[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2782 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 2782
To provide a taxpayer bill of rights for small businesses.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 9, 2025
Mr. Kustoff introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Oversight and Government Reform, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To provide a taxpayer bill of rights for small businesses.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business
Taxpayer Bill of Rights Act of 2025''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Modification of standards for awarding of costs and certain
fees.
Sec. 3. Civil damages allowed for reckless or intentional disregard of
internal revenue laws.
Sec. 4. Modifications relating to certain offenses by officers and
employees in connection with revenue laws.
Sec. 5. Modifications relating to civil damages for unauthorized
inspection or disclosure of returns and
return information.
Sec. 6. Ban on ex parte discussions.
Sec. 7. Right to independent conference.
Sec. 8. Alternative dispute resolution procedures.
Sec. 9. Increase in monetary penalties for certain unauthorized
disclosures of information.
Sec. 10. Ban on raising new issues on appeal.
Sec. 11. Limitation on enforcement of liens against principal
residences.
Sec. 12. Additional provisions relating to mandatory termination for
misconduct.
Sec. 13. Review by the Treasury Inspector General for Tax
Administration.
Sec. 14. Deduction for expenses relating to certain audits.
Sec. 15. Term limit for National Taxpayer Advocate.
Sec. 16. Release of IRS levy due to economic hardship for business
taxpayers.
Sec. 17. Repeal of partial payment requirement on submissions of
offers-in-compromise.
SEC. 2. MODIFICATION OF STANDARDS FOR AWARDING OF COSTS AND CERTAIN
FEES.
(a) Small Businesses Eligible Without Regard to Net Worth.--
Subparagraph (D) of section 7430(c)(4) of the Internal Revenue Code of
1986 is amended by striking ``and'' at the end of clause (i)(II), by
striking the period at the end of clause (ii) and inserting ``, and'',
and by adding at the end the following new clause:
``(iii) in the case of an eligible small
business, the net worth limitation in clause
(ii) of such section shall not apply.''.
(b) Eligible Small Business.--Paragraph (4) of section 7430(c) of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new subparagraph:
``(F) Eligible small business.--
``(i) In general.--For purposes of
subparagraph (D)(iii), the term `eligible small
business' means, with respect to any proceeding
commenced in a taxable year--
``(I) a corporation the stock of
which is not publicly traded,
``(II) a partnership, or
``(III) a sole proprietorship,
if the average annual gross receipts of such
corporation, partnership, or sole
proprietorship for the 3-taxable-year period
preceding such taxable year does not exceed
$50,000,000. For purposes of applying the test
under the preceding sentence, rules similar to
the rules of paragraphs (2) and (3) of section
448(c) shall apply.
``(ii) Adjustment for inflation.--In the
case of any calendar year after 2025, the
$50,000,000 amount in clause (i) shall be
increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for such calendar year,
determined by substituting `calendar
year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding
sentence is not a multiple of $500, such amount
shall be rounded to the next lowest multiple of
$500.''.
(c) Effective Date.--The amendments made by this section shall
apply to proceedings commenced after the date of the enactment of this
Act.
SEC. 3. CIVIL DAMAGES ALLOWED FOR RECKLESS OR INTENTIONAL DISREGARD OF
INTERNAL REVENUE LAWS.
(a) Increase in Amount of Damages.--
(1) In general.--Section 7433(b) of the Internal Revenue
Code of 1986 is amended by striking ``$1,000,000 ($100,000, in
the case of negligence)'' and inserting ``$5,000,000 ($500,000,
in the case of negligence)''.
(2) Adjustment for inflation.--Section 7433 of such Code is
amended by adding at the end the following new subsection:
``(f) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $5,000,000 and $500,000 amounts in subsection (b) shall
each be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2023' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $500, such amount shall be rounded to the next lowest
multiple of $500.''.
(b) Extension of Time To Bring Action.--Section 7433(d)(3) of the
Internal Revenue Code of 1986 is amended by striking ``2 years'' and
inserting ``5 years''.
(c) Effective Date.--The amendments made by this section shall
apply to actions of employees of the Internal Revenue Service after the
date of the enactment of this Act.
SEC. 4. MODIFICATIONS RELATING TO CERTAIN OFFENSES BY OFFICERS AND
EMPLOYEES IN CONNECTION WITH REVENUE LAWS.
(a) Increase in Penalty.--Section 7214 of the Internal Revenue Code
of 1986 is amended--
(1) by striking ``$10,000'' in subsection (a) and inserting
``$25,000'', and
(2) by striking ``$5,000'' in subsection (b) and inserting
``$10,000''.
(b) Adjustment for Inflation.--Section 7214 of the Internal Revenue
Code of 1986, as amended by subsection (a), is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b)
the following new subsection:
``(c) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $25,000 amount in subsection (a) and the $10,000 amount
in subsection (b) shall each be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $100, such amount shall be rounded to the next lowest
multiple of $100.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 5. MODIFICATIONS RELATING TO CIVIL DAMAGES FOR UNAUTHORIZED
INSPECTION OR DISCLOSURE OF RETURNS AND RETURN
INFORMATION.
(a) Increase in Amount of Damages.--Subparagraph (A) of section
7431(c)(1) of the Internal Revenue Code of 1986 is amended by striking
``$1,000'' and inserting ``$10,000''.
(b) Adjustment for Inflation.--Section 7431 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
subsection:
``(i) Adjustment for Inflation.--In the case of any calendar year
after 2025, the $10,000 amount in subsection (c)(1)(A) shall be
increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $100, such amount shall be rounded to the next lowest
multiple of $100.''.
(c) Period for Bringing Action.--Subsection (d) of section 7431 of
the Internal Revenue Code of 1986 is amended by striking ``2 years''
and inserting ``5 years''.
(d) Effective Date.--The amendment made by this section shall apply
to inspections and disclosure occurring on and after the date of the
enactment of this Act.
SEC. 6. BAN ON EX PARTE DISCUSSIONS.
(a) In General.--Notwithstanding section 1001(a)(4) of the Internal
Revenue Service Restructuring and Reform Act of 1998, the Internal
Revenue Service shall prohibit any ex parte communications between
officers in the Internal Revenue Service Independent Office of Appeals
and other Internal Revenue Service employees with respect to any matter
pending before such officers.
(b) Termination of Employment for Misconduct.--Subject to
subsection (c), the Commissioner of Internal Revenue shall terminate
the employment of any employee of the Internal Revenue Service if there
is a final administrative or judicial determination that such employee
committed any act or omission prohibited under subsection (a) in the
performance of the employee's official duties. Such termination shall
be a removal for cause on charges of misconduct.
(c) Determination of Commissioner.--
(1) In general.--The Commissioner of Internal Revenue may
take a personnel action other than termination for an act
prohibited under subsection (a).
(2) Discretion.--The exercise of authority under paragraph
(1) shall be at the sole discretion of the Commissioner of
Internal Revenue and may not be delegated to any other officer.
At the sole discretion of the Commissioner of Internal Revenue,
such Commissioner may establish a procedure which will be used
to determine whether an individual should be referred to the
Commissioner of Internal Revenue for a determination by the
Commissioner under paragraph (1).
(3) No appeal.--Any determination of the Commissioner of
Internal Revenue under this subsection may not be appealed in
any administrative or judicial proceeding.
(d) TIGTA Reporting of Termination or Mitigation.--Section
7803(d)(1)(E) of the Internal Revenue Code of 1986 is amended by
inserting ``or section 6 of the Small Business Taxpayer Bill of Rights
Act of 2025'' after ``1998''.
SEC. 7. RIGHT TO INDEPENDENT CONFERENCE.
Section 1001 of the Internal Revenue Service Restructuring and
Reform Act of 1998 is amended by redesignating subsection (c) as
subsection (d) and by inserting after subsection (b) the following new
subsection:
``(c) Right to Independent Conference.--Under the organization plan
of the Internal Revenue Service, a taxpayer shall have the right to a
conference with the Internal Revenue Service Independent Office of
Appeals which does not include personnel from the Office of Chief
Counsel for the Internal Revenue Service or the compliance functions of
the Internal Revenue Service unless the taxpayer specifically consents
to the participation of such personnel.''.
SEC. 8. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.
(a) In General.--Section 7123 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(d) Availability of Dispute Resolutions.--
``(1) In general.--The procedures prescribed under
subsection (b)(1) and the pilot program established under
subsection (b)(2) shall provide that a taxpayer may request
mediation or arbitration in any case unless the Secretary has
specifically excluded the type of issue involved in such case
or the class of cases to which such case belongs as not
appropriate for resolution under such subsection. The Secretary
shall make any determination that excludes a type of issue or a
class of cases public within 5 working days and provide an
explanation for each determination.
``(2) Independent mediators.--
``(A) In general.--The procedures prescribed under
subsection (b)(1) shall provide the taxpayer an
opportunity to elect to have the mediation conducted by
an independent, neutral individual not employed by the
Internal Revenue Service Independent Office of Appeals.
``(B) Cost and selection.--
``(i) In general.--Any taxpayer making an
election under subparagraph (A) shall be
required--
``(I) to share the costs of such
independent mediator equally with the
Internal Revenue Service Independent
Office of Appeals, and
``(II) to limit the selection of
the mediator to a roster of recognized
national or local neutral mediators.
``(ii) Exception.--Clause (i)(I) shall not
apply to any taxpayer who is an individual or
who was a small business in the preceding
calendar year if such taxpayer had an adjusted
gross income that did not exceed 250 percent of
the poverty level, as determined in accordance
with criteria established by the Director of
the Office of Management and Budget, in the
taxable year preceding the request.
``(iii) Small business.--For purposes of
clause (ii), the term `small business' has the
meaning given such term under section
41(b)(3)(D)(iii).
``(3) Availability of process.--The procedures prescribed
under subsection (b)(1) and the pilot program established under
subsection (b)(2) shall provide the opportunity to elect
mediation or arbitration at the time when the case is first
filed with the Internal Revenue Service Independent Office of
Appeals and at any time before deliberations in the appeal
commence.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 9. INCREASE IN MONETARY PENALTIES FOR CERTAIN UNAUTHORIZED
DISCLOSURES OF INFORMATION.
(a) In General.--Paragraphs (1), (2), (3), and (4) of section
7213(a) of the Internal Revenue Code of 1986 are each amended by
striking ``$5,000'' and inserting ``$10,000''.
(b) Adjustment for Inflation.--Subsection (a) of section 7213 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(6) Adjustment for inflation.--In the case of any
calendar year after 2025, the $10,000 amounts in paragraphs
(1), (2), (3), and (4) shall each be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year,
determined by substituting `calendar year 2023' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not
a multiple of $100, such amount shall be rounded to the next
lowest multiple of $100.''.
(c) Effective Date.--The amendments made by this section shall
apply to disclosures made after the date of the enactment of this Act.
SEC. 10. BAN ON RAISING NEW ISSUES ON APPEAL.
(a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 7531. PROHIBITION ON INTERNAL REVENUE SERVICE RAISING NEW ISSUES
IN AN INTERNAL APPEAL.
``(a) In General.--In reviewing an appeal of any determination
initially made by the Internal Revenue Service, the Internal Revenue
Service Independent Office of Appeals may not consider or decide any
issue that is not within the scope of the initial determination.
``(b) Certain Issues Deemed Outside of Scope of Determination.--For
purposes of subsection (a), the following matters shall be considered
to be not within the scope of a determination:
``(1) Any issue that was not raised in a notice of
deficiency or an examiner's report which is the subject of the
appeal.
``(2) Any deficiency in tax which was not included in the
initial determination.
``(3) Any theory or justification for a tax deficiency
which was not considered in the initial determination.
``(c) No Inference With Respect to Issues Raised by Taxpayers.--
Nothing in this section shall be construed to provide any limitation in
addition to any limitations in effect on the date of the enactment of
this section on the right of a taxpayer to raise an issue, theory, or
justification on an appeal from a determination initially made by the
Internal Revenue Service that was not within the scope of the initial
determination.''.
(b) Clerical Amendment.--The table of sections for chapter 77 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new item:
``Sec. 7531. Prohibition on Internal Revenue Service raising new issues
in an internal appeal.''.
(c) Effective Date.--The amendments made by this section shall
apply to matters filed or pending with the Internal Revenue Service
Independent Office of Appeals on or after the date of the enactment of
this Act.
SEC. 11. LIMITATION