
(i)
by striking “$500,000” and inserting “$1,000,000”, and
(ii)
by striking “$1,500,000” and inserting “$3,000,000”,
(B)
in subparagraph (B)—
(i)
by striking “$75,000” and inserting “$175,000”, and
(ii)
by striking “$250,000” and inserting “$500,000”, and
(C)
in subparagraph (C)—
(i)
by striking “$200,000” and inserting “$500,000”, and
(ii)
by striking “$500,000” (prior to amendment by subparagraph (A)) and inserting “$1,500,000”.
(4)
Penalty in case of intentional disregard— Section 6722(e) is amended—
(A)
by striking “$250” in paragraph (2) and inserting “$500”, and
(B)
by striking “$1,500,000” in paragraph (3)(A) and inserting “$3,000,000”.
(f)
Effective date— The amendments made by this section shall apply with respect to returns and statements required to be filed after December 31, 2014.

Sec. 6303 Clarification of 6-year statute of limitations in case of overstatement of basis

(a)
In general— Subparagraph (B) of section 6501(e)(1) is amended—
(1)
by striking “and” at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause:

“(ii) An understatement of gross income by reason of an overstatement of unrecovered cost or other basis is an omission from gross income; and”

(2)
by inserting “(other than in the case of an overstatement of unrecovered cost or other basis)” in clause (iii) (as so redesignated) after “In determining the amount omitted from gross income”.
(b)
Effective date— The amendments made by this section shall apply to—
(1)
returns filed after the date of the enactment of this Act, and
(2)
returns filed on or before such date if the period specified in section 6501 of the Internal Revenue Code of 1986 (determined without regard to such amendments) for assessment of the taxes with respect to which such return relates has not expired as of such date.

Sec. 6304 Reform of rules related to qualified tax collection contracts

(a)
Requirement To collect certain inactive tax receivables under qualified tax collection contracts— Section 6306 is amended by redesignating subsections (c) through (f) as subsections (d) through (g), respectively, and by inserting after subsection (b) the following new subsection:

“(c) Collection of inactive tax receivables

“(1) In general—Notwithstanding any other provision of law, the Secretary shall enter into one or more qualified tax collection contracts for the collection of all outstanding inactive tax receivables.

“(2) Inactive tax receivables—For purposes of this section—

“(A) In general—The term “inactive tax receivable” means any tax receivable if—

“(i) at any time after assessment, the Internal Revenue Service removes such receivable from the active inventory for lack of resources or inability to locate the taxpayer,

“(ii) more than 1/3 of the period of the applicable statute of limitation has lapsed and no employee of the Internal Revenue Service has been assigned such receivable for collection, or

“(iii) in the case of a receivable which has been assigned for collection, more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection of such receivable.

“(B) Tax receivable—The term “tax receivable” means any outstanding assessment which the Internal Revenue Service includes in potentially collectible inventory.”

(b)
Certain tax receivables not eligible for collection under qualified tax collection contracts— Section 6306, as amended by subsection (a), is amended by redesignating subsections (d) through (g) as subsections (e) through (h), respectively, and by inserting after subsection (c) the following new subsection:

“(d) Certain tax receivables not eligible for collection under qualified tax collections contracts—A tax receivable shall not be eligible for collection pursuant to a qualified tax collection contract if such receivable—

“(1) is subject to a pending or active offer-in-compromise or installment agreement,

“(2) is classified as an innocent spouse case,

“(3) involves a taxpayer identified by the Secretary as being—

“(A) deceased,

“(B) under the age of 18,

“(C) in a designated combat zone, or

“(D) a victim of identity theft,

“(4) is currently under examination, litigation, criminal investigation, or levy, or

“(5) is currently subject to a proper exercise of a right of appeal under this title.”

(c)
Contracting priority— Section 6306, as amended by the preceding provisions of this section, is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

“(h) Contracting priority—In contracting for the services of any person under this section, the Secretary shall give priority to private collection contractors and debt collection centers on the schedule required under section 3711(g) of title 31, United States Code, to the extent such private collection contractors and debt collection centers are appropriate to carry out the purposes of this section.”

(d)
Disclosure of return information— Section 6103(k) is amended by adding at the end the following new paragraph:

“(11) Qualified tax collection contractors—Persons providing services pursuant to a qualified tax collection contract under section 6306 may, if speaking to a person who has identified himself or herself as having the name of the taxpayer to which a tax receivable (within the meaning of such section) relates, identify themselves as contractors of the Internal Revenue Service and disclose the business name of the contractor, and the nature, subject, and reason for the contact. Disclosures under this paragraph shall be made only in such situations and under such conditions as have been approved by the Secretary.”

(e)
Taxpayers affected by federally declared disasters— Section 6306, as amended by the preceding provisions of this section, is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

“(i) Taxpayers in Presidentially declared disaster areas—The Secretary may prescribe procedures under which a taxpayer determined to be affected by a federally declared disaster (as defined by section 165(i)(5)) may request—

“(1) relief from immediate collection measures by contractors under this section, and

“(2) a return of the inactive tax receivable to the Internal Revenue Service for collection.”

(f)
Report to Congress—
(1)
In general— Section 6306, as amended by the preceding provisions of this section, is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection:

“(j) Report to Congress—Not later than 90 days after each fiscal year ending on September 30, the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report with respect to qualified tax collection contracts under this section which shall include—

“(1) annually (with respect to each such fiscal year beginning with the first such fiscal year ending after the date of the enactment of this subsection)—

“(A) the total number and amount of tax receivables provided to each contractor for collection under this section,

“(B) the total amounts collected (and amounts of installment agreements entered into under subsection (b)(1)(B)) with respect to each contractor and the collection costs incurred (directly and indirectly) by the Internal Revenue Service with respect to such amounts,

“(C) the impact of such contracts on the total number and amount of unpaid assessments, and on the number and amount of assessments collected by Internal Revenue Service personnel after initial contact by a contractor,

“(D) the amount of fees retained by the Secretary under subsection (e) and a description of the use of such funds, and

“(E) a disclosure safeguard report in a form similar to that required under section 6103(p)(5), and

“(2) biannually (beginning with the second report submitted under this subsection)—

“(A) an independent evaluation of contractor performance; and

“(B) a measurement plan that includes a comparison of the best practices used by the private collectors to the collection techniques used by the Internal Revenue Service and mechanisms to identify and capture information on successful collection techniques used by the contractors that could be adopted by the Internal Revenue Service.”

(2)
Repeal of existing reporting requirements with respect to qualified tax collection contracts— Section 881 of the American Jobs Creation Act of 2004 is amended by striking subsection (e).
(g)
Effective dates—
(1)
In general— The amendments made by subsections (a) and (b) shall apply to tax receivables identified by the Secretary after the date of the enactment of this Act.
(2)
Contracting priority— The amendments made by subsection (c) shall apply to contracts and agreements entered into after the date of the enactment of this Act.
(3)
Disclosures— The amendments made by subsection (d) shall apply to disclosures made after the date of the enactment of this Act.
(4)
Procedures; Report to Congress— The amendments made by subsections (e) and (f) shall take effect on the date of the enactment of this Act.

Sec. 6305 100 percent continuous levy on payments to Medicare providers and suppliers

(a)
In general— Paragraph (3) of section 6331(h) is amended by striking the period at the end and inserting “, or to a Medicare provider or supplier under title XVIII of the Social Security Act.”.
(b)
Effective date— The amendment made by this section shall apply to levies issued after the date of the enactment of this Act.

Sec. 6306 Treatment of refundable credits for purposes of certain penalties

(a)
Application of underpayment penalties— Section 6664(a) is amended by adding at the end the following: “A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.”.
(b)
Penalty for erroneous claim of credit made applicable to earned income credit— Section 6676(a) is amended by striking “(other than a claim for a refund or credit relating to the earned income credit under section 32)”.
(c)
Effective dates—
(1)
Underpayment penalties— The amendment made by subsection (a) shall apply to—
(A)
returns filed after February 26, 2014, and
(B)
returns filed on or before such date if the period specified in section 6501 of the Internal Revenue Code of 1986 for assessment of the taxes with respect to which such return relates has not expired as of such date.
(2)
Penalty for erroneous claim of credit— The amendment made by subsection (b) shall apply to claims filed after February 26, 2014.