The House Ways and Means Committee advanced two tax administration bills Wednesday evening aimed at improving the taxpayer experience. One bill calls for an about-face on a recent U.S. Supreme Court ruling on Tax Court jurisdiction, while the other concerns IRS information requests to third parties. The committee also advanced a bill to exempt certain “less-than-lethal” devices from excise tax.
Taxpayer Due Process Enhancement Act
After a lengthy markup of other measures on December 10, Ways and Means quickly approved the Taxpayer Due Process Enhancement Act, H.R. 6506, with a 41-0 vote. The bill takes up a recent Supreme Court decision on Tax Court jurisdiction, Commissioner v. Zuch. The Supreme Court ruled in Zuch that when the IRS decides to no longer pursue a levy, the Tax Court lacks jurisdiction over a case. The bill would reverse course and instead provide that the Tax Court retains jurisdiction over both the hearing determination and the liability amount, whether or not the IRS abandons a lien or proposed levy.
The bill, headed up by Representatives Nathanial Moran (R-TX) and Terri Sewell (D-AL), also would address another “unfair” result in Zuch, by prohibiting the IRS from crediting any overpayments made by the taxpayer for other taxes or tax periods against the liability in dispute until the collection due process hearing concludes and no appeal rights remain. Under current law, explained Ways and Means Chair Jason Smith (R-MO), “the IRS can wipe their tax liability and avoid judicial review.”
Finally, the bill “pauses the refund clock during disputes,” said Moran. Specifically, it would suspend the limitations period for taxpayers that request a collection due process hearing, in certain instances. Moran explained that currently, taxpayers may lose “the ability to file for a refund of the disputed tax if the Tax Court proceeding last longer than three years and the taxpayer has not pursued all of their administrative remedies during the pendency of that Tax Court proceeding.”
Under the bill, suspension would be available for tax credit or refund claims disputed during the hearing. “We do not want procedural technicalities to lead to unjust rulings against the taxpayer in disputes with the IRS,” added Moran.
Taxpayer Notification and Privacy Act
The committee next sailed through consideration of the Taxpayer Notification and Privacy Act, H.R. 6495, again voting 41-0. The bill, led by Representatives Greg Steube (R-FL) and Jimmy Panetta (D-CA), sets forth requirements for IRS notices to taxpayers when the agency plans to request information from a third party.
The bill reflects a National Taxpayer Advocate recommendation, Smith explained. And requests to third parties are “not simply a routine administrative step,” Smith added – rather these have “the potential to affect livelihoods, reputations, and business relationships.” Panetta, too, noted that “any type of notice from the IRS can chill business dealings and, yes, even damage livelihoods.”
Under the bill, the IRS would need to “identify each specific item of information it intends to seek from third parties” and “giv[e] the taxpayer a real window to respond,” said Steube. Notice to a taxpayer generally would need to be provided 45 days before the IRS requests information from third parties.
Steube noted that the bill, however, “is not designed to let bad actors hide the ball.” For that reason, Steube added, the new notice provisions would not apply “if the information is sought with respect to the collection of a tax liability or if the Secretary determines the information is necessary.”
Innovate Less Lethal to De-Escalate Tax Modernization Act
The Innovate Less Lethal to De-Escalate Tax Modernization Act, H.R. 4242, saw some opposition, but ultimately advanced 26-15. The bill, headed up by Representative David Schweikert (R-AZ), would exempt from the firearms and ammunition excise tax “less-than-lethal projectile devices” as well as devices on a Treasury list of non-lethal devices with projectiles exceeding 500 feet per second. It also would exclude certain shells and cartridges to be used in these devices from excise tax.
Schweikert explained that the goal of the bill is to make devices like TASERs more available to law enforcement. Representative Mike Thompson (D-CA) voiced his support Schweikert’s stated goal – but he had concerns that the bill does not properly accomplish that goal. According to Thompson, law enforcement doesn’t pay the excise tax for which this bill would create an exclusion.
Schweikert countered that while law enforcement does not pay the excise tax, “it’s often done through a refund mechanism, so the paperwork and the documentation of that still exists.” Joint Committee on Taxation’s Tom Barthold confirmed this, noting the Alcohol and Tobacco Tax and Trade Bureau form for use by state and local governments for firearms.
One Democrat – Representative Brendan Boyle (D-PA) – stepped up to voice support for the bill, which has a total of 16 Democrat co-sponsors. “I am sincerely interested in any bill that could incentivize law enforcement to have a greater use of TASERs,” said Boyle. But he encouraged his colleagues to work to “identify language that … gets us to where we want to be” – specifically, making it easier for law enforcement to use TASERs in place of guns while avoiding loopholes. An amendment to take on one such loophole, however, failed 17-23.
Take your tax and accounting research to the next level with Checkpoint Edge and CoCounsel. Get instant access to AI-assisted research, expert-approved answers, and cutting-edge tools like Advisory Maps and State Charts. Try it today and transform the way you work! Subscribe now and discover a smarter way to find answers.
