Taxpayer Bill of Rights 2.

• Author: Heck, Patrick

On July 11, 1996, Congress approved by unanimous consent H.R. 2337, the Taxpayer Bill of Rights 2, a package of provisions aimed at helping taxpayers in their dealings with the IRS. The bill was signed by President Clinton on July 30, 1996.

The new law will raise $196 million: $33 million to offset the revenue loss by allowing the Service to impose sanctions short of complete revocation of tax-exempt status on Sec. 501(c)(3) and 501(c)(4) organizations for certain violations, and $163 million by applying the failure-to-pay penalty to substitute returns filed by the IRS in the same manner as the penalty is applied to delinquent returns filed by taxpayers.

Specific provisions

[] Establishment of a taxpayer advocate within the Service: The bill establishes a new position of Taxpayer Advocate equal to that of the IRS Chief Counsel. The Advocate will make independent reports to Congress on problems encountered by taxpayers and recommendations for improvement of the tax system.

[] Expansion of authority to issue Taxpayer Assistance Orders (TAOs): The bill provides the new taxpayer advocate with broader authority to intervene and take affirmative action on behalf of taxpayers who would otherwise suffer significant hardship.

[] Modifications to installment agreement provisions: The IRS must provide taxpayers with notice before altering, modifying or terminating an installment agreement. The bill also requires the IRS to establish procedures for an independent administrative review of termination of an installment agreement for taxpayers who request such a review.

[] Expansion of authority to abate interest: The bill expands the interest abatement provisions by permitting the Service to abate interest from any unreasonable error or delay resulting from managerial acts as well as ministerial acts. This would include extensive delays resulting from the loss of records by the Service, IRS personnel transfers, extended illnesses, extended personnel training or extended leave. The bill also gives the Tax Court jurisdiction to determine whether the Service's failure to abate interest was an abuse of discretion.

[] Extension of interest-free period for payment of tax: The bill extends the interest-free period provided to taxpayers for the payment of the tax liability reflected in a deficiency notice from 10 days to 21 days, provided that the total tax liability shown on the notice is less than $100,000.

[] Abatement of penalty for failure to make required deposits of payroll taxes: The bill enumerates additional circumstances under which the penalty assessed against a taxpayer that...