Section 1 Short title
This Act may be cited as the “Restoring the IRS Act”.
Restoring the IRS Act
A BILL
To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes.
Sec. 2 Sense of Congress
It is the sense of Congress that—
the Internal Revenue Service should be given resources to increase audits and enforcement of tax compliance of high-income, high-wealth individuals and corporations, with an emphasis on the auditing and enforcement of tax compliance by individuals with gross income of not less than $1,000,000 and of large corporations;
priorities for actions and resources to improve compliance with tax laws should be guided by the relative revenue loss from non-compliance;
the Internal Revenue Service should ensure there are not racial disparities in its enforcement activities;
it should be the goal of the Internal Revenue service that, by the tenth tax year after the date of the enactment of this Act, the net tax gap should be reduced by at least one-third, as compared with the fraction estimated in the most recently Internal Revenue Service study prior to such date of enactment; and
it should be the goal of the Internal Revenue Service to provide quality, timely, and accurate assistance to all taxpayers interacting with the Internal Revenue Service.
Sec. 3 Internal Revenue Service appropriations
In general— There is hereby appropriated to each fiscal year ending after fiscal year 2021, out of any moneys in the Treasury not otherwise appropriated, $31,500,000,000, for necessary expenses for activities of the Internal Revenue Service related to the following activities:
To provide taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer advocacy services, other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, and other related expenses, including the Tax Counseling for the Elderly Program, low-income taxpayer clinic grants, and the Taxpayer Advocate Service.
Tax enforcement activities to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles (31 U.S.C. 1343(b)), to increase audits of high-income taxpayers, and to provide other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner.
To support taxpayer services and enforcement programs and activities, including rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administration activities; research and statistics of income; telecommunications; information technology development and support, enhancement, operations, maintenance, and security; the hire of passenger motor vehicles (31 U.S.C. 1343(b)); the operations of the Internal Revenue Service Oversight Board; and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner.
For the business systems modernization program for the capital asset acquisition of information technology systems, including management and related contractual costs of said acquisitions, including related Internal Revenue Service labor costs, and contractual costs associated with operations authorized by 5 U.S.C. 3109.
Inflation adjustment—
In general— In the case of any fiscal year beginning after fiscal year 2022, the dollar amount in subsection (a) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code of 1986 for the calendar year in which such fiscal year begins by substituting “calendar year 2021” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Rounding— Any increase determined under paragraph (1) shall be rounded to the nearest multiple of $100.
Limitation— Of the amounts appropriated under subsection (a)—
not less than 50 percent of funds made available for any fiscal year shall be used for purposes described in subsection (a)(2) (or for activities described in subsection (a)(3) that are related to activities described in subsection (a)(2); and
not less than 15 percent of funds made available for any fiscal year shall be used for purposes described in subsection (a)(1).
Administrative provisions— None of the funds made available in this section may be used to enter into, renew, extend, administer, implement, or enforce any qualified tax collection contract (as defined in section 6306 of the Internal Revenue Code of 1986).
Sec. 4 Returns relating to certain business transactions
In general—
Return requirement— Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“6050Z. Returns relating to account transactions
“(a) Requirement of reporting—Any covered financial institution shall make the information return described in subsection (b) at such time as the Secretary may by regulations prescribe.
“(b) Return—A return is described in this subsection if such return—
“(1) is in such form as the Secretary may prescribe, and
“(2) contains, with respect to each account maintained by the covered financial institution—
“(A) the name, address, and TIN of the person on whose behalf the account is maintained,
“(B) the monthly gross inflows and outflows with respect to such account,
“(C) in the case of an account that is not related to a trade or business, the amount of such inflows and outflows that are related to—
“(i) cash transactions,
“(ii) foreign transactions, and
“(iii) transfers to related accounts, and
“(D) such other information as the Secretary may require for tax administration and enforcement purposes.
“(c) Statement To be furnished to taxpayers with respect to whom information is required
“(1) In general—Every covered financial institution that is required to make a return under subsection (a) shall furnish to each person whose identity is required to be set forth in such return a written statement showing—
“(A) the name, address, and phone number of the information contact of the covered financial institution required to make such a return, and
“(B) the information required to be shown on such return with respect to such person.
“(2) Furnishing of information—The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.
“(d) Covered financial institution—For purposes of this section, the term covered financial institution means any financial institution (as determined under regulations provided by the Secretary) which maintains an account on behalf of another person.”
Regulations—
In general— Not later than 12 months after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary's delegate) shall issue regulations on information reporting required under section 6050Z of the Internal Revenue Code of 1986 (as added by paragraph (1)), including regulations specifying any other information required to be reported under such section for purposes of closing the tax gap (as defined in section 4(a)(2)).
Avoidance of additional burden— The regulations established under subparagraph (A) shall minimize additional reporting burdens on taxpayers.
Penalties—
Returns— Section 6724(d)(1)(B) of the Internal Revenue Code of 1986 is amended by striking “or” at the end of clause (xxv), by striking “and” at the end of clause (xxvi), and by inserting after clause (xxvi) the following new clause:
“(xxvii) section 6050Z (relating to information with respect to account transactions),”
Statements— Section 6724(d)(2) of such Code is amended—
by striking “or” at the end of subparagraph (II),
by striking the period at the end of the first subparagraph (JJ) (relating to section 6035) and inserting a comma,
by redesignating the second subparagraph (JJ) (relating to section 6050Y) as subparagraph (KK),
by striking the period at the end of subparagraph (KK) (as redesignated by subparagraph (C)) and inserting “, or”, and
by inserting after subparagraph (KK) (as so redesignated) the following new subparagraph:
“(LL) section 6050Z (relating to information with respect to account transactions).”
Clerical amendment— The table of sections for subpart B of part III of subchapter A of chapter 61 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 taxable years beginning after December 31, 2022.
Sec. 5 Reports to Congress
Not later than 1 year after the date of the enactment of this Act and annually thereafter, the Commissioner of the Internal Revenue Service, after consultation with the Comptroller General, shall submit to Congress a report containing the following:
Audit plan— A comprehensive description of—
a plan to—
shift more of the auditing and enforcement assets of the Internal Revenue Service toward high-income, high-wealth tax filers and corporations, and
recruit and retain auditors with the skills essential to audit high-income individuals, and
the progress made in implementing such plan.
Tax gap analysis—
In general— A comprehensive description of the tax gap, including—
the amount attributed to high-income, high-wealth tax filers and corporations, and
how other information reporting improvements could reduce the tax gap, including strengthened third-party reporting on ownership of C-corporations and ultimate ownership of partnerships.
Tax gap— For purposes of this paragraph, the term tax gap means, with respect to any tax year, the difference between—
the amount of taxes owed by taxpayers under the Internal Revenue Code of 1986 for such tax year, and
the amount of revenue paid voluntarily and timely by taxpayers under such Code for such tax year.
Racial disparities analysis— A comprehensive analysis and description of whether there exist any racial disparities in the Internal Revenue Service’s enforcement activities, including audits, based on gross income, including a comprehensive description of any plans the Internal Revenue Service has to address any such disparities in the coming fiscal year.
Sec. 6 Underpayment penalties increased for certain taxpayers
In general— Subsection (a) of section 6662 of the Internal Revenue Code of 1986 is amended to read as follows:
“(a) Imposition of penalty
“(1) In general—If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to the applicable percentage of the portion of the underpayment to which this section applies.
“(2) Applicable percentage—For purposes of paragraph (1), the term “applicable percentage” means—
“(A) in the case of a taxpayer with a taxable income of less than $2 million, 20 percent,
“(B) in the case of a taxpayer with a taxable income greater than $2 million but less than $5 million, 30 percent, and
“(C) in the case of a taxpayer with a taxable income greater than $5 million, 40 percent.”
Conforming amendments—
Gross valuation misstatements— Section 6662(h)(1) of such Code is amended by striking “with respect to such portion by substituting” and all that follows and inserting
“(A) by substituting “40 percent” for “20 percent” in paragraph (2)(A) thereof,
“(B) by substituting “45 percent” for “30 percent” in paragraph (2)(B) thereof, and
“(C) by substituting “50 percent” for “40 percent” in paragraph (2)(C) thereof.”
Nondisclosed noneconomic substance transactions— Section 6662(i)(1) of such Code is amended by striking “with respect to such portion by substituting” and all that follows and inserting
“(A) by substituting “40 percent” for “20 percent” in paragraph (2)(A) thereof,
“(B) by substituting “45 percent” for “30 percent” in paragraph (2)(B) thereof, and
“(C) by substituting “50 percent” for “40 percent” in paragraph (2)(C) thereof.”
Undisclosed foreign financial asset understatements— Section 6662(j)(3) of such Code is amended by striking “with respect to such portion by substituting” and all that follows and inserting
“(A) by substituting “40 percent” for “20 percent” in paragraph (2)(A) thereof,
“(B) by substituting “45 percent” for “30 percent” in paragraph (2)(B) thereof, and
“(C) by substituting “50 percent” for “40 percent” in paragraph (2)(C) thereof.”
Effective date— The amendments made by this section shall apply to returns on the due date which (determined without regard to extensions) is after December 31, 2022.
Sec. 7 Application of false claims rules to the tax claims
In general— Subsection (d) of section 3729 of title 31, United States Code is amended to read as follows:
“(d) Internal revenue code
“(1) General exclusion—Except as provided under paragraph (2), this section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986.
“(2) Exception—This section shall apply to any claims, records, or statements made under the Internal Revenue Code of 1986 if—
“(A) the gross income of the person making the claim equals or exceeds $10,000,000 for the taxable year with respect to which the claim is made; and
“(B) the damages sustained by the Government because of the act of the person exceed $1,000,000.”
Effective date— The amendments made by this section shall apply to claims, records, or statements made after the date of the enactment of this Act.