To continue the pace of IRS reform, address growing privacy issues, and level the playing field between taxpayers and the IRS, lawmakers in Congress are considering the adoption of a Taxpayers Bill of Rights 2000.

The House Ways and Means Committee released on April 1, 2000, a summary of the plan, which Committee Chairman Bill Archer (R-Tex.) announced on that day’s radio address. The committee plans to markup the bill on April 5. Archer also has announced that the committee will hold a three-day congressional summit on fundamental tax reform starting April 11.

Specifically, the Taxpayer Bill of Rights 2000 would require that all states conduct annual on-site taxpayer information systems reviews to safeguard against illegal disclosures and computer hackers. Under the bill, each state would be required to submit a report of its findings to the IRS and certify annually that all contractors are in compliance with the requirements to safeguard the confidentiality of federal returns and return information.

The IRS would be required to immediately notify taxpayers if their information is obtained illegally by third parties.

In addition, the bill would generally prohibit an IRS employee, while conducting an examination of a taxpayer, from inspecting the taxpayer representative’s tax return information. It also would require the IRS to provide information on unauthorized disclosures or inspections of tax return information in its public annual report to the Joint Committee on Taxation.

Another measure in the bill would toughen existing requirements when taxpayers authorize lenders to access tax information, and requires lenders "under the penalties of perjury" to verify a consent reform was complete and dated at the time it was signed by the taxpayer.

The plan also would require all third parties receiving tax information to ensure that information will be kept confidential. Many authorizations today are undated and incomplete, which gives lenders wide latitude to access information for purposes other than the taxpayer intended, according to a committee release.

Also, the bill would make it easier for "innocent spouses" to get tax information about joint returns by allowing oral, rather than written, requests for the information. The IRS Restructuring and Reform Act of 1998 provided many new protections for "innocent spouses" who were left with their former spouse’s tax bill as a result of filing a joint return.

Under current law, very little interest is ever waived by the IRS, said the committee, noting that the plan would allow interest on past-due taxes to be waived if the IRS made a mistake or caused an unreasonable delay. Interest would also be waived if the taxpayer relied on written advice from the IRS. Taxpayers currently cannot deduct interest payments made to the IRS, but must pay tax on any interest received from the IRS, said the committee, noting that the plan mandates that no tax would be charged on IRS payments to individuals.

In addition, the bill would:

1. Allow the IRS to use any means of "mass communication," including the Internet, to notify the taxpayer of an undelivered refund. Currently, if checks are returned to the IRS undelivered, the IRS process of notification is through advertisements in newspapers.
   
2. Allow taxpayers in a dispute with the IRS to limit their exposure to underpayment interest through the use of a dispute reserve account. Amounts deposited in a dispute reserve account could either be withdrawn with interest or used to offset an underpayment of tax.
   
3. Repeal the present-law penalty for failure to pay tax so taxpayers who are unable to pay their taxes on time would only be subject to an interest charge.
   
4. Give taxpayers a four-month period to enter into an installment agreement without a late payment service charge.
   
5. Simplify the calculation of estimated tax by providing for one interest rate per underpayment period.
   
6. Convert the present-law penalty for failure to pay estimated tax into an interest charge, increase the threshold for underpayment of estimated tax from $1,000 to $2,000, and allow both tax withheld and estimated tax paid equally throughout the year to be considered in determining whether the threshold has been met.
   
7. Provide that a tax-exempt organization would be deemed to have exhausted its administrative remedies under the declaratory judgment procedures contained in section 7428 at the expiration of 270 days after the date on which the request for a written determination was made or, if earlier, 180 days after such request for written determination was received in the IRS National Office.
   
8. Strengthen the present-law requirement that the Treasury Inspector General for Tax Administration include a summary of allegations of employee misconduct in its semi-annual report.
   
9. Direct the Treasury Inspector General for Tax Administration to submit to Congress annually a report on awards of costs and certain fees (such as attorneys? fees) in administrative and court proceedings.
   
10. Require the Treasury Inspector General for Tax Administration to submit to Congress no later than 18 months after the date of enactment a report evaluating whether technological advances, such as e-mail and facsimile transmission, permit the use of alternative means for the IRS to communicate with taxpayers.

Archer also announced that the committee plans to hold a three-day congressional summit on tax reform, beginning on April 11. "We’ll look at new ideas to eliminate the current tax code and replace it with something that is more simple and fair," he said during an April 1 radio address. Archer noted that the committee will look at the national sales tax and the flat tax, among other options.

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