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H.R. 6506 · House bill · 119th Congress
This bill suspends the period of time allowed for claiming a federal tax refund (limitations period) during collection due process (CDP) proceedings, prohibits the Internal Revenue Service (IRS) from applying tax overpayments to a tax liability that is disputed in such proceedings, and expands the Tax Court’s jurisdiction.
As background, IRS collection actions and the underlying tax liability (in some circumstances) may be disputed in a CDP hearing. Collection actions are suspended during CDP proceedings, but the IRS may apply tax overpayments from other tax years to the disputed tax liability. The Tax Court may review an appeal of a CDP hearing determination. However, the Supreme Court held in Commissioner v. Zuch that the Tax Court loses jurisdiction over a CDP appeal if the CDP hearing determination is revoked because tax overpayments are applied to and fully satisfy the tax liability. In such circumstances, the taxpayer may claim a refund and seek redress in federal district court. Currently, the limitations period to file a refund claim is not suspended during CDP proceedings.
The bill
suspends the limitations period for claiming a tax refund during CDP proceedings (with exceptions),
prohibits the IRS from applying tax overpayments to a properly disputed tax liability during CDP proceedings (unless waived or an exception applies),
expands the Tax Court's jurisdiction in CDP cases to include jurisdiction over the underlying tax liability amount (if properly disputed), and
provides that the Tax Court retains its jurisdiction if the IRS abandons collection actions.
This Act may be cited as the “Taxpayer Due Process Enhancement Act”.
(a) In general.— Section 6330(e)(1) of the Internal Revenue Code of 1986 is amended by inserting “subsection (a), (b), or (c) of section 6511 (relating to limitations on credit or refund),” after “section 6502 (relating to collection after assessment),”.
(b) Period of limitations on filing a claim for credit or refund.— Section 6330(e) of such Code is amended by adding at the end the following new paragraph:
“(3) Period of limitations on filing a claim for credit or refund.— In the case of the running of any period of limitations under subsection (a), (b), or (c) of section 6511 with respect to the filing of any claim for credit or refund, paragraph (1)—
(A) shall apply only to the extent that such credit or refund relates to an underlying tax liability properly disputed at the hearing requested under this section, and
(B) shall not result in a suspension of the running of such period of limitations after any date on which a lapse of a deadline, a court filing, or a court order establishes that the taxpayer has forfeited or otherwise lost the right to pursue such dispute.”.
(c) Cross reference.— Section 6511(i) of such Code is amended by adding at the end the following new paragraph:
“(8) For limitations in case of collection action proceedings, see section 6330(e).”.
(d) Effective date.— The amendments made by this section shall apply to the running of any period of limitations if such period (determined without regard to the amendments made by this section) ends on or after the date of the enactment of this Act.
(a) In general.— Section 6402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(o) Prohibition on crediting of overpayments against disputed tax liability during collection action proceedings.— If a hearing is properly requested under section 6320(a)(3)(B) or 6330(a)(3)(B), and an underlying tax liability referred to in section 6330(c)(2)(B) is properly disputed at such hearing, such tax liability shall not, except with the consent of the taxpayer, be taken into account under subsection (a) for the period during which the period of limitations for filing a claim for credit or refund relating to such tax liability is suspended by reason of section 6330(e).”.
(b) Clarification of application of certain levy hearing rules to lien hearings.— Section 6330(c)(2)(A) of such Code is amended by striking “unpaid tax or the proposed levy” and inserting “unpaid tax, collection action, or proposed collection action”.
(c) Effective dates.—
(1) In general.— The amendment made by subsection (a) shall apply with respect to any period described in section 6402(o) of the Internal Revenue Code of 1986 (as added by this section) if any portion of such period is after the date of the enactment of this Act.
(2) Clarification of application of certain levy hearing rules to lien hearings.— The amendment made by subsection (b) shall take effect on the date of the enactment of this Act.
(a) In general.— Section 6330(d)(1) of the Internal Revenue Code of 1986 is amended to read as follows:
“(1) Petition for review by Tax Court.—
(A) In general.— In the case of a determination under this section, the person may, within 30 days of such determination, petition the Tax Court for review of—
(i) such determination, and
(ii) any underlying tax liability referred to in subsection (c)(2)(B) which is properly disputed at the hearing in which such determination is made.
(B) Jurisdiction of Tax Court.— Upon the filing of a petition, the Tax Court shall have jurisdiction with respect to—
(i) the determination referred to in subparagraph (A)(i),
(ii) any underlying tax liability referred to in subparagraph (A)(ii), and
(iii) any equitable tolling of the 30-day deadline referred to in subparagraph (A).
(C) Retention of jurisdiction.— Upon a determination being made under this section, subparagraphs (A) and (B) shall apply whether or not the Secretary abandons the collection action or proposed collection action at issue in such determination.”.
(b) Effective date.— The amendment made by this section shall apply with respect to petitions filed after the date of the enactment of this Act.