Eliminating Improper and Abusive IRS Audits Act of 2014
A BILL
To protect taxpayers from improper audits by the Internal Revenue Service.
2. Civil damages allowed for reckless or intentional disregard of internal revenue laws
Increase in amount of damages— Section 7433(b) of the Internal Revenue Code of 1986 is amended by striking “$1,000,000 ($100,000, in the case of negligence)” and inserting “$3,000,000 ($300,000, in the case of negligence)”.
Extension of time To bring action— Section 7433(d)(3) of the Internal Revenue Code of 1986 is amended by striking “2 years” and inserting “5 years”.
Effective date— The amendments made by this section shall apply to actions of employees of the Internal Revenue Service after the date of the enactment of this Act.
3. Modifications relating to certain offenses by officers and employees in connection with revenue laws
4. Modifications relating to civil damages for unauthorized inspection or disclosure of returns and return information
Increase in amount of damages— Subparagraph (A) of section 7431(c)(1) of the Internal Revenue Code of 1986 is amended by striking “$1,000” and inserting “$10,000”.
Effective date— The amendment made by this section shall apply to inspections and disclosure occurring on and after the date of the enactment of this Act.
5. Extension of time for contesting IRS levy
Extension of time for return of property subject to levy— Subsection (b) of section 6343 of the Internal Revenue Code of 1986 is amended by striking “9 months” and inserting “3 years”.
Period of limitation on suits— Subsection (c) of section 6532 of the Internal Revenue Code of 1986 is amended—
in paragraph (1) by striking “9 months” and inserting ‘‘3 years”, and
in paragraph (2) by striking “9-month” and inserting “3-year”.
Effective date— The amendments made by this section shall apply to—
levies made after the date of the enactment of this Act, and
levies made on or before such date if the 9-month period has not expired under section 6343(b) of the Internal Revenue Code of 1986 (without regard to this section) as of such date.
6. Increase in monetary penalties for certain unauthorized disclosures of information
In general— Paragraphs (1), (2), (3), and (4) of section 7213(a) of the Internal Revenue Code of 1986 are each amended by striking “$5,000” and inserting “$10,000”.
Effective date— The amendments made by this section shall apply to disclosures made after the date of the enactment of this Act.
7. Ban on raising new issues on appeal
In general— Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“7529. Prohibition on Internal Revenue Service raising new issues in an internal appeal
“(a) In general—In reviewing an appeal of any determination initially made by the Internal Revenue Service, the Internal Revenue Service Office of Appeals may not consider or decide any issue that is not within the scope of the initial determination.
“(b) Certain issues deemed outside of scope of determination—For purposes of subsection (a), the following matters shall be considered to be not within the scope of a determination:
“(1) Any issue that was not raised in a notice of deficiency or an examiner's report which is the subject of the appeal.
“(2) Any deficiency in tax which was not included in the initial determination.
“(3) Any theory or justification for a tax deficiency which was not considered in the initial determination.
“(c) No inference with respect to issues raised by taxpayers—Nothing in this section shall be construed to provide any limitation in addition to any limitations in effect on the date of the enactment of this section on the right of a taxpayer to raise an issue, theory, or justification on an appeal from a determination initially made by the Internal Revenue Service that was not within the scope of the initial determination.”
Clerical amendment— The table of sections for chapter 77 of such Code is amended by adding at the end the following new item:
Effective date— The amendments made by this section shall apply to matters filed or pending with the Internal Revenue Service Office of Appeals on or after the date of the enactment of this Act.
8. Limitation on enforcement of liens against principal residences
by striking “In any case” and inserting the following:
“(1) In general—In any case”
by adding at the end the following new paragraph:
“(2) Limitation with respect to principal residence
“(A) In general—Paragraph (1) shall not apply to any property used as the principal residence of the taxpayer (within the meaning of section 121) unless the Secretary of the Treasury makes a written determination that—
“(i) all other property of the taxpayer, if sold, is insufficient to pay the tax or discharge the liability, and
“(ii) such action will not create an economic hardship for the taxpayer.
“(B) Delegation—For purposes of this paragraph, the Secretary of the Treasury may not delegate any responsibilities under subparagraph (A) to any person other than—
“(i) the Commissioner of Internal Revenue, or
“(ii) a district director or assistant district director of the Internal Revenue Service.”
Effective date— The amendments made by this section shall apply to actions filed after the date of the enactment of this Act.
9. Additional provisions relating to mandatory termination for misconduct
Termination of unemployment for inappropriate review of tax-Exempt status— Section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking “and” at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting “; and”, and by adding at the end the following new paragraph:
“(11) in the case of any review of an application for tax-exempt status by an organization described in section 501(c) of the Internal Revenue Code of 1986, developing or using any methodology that applies disproportionate scrutiny to any applicant based on the ideology expressed in the name or purpose of the organization.”
Mandatory unpaid administrative leave for misconduct— Paragraph (1) of Section 1203(c) 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 sentence: “Notwithstanding the preceding sentence, if the Commissioner of Internal Revenue takes a personnel action other than termination for an act or omission described in subsection (b), the Commissioner shall place the employee on unpaid administrative leave for a period of not less than 30 days.”.
Limitation on alternative punishment— Paragraph (1) of section 1203(c) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking “The Commissioner” and inserting “Except in the case of an act or omission described in subsection (b)(3)(A), the Commissioner”.
10. Extension of declaratory judgment procedures to social welfare organizations
In general— Section 7428(a)(1) of the Internal Revenue Code of 1986 is amended by striking “or” at the end of subparagraph (C) and by adding at the end 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”
Effective date— The amendments made by this section shall apply with respect to pleading filed after the date of the enactment of this Act.
11. Review by the Treasury Inspector General for Tax Administration
Review— Subsection (k)(1) of section 8D of the Inspector General Act of 1978 (5 U.S.C. App.) is amended—
in subparagraph (C), by striking “and” at the end;
by redesignating subparagraph (D) as subparagraph (E);
by inserting after subparagraph (C) the following new subparagraph:
“(D) shall—
“(i) review any criteria employed by the Internal Revenue Service to select tax returns (including applications for recognition of tax-exempt status) for examination or audit, assessment or collection of deficiencies, criminal investigation or referral, refunds for amounts paid, or any heightened scrutiny or review in order to determine whether the criteria discriminates against taxpayers on the basis of race, religion, or political ideology; and
“(ii) consult with the Internal Revenue Service on recommended amendments to such criteria in order to eliminate any discrimination identified pursuant to the review described in clause (i); and”
in subparagraph (E), as so redesignated, by striking “and (C)” and inserting “(C), and (D)”.
Semiannual Report— Subsection (g) of such section is amended by adding at the end the following new paragraph:
“(3) Any semiannual report made by the Treasury Inspector General for Tax Administration that is required pursuant to section 5(a) shall include—
“(A) a statement affirming that the Treasury Inspector General for Tax Administration has reviewed the criteria described in subsection (k)(1)(D) and consulted with the Internal Revenue Service regarding such criteria; and
“(B) a description and explanation of any such criteria that was identified as discriminatory by the Treasury Inspector General for Tax Administration.”