S. 3931 — TAS Act

This section requires (1) any federal tax return or amendment required to be filed with the IRS to be accepted if filed electronically and, if so filed, to be processed electronically; and (2) the IRS to use optical character recognition technology (or functionally similar technology) to transcribe any paper returns or correspondence received solely in paper form. It permits exceptions if the Secretary determines such technology is slower or less reliable than manual transcription or other IRS processes, provided the Secretary reports the determination to the House Ways and Means Committee and Senate Finance Committee within 30 days. The requirements apply to individual income tax returns received on or after January 1 of the first calendar year beginning more than 180 days after enactment, estate or gift tax returns received on or after January 1 of the first calendar year beginning more than 24 months after enactment, and all other returns or correspondence received on or after January 1 of the first calendar year beginning more than 18 months after enactment.

This section establishes a real-time public dashboard on the IRS website providing, for each applicable phone number extension (i.e., certain IRS accounts management, automated collection, Joint Operations Center, contractor-operated, or high-volume lines receiving 200,000 or more calls in the prior year): (1) current numbers of callers connected to representatives or automated systems, waiting callers, longest wait time, and callback availability; (2) an embedded tool displaying that information and estimating wait times for representatives; (3) a public API for automated access to the data; and (4) monthly summaries of prior-month metrics including average/median call lengths and talk times, percentages routed to automation or disconnected, transfers and hold times, and caller satisfaction rates. It further requires the IRS to (1) use technology to detect and screen automated calls and (2) post, for any week with a significant processing delay (i.e., failure to process applicable items—such as tax returns, claims, or other documents—received at least 21 days prior), the earliest receipt date of items processed that week. The requirements apply beginning 12 months after enactment.

This section directs the Secretary of the Treasury, not later than January 1 of the first calendar year beginning more than 12 months after enactment, to provide taxpayers individualized, specific, and up-to-date information on their tax returns and amended returns through a website and mobile application. Such information must include (1) whether the Internal Revenue Service (IRS) has received and entered the return into its systems, (2) processing completion details—including the refund issuance date, expected receipt date, and payment method (i.e., for electronic funds transfers, the partial or full account number, financial institution name, and routing number; for paper checks, the mailing address)—and (3) any processing suspension, including the reason and, if applicable, details on requested information, submission method, and due date.

This section expresses the sense of Congress that taxpayers contacting the Internal Revenue Service (IRS) should have the option to receive a callback and that, not later than calendar year 2028, the IRS should provide any taxpayer—including those residing outside the United States—with a callback option for calls to an applicable phone number extension not answered within 5 minutes.

This section directs the Secretary of the Treasury, not later than January 1 of the first calendar year beginning more than 18 months after enactment, to establish a website or mobile application enabling any taxpayer (including those outside the United States) to (1) view IRS-sent or taxpayer-filed returns, documents, notices, or letters (excluding non-legal educational items) from the preceding six-year period (prospectively from enactment); (2) respond to IRS notices by uploading materials; and (3) authorize access and transmittals by representatives practicing before the Department of the Treasury under 31 U.S.C. 330, tax return preparers with PTINs, or qualified reporting agents (i.e., persons authorized to sign and file employment tax returns under specified IRC sections). The platform must enable such authorized third parties to access multiple taxpayer accounts without separate logins. The section further requires the Secretary to conduct taxpayer and professional focus groups beforehand; establish a program to investigate and address unauthorized access, use, or disclosure of return information by authorized third parties; and annually publish related statistics (e.g., complaints investigated, access revocations).

This section amends IRC §6402(a), which authorizes the Treasury Secretary to offset federal tax refunds against certain debts (e.g., past-due taxes or nontax debts), by establishing a special rule requiring refund of the Earned Income Tax Credit (EITC) portion of an overpayment—up to the full EITC amount claimed—for applicable taxpayers, subject to existing exceptions in subsections (c)–(f). An applicable taxpayer is one classified by the Secretary as currently not collectible (CNC) under IRC §6343(e) (i.e., unable to pay due to economic hardship) prior to requesting the refund. The amendments apply to offsets made after 12 months from enactment.

This section waives the installment agreement user fee under IRC §6159 for (1) taxpayers with adjusted gross income not exceeding 250% of the applicable federal poverty level (based on the most recent year for which such information is available) and (2) taxpayers who enter the agreement using the IRS public website and agree to make payments electronically via debit instrument. The waiver applies to agreements entered into 12 months after enactment.

This section directs the Secretary of the Treasury, not later than 12 months after enactment, to establish a program to identify taxpayers reasonably likely to be experiencing economic hardship (determined using existing IRS criteria under IRC §6343(a)(1)(D) based on recent income, asset, and schedule data) who have unpaid tax liabilities and, if such a taxpayer requests an installment agreement under IRC §6159(a), to inform them of alternatives including offers-in-compromise (IRC §7122) and currently not collectible status (IRC §6343(e)). It further requires the Secretary, in consultation with the National Taxpayer Advocate and not later than two years after enactment, to report to the House Ways and Means Committee and Senate Finance Committee on the program's identification accuracy, potential other applications, number of taxpayers identified, options provided, and status of their tax liabilities.

This section revises IRS notice requirements for taxpayers with delinquent tax debts exceeding $50,000 by requiring quarterly notices (from annually), effective 24 months after enactment. The notices must include (1) an estimate of penalties and interest accruing if the debt is not paid by the collection period's end under IRC §6502(a) and (2) information on taxpayer assistance programs, except during installment agreements (IRC §6159(a)), accepted offers-in-compromise (IRC §7122), or when the debt is determined currently not collectible (IRC §6343(e)).

This section revises the matching funds requirement in the Low-Income Taxpayer Clinic (LITC) grant program to 100% of the grant amount (from 50%), permits the Secretary to reduce the percentage to not less than 25% if it expands clinic services to additional taxpayers, and specifies that matching funds may include salaries (with fringe benefits) and equipment costs but exclude indirect expenses such as general overhead. (As background, LITCs provide free or low-cost assistance to low-income taxpayers for tax controversy representation and education.) It also strikes prior paragraphs on grant limits and matching funds, reorganizes the subsection, and applies the changes to calendar years beginning after enactment.

This section streamlines Chief Counsel reviews of offers-in-compromise by requiring the Treasury General Counsel's opinion, filed with the Secretary, only in cases the Secretary determines present a significant legal issue (previously required in any case). The changes apply to offers submitted or pending on or after enactment.

This section revises the supervisory approval requirements in IRC §6751(b)(1) to prohibit assessment of any penalty or application of any disallowance period unless the decision is personally approved in writing on an electronic form by the immediate supervisor or the IRS Office of Servicewide Penalties (or successor) before sending the taxpayer an appealable notice (i.e., the first written notice providing an opportunity to appeal to the IRS Independent Office of Appeals or petition a federal court). It also (1) defines disallowance period under new §6751(d) to mean the temporary prohibition on claiming certain refundable tax credits—child tax credit (§24(g)(1)), American opportunity tax credit (§25A(b)(4)(A)), or earned income tax credit (§32(k)(1))—previously triggered by reckless or fraudulent claims; and (2) excepts such periods automatically calculated electronically from any exception in §6751(b)(2)(B). The changes apply to notices sent more than 12 months after enactment. Additionally, this section requires the Secretary, beginning 24 months after enactment and annually thereafter, to publicly release a report on all IRS-assessed penalties from the prior calendar year, disaggregated by organizational unit and detailing progression through determination, assessment, review, and final resolution.

This section requires the IRS, upon acceptance of an offer-in-compromise (OIC) under IRC §7122—whereby a taxpayer settles tax liabilities for less than the full amount owed—to refund any excess amounts collected from the taxpayer beyond remaining scheduled payments (unless the parties agree otherwise or the IRS declares default and terminates the OIC). The section further requires the IRS to release any related levy and return seized property upon OIC acceptance (subject to the same exceptions). The amendments apply to OICs accepted after enactment.

This section revises the nine-month deadline for the Internal Revenue Service (IRS) to return amounts or property wrongfully levied upon (under IRC §6343(b)) by starting the period from the date the Secretary receives the amount (from the date of levy). (Thus, for levied property, the clock starts upon receipt of sale proceeds rather than seizure.) The change applies to money levied upon or amounts received from property sales after 12 months after enactment.

This section directs the Secretary of the Treasury, following specified consultations, to submit reports to the House Committee on Ways and Means and the Senate Committee on Finance as follows: (1) not later than two years after enactment, a report analyzing Internal Revenue Service (IRS) actions to implement this title and related amendments, including successes, challenges, and recommendations; and (2) not later than 12 months after enactment and annually thereafter, a report on IRS efforts to identify, prevent, and resolve tax fraud—including first-person fraud (i.e., use of a real person's information to file fraudulent returns) and stolen identity refund fraud—detailing interactions and information sharing with Security Summit participants (i.e., public-private partnership of IRS, software companies, and financial institutions) and non-participants, fraud data by type and filing method for the most recent tax season, and erroneous refund disbursements versus those prevented, with appropriately redacted data posted publicly on the IRS website. This section further specifies that the IRS annual report under IRC §7803(c)(2)(B) does not satisfy the complexity analysis requirement of §4022(a) of the Internal Revenue Service Restructuring and Reform Act of 1998.

This section directs the Secretary of the Treasury to conduct a study, with input from the National Taxpayer Advocate and nonresident U.S. taxpayers, on (1) combining and simplifying reporting required under section 5314 of title 31, United States Code (i.e., reports on transactions or relationships with foreign financial agencies), and sections 6038, 6038A, 6038B, 6038C, 6038D, 6039F, 6046A, and 6048 of the Internal Revenue Code of 1986; and (2) eliminating duplicative information requests from nonresident U.S. taxpayers. The Secretary must submit a report to Congress on the study—including any actions taken and legislative recommendations—within 180 days of enactment.

This section directs the Comptroller General of the United States to conduct a study on compliance burdens under federal tax laws for U.S. persons living abroad—including filing requirements under 31 U.S.C. 5314 (i.e., reports of transactions with foreign financial agencies, commonly known as FBARs)—with specific focus on low- and moderate-income individuals, and to submit a report to Congress, the Secretary of the Treasury, and publicly within one year of enactment. The section further directs the Secretary to submit a report to Congress within one year after receiving the Comptroller General's report describing actions taken to address identified problems and any necessary legislation.

This section modifies tax treatment of foreign currency gains and losses as follows: (1) increases the de minimis exclusion threshold for personal foreign currency transactions under section 988(e)(2) to $1,000 (from $200), with inflation adjustment for taxable years after 2025 (rounded to the next lowest multiple of $50 and based on calendar year 2024); (2) allows deduction under new section 165(c)(4) and (5) of foreign currency losses on qualified mortgage debt secured by a qualified foreign residence (i.e., personal residence outside the U.S. or its possessions), but only to the extent of gain recognized on the residence sale, and losses on the residence sale, but only to the extent of foreign currency gain on the debt (with matching character and source rules under revised section 165(f) and above-the-line treatment under new section 62(a)(22)); (3) provides under new section 989(c) that refinancing of qualified mortgage debt (generally, acquisition indebtedness, home equity indebtedness, or similar debt approved by the Secretary) in a nonfunctional currency triggers no foreign currency gain or loss, with repayment gain or loss based on the original liability amount; and (4) permits under new section 989(d) a qualified individual to elect to aggregate all transactions during a calendar year involving qualified foreign earned income or expenses and determine foreign currency gain or loss using the average exchange rate for the year.

This section increases the de minimis thresholds under IRC §904(j)(2)(B) for individuals to use simplified foreign tax credit rules and reporting—from $300 ($600 for joint returns) to $1,000 ($2,000)—and establishes an inflation adjustment for those thresholds for taxable years beginning after 2025 (using 2024 as the base year and rounding to the next lowest multiple of $50). (As background, these thresholds allow eligible individuals with low foreign-source income and taxes to forgo complex separate limitation computations for the foreign tax credit.) The amendments apply to taxable years beginning after enactment.

This section extends from 60 days to 120 days the period for a person outside the United States to request abatement of an IRS math error on a tax return (i.e., correction of an arithmetic or clerical error without full deficiency procedures). The change applies to notices sent after 180 days following enactment.

This section authorizes U.S. Tax Court judges and special trial judges to issue subpoenas—signed by the judge, clerk, or deputy clerk—for the attendance and testimony of parties or witnesses and the production of books, papers, documents, electronically stored information, or tangible things from any place in the United States for discovery purposes or use as evidence in accordance with Tax Court rules. (Thus, this expands the court's pretrial discovery authority to facilitate settlements before hearings.)

This section authorizes the U.S. Tax Court to (1) correct clerical mistakes, oversights, or omissions in a judgment, order, or record at any time (with appellate court leave required if an appeal is pending); and (2) relieve a party from a final judgment or order, on motion and just terms, for reasons including mistake, inadvertence, surprise, or excusable neglect; newly discovered evidence; fraud, misrepresentation, or misconduct by an opposing party; a void judgment; or any other circumstance where justice requires (with motions required within a reasonable time, and for the first three reasons, not later than one year after entry). Such motions do not affect the judgment's finality or operation while pending, and this authority does not limit the court's existing power to set aside a judgment for fraud on the court. This section further permits either party to appeal a Tax Court order granting such relief by filing a notice of appeal within 90 days.

This section expands the authority of special trial judges in the U.S. Tax Court by (1) authorizing them, upon consent of the parties and pursuant to Tax Court rules, to hear any proceeding not otherwise eligible for assignment under current law (i.e., cases beyond the existing categories such as small tax claims with deficiencies not exceeding $50,000); and (2) granting them independent power to punish contempt of the court's authority, limited to Class C misdemeanor penalties (i.e., up to $5,000 fine under 18 U.S.C. §3571(b)(6) or 30 days' imprisonment under 18 U.S.C. §3581(b)(8)). The jurisdictional expansion takes effect on the date the Tax Court adopts implementing rules.

This section applies the federal judicial disqualification standards of 28 U.S.C. 455—requiring judges to recuse themselves where impartiality might reasonably be questioned (e.g., due to personal bias, prior involvement in the matter, or financial interests)—to U.S. Tax Court judges, special trial judges, and Tax Court proceedings.

This section establishes enhanced notice, Tax Court review, burden-shifting, and trigger modification procedures for multi-year disallowance periods (i.e., bans on claiming credits) under the child tax credit (section 24), American opportunity tax credit (section 25A), and earned income tax credit (section 32). (As background, these credits provide refundable tax benefits to eligible families with children, postsecondary students, and low-income workers, respectively, and impose such periods following improper claims.) Specifically, the section (1) amends section 6212(a) to require deficiency notices for credit denials to identify the denied credit and grounds, notify taxpayers of future eligibility documentation requirements, and state grounds and length for any disallowance period, effective for notices mailed 36 months after enactment; (2) amends section 6214 to grant the Tax Court jurisdiction to redetermine disallowance periods (including in Secretary-asserted claims), effective for petitions filed on or after enactment, with a transition rule allowing review (and refunds) of certain pre-36-month disallowance periods lacking notice grounds; (3) amends section 7491(c) to place the burden of production on the Secretary for disallowance periods and apply a preponderance-of-evidence standard (per section 7454(a)) for specified cases, effective for court proceedings beginning more than 36 months after enactment involving later-determined periods; and (4) amends section 24(g)(1) to modify the child tax credit disallowance trigger from a final determination of denial to a section 6212(a) deficiency notice of denial or final Tax Court denial under section 7481.

This section authorizes de novo judicial review of IRS denials of innocent spouse relief under IRC §6015 (i.e., relief from joint and several tax liability for a spouse who did not know, and had no reason to know, of an understatement on a joint return) by the Tax Court and other courts, striking prior restrictions limiting such review exclusively to the Tax Court based on the administrative record. The amendment applies to petitions and requests filed or pending on or after enactment and does not limit the Tax Court's or any other court's authority or jurisdiction to grant or review such relief.

This section amends IRC §7451 to treat deadlines for filing U.S. Tax Court petitions challenging IRS innocent spouse relief determinations (§6015(e)(1)(A)), tax deficiencies (§6213(a)), and collection due process decisions (§6330(d)(1)(A)) as nonjurisdictional claims-processing rules subject to waiver, forfeiture, estoppel, and equitable tolling. (As background, these petitions allow taxpayers to contest IRS actions on spousal tax relief, proposed additional taxes, and enforced collections, respectively; previously, the deadlines were generally treated as jurisdictional and strictly enforced.) It makes conforming amendments to IRC §7459(d) on Tax Court dismissal rules (with an exception for dismissals based solely on denial of equitable tolling) and revises IRC §7451(c) to toll time for partial days. The amendments apply to cases pending on or after enactment and create no inference as to prior cases or other Tax Court petitions.

This section clarifies Tax Court jurisdiction in collection due process (CDP) appeals under IRC §6330—where taxpayers may challenge IRS proposed levies or liens before collection action—by making two changes: (1) specifying that a prior opportunity to dispute underlying tax liability includes Tax Court proceedings other than refund suits under IRC §7442(b), thus precluding such disputes during the CDP hearing; and (2) limiting issues barred from Tax Court review (if not raised during the CDP hearing) to those unrelated to the amount or existence of the underlying tax liability.

This section authorizes the U.S. Tax Court, in collection due process (CDP) appeals under section 6330(d)(1), to determine overpayments of tax for the taxable periods or events at issue (unless a challenge was precluded under section 6330(c)) and to order credits or refunds, applying rules similar to those in section 6512(b)(1) and (2) for enforcement. (CDP hearings allow taxpayers to contest IRS notices of intent to levy for unpaid taxes.) It limits such credits or refunds to overpayments paid (1) after the CDP notice under section 6330(a) or 6320(a), (2) within periods applicable under section 6511(b)(2), (c), or (d) as if a claim had been filed on the notice date, or (3) within section 6511 periods for prior refund claims that were pending, timely suable, or in litigation as of the notice date (with a special three-year rule if no return was filed by the notice date during the third year after the return due date). This section also makes a conforming amendment to section 6330(e)(1) to reference section 6511 limitations on credits or refunds. The amendments apply to cases pending on or after enactment.

This section authorizes the U.S. Tax Court to exercise jurisdiction, concurrent with U.S. district courts and the U.S. Court of Federal Claims and subject to administrative claim requirements under section 7422, over civil actions for refund of any internal revenue tax or penalty alleged to have been erroneously or illegally assessed or collected, or any sum alleged to have been excessive or wrongfully collected, up to an applicable amount of $2 million—specifically, $2 million for any one taxable year (subtitle A income taxes), $2 million (chapter 11 estate tax), $2 million for any one calendar year (chapter 12 gift tax), $2 million for any one taxable period or event (subtitle C, D, or E taxes), or $2 million for any other amount. If the Secretary of the Treasury mails a notice of deficiency related to the tax at issue before the Tax Court hearing, the refund suit is stayed pending the taxpayer's opportunity to petition the Tax Court for redetermination (plus 60 days), with consolidation if such a petition is filed. (Thus, this expands Tax Court authority—previously limited primarily to pre-payment deficiency redeterminations—into post-payment refund litigation for claims up to $2 million, leveraging the court's tax expertise.) The section makes conforming amendments to (1) section 7422(k) to reference Tax Court jurisdiction, (2) section 7482(b)(1) to set venue for such cases at the petitioner's legal residence (individuals) or principal place of business or office (entities), and (3) 28 U.S.C. §1346(a) to clarify concurrent jurisdiction among the three courts. The amendments apply to actions filed more than 12 months after enactment.

This section authorizes the Secretary of the Treasury to treat any "applicable penalty"—identified in guidance as a penalty under the Internal Revenue Code not otherwise assessable (excluding those required to be recovered in a civil or criminal action)—as a deficiency of tax subject to deficiency procedures under subchapter B of chapter 63 (i.e., notice of deficiency under IRC §6212 and Tax Court review under IRC §6213 prior to assessment). It includes special rules (1) prohibiting assessment of the same penalty after a notice of deficiency (absent rescission), (2) barring additional deficiency determinations if the taxpayer petitions Tax Court, (3) excepting penalties under IRC §§6038(b)(2), 6038A(d)(2), and 6038D(d)(2), and (4) coordinating with notice, assessment, and supervisory approval requirements; the provision applies prospectively with no inference as to prior treatment.

This section authorizes the district courts of the United States, the U.S. Court of Federal Claims, and the Tax Court to exercise jurisdiction over a taxpayer's action to determine the correct amount of tax liability or claim a refund without requiring full payment of the liability (i.e., expands exceptions to the full payment rule under section 7422), if the amount at issue meets specified conditions on the filing date: (1) it is subject to an installment agreement under IRC §6159 with all installments due by the filing date paid, or has been placed in currently not collectible (CNC) status under IRC §6343(e); and (2) no procedural period is pending under IRC §§6320 or 6330 (i.e., no unexpired notice period for a collection due process hearing request, no requested hearing pending, or no unexpired appeal period from a hearing determination). (Thus, qualifying taxpayers in good standing under an installment agreement or CNC status may litigate their liability before full payment.) The provision further permits the United States (or Secretary, for Tax Court cases) to seek dismissal if the taxpayer falls out of compliance, with courts weighing factors such as case progress, partial payments, and burdens on parties before dismissing with leave to refile upon full payment or renewed compliance; court redeterminations of liability are final as to uncollectibility of disallowed amounts and refunds of overpayments. The amendments apply to actions filed on or after 12 months following enactment.

This section increases the jurisdictional threshold for small tax case procedures in the U.S. Tax Court to $100,000 (from $50,000) and adds an inflation adjustment to that threshold—using the cost-of-living adjustment under IRC §1(f)(3) with 2025 as the base year, rounded down to the nearest $1,000—for petitions or appeals filed in calendar years beginning after 2026. (As background, small tax case procedures under IRC §7463 provide simplified, expedited Tax Court proceedings for disputes involving $50,000 or less, with non-precedential decisions not directly appealable to a court of appeals.) The changes apply to proceedings commencing after enactment and include conforming amendments to the section heading and table of contents.

This section authorizes the National Taxpayer Advocate to appoint counsel in the Office of the Taxpayer Advocate who report directly to the National Taxpayer Advocate or designee. For such counsel, it (1) permits use of direct hire authority without regard to hiring preferences, (2) specifies they do not report to the IRS Chief Counsel or represent the government in litigation, (3) states their legal interpretations are not binding on the Secretary, and (4) requires the Chief Counsel to continue providing advice to the National Taxpayer Advocate and Office.

This section expands the National Taxpayer Advocate's authority under IRC §7803(c)(2)(D)(i)(II) to make personnel decisions for any officer or employee of the Office of the Taxpayer Advocate (OTA)—an IRS office that independently assists taxpayers with unresolved issues and recommends administrative and legislative changes—previously limited to employees of local taxpayer advocate offices. The amendment takes effect 12 months after enactment.

This section requires the IRS Commissioner, upon written request by the Office of the Taxpayer Advocate (OTA), to provide OTA access within two weeks (or as agreed) to (1) taxpayer return information, IRS Chief Counsel legal advice (including non-disclosable advice and advice prepared for litigation), and taxpayer-IRS meetings necessary to assist taxpayers with pending OTA cases; (2) relevant documents, data, statistical information, and Chief Counsel legal advice needed for OTA reports to Congress on IRS systemic problems; and (3) Chief Counsel legal advice on any matter. (As background, OTA helps taxpayers resolve IRS disputes, conducts case advocacy, and annually reports to Congress on taxpayer rights and agency problems.) It further requires OTA annual reports to identify any Commissioner failures to provide such access by the deadline and specifies that access does not waive privileges; the changes take effect on enactment.

This section repeals the suspension of periods of limitations on IRS tax assessments and collections during the pendency of a Taxpayer Advocate Service (TAS) case. (Thus, such periods will continue to run while TAS processes a taxpayer's request for assistance.) It makes a conforming cross-reference amendment to IRC §6306 and applies to cases after enactment.

This section authorizes the IRS Commissioner and Office of the Taxpayer Advocate, notwithstanding the Antideficiency Act (31 U.S.C. §1341(a)), to incur obligations in advance of appropriations during any lapse in appropriations as necessary (1) to assist taxpayers experiencing economic hardship (i.e., immediate risk of losing housing, utilities, or basic necessities, per IRC §6343(a)(1)(D)) due to IRS action or inaction, and (2) to comply with Taxpayer Assistance Orders issued under IRC §7811. (Thus, these officials may continue limited operations to provide such relief during government shutdowns.)

This section expands the definition of “return” in section 6696(e)(1)—for purposes of penalties on tax return preparers who improperly alter or disclose information—to include (A) any return of tax imposed by the Internal Revenue Code, (B) any administrative adjustment request under section 6227, (C) any partnership adjustment tracking report under section 6226(b)(4)(A), and (D) any other document purporting to be such a return, request, or report. (Thus, these penalties now apply to documents filed under the centralized partnership audit regime.) The amendment applies to actions after the date of enactment.

This section revises IRC penalties and definitions related to tax return preparers' identifying numbers and directs the IRS to establish a compliance program. Specifically, it (1) replaces IRC §6695(c) with a $250 penalty per return or claim for a tax return preparer's failure to furnish a valid identifying number under IRC §6109(a)(4)(A) (i.e., a PTIN that is not assigned to another person, nonexistent, inactive/expired, withdrawn, suspended/revoked, or otherwise invalid), subject to a reasonable cause exception and annual cap of $75,000; (2) adds IRC §6695(h) imposing a $250 penalty on electronic return originators (i.e., persons originating electronic submissions of others' returns or claims, with specified exceptions) for failing to use a valid electronic filing identification number (EFIN) assigned by the IRS, subject to reasonable cause exception; (3) broadens the definition of tax return preparer under IRC §7701(a)(36) to include preparation for compensation of any document purporting to be a tax return (in addition to returns and refund claims) or employing others to do so, treating preparation of a substantial portion as full preparation; and (4) within 18 months of enactment, requires the IRS—after consulting the National Taxpayer Advocate, low-income taxpayer clinics, and stakeholders—to implement a program to promote compliance, including pre-processing identification of errors and opportunities to correct invalid PTINs or EFINs to avoid penalties. This section also adds a new criminal penalty under IRC §7218 for willful failure to provide a valid identifying number.

This section increases penalties under section 6695 of the Internal Revenue Code on tax return preparers for failures in preparing returns for others—including failing to furnish identifying numbers (subsec. (a)), sign returns (subsec. (b)), provide client copies (subsec. (d)), or file correct information returns (subsec. (e))—and establishes a new penalty for misappropriating taxpayer refunds. Specifically, it (1) increases the per failure penalty to $250 (from $50) and annual maximum to $50,000 (from $25,000) in subsections (a) and (d), or to $75,000 (from $25,000) in subsections (b) and (e); (2) increases the penalty in subsection (g) to $1,000 (from $500); (3) updates inflation adjustment base years in subsection (i)(1) to calendar year 2025 and calendar year 2024 (from 2014 and 2013); and (4) replaces subsection (f) with a penalty equal to the greater of $1,000 or the full amount of each misappropriated refund payment issued to a taxpayer (with an exception for banks depositing the full amount in the taxpayer's account).

This section (1) requires the Secretary of the Treasury to publish on a public website, within 30 days after all appeals are exhausted, any final determination under 31 U.S.C. 330(c) or (d) imposing suspension, disbarment, censure, or other penalties on representatives or appraisers before the Department of the Treasury—including a statement of facts and circumstances; and (2) establishes a program under 26 U.S.C. 6109(e) for administering preparer tax identification numbers (PTINs)—required on tax returns prepared by paid preparers—restricting issuance or renewal to individuals who (A) demonstrate suitability via background check and personal tax compliance (with grandfathering of prior background checks except for tax compliance review), (B) complete up to 18 hours annually of Secretary-approved educational programs on ethics, professional responsibility, and tax law (with written materials, attendance verification, no mandated providers, notice of noncompliance, and 30-day cure period), (C) meet applicable state preparer licensing requirements, or (D) qualify as specified practitioners (i.e., certified public accountants, attorneys, or enrolled agents authorized to practice before the Department under 31 U.S.C. 330 and in good standing). (Thus, invalid PTINs may not be used on returns, enhancing IRS oversight of non-professional tax preparers.)

This section authorizes the Chief of Appeals in the Internal Revenue Service (IRS) Independent Office of Appeals to appoint counsel who report directly to the Chief of Appeals, do not report to the IRS Chief Counsel, do not represent the government in litigation, and whose legal interpretations are not binding on the Secretary.

This section authorizes the Secretary of the Treasury to use direct hire authority—bypassing standard notice and competitive service preference requirements—to recruit and appoint qualified applicants to positions in the Internal Revenue Service (IRS) Independent Office of Appeals (i.e., the IRS office that provides impartial resolution of taxpayer disputes), provided such applicants are not IRS employees engaged in enforcement functions (e.g., audits or collections).

This section requires the IRS, for claims for refund received more than 12 months after enactment, to review each claim within 12 months of receipt (or an agreed date), provide a detailed written explanation for any disallowance mailed to the taxpayer's last known address (with appeal instructions if applicable), and authorizes appeals of disallowances to the IRS Independent Office of Appeals within 30 days (90 days if mailed outside the U.S.), which suspends the 2-year period for filing suit (under IRC §6532(a)(1)) during the appeal and for 30 days thereafter. (1) If the IRS fails to act by the applicable date, overpayment interest increases by 1 percentage point (capped at $500 per claim, adjusted for inflation after 2026 using 2024 as the base year and rounded to the nearest $50). (2) Taxpayers may elect deemed disallowance after the applicable date to trigger appeal rights. (3) Frivolous claims (i.e., based on positions deemed frivolous by federal courts and identified under IRC §6702(c)) are exempt from explanation and appeal requirements but require denial notification by the applicable date.

This section expands the right to an independent administrative review under IRC §7122(e) to include, prior to communication to the taxpayer, (1) any IRS determination to return an offer-in-compromise as nonprocessable or ineligible for processing and (2) any rejection of a proposed offer-in-compromise or installment agreement under §7122 or §6159 (i.e., agreements allowing taxpayers to pay tax liabilities in installments). (Thus, taxpayers may now appeal certain early-stage IRS decisions on these debt resolution options before receiving formal notice.)

This section revises the duties of the IRS Independent Office of Appeals (IOA)—which resolves federal tax disputes impartially without litigation—by requiring it to evaluate all hazards of litigation without exception in every referred case. The section also replaces the prior right-of-appeal provision with a new one that (1) generally provides all taxpayers a right to IOA resolution for any Secretary determination on a federal tax controversy (i.e., liability or refund claims for tax or penalties; collection alternatives such as installment agreements or offers in compromise; or related discretionary actions), and (2) specifies exceptions, including constitutional challenges without a final court invalidation; frivolous positions or related penalties; closing agreements; matters during active criminal investigations, referrals, or prosecutions (unless the IRS Chief Counsel determines IOA review would not interfere); and issues designated by Chief Counsel for litigation.

This section revises the Tax Court review process for IRS whistleblower award determinations under IRC §7623(b)(4)—which provides for awards of 15%-30% of collected proceeds (generally $2 million or more) to individuals furnishing information on tax underpayments—by replacing "appealed to" with "reviewed by" the Tax Court, adding a de novo standard based on the administrative record and any additional newly discovered or previously unavailable evidence (previously, an appeal with no specified standard), and making a conforming change to the paragraph heading from "Appeal" to "Review." The changes apply to petitions pending on, or filed on or after, the date of enactment.

This section exempts awards to whistleblowers authorized under section 7623 of the Internal Revenue Code (i.e., IRS payments to individuals providing information leading to tax collections) from sequestration reductions under the Balanced Budget and Emergency Deficit Control Act of 1985, for any sequestration order issued after enactment.

This section establishes a right for whistleblowers to proceed anonymously before the U.S. Tax Court in all proceedings under IRC section 7623(b) (i.e., claims for whistleblower awards from information leading to IRS tax collections of at least $2 million), notwithstanding general Tax Court rules requiring public proceedings (sections 7458 and 7461), unless the court finds that a societal interest in disclosure outweighs potential harm to the whistleblower. The provision applies to Tax Court petitions pending on, or filed on or after, the date of enactment.

This section modifies the annual IRS whistleblower report to require inclusion of a list and descriptions of the top tax avoidance schemes, not to exceed 10, disclosed by whistleblowers during the fiscal year. The amendments apply to reports for fiscal years ending after enactment of this Act.

This section establishes interest on whistleblower awards under Internal Revenue Code (IRC) §7623(b) (i.e., 15%-30% of collected proceeds exceeding $2 million, or $200,000 for certain individual taxpayers) at the IRC §6621(a) overpayment rate if the IRS does not provide notice of a preliminary award recommendation before the applicable date. The applicable date is 12 months after all proceeds are collected and tax liabilities are finalized (i.e., refund claim period expired or taxpayers and IRS reached final agreement with waiver or resolution of refund claims); no interest accrues after notice is provided. The amendments apply 180 days after enactment, with a special rule resetting the applicable date to 12 months after that effective date for pending cases where proceeds were collected, liabilities finalized, and no notice provided.

This section expands the above-the-line deduction for attorney fees and court costs under IRC §62(a)(21) to apply to all whistleblower awards under IRC §7623 (previously limited to awards under §7623(b)). The change applies to taxable years ending after the date of enactment.

This section establishes new IRC §7511 to disregard, for purposes of an applicable individual's tax liabilities, the period during which such individual was unlawfully or wrongfully detained abroad or held hostage abroad when determining (1) compliance with deadlines for specified acts (e.g., filing returns or paying tax under IRC §7508(a)(1)), (2) interest or penalties accruing after the detention begins, and (3) credits or refunds. An applicable individual is a U.S. national determined by the Secretary of State to be wrongfully detained abroad under criteria in 22 U.S.C. §1741(a) (i.e., review for credible evidence of unlawful detention based on factors such as innocence, nationality-based motives, or inhumane conditions) or identified as a hostage by the Hostage Recovery Fusion Cell; the provision applies to such individuals and their spouses, requires annual lists from the Secretaries of State and Justice to Treasury beginning January 1, 2027, directs Treasury database updates, and abates with refunds any prior interest or penalties once identified. The changes apply to taxable years ending after enactment.

This section amends IRC §7511 (as added by section 801) to establish, by January 1, 2027, a program administered by the Secretary of the Treasury (in consultation with the Secretary of State and Attorney General) allowing eligible individuals—or their spouses or dependents—to apply for refunds or abatements (including interest) of penalties, additional amounts, additions to tax, and related payments attributable to failures to perform acts under IRC §7508(a)(1) during the applicable period (January 1, 2021, through enactment), effective for taxable years ending on or before enactment. It further requires the Secretary of State and Attorney General, acting through the Hostage Recovery Fusion Cell, to compile and provide to the Treasury Secretary by January 1, 2027, a list of applicable individuals (i.e., U.S. nationals wrongfully detained abroad) during that period; directs notice to listed individuals within 90 days of enactment (if released by then) or their release (if after); and authorizes refunds via IRC §6402 procedures, extending the three-year limitations period of §6511(a) to one year after notice and waiving §6511(b)(2).

This section authorizes voluntary withholding agreements for applicable non-wage remuneration (i.e., payments for services performed by an individual that do not constitute wages, such as payments to independent contractors). If such an agreement is in effect at the time of payment, the remuneration is treated as wages for federal income tax withholding purposes. The Secretary of the Treasury must issue regulations or other guidance as necessary within 18 months of enactment, including for determining withholding amounts and identifying applicable payments.

This section establishes a safe harbor exempting individuals from the failure-to-pay penalty under IRC §6651(a)(2) for income taxes if they pay, by the payment due date (with extensions), 125% of the tax shown on their prior year's return. (As background, the failure-to-pay penalty applies to any balance due shown on a timely filed return.) The safe harbor does not apply if the individual fails to timely file the current or prior year's return (with extensions), the prior year was less than 12 months, or for any period after the filing due date (including extensions); for joint returns, special rules aggregate or recompute spouses' prior-year liabilities. This section also makes a conforming amendment to the heading of IRC §6651(c) and applies to taxable years beginning more than 12 months after enactment.

This section extends the timely mailing/timely filing rule (i.e., mailbox rule) of IRC §7502 to electronic documents and payments authorized by the IRS, deeming them timely if the taxpayer authorizes submission using a permitted electronic means by the due date or period and they are received (or, for payments, received and accounted for) no later than 3 business days thereafter. (Thus, taxpayers receive a 3-business-day grace period for IRS receipt of authorized electronic submissions.) An exception applies if the Secretary determines the taxpayer or intermediary used a system principally to delay Treasury fund transfers for economic benefit; the Secretary must issue regulations or guidance, including on proof of timely submission, within 1 year of enactment of the Taxpayer Assistance and Service Act. The amendments apply to documents and payments sent on or after 1 year after enactment of this section.

This section revises the third-party contact notice requirements under IRC §7602(c)—which requires the IRS to notify taxpayers before contacting third parties (e.g., banks or employers) in tax examinations or collections—as follows: (1) requiring notices to identify the specific information sought from third parties if it could reasonably be provided directly by the taxpayer; (2) affording taxpayers at least 45 days (or more, if requested with reasonable cause) to respond, including by providing that information, before third-party contacts; and (3) expanding the "good cause" exception to permit immediate contacts upon a reasonable belief of risks such as concealment or destruction of records/assets, intimidation or bribery of witnesses, or flight to avoid testifying or producing records. The changes apply to notices provided more than 12 months after enactment.

This section authorizes authorized persons in the Department of Education to redisclose, upon written request by the Director of the Congressional Budget Office (CBO) to the Secretary of Education, certain tax return information related to education loans—previously received under IRC §6103(l)(13)(A)-(C)—to CBO officers and employees solely for, and to the extent necessary in, estimating costs of federal student financial assistance programs. The section makes conforming amendments to disclosure restrictions; applies to disclosures after enactment; and requires the Secretary of Education to annually report to the Secretary of the Treasury on the number of such redisclosures and any unauthorized use, access, or disclosure of the information.

This section modifies the magnetic media filing requirement for partnership returns under IRC §6011(e) to apply if the partnership has more than 50 partners or assets of $1 million or more (previously, more than 100 partners), effective for returns filed on or after January 1 of the calendar year following enactment.

This section limits the unlimited statute of limitations on IRS tax assessments for false or fraudulent returns to cases involving intent to evade tax **by the taxpayer** (previously, intent to evade tax). (Thus, the period is not extended for victims of tax preparer fraud lacking such intent.) The amendment applies to assessments made or proceedings begun after enactment.

This section redesignates subsection (f) of IRC §7508A—as added by the Disaster Related Extension of Deadlines Act—as subsection (g), effective as if included in the enactment of that Act.