Section 1 Short title
This Act may be cited as the “Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly Act” or the “Stop CHEATERS Act”.
Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly Act
A BILL
To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes.
Sec. 2 Policy of Congress
It is the policy of Congress that—
tax compliance, to raise revenue for national needs, restore fairness, and protect the integrity of the tax system, high-income United States citizens and corporations should pay all of the taxes they owe,
tax compliance, as indicated by the fraction of taxes due that are reported and paid, should be comparable among groups of taxpayers regardless of the legal entity,
the Internal Revenue Service should be given resources to increase audits and enforcement of tax compliance of high-income individuals to reduce the tax gap, 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, and to modernize its technology in order to better serve taxpayers and enforce the tax laws,
pursuing non-filers is one of the most efficient enforcement strategies of the Internal Revenue Service because issuing non-filer notices can be a cost-effective tool that requires little more than automated notices,
priorities for actions and resources to improve compliance should be guided by the relative revenue loss from non-compliance,
it should be the goal of the Internal Revenue Service that, by the tenth tax year after the effective date of this statute, the net tax gap, as measured by the fraction of taxes that are due that are not reported and paid, should be reduced by at least one-third, as compared with the fraction estimated in the most recent Internal Revenue Service study prior to enactment of this statute, 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 Additional appropriations for the Internal Revenue Service
Enforcement—
In general— In addition to other amounts, there is appropriated the following amounts for necessary expenses to strengthen the enforcement capacity of the Internal Revenue Service by increasing audits annually to meet the audit goals described in paragraph (2):
For fiscal year 2022, $1,600,000,000.
For fiscal year 2023, $3,200,000,000.
For fiscal year 2024, $4,000,000,000.
For fiscal year 2025, $6,400,000,000.
For fiscal year 2026, $6,800,000,000.
For fiscal year 2027, $6,800,000,000.
For fiscal year 2028, $6,800,000,000.
For fiscal year 2029, $6,800,000,000.
For fiscal year 2030, $6,800,000,000.
For fiscal year 2031, $6,800,000,000.
Goals— The goals described in this subparagraph are to annually audit by 2025 and each year thereafter—
in the case of the income tax returns of individuals—
20 percent of such returns reporting an adjusted gross income of not less than $1,000,000 but less than $5,000,000;
33 percent of such returns reporting an adjusted gross income of not less than $5,000,000 but less than $10,000,000 and
50 percent of such returns reporting an adjusted gross income of not less than $10,000,000;
95 percent of the income tax returns of corporations reporting more than $20,000,000,000 in assets;
40 percent of the estate tax returns having a gross estate valued at more than $10,000,000;
1.2 percent of gift tax returns; and
0.22 percent of employment tax returns filed by employers with respect to the taxes imposed under chapters 21 or 22 of the Internal Revenue Code of 1986.
Taxpayer services— In addition to other amounts, there are appropriated the following amounts to provide taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer advocacy services, and services related to the reporting required under section 6050Z of the Internal Revenue Code of 1986 (as added by section 4):
For fiscal year 2022, $800,000,000.
For fiscal year 2023, $800,000,000.
For fiscal year 2024, $800,000,000.
For fiscal year 2025, $2,000,000,000.
For fiscal year 2026, $2,000,000,000.
For fiscal year 2027, $2,000,000,000.
For fiscal year 2028, $2,000,000,000.
For fiscal year 2029, $2,000,000,000.
For fiscal year 2030, $2,000,000,000.
For fiscal year 2031, $2,000,000,000.
Operations support— There are appropriated the following additional amounts for the “Department of the Treasury—Internal Revenue Service—Operations Support” account to overhaul outdated technology of the Internal Revenue Service and improve the capacity of the Internal Revenue Service to detect fraud related to income from a trade or business:
For fiscal year 2022, $800,000,000.
For fiscal year 2023, $800,000,000.
For fiscal year 2024, $800,000,000.
For fiscal year 2025, $800,000,000.
For fiscal year 2026, $800,000,000.
For fiscal year 2027, $800,000,000.
For fiscal year 2028, $800,000,000.
For fiscal year 2029, $800,000,000.
For fiscal year 2030, $800,000,000.
For fiscal year 2031, $800,000,000.
Availability— Each additional amount appropriated by this section shall remain available until expended.
Sec. 4 Returns relating to certain business transactions
In general— 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 certain transactions
“(a) Requirement of reporting—Any covered financial service provider 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 service provider—
“(A) the name, address, and TIN of the person on whose behalf the account is maintained,
“(B) a summary report of total deposits received and total withdrawals made in such account, and
“(C) such other information as the Secretary may require.
“(c) Statement To be furnished to taxpayers with respect to whom information is required
“(1) In general—Every covered financial service provider 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 service provider 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 service provider—For purposes of this section, the term covered financial service provider means any financial service provider (as determined under regulations provided by the Secretary) which maintains an account on behalf of another person.
“(e) Regulations and guidance—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section.”
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 certain 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 certain 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 calendar years beginning after December 31, 2021.
Sec. 5 Reports to Congress
Not later than 1 year after the date of the enactment of this Act and every 2 years thereafter, the Commissioner of the Internal Revenue Service, after consultation with the Comptroller General, shall submit to Congress a report containing—
a comprehensive description of—
a plan to—
shift more of the auditing and enforcement assets of the Internal Revenue Service toward high-income tax filers, and
recruit and retain auditors with the skills essential to audit high-income individuals, and
the progress made in implementing such plan,
an estimate of revenue loss from offshore tax evasion, and
information with respect to revenue loss due to such tax evasion, organized by groups of taxpayers arranged by the true income level of such taxpayers, as determined by the Secretary.
Sec. 6 IRS Enforcement 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, and
“(B) by substituting “40 percent” for “30 percent” in paragraph (2)(B) 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, and
“(B) by substituting “40 percent” for “30 percent” in paragraph (2)(B) 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, and
“(B) by substituting “40 percent” for “30 percent” in paragraph (2)(B) thereof.”
Effective date— The amendment made by this section shall apply to returns on the due date which (determined without regard to extensions) is after December 31, 2022.