Summary:

All articles in Senate section

INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
(Senate - May 06, 1998)

Text of this article available as: TXT PDF [Pages S4379-S4405] INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 The PRESIDENT pro tempore. The clerk will report the pending business. The assistant legislative clerk read as follows: A bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to restructure and reform the Internal Revenue Service, and for other purposes. The Senate resumed consideration of the bill. Mr. ROTH addressed the Chair. The PRESIDENT pro tempore. The Senator from Delaware. Mr. ROTH. Mr. President, I further ask that at the conclusion or yielding back of time the Senate proceed to vote on the Roth amendment followed by a vote on the Kerrey amendment. The PRESIDING OFFICER (Mr. Allard). Without objection, it is so ordered. Mr. ROTH. Mr. President, before we begin debate today, I would like to offer some comments about the consent agreement that governs the offering of amendments. Basically, amendments that are to be in order must be relevant to the purpose of the IRS reform legislation, which covers three major areas. First, it reorganizes, restructures, and re-equips the IRS to make it more customer friendly in its tax-collecting mission. Second, it protects taxpayers from abusive practices and procedures of the IRS. Third, it deals with the management and conduct of IRS employees. These are the main purposes of the bill. While there are provisions dealing with electronic filing and congressional oversight, that is basically what this bill does. Title 6 of the bill is an entirely different matter. That title contains technical amendments that run the breadth of the tax code. In the House of Representatives, this title was reported by the Ways and Means Committee as a separate bill--which, in fact, it is. Title 6 is unrelated to IRS reform. It contains only technical corrections to previously enacted tax legislation that meet the following criteria: [[Page S4380]] First, they carry out the original intent of Congress in enacting the provision being amended. Second, by definition, the technical correction does not score as a revenue gain or loss. Third, the policy has been approved by the Treasury Department, the Joint Committee on Taxation, and the majority and minority of both the House Ways and Means Committee and the Senate Finance Committee. As a consequence, amendments which are relevant because of provisions in title 6 must meet a more difficult standard under the consent agreement. They must not only be relevant, but must be cleared but the two managers and the two leaders. And in clearing provisions that relate to title 6, I will apply the same criteria that the provisions of title 6 had to meet to become part of that title. I hope this explanation provides a clearer understanding of the application of the consent agreement to possible amendments. Amendment No. 2339 (Purpose: To ensure compliance with Federal budget requirements) Mr. ROTH. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Delaware (Mr. Roth) proposes an amendment numbered 2339. Mr. ROTH. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. The amendment is as follows: On page 401, strike line 3, and insert: ``beginning after December 31, 1998''. On page 415, between lines 16 and 17, insert: SEC. 5007. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY LOSS. (a) In General.--Subparagraph (B) of section 172(f)(1) (defining specified liability loss) is amended to read as follows: ``(B) Any amount (not described in subparagraph (A)) allowable as a deduction under this chapter which is attributable to a liability-- ``(i) under a Federal or State law requiring the reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore drilling platform, remediation of environmental contamination, or payment of workmen's compensation, and ``(ii) with respect to which the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year.'' (b) Effective Date.--The amendment made by this section shall apply to net operating losses arising in taxable years beginning after the date of the enactment of this Act. SEC. 5008. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS. (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based on modified adjusted gross income) is amended to read as follows: ``(i) adjusted gross income shall be determined in the same manner as under section 219(g)(3), except that-- ``(I) any amount included in gross income under subsection (d)(3) shall not be taken into account, and ``(II) any amount included in gross income by reason of a required distribution under a provision described in paragraph (5) shall not be taken into account for purposes of subparagraph (B)(i).'' (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 5009. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES. Subsection (c) of section 10511 of the Revenue Act of 1987 is amended by striking ``October 1, 2003'' and inserting ``October 1, 2007''. The PRESIDING OFFICER. Under the previous order, the amendment is now set aside. Does the Senator from Nebraska wish to offer his amendment? Amendment No. 2340 (Purpose: To ensure compliance with Federal budget requirements) Mr. KERREY. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Nebraska (Mr. Kerrey) proposes an amendment numbered 2340. Mr. KERREY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. (The text of the amendment is printed in today's Record under ``Amendments submitted.'') Mr. ROTH addressed the Chair. The PRESIDING OFFICER. The Senator from Delaware. The Senator from Delaware has 30 minutes under his control. Amendment No. 2339 Mr. ROTH. Mr. President, I yield myself 5 minutes. Mr. President, under the Senate's budget rules, the first year, first five years, and second five years of revenue losses in a tax bill must be offset with either mandatory savings or revenue increases. When the Finance Committee marked up the underlying bill, the first five years of revenue loss were offset. The second five years of revenue loss were not fully offset. The IRS Restructuring bill was short in excess of $9 billion in the last five years. During the markup, I indicated that I would work with the Budget Committee to attempt to find offsets so that the bill would be fully paid for over the last five years. Finding offsets was not an easy task. Every major revenue raiser I considered brought forth opposition from different members. After several weeks of reviewing options, I have developed a package, in consultation with the leadership. Mr. President, this pay-for package contains three new revenue raisers and a change to a revenue raiser in the underlying bill. The first revenue raiser comes from the Administration's budget. This proposal would tighten the definition of operating losses that are eligible for a special ten year carry back. Congress intended this treatment to be limited to a narrow category of activities. This proposal simply clarifies the types of losses eligible for this special treatment. This proposal is noncontroversial. The second new revenue raiser relates to the rollover rules for Roth IRAs. Under current law, individuals or married couples with adjusted gross income over $100,000 cannot rollover a traditional IRA into a Roth IRA. For purposes of the $100,000 test, minimum distributions which are required when an IRA beneficiary reaches 70\1/2\ are counted as income. This second new raiser would modify current law by excluding minimum distributions from the $100,000 test. The effect of this proposal is to allow more taxpayers, at age 70\1/2\ and above, to rollover from a traditional IRA to a Roth IRA. This proposal will enlarge the group of taxpayers who can enjoy the benefits of the Roth IRA. The third new raiser would extend the current law user fees charge by the IRS for private letter rulings. This extension would be effective for four years. Let me note that the IRS restructuring bill uses the balance on the pay-go scorecard of $406 million in the last five years as an offset. We have been informed by the Budget Committee staff that the use of the pay-go balance is appropriate in this instance. Finally, this amendment modifies an effective date of a revenue raiser in the Finance Committee bill. The proposal modified is the proposal to limit the carry back period of the foreign tax credit. Under this amendment, the effective date of the foreign tax credit raiser has been moved out one year to tax years beginning after 1998. Now, Mr. President, some on the other side may criticize the most significant new revenue raiser in this package. The target of their criticism is the proposal to allow more older taxpayers to convert to Roth IRAs. As I see it, those criticizing the rollover provision have the objective of limiting retirement savings choices for taxpayers who reach the end of their working years. For taxpayers who reach 70\1/2\, the opponents of the rollover provision are saying those taxpayers should fall under a more restrictive rule than those taxpayers under 70\1/2\. If you are over 70\1/2\ and you are a middle income person who has a healthy IRA or pension plan, the opponents of the rollover provision are arguing you should not have the choice of a Roth IRA. Alan Greenspan says America's most important economic problem is its low savings rate. It is a problem that we must address. The rollover provision in this amendment is a small step toward resolving our number 1 economic problem. [[Page S4381]] Mr. President, I ask unanimous consent that a technical description of this amendment, and a revised revenue table for the IRS restructuring bill, prepared by the Joint Committee on Taxation, be printed in the Record. There being no objection, the material was ordered to be printed in the Record, as follows: Description of Roth Financing Amendment to the Internal Revenue Service Restructuring and Reform Act of 1998 as Reported by the Senate Committee on Finance a. foreign tax credit carryback and carryover periods (sec. 5002 of the bill) Under the bill, the provision is effective with respect to credits arising in taxable years ending after the date of enactment. Under the modification, the provision would be effective with respect to credits arising in taxable years beginning after December 31, 1998. b. restrict special net operating loss carryback rules for specified liability losses Present law Under present law, that portion of a net operating loss that qualifies as a ``specified liability loss'' may be carried back 10 years rather than being limited to the general two-year carryback period. A specified liability loss includes amounts allowable as a deduction with respect to product liability, and also certain liabilities that arise under Federal or State law or out of any tort of the taxpayer. In the case of a liability arising out of a Federal or State law, the act (or failure to act) giving rise to the liability must occur at least 3 years before the beginning of the taxable year. In the case of a liability arising out of a tort, the liability must arise out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurred at least 3 years before the beginning of the taxable year. A specified liability loss cannot exceed the amount of the net operating loss, and is only available to taxpayers that used an accrual method throughout the period that the acts (or failures to act) giving rise to the liability occurred. Description of proposal Under the proposal, specified liability losses would be defined and limited to include (in addition to product liability losses) only amounts allowable as a deduction that are attributable to a liability that arises under Federal or State law for reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore oil drilling platform, remediation of environmental contamination, or payments arising under a workers' compensation statute, if the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year. No inference regarding the interpretation of the specified liability loss carryback rules under current law would be intended by this proposal. Effective date The proposal would be effective for net operating losses arising in taxable years beginning after the date of enactment. C. Modification of Minimum Distribution Requirements to Determine AGI for Roth IRA Conversions Present law Under present law, uniform minimum distribution rules generally apply to all types of tax-favored retirement vehicles, including qualified retirement plans and annuities, individual retirement arrangements (``IRAs'') other than Roth IRAs, and tax-sheltered annuities (sec 403(b)). Under present law, distributions are required to begin no later than the participant's required beginning date (sec. 401(a)(9)). The required beginning date means the April 1 of the calendar year following the later of (1) the calendar year in which the employee attains age 70\1/2\, or (2) the calendar year in which the employee retires. In the case of an employee who is a 5-percent owner (as defined in section 416), the required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 70\1/2\. The Internal Revenue Service has issued extensive Regulations for purposes of calculating minimum distributions. In general, minimum distributions are includible in gross income in the year of distribution. An excise tax equal to 50 percent of the required distribution applies to the extent a required distribution is not made. Under present law, all or any part of amounts held in a deductible or nondeductible IRA may be converted into a Roth IRA. Only taxpayers with adjusted gross income (``AGI'') of $100,000 or less are eligible to convert an IRA into a Roth IRA. In the case of a married taxpayer, AGI is the combined AGI of the couple. Married taxpayers filing a separate return are not eligible to make a conversion. Description of proposal The proposal would modify the definition of AGI to exclude required minimum distributions from the taxpayer's AGI solely for purposes of determining eligibility to convert from an IRA to a Roth IRA. As under present law, the required minimum distribution would not be eligible for conversion and would be includible in gross income. Effective date The proposal would be effective for taxable years beginning after December 31, 2004. D. Extension of IRS User Fees Present law The IRS provides written responses to questions of individuals, corporations, and organizations relating to their tax status or the effects of particular transactions for tax purposes in the form of ruling letters, determination letters, opinion letters, and other similar rulings or determinations. The IRS is directed by statute to establish a user fee program with respect to such rulings and determinations. Pursuant to this statutory authorization, the IRS establishes a schedule of user fees. The statutory authorization for the IRS use fee program is in effect for requests made before October 1, 2003 (P.L. 104-117). Description of proposal The proposal would extend the IRS user fee program for requests made before October 1, 2007. Effective date The proposal would be effective on the date of enactment. ESTIMATED REVENUE EFFECTS OF H.R. 2676, THE ``INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998,'' AS REPORTED BY THE SENATE COMMITTEE ON FINANCE AND MODIFIED BY THE ROTH FINANCING AMENDMENT [Fiscal Years 1998-2007, in millions of dollars] ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Provision Effective 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998-2002 2003-2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Title I. Executive Branch Governance.. .............................. (11)No Revenue Effect Title II. Electronic Filing........... .............................. (11)No Revenue Effect Title III. Taxpayer Bill of Rights 3: A. Burden of Proof................ eca DOE (\1\) -221 -232 -243 -256 -269 -282 -295 -311 -326 -953 -1,483 B. Proceedings by Taxpayers: 1. Expansion of authority to 180da DOE ........ -14 -15 -16 -17 -20 -21 -22 -23 -25 -62 -111 award costs and certain fees at prevailing rate and CFR rule 68 provision with net worth limitation (includes outlay effects). 2. Civil damages with respect DOE -2 -15 -25 -50 -30 -25 -25 -25 -25 -25 -122 -125 to unauthorized collection actions (includes outlay effects). 3. Increase in size of cases pca DOE permitted on small case calendar to $50,000. (11)No Revenue Effect 4. Expand Tax Court pca DOE -11 -15 -13 -7 -7 -7 -7 -8 -8 -8 -53 -38 jurisdiction to include responsible person penalties. 5. Actions for refund with rfa DOE respect to certain estates which have elected the installment method of payment. (11)Negligible Revenue Effect 6. Provide Tax Court pfa DOE (\1\) -5 -2 -2 -2 -2 -2 -2 -2 -2 -11 -10 jurisdiction to review adverse IRS determination of a bond issuer's tax-exempt status. C. Relief for Innocent Spouses and Persons with Disabilities: 1. Innocent spouse relief-- iaa & ulb DOE -58 -350 -288 -273 -346 -480 -608 -773 -910 -1,071 -1,315 -3,842 innocent spouses would be able to elect to be liable only for tax attributable to their income (assumes no interaction with any other proposal; includes anti-abuse rule; not innocent if have actual knowledge of understatement of tax). 2. Reports on collection bi 1999 activity against spouses. (11)No Revenue Effect 3. Suspension of statute of (\2\) -10 -70 -35 -15 -16 -17 -18 -19 -20 -21 -146 -95 limitations on filing refund claims during periods of disability. 4. Require the IRS to send -nma DOE separate notification to both spouses by certified mail. (11)No Revenue Effect D. Provisions Relating to Interest and Penalties: 1. Elimination of interest cqba DOE -(\1\) -9 -28 -42 -54 -57 -60 -63 -66 -69 -134 -315 rate differential on overlapping periods of interest on income tax overpayments and underpayments. 2. Increase refund interest cqba DOE -5 -51 -54 -56 -59 -62 -65 -69 -72 -76 -225 -344 rate to Applicable Federal Rate (``AFR'') + 3 for individual taxpayers (includes outlay effects) \3\. 3. Elimination of penalty on iapma DOE -29 -272 -287 -302 -317 -338 -354 -372 -390 -410 -1,207 -1,864 individual's failure to pay during installment agreements (for individuals and timely filed returns only). 4. Mitigations of failure to dma 180da DOE ........ -47 -64 -64 -65 -66 -66 -67 -68 -68 -240 -335 deposit penalty cascading (all taxpayers). [[Page S4382]] 5. Suspend accrual of interest tyea DOE ........ ........ -358 -428 -482 -514 -609 -615 -622 -628 -1,268 -2,988 and penalties if IRS fails to contact taxpayer within 12 months after a timely-filed return (except for fraud and criminal penalties). 6. Notices of interest and na 180da DOE penalties must show computation. (11)No Revenue Effect 7. Require management to pa 180da DOE approve non-computer generated penalties (excluding failure to file, pay, or estimated tax payment). (11)Negligible Revenue Effect E. Protections for Taxpayers Subject to Audit or Collection: 1. Due process for IRS caia 6ma DOE ........ -45 -1 -1 -1 -1 -1 -1 -1 -1 -48 -5 collection actions. 2. Extend the attorney client DOE (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) privilege to accountants and other tax practitioners for tax advice of accountant and other tax practitioners. 3. Expand the Taxpayer DOE (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\4\) (\4\) Advocate's authority to issue taxpayer assistance orders. 4. Limitation on financial DOE status audit techniques. (11)No Revenue Effect 5. IRS summons of computer sia DOE & pfsib DOE ........ -26 -32 -39 -45 -53 -61 -66 -72 -74 -142 -326 source code. 6. Prohibition on extension of (\6\) -6 -44 -38 -31 -25 -25 -25 -25 -25 -25 -144 -125 statute of limitations for collection beyond 10 years with estate tax exception. 7. Notice of deficiency to nma 12/31/98 specify deadlines for filing Tax Court petition. (11)Negligible Revenue Effect 8. Refund or credit of DOE overpayments before final determination. (11)Negligible Revenue Effect 9. Prohibition on improper DOE threat of audit activity for tip reporting. (11)No Revenue Effect 10. Codify existing IRS DOE procedures relating to appeal of examinations and collections and increase independence of appeals function. (11)No Revenue Effect 11. Appeals videoconferencing DOE alternative for rural areas. (11)No Revenue Effect 12. Require IRS to notify 180da DOE ........ (\4\) (\4\) (\4\ (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) taxpayer before contacting third parties regarding IRS examination or collection activities with respect to the taxpayer (does not apply for criminal cases). F. Disclosures to Taxpayers: 1. Explanation of joint and 180da DOE several liability. (11)No Revenue Effect 2. Explanation of taxpayers' 180da DOE ........ -13 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\5\) (\4\) rights in interviews with IRS. 3. Disclosure of criteria for 180da DOE examination selection. (11)No Revenue Effect 4. Explanations of appeals and 180da DOE collection process. (11)No Revenue Effect 5. Require IRS to explain 180da DOE reason for denial for refund. (11)No Revenue Effect 6. Statement to taxpayers with 180da DOE installment agreements. (11)No Revenue Effect G. Low-Income Taxpayer Clinics H. Other Taxpayer Rights Provisions: 1. Cataloging complaints of DOE IRS employee misconduct. (11)No Revenue Effect 2. Archive of records of IRS.. DOE (11)No Revenue Effect 3. Payment of taxes to the DOE U.S. Treasury\3\. (11)No Revenue Effect 4. Clarification of authority DOE of Secretary relating to the making of elections. (11)No Revenue Effect I. Studies: 1. Study of penalty and 9ma DOE interest administration and implementation. (11)No Revenue Effect 2. Study of confidentiality of 1ya DOE tax return information. (11)No Revenue Effect J. Limits on Seizure Authority: 1. IRS to implement approval caca DOE process for liens, levies, or seizures. (11)No Revenue Effect 2. Prohibit the IRS from Soa DOE selling taxpayer's property for less than the minimum bid. (11)No Revenue Effect 3. Require the IRS to provide soa DOE an accounting and receipt to the taxpayer (including the amount credited to the taxpayer's account) for property seized and sold. (11)Negligible Revenue Effect 4. Require the IRS to study DOE & 2 years and implement a uniform asset disposal mechanism for sales of seized property to prevent revenue officers from conducting sales. (11)No Revenue Effect 5. Increase the amount exempt cata DOE (\1\) -5 -5 -5 -5 -6 -6 -6 -6 -6 -21 -30 from levy to $10,000 for personal property and $5,000 for books and tools of trade, indexed for inflation. 6. Require the IRS to lia DOE immediately release a levy upon agreement that the amount is not collectible. (11)Negligible Revenue Effect 7. Codify IRS administrative DOE procedures for seizure of taxpayer's property. (11)No Revenue Effect 8. Suspend collection by levy tyba 12/31/98 during refund suit. (11)Negligible Revenue Effect 9. Require District Counsel taa DOE review of jeopardy and termination assessments and jeopardy levies. (11)Negligible Revenue Effect 10. Codify certain fair debt DOE collection procedures. (11)No Revenue Effect 11. Ensure availability of DOE installment agreements.

Major Actions:

All articles in Senate section

INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
(Senate - May 06, 1998)

Text of this article available as: TXT PDF [Pages S4379-S4405] INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 The PRESIDENT pro tempore. The clerk will report the pending business. The assistant legislative clerk read as follows: A bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to restructure and reform the Internal Revenue Service, and for other purposes. The Senate resumed consideration of the bill. Mr. ROTH addressed the Chair. The PRESIDENT pro tempore. The Senator from Delaware. Mr. ROTH. Mr. President, I further ask that at the conclusion or yielding back of time the Senate proceed to vote on the Roth amendment followed by a vote on the Kerrey amendment. The PRESIDING OFFICER (Mr. Allard). Without objection, it is so ordered. Mr. ROTH. Mr. President, before we begin debate today, I would like to offer some comments about the consent agreement that governs the offering of amendments. Basically, amendments that are to be in order must be relevant to the purpose of the IRS reform legislation, which covers three major areas. First, it reorganizes, restructures, and re-equips the IRS to make it more customer friendly in its tax-collecting mission. Second, it protects taxpayers from abusive practices and procedures of the IRS. Third, it deals with the management and conduct of IRS employees. These are the main purposes of the bill. While there are provisions dealing with electronic filing and congressional oversight, that is basically what this bill does. Title 6 of the bill is an entirely different matter. That title contains technical amendments that run the breadth of the tax code. In the House of Representatives, this title was reported by the Ways and Means Committee as a separate bill--which, in fact, it is. Title 6 is unrelated to IRS reform. It contains only technical corrections to previously enacted tax legislation that meet the following criteria: [[Page S4380]] First, they carry out the original intent of Congress in enacting the provision being amended. Second, by definition, the technical correction does not score as a revenue gain or loss. Third, the policy has been approved by the Treasury Department, the Joint Committee on Taxation, and the majority and minority of both the House Ways and Means Committee and the Senate Finance Committee. As a consequence, amendments which are relevant because of provisions in title 6 must meet a more difficult standard under the consent agreement. They must not only be relevant, but must be cleared but the two managers and the two leaders. And in clearing provisions that relate to title 6, I will apply the same criteria that the provisions of title 6 had to meet to become part of that title. I hope this explanation provides a clearer understanding of the application of the consent agreement to possible amendments. Amendment No. 2339 (Purpose: To ensure compliance with Federal budget requirements) Mr. ROTH. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Delaware (Mr. Roth) proposes an amendment numbered 2339. Mr. ROTH. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. The amendment is as follows: On page 401, strike line 3, and insert: ``beginning after December 31, 1998''. On page 415, between lines 16 and 17, insert: SEC. 5007. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY LOSS. (a) In General.--Subparagraph (B) of section 172(f)(1) (defining specified liability loss) is amended to read as follows: ``(B) Any amount (not described in subparagraph (A)) allowable as a deduction under this chapter which is attributable to a liability-- ``(i) under a Federal or State law requiring the reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore drilling platform, remediation of environmental contamination, or payment of workmen's compensation, and ``(ii) with respect to which the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year.'' (b) Effective Date.--The amendment made by this section shall apply to net operating losses arising in taxable years beginning after the date of the enactment of this Act. SEC. 5008. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS. (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based on modified adjusted gross income) is amended to read as follows: ``(i) adjusted gross income shall be determined in the same manner as under section 219(g)(3), except that-- ``(I) any amount included in gross income under subsection (d)(3) shall not be taken into account, and ``(II) any amount included in gross income by reason of a required distribution under a provision described in paragraph (5) shall not be taken into account for purposes of subparagraph (B)(i).'' (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 5009. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES. Subsection (c) of section 10511 of the Revenue Act of 1987 is amended by striking ``October 1, 2003'' and inserting ``October 1, 2007''. The PRESIDING OFFICER. Under the previous order, the amendment is now set aside. Does the Senator from Nebraska wish to offer his amendment? Amendment No. 2340 (Purpose: To ensure compliance with Federal budget requirements) Mr. KERREY. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Nebraska (Mr. Kerrey) proposes an amendment numbered 2340. Mr. KERREY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. (The text of the amendment is printed in today's Record under ``Amendments submitted.'') Mr. ROTH addressed the Chair. The PRESIDING OFFICER. The Senator from Delaware. The Senator from Delaware has 30 minutes under his control. Amendment No. 2339 Mr. ROTH. Mr. President, I yield myself 5 minutes. Mr. President, under the Senate's budget rules, the first year, first five years, and second five years of revenue losses in a tax bill must be offset with either mandatory savings or revenue increases. When the Finance Committee marked up the underlying bill, the first five years of revenue loss were offset. The second five years of revenue loss were not fully offset. The IRS Restructuring bill was short in excess of $9 billion in the last five years. During the markup, I indicated that I would work with the Budget Committee to attempt to find offsets so that the bill would be fully paid for over the last five years. Finding offsets was not an easy task. Every major revenue raiser I considered brought forth opposition from different members. After several weeks of reviewing options, I have developed a package, in consultation with the leadership. Mr. President, this pay-for package contains three new revenue raisers and a change to a revenue raiser in the underlying bill. The first revenue raiser comes from the Administration's budget. This proposal would tighten the definition of operating losses that are eligible for a special ten year carry back. Congress intended this treatment to be limited to a narrow category of activities. This proposal simply clarifies the types of losses eligible for this special treatment. This proposal is noncontroversial. The second new revenue raiser relates to the rollover rules for Roth IRAs. Under current law, individuals or married couples with adjusted gross income over $100,000 cannot rollover a traditional IRA into a Roth IRA. For purposes of the $100,000 test, minimum distributions which are required when an IRA beneficiary reaches 70\1/2\ are counted as income. This second new raiser would modify current law by excluding minimum distributions from the $100,000 test. The effect of this proposal is to allow more taxpayers, at age 70\1/2\ and above, to rollover from a traditional IRA to a Roth IRA. This proposal will enlarge the group of taxpayers who can enjoy the benefits of the Roth IRA. The third new raiser would extend the current law user fees charge by the IRS for private letter rulings. This extension would be effective for four years. Let me note that the IRS restructuring bill uses the balance on the pay-go scorecard of $406 million in the last five years as an offset. We have been informed by the Budget Committee staff that the use of the pay-go balance is appropriate in this instance. Finally, this amendment modifies an effective date of a revenue raiser in the Finance Committee bill. The proposal modified is the proposal to limit the carry back period of the foreign tax credit. Under this amendment, the effective date of the foreign tax credit raiser has been moved out one year to tax years beginning after 1998. Now, Mr. President, some on the other side may criticize the most significant new revenue raiser in this package. The target of their criticism is the proposal to allow more older taxpayers to convert to Roth IRAs. As I see it, those criticizing the rollover provision have the objective of limiting retirement savings choices for taxpayers who reach the end of their working years. For taxpayers who reach 70\1/2\, the opponents of the rollover provision are saying those taxpayers should fall under a more restrictive rule than those taxpayers under 70\1/2\. If you are over 70\1/2\ and you are a middle income person who has a healthy IRA or pension plan, the opponents of the rollover provision are arguing you should not have the choice of a Roth IRA. Alan Greenspan says America's most important economic problem is its low savings rate. It is a problem that we must address. The rollover provision in this amendment is a small step toward resolving our number 1 economic problem. [[Page S4381]] Mr. President, I ask unanimous consent that a technical description of this amendment, and a revised revenue table for the IRS restructuring bill, prepared by the Joint Committee on Taxation, be printed in the Record. There being no objection, the material was ordered to be printed in the Record, as follows: Description of Roth Financing Amendment to the Internal Revenue Service Restructuring and Reform Act of 1998 as Reported by the Senate Committee on Finance a. foreign tax credit carryback and carryover periods (sec. 5002 of the bill) Under the bill, the provision is effective with respect to credits arising in taxable years ending after the date of enactment. Under the modification, the provision would be effective with respect to credits arising in taxable years beginning after December 31, 1998. b. restrict special net operating loss carryback rules for specified liability losses Present law Under present law, that portion of a net operating loss that qualifies as a ``specified liability loss'' may be carried back 10 years rather than being limited to the general two-year carryback period. A specified liability loss includes amounts allowable as a deduction with respect to product liability, and also certain liabilities that arise under Federal or State law or out of any tort of the taxpayer. In the case of a liability arising out of a Federal or State law, the act (or failure to act) giving rise to the liability must occur at least 3 years before the beginning of the taxable year. In the case of a liability arising out of a tort, the liability must arise out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurred at least 3 years before the beginning of the taxable year. A specified liability loss cannot exceed the amount of the net operating loss, and is only available to taxpayers that used an accrual method throughout the period that the acts (or failures to act) giving rise to the liability occurred. Description of proposal Under the proposal, specified liability losses would be defined and limited to include (in addition to product liability losses) only amounts allowable as a deduction that are attributable to a liability that arises under Federal or State law for reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore oil drilling platform, remediation of environmental contamination, or payments arising under a workers' compensation statute, if the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year. No inference regarding the interpretation of the specified liability loss carryback rules under current law would be intended by this proposal. Effective date The proposal would be effective for net operating losses arising in taxable years beginning after the date of enactment. C. Modification of Minimum Distribution Requirements to Determine AGI for Roth IRA Conversions Present law Under present law, uniform minimum distribution rules generally apply to all types of tax-favored retirement vehicles, including qualified retirement plans and annuities, individual retirement arrangements (``IRAs'') other than Roth IRAs, and tax-sheltered annuities (sec 403(b)). Under present law, distributions are required to begin no later than the participant's required beginning date (sec. 401(a)(9)). The required beginning date means the April 1 of the calendar year following the later of (1) the calendar year in which the employee attains age 70\1/2\, or (2) the calendar year in which the employee retires. In the case of an employee who is a 5-percent owner (as defined in section 416), the required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 70\1/2\. The Internal Revenue Service has issued extensive Regulations for purposes of calculating minimum distributions. In general, minimum distributions are includible in gross income in the year of distribution. An excise tax equal to 50 percent of the required distribution applies to the extent a required distribution is not made. Under present law, all or any part of amounts held in a deductible or nondeductible IRA may be converted into a Roth IRA. Only taxpayers with adjusted gross income (``AGI'') of $100,000 or less are eligible to convert an IRA into a Roth IRA. In the case of a married taxpayer, AGI is the combined AGI of the couple. Married taxpayers filing a separate return are not eligible to make a conversion. Description of proposal The proposal would modify the definition of AGI to exclude required minimum distributions from the taxpayer's AGI solely for purposes of determining eligibility to convert from an IRA to a Roth IRA. As under present law, the required minimum distribution would not be eligible for conversion and would be includible in gross income. Effective date The proposal would be effective for taxable years beginning after December 31, 2004. D. Extension of IRS User Fees Present law The IRS provides written responses to questions of individuals, corporations, and organizations relating to their tax status or the effects of particular transactions for tax purposes in the form of ruling letters, determination letters, opinion letters, and other similar rulings or determinations. The IRS is directed by statute to establish a user fee program with respect to such rulings and determinations. Pursuant to this statutory authorization, the IRS establishes a schedule of user fees. The statutory authorization for the IRS use fee program is in effect for requests made before October 1, 2003 (P.L. 104-117). Description of proposal The proposal would extend the IRS user fee program for requests made before October 1, 2007. Effective date The proposal would be effective on the date of enactment. ESTIMATED REVENUE EFFECTS OF H.R. 2676, THE ``INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998,'' AS REPORTED BY THE SENATE COMMITTEE ON FINANCE AND MODIFIED BY THE ROTH FINANCING AMENDMENT [Fiscal Years 1998-2007, in millions of dollars] ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Provision Effective 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998-2002 2003-2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Title I. Executive Branch Governance.. .............................. (11)No Revenue Effect Title II. Electronic Filing........... .............................. (11)No Revenue Effect Title III. Taxpayer Bill of Rights 3: A. Burden of Proof................ eca DOE (\1\) -221 -232 -243 -256 -269 -282 -295 -311 -326 -953 -1,483 B. Proceedings by Taxpayers: 1. Expansion of authority to 180da DOE ........ -14 -15 -16 -17 -20 -21 -22 -23 -25 -62 -111 award costs and certain fees at prevailing rate and CFR rule 68 provision with net worth limitation (includes outlay effects). 2. Civil damages with respect DOE -2 -15 -25 -50 -30 -25 -25 -25 -25 -25 -122 -125 to unauthorized collection actions (includes outlay effects). 3. Increase in size of cases pca DOE permitted on small case calendar to $50,000. (11)No Revenue Effect 4. Expand Tax Court pca DOE -11 -15 -13 -7 -7 -7 -7 -8 -8 -8 -53 -38 jurisdiction to include responsible person penalties. 5. Actions for refund with rfa DOE respect to certain estates which have elected the installment method of payment. (11)Negligible Revenue Effect 6. Provide Tax Court pfa DOE (\1\) -5 -2 -2 -2 -2 -2 -2 -2 -2 -11 -10 jurisdiction to review adverse IRS determination of a bond issuer's tax-exempt status. C. Relief for Innocent Spouses and Persons with Disabilities: 1. Innocent spouse relief-- iaa & ulb DOE -58 -350 -288 -273 -346 -480 -608 -773 -910 -1,071 -1,315 -3,842 innocent spouses would be able to elect to be liable only for tax attributable to their income (assumes no interaction with any other proposal; includes anti-abuse rule; not innocent if have actual knowledge of understatement of tax). 2. Reports on collection bi 1999 activity against spouses. (11)No Revenue Effect 3. Suspension of statute of (\2\) -10 -70 -35 -15 -16 -17 -18 -19 -20 -21 -146 -95 limitations on filing refund claims during periods of disability. 4. Require the IRS to send -nma DOE separate notification to both spouses by certified mail. (11)No Revenue Effect D. Provisions Relating to Interest and Penalties: 1. Elimination of interest cqba DOE -(\1\) -9 -28 -42 -54 -57 -60 -63 -66 -69 -134 -315 rate differential on overlapping periods of interest on income tax overpayments and underpayments. 2. Increase refund interest cqba DOE -5 -51 -54 -56 -59 -62 -65 -69 -72 -76 -225 -344 rate to Applicable Federal Rate (``AFR'') + 3 for individual taxpayers (includes outlay effects) \3\. 3. Elimination of penalty on iapma DOE -29 -272 -287 -302 -317 -338 -354 -372 -390 -410 -1,207 -1,864 individual's failure to pay during installment agreements (for individuals and timely filed returns only). 4. Mitigations of failure to dma 180da DOE ........ -47 -64 -64 -65 -66 -66 -67 -68 -68 -240 -335 deposit penalty cascading (all taxpayers). [[Page S4382]] 5. Suspend accrual of interest tyea DOE ........ ........ -358 -428 -482 -514 -609 -615 -622 -628 -1,268 -2,988 and penalties if IRS fails to contact taxpayer within 12 months after a timely-filed return (except for fraud and criminal penalties). 6. Notices of interest and na 180da DOE penalties must show computation. (11)No Revenue Effect 7. Require management to pa 180da DOE approve non-computer generated penalties (excluding failure to file, pay, or estimated tax payment). (11)Negligible Revenue Effect E. Protections for Taxpayers Subject to Audit or Collection: 1. Due process for IRS caia 6ma DOE ........ -45 -1 -1 -1 -1 -1 -1 -1 -1 -48 -5 collection actions. 2. Extend the attorney client DOE (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) privilege to accountants and other tax practitioners for tax advice of accountant and other tax practitioners. 3. Expand the Taxpayer DOE (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\4\) (\4\) Advocate's authority to issue taxpayer assistance orders. 4. Limitation on financial DOE status audit techniques. (11)No Revenue Effect 5. IRS summons of computer sia DOE & pfsib DOE ........ -26 -32 -39 -45 -53 -61 -66 -72 -74 -142 -326 source code. 6. Prohibition on extension of (\6\) -6 -44 -38 -31 -25 -25 -25 -25 -25 -25 -144 -125 statute of limitations for collection beyond 10 years with estate tax exception. 7. Notice of deficiency to nma 12/31/98 specify deadlines for filing Tax Court petition. (11)Negligible Revenue Effect 8. Refund or credit of DOE overpayments before final determination. (11)Negligible Revenue Effect 9. Prohibition on improper DOE threat of audit activity for tip reporting. (11)No Revenue Effect 10. Codify existing IRS DOE procedures relating to appeal of examinations and collections and increase independence of appeals function. (11)No Revenue Effect 11. Appeals videoconferencing DOE alternative for rural areas. (11)No Revenue Effect 12. Require IRS to notify 180da DOE ........ (\4\) (\4\) (\4\ (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) taxpayer before contacting third parties regarding IRS examination or collection activities with respect to the taxpayer (does not apply for criminal cases). F. Disclosures to Taxpayers: 1. Explanation of joint and 180da DOE several liability. (11)No Revenue Effect 2. Explanation of taxpayers' 180da DOE ........ -13 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\5\) (\4\) rights in interviews with IRS. 3. Disclosure of criteria for 180da DOE examination selection. (11)No Revenue Effect 4. Explanations of appeals and 180da DOE collection process. (11)No Revenue Effect 5. Require IRS to explain 180da DOE reason for denial for refund. (11)No Revenue Effect 6. Statement to taxpayers with 180da DOE installment agreements. (11)No Revenue Effect G. Low-Income Taxpayer Clinics H. Other Taxpayer Rights Provisions: 1. Cataloging complaints of DOE IRS employee misconduct. (11)No Revenue Effect 2. Archive of records of IRS.. DOE (11)No Revenue Effect 3. Payment of taxes to the DOE U.S. Treasury\3\. (11)No Revenue Effect 4. Clarification of authority DOE of Secretary relating to the making of elections. (11)No Revenue Effect I. Studies: 1. Study of penalty and 9ma DOE interest administration and implementation. (11)No Revenue Effect 2. Study of confidentiality of 1ya DOE tax return information. (11)No Revenue Effect J. Limits on Seizure Authority: 1. IRS to implement approval caca DOE process for liens, levies, or seizures. (11)No Revenue Effect 2. Prohibit the IRS from Soa DOE selling taxpayer's property for less than the minimum bid. (11)No Revenue Effect 3. Require the IRS to provide soa DOE an accounting and receipt to the taxpayer (including the amount credited to the taxpayer's account) for property seized and sold. (11)Negligible Revenue Effect 4. Require the IRS to study DOE & 2 years and implement a uniform asset disposal mechanism for sales of seized property to prevent revenue officers from conducting sales. (11)No Revenue Effect 5. Increase the amount exempt cata DOE (\1\) -5 -5 -5 -5 -6 -6 -6 -6 -6 -21 -30 from levy to $10,000 for personal property and $5,000 for books and tools of trade, indexed for inflation. 6. Require the IRS to lia DOE immediately release a levy upon agreement that the amount is not collectible. (11)Negligible Revenue Effect 7. Codify IRS administrative DOE procedures for seizure of taxpayer's property. (11)No Revenue Effect 8. Suspend collection by levy tyba 12/31/98 during refund suit. (11)Negligible Revenue Effect 9. Require District Counsel taa DOE review of jeopardy and termination assessments and jeopardy levies. (11)Negligible Revenue Effect 10. Codify certain fair debt DOE collection procedures. (11)No Revenue Effect 11. Ensure availability of DOE installment agreements.

Summary:

All articles in Senate section

INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
(Senate - May 06, 1998)

Text of this article available as: TXT PDF [Pages S4379-S4405] INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 The PRESIDENT pro tempore. The clerk will report the pending business. The assistant legislative clerk read as follows: A bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to restructure and reform the Internal Revenue Service, and for other purposes. The Senate resumed consideration of the bill. Mr. ROTH addressed the Chair. The PRESIDENT pro tempore. The Senator from Delaware. Mr. ROTH. Mr. President, I further ask that at the conclusion or yielding back of time the Senate proceed to vote on the Roth amendment followed by a vote on the Kerrey amendment. The PRESIDING OFFICER (Mr. Allard). Without objection, it is so ordered. Mr. ROTH. Mr. President, before we begin debate today, I would like to offer some comments about the consent agreement that governs the offering of amendments. Basically, amendments that are to be in order must be relevant to the purpose of the IRS reform legislation, which covers three major areas. First, it reorganizes, restructures, and re-equips the IRS to make it more customer friendly in its tax-collecting mission. Second, it protects taxpayers from abusive practices and procedures of the IRS. Third, it deals with the management and conduct of IRS employees. These are the main purposes of the bill. While there are provisions dealing with electronic filing and congressional oversight, that is basically what this bill does. Title 6 of the bill is an entirely different matter. That title contains technical amendments that run the breadth of the tax code. In the House of Representatives, this title was reported by the Ways and Means Committee as a separate bill--which, in fact, it is. Title 6 is unrelated to IRS reform. It contains only technical corrections to previously enacted tax legislation that meet the following criteria: [[Page S4380]] First, they carry out the original intent of Congress in enacting the provision being amended. Second, by definition, the technical correction does not score as a revenue gain or loss. Third, the policy has been approved by the Treasury Department, the Joint Committee on Taxation, and the majority and minority of both the House Ways and Means Committee and the Senate Finance Committee. As a consequence, amendments which are relevant because of provisions in title 6 must meet a more difficult standard under the consent agreement. They must not only be relevant, but must be cleared but the two managers and the two leaders. And in clearing provisions that relate to title 6, I will apply the same criteria that the provisions of title 6 had to meet to become part of that title. I hope this explanation provides a clearer understanding of the application of the consent agreement to possible amendments. Amendment No. 2339 (Purpose: To ensure compliance with Federal budget requirements) Mr. ROTH. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Delaware (Mr. Roth) proposes an amendment numbered 2339. Mr. ROTH. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. The amendment is as follows: On page 401, strike line 3, and insert: ``beginning after December 31, 1998''. On page 415, between lines 16 and 17, insert: SEC. 5007. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY LOSS. (a) In General.--Subparagraph (B) of section 172(f)(1) (defining specified liability loss) is amended to read as follows: ``(B) Any amount (not described in subparagraph (A)) allowable as a deduction under this chapter which is attributable to a liability-- ``(i) under a Federal or State law requiring the reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore drilling platform, remediation of environmental contamination, or payment of workmen's compensation, and ``(ii) with respect to which the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year.'' (b) Effective Date.--The amendment made by this section shall apply to net operating losses arising in taxable years beginning after the date of the enactment of this Act. SEC. 5008. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS. (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based on modified adjusted gross income) is amended to read as follows: ``(i) adjusted gross income shall be determined in the same manner as under section 219(g)(3), except that-- ``(I) any amount included in gross income under subsection (d)(3) shall not be taken into account, and ``(II) any amount included in gross income by reason of a required distribution under a provision described in paragraph (5) shall not be taken into account for purposes of subparagraph (B)(i).'' (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 5009. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES. Subsection (c) of section 10511 of the Revenue Act of 1987 is amended by striking ``October 1, 2003'' and inserting ``October 1, 2007''. The PRESIDING OFFICER. Under the previous order, the amendment is now set aside. Does the Senator from Nebraska wish to offer his amendment? Amendment No. 2340 (Purpose: To ensure compliance with Federal budget requirements) Mr. KERREY. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Nebraska (Mr. Kerrey) proposes an amendment numbered 2340. Mr. KERREY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. (The text of the amendment is printed in today's Record under ``Amendments submitted.'') Mr. ROTH addressed the Chair. The PRESIDING OFFICER. The Senator from Delaware. The Senator from Delaware has 30 minutes under his control. Amendment No. 2339 Mr. ROTH. Mr. President, I yield myself 5 minutes. Mr. President, under the Senate's budget rules, the first year, first five years, and second five years of revenue losses in a tax bill must be offset with either mandatory savings or revenue increases. When the Finance Committee marked up the underlying bill, the first five years of revenue loss were offset. The second five years of revenue loss were not fully offset. The IRS Restructuring bill was short in excess of $9 billion in the last five years. During the markup, I indicated that I would work with the Budget Committee to attempt to find offsets so that the bill would be fully paid for over the last five years. Finding offsets was not an easy task. Every major revenue raiser I considered brought forth opposition from different members. After several weeks of reviewing options, I have developed a package, in consultation with the leadership. Mr. President, this pay-for package contains three new revenue raisers and a change to a revenue raiser in the underlying bill. The first revenue raiser comes from the Administration's budget. This proposal would tighten the definition of operating losses that are eligible for a special ten year carry back. Congress intended this treatment to be limited to a narrow category of activities. This proposal simply clarifies the types of losses eligible for this special treatment. This proposal is noncontroversial. The second new revenue raiser relates to the rollover rules for Roth IRAs. Under current law, individuals or married couples with adjusted gross income over $100,000 cannot rollover a traditional IRA into a Roth IRA. For purposes of the $100,000 test, minimum distributions which are required when an IRA beneficiary reaches 70\1/2\ are counted as income. This second new raiser would modify current law by excluding minimum distributions from the $100,000 test. The effect of this proposal is to allow more taxpayers, at age 70\1/2\ and above, to rollover from a traditional IRA to a Roth IRA. This proposal will enlarge the group of taxpayers who can enjoy the benefits of the Roth IRA. The third new raiser would extend the current law user fees charge by the IRS for private letter rulings. This extension would be effective for four years. Let me note that the IRS restructuring bill uses the balance on the pay-go scorecard of $406 million in the last five years as an offset. We have been informed by the Budget Committee staff that the use of the pay-go balance is appropriate in this instance. Finally, this amendment modifies an effective date of a revenue raiser in the Finance Committee bill. The proposal modified is the proposal to limit the carry back period of the foreign tax credit. Under this amendment, the effective date of the foreign tax credit raiser has been moved out one year to tax years beginning after 1998. Now, Mr. President, some on the other side may criticize the most significant new revenue raiser in this package. The target of their criticism is the proposal to allow more older taxpayers to convert to Roth IRAs. As I see it, those criticizing the rollover provision have the objective of limiting retirement savings choices for taxpayers who reach the end of their working years. For taxpayers who reach 70\1/2\, the opponents of the rollover provision are saying those taxpayers should fall under a more restrictive rule than those taxpayers under 70\1/2\. If you are over 70\1/2\ and you are a middle income person who has a healthy IRA or pension plan, the opponents of the rollover provision are arguing you should not have the choice of a Roth IRA. Alan Greenspan says America's most important economic problem is its low savings rate. It is a problem that we must address. The rollover provision in this amendment is a small step toward resolving our number 1 economic problem. [[Page S4381]] Mr. President, I ask unanimous consent that a technical description of this amendment, and a revised revenue table for the IRS restructuring bill, prepared by the Joint Committee on Taxation, be printed in the Record. There being no objection, the material was ordered to be printed in the Record, as follows: Description of Roth Financing Amendment to the Internal Revenue Service Restructuring and Reform Act of 1998 as Reported by the Senate Committee on Finance a. foreign tax credit carryback and carryover periods (sec. 5002 of the bill) Under the bill, the provision is effective with respect to credits arising in taxable years ending after the date of enactment. Under the modification, the provision would be effective with respect to credits arising in taxable years beginning after December 31, 1998. b. restrict special net operating loss carryback rules for specified liability losses Present law Under present law, that portion of a net operating loss that qualifies as a ``specified liability loss'' may be carried back 10 years rather than being limited to the general two-year carryback period. A specified liability loss includes amounts allowable as a deduction with respect to product liability, and also certain liabilities that arise under Federal or State law or out of any tort of the taxpayer. In the case of a liability arising out of a Federal or State law, the act (or failure to act) giving rise to the liability must occur at least 3 years before the beginning of the taxable year. In the case of a liability arising out of a tort, the liability must arise out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurred at least 3 years before the beginning of the taxable year. A specified liability loss cannot exceed the amount of the net operating loss, and is only available to taxpayers that used an accrual method throughout the period that the acts (or failures to act) giving rise to the liability occurred. Description of proposal Under the proposal, specified liability losses would be defined and limited to include (in addition to product liability losses) only amounts allowable as a deduction that are attributable to a liability that arises under Federal or State law for reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore oil drilling platform, remediation of environmental contamination, or payments arising under a workers' compensation statute, if the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year. No inference regarding the interpretation of the specified liability loss carryback rules under current law would be intended by this proposal. Effective date The proposal would be effective for net operating losses arising in taxable years beginning after the date of enactment. C. Modification of Minimum Distribution Requirements to Determine AGI for Roth IRA Conversions Present law Under present law, uniform minimum distribution rules generally apply to all types of tax-favored retirement vehicles, including qualified retirement plans and annuities, individual retirement arrangements (``IRAs'') other than Roth IRAs, and tax-sheltered annuities (sec 403(b)). Under present law, distributions are required to begin no later than the participant's required beginning date (sec. 401(a)(9)). The required beginning date means the April 1 of the calendar year following the later of (1) the calendar year in which the employee attains age 70\1/2\, or (2) the calendar year in which the employee retires. In the case of an employee who is a 5-percent owner (as defined in section 416), the required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 70\1/2\. The Internal Revenue Service has issued extensive Regulations for purposes of calculating minimum distributions. In general, minimum distributions are includible in gross income in the year of distribution. An excise tax equal to 50 percent of the required distribution applies to the extent a required distribution is not made. Under present law, all or any part of amounts held in a deductible or nondeductible IRA may be converted into a Roth IRA. Only taxpayers with adjusted gross income (``AGI'') of $100,000 or less are eligible to convert an IRA into a Roth IRA. In the case of a married taxpayer, AGI is the combined AGI of the couple. Married taxpayers filing a separate return are not eligible to make a conversion. Description of proposal The proposal would modify the definition of AGI to exclude required minimum distributions from the taxpayer's AGI solely for purposes of determining eligibility to convert from an IRA to a Roth IRA. As under present law, the required minimum distribution would not be eligible for conversion and would be includible in gross income. Effective date The proposal would be effective for taxable years beginning after December 31, 2004. D. Extension of IRS User Fees Present law The IRS provides written responses to questions of individuals, corporations, and organizations relating to their tax status or the effects of particular transactions for tax purposes in the form of ruling letters, determination letters, opinion letters, and other similar rulings or determinations. The IRS is directed by statute to establish a user fee program with respect to such rulings and determinations. Pursuant to this statutory authorization, the IRS establishes a schedule of user fees. The statutory authorization for the IRS use fee program is in effect for requests made before October 1, 2003 (P.L. 104-117). Description of proposal The proposal would extend the IRS user fee program for requests made before October 1, 2007. Effective date The proposal would be effective on the date of enactment. ESTIMATED REVENUE EFFECTS OF H.R. 2676, THE ``INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998,'' AS REPORTED BY THE SENATE COMMITTEE ON FINANCE AND MODIFIED BY THE ROTH FINANCING AMENDMENT [Fiscal Years 1998-2007, in millions of dollars] ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Provision Effective 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998-2002 2003-2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Title I. Executive Branch Governance.. .............................. (11)No Revenue Effect Title II. Electronic Filing........... .............................. (11)No Revenue Effect Title III. Taxpayer Bill of Rights 3: A. Burden of Proof................ eca DOE (\1\) -221 -232 -243 -256 -269 -282 -295 -311 -326 -953 -1,483 B. Proceedings by Taxpayers: 1. Expansion of authority to 180da DOE ........ -14 -15 -16 -17 -20 -21 -22 -23 -25 -62 -111 award costs and certain fees at prevailing rate and CFR rule 68 provision with net worth limitation (includes outlay effects). 2. Civil damages with respect DOE -2 -15 -25 -50 -30 -25 -25 -25 -25 -25 -122 -125 to unauthorized collection actions (includes outlay effects). 3. Increase in size of cases pca DOE permitted on small case calendar to $50,000. (11)No Revenue Effect 4. Expand Tax Court pca DOE -11 -15 -13 -7 -7 -7 -7 -8 -8 -8 -53 -38 jurisdiction to include responsible person penalties. 5. Actions for refund with rfa DOE respect to certain estates which have elected the installment method of payment. (11)Negligible Revenue Effect 6. Provide Tax Court pfa DOE (\1\) -5 -2 -2 -2 -2 -2 -2 -2 -2 -11 -10 jurisdiction to review adverse IRS determination of a bond issuer's tax-exempt status. C. Relief for Innocent Spouses and Persons with Disabilities: 1. Innocent spouse relief-- iaa & ulb DOE -58 -350 -288 -273 -346 -480 -608 -773 -910 -1,071 -1,315 -3,842 innocent spouses would be able to elect to be liable only for tax attributable to their income (assumes no interaction with any other proposal; includes anti-abuse rule; not innocent if have actual knowledge of understatement of tax). 2. Reports on collection bi 1999 activity against spouses. (11)No Revenue Effect 3. Suspension of statute of (\2\) -10 -70 -35 -15 -16 -17 -18 -19 -20 -21 -146 -95 limitations on filing refund claims during periods of disability. 4. Require the IRS to send -nma DOE separate notification to both spouses by certified mail. (11)No Revenue Effect D. Provisions Relating to Interest and Penalties: 1. Elimination of interest cqba DOE -(\1\) -9 -28 -42 -54 -57 -60 -63 -66 -69 -134 -315 rate differential on overlapping periods of interest on income tax overpayments and underpayments. 2. Increase refund interest cqba DOE -5 -51 -54 -56 -59 -62 -65 -69 -72 -76 -225 -344 rate to Applicable Federal Rate (``AFR'') + 3 for individual taxpayers (includes outlay effects) \3\. 3. Elimination of penalty on iapma DOE -29 -272 -287 -302 -317 -338 -354 -372 -390 -410 -1,207 -1,864 individual's failure to pay during installment agreements (for individuals and timely filed returns only). 4. Mitigations of failure to dma 180da DOE ........ -47 -64 -64 -65 -66 -66 -67 -68 -68 -240 -335 deposit penalty cascading (all taxpayers). [[Page S4382]] 5. Suspend accrual of interest tyea DOE ........ ........ -358 -428 -482 -514 -609 -615 -622 -628 -1,268 -2,988 and penalties if IRS fails to contact taxpayer within 12 months after a timely-filed return (except for fraud and criminal penalties). 6. Notices of interest and na 180da DOE penalties must show computation. (11)No Revenue Effect 7. Require management to pa 180da DOE approve non-computer generated penalties (excluding failure to file, pay, or estimated tax payment). (11)Negligible Revenue Effect E. Protections for Taxpayers Subject to Audit or Collection: 1. Due process for IRS caia 6ma DOE ........ -45 -1 -1 -1 -1 -1 -1 -1 -1 -48 -5 collection actions. 2. Extend the attorney client DOE (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) privilege to accountants and other tax practitioners for tax advice of accountant and other tax practitioners. 3. Expand the Taxpayer DOE (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\4\) (\4\) Advocate's authority to issue taxpayer assistance orders. 4. Limitation on financial DOE status audit techniques. (11)No Revenue Effect 5. IRS summons of computer sia DOE & pfsib DOE ........ -26 -32 -39 -45 -53 -61 -66 -72 -74 -142 -326 source code. 6. Prohibition on extension of (\6\) -6 -44 -38 -31 -25 -25 -25 -25 -25 -25 -144 -125 statute of limitations for collection beyond 10 years with estate tax exception. 7. Notice of deficiency to nma 12/31/98 specify deadlines for filing Tax Court petition. (11)Negligible Revenue Effect 8. Refund or credit of DOE overpayments before final determination. (11)Negligible Revenue Effect 9. Prohibition on improper DOE threat of audit activity for tip reporting. (11)No Revenue Effect 10. Codify existing IRS DOE procedures relating to appeal of examinations and collections and increase independence of appeals function. (11)No Revenue Effect 11. Appeals videoconferencing DOE alternative for rural areas. (11)No Revenue Effect 12. Require IRS to notify 180da DOE ........ (\4\) (\4\) (\4\ (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) taxpayer before contacting third parties regarding IRS examination or collection activities with respect to the taxpayer (does not apply for criminal cases). F. Disclosures to Taxpayers: 1. Explanation of joint and 180da DOE several liability. (11)No Revenue Effect 2. Explanation of taxpayers' 180da DOE ........ -13 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\5\) (\4\) rights in interviews with IRS. 3. Disclosure of criteria for 180da DOE examination selection. (11)No Revenue Effect 4. Explanations of appeals and 180da DOE collection process. (11)No Revenue Effect 5. Require IRS to explain 180da DOE reason for denial for refund. (11)No Revenue Effect 6. Statement to taxpayers with 180da DOE installment agreements. (11)No Revenue Effect G. Low-Income Taxpayer Clinics H. Other Taxpayer Rights Provisions: 1. Cataloging complaints of DOE IRS employee misconduct. (11)No Revenue Effect 2. Archive of records of IRS.. DOE (11)No Revenue Effect 3. Payment of taxes to the DOE U.S. Treasury\3\. (11)No Revenue Effect 4. Clarification of authority DOE of Secretary relating to the making of elections. (11)No Revenue Effect I. Studies: 1. Study of penalty and 9ma DOE interest administration and implementation. (11)No Revenue Effect 2. Study of confidentiality of 1ya DOE tax return information. (11)No Revenue Effect J. Limits on Seizure Authority: 1. IRS to implement approval caca DOE process for liens, levies, or seizures. (11)No Revenue Effect 2. Prohibit the IRS from Soa DOE selling taxpayer's property for less than the minimum bid. (11)No Revenue Effect 3. Require the IRS to provide soa DOE an accounting and receipt to the taxpayer (including the amount credited to the taxpayer's account) for property seized and sold. (11)Negligible Revenue Effect 4. Require the IRS to study DOE & 2 years and implement a uniform asset disposal mechanism for sales of seized property to prevent revenue officers from conducting sales. (11)No Revenue Effect 5. Increase the amount exempt cata DOE (\1\) -5 -5 -5 -5 -6 -6 -6 -6 -6 -21 -30 from levy to $10,000 for personal property and $5,000 for books and tools of trade, indexed for inflation. 6. Require the IRS to lia DOE immediately release a levy upon agreement that the amount is not collectible. (11)Negligible Revenue Effect 7. Codify IRS administrative DOE procedures for seizure of taxpayer's property. (11)No Revenue Effect 8. Suspend collection by levy tyba 12/31/98 during refund suit. (11)Negligible Revenue Effect 9. Require District Counsel taa DOE review of jeopardy and termination assessments and jeopardy levies. (11)Negligible Revenue Effect 10. Codify certain fair debt DOE collection procedures. (11)No Revenue Effect 11. Ensure availability of DOE installment agreements.

Major Actions:

All articles in Senate section

INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
(Senate - May 06, 1998)

Text of this article available as: TXT PDF [Pages S4379-S4405] INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 The PRESIDENT pro tempore. The clerk will report the pending business. The assistant legislative clerk read as follows: A bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to restructure and reform the Internal Revenue Service, and for other purposes. The Senate resumed consideration of the bill. Mr. ROTH addressed the Chair. The PRESIDENT pro tempore. The Senator from Delaware. Mr. ROTH. Mr. President, I further ask that at the conclusion or yielding back of time the Senate proceed to vote on the Roth amendment followed by a vote on the Kerrey amendment. The PRESIDING OFFICER (Mr. Allard). Without objection, it is so ordered. Mr. ROTH. Mr. President, before we begin debate today, I would like to offer some comments about the consent agreement that governs the offering of amendments. Basically, amendments that are to be in order must be relevant to the purpose of the IRS reform legislation, which covers three major areas. First, it reorganizes, restructures, and re-equips the IRS to make it more customer friendly in its tax-collecting mission. Second, it protects taxpayers from abusive practices and procedures of the IRS. Third, it deals with the management and conduct of IRS employees. These are the main purposes of the bill. While there are provisions dealing with electronic filing and congressional oversight, that is basically what this bill does. Title 6 of the bill is an entirely different matter. That title contains technical amendments that run the breadth of the tax code. In the House of Representatives, this title was reported by the Ways and Means Committee as a separate bill--which, in fact, it is. Title 6 is unrelated to IRS reform. It contains only technical corrections to previously enacted tax legislation that meet the following criteria: [[Page S4380]] First, they carry out the original intent of Congress in enacting the provision being amended. Second, by definition, the technical correction does not score as a revenue gain or loss. Third, the policy has been approved by the Treasury Department, the Joint Committee on Taxation, and the majority and minority of both the House Ways and Means Committee and the Senate Finance Committee. As a consequence, amendments which are relevant because of provisions in title 6 must meet a more difficult standard under the consent agreement. They must not only be relevant, but must be cleared but the two managers and the two leaders. And in clearing provisions that relate to title 6, I will apply the same criteria that the provisions of title 6 had to meet to become part of that title. I hope this explanation provides a clearer understanding of the application of the consent agreement to possible amendments. Amendment No. 2339 (Purpose: To ensure compliance with Federal budget requirements) Mr. ROTH. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Delaware (Mr. Roth) proposes an amendment numbered 2339. Mr. ROTH. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. The amendment is as follows: On page 401, strike line 3, and insert: ``beginning after December 31, 1998''. On page 415, between lines 16 and 17, insert: SEC. 5007. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY LOSS. (a) In General.--Subparagraph (B) of section 172(f)(1) (defining specified liability loss) is amended to read as follows: ``(B) Any amount (not described in subparagraph (A)) allowable as a deduction under this chapter which is attributable to a liability-- ``(i) under a Federal or State law requiring the reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore drilling platform, remediation of environmental contamination, or payment of workmen's compensation, and ``(ii) with respect to which the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year.'' (b) Effective Date.--The amendment made by this section shall apply to net operating losses arising in taxable years beginning after the date of the enactment of this Act. SEC. 5008. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS. (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based on modified adjusted gross income) is amended to read as follows: ``(i) adjusted gross income shall be determined in the same manner as under section 219(g)(3), except that-- ``(I) any amount included in gross income under subsection (d)(3) shall not be taken into account, and ``(II) any amount included in gross income by reason of a required distribution under a provision described in paragraph (5) shall not be taken into account for purposes of subparagraph (B)(i).'' (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 5009. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES. Subsection (c) of section 10511 of the Revenue Act of 1987 is amended by striking ``October 1, 2003'' and inserting ``October 1, 2007''. The PRESIDING OFFICER. Under the previous order, the amendment is now set aside. Does the Senator from Nebraska wish to offer his amendment? Amendment No. 2340 (Purpose: To ensure compliance with Federal budget requirements) Mr. KERREY. Mr. President, I send an amendment to the desk. The PRESIDING OFFICER. The clerk will report. The assistant legislative clerk read as follows: The Senator from Nebraska (Mr. Kerrey) proposes an amendment numbered 2340. Mr. KERREY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with. The PRESIDING OFFICER. Without objection, it is so ordered. (The text of the amendment is printed in today's Record under ``Amendments submitted.'') Mr. ROTH addressed the Chair. The PRESIDING OFFICER. The Senator from Delaware. The Senator from Delaware has 30 minutes under his control. Amendment No. 2339 Mr. ROTH. Mr. President, I yield myself 5 minutes. Mr. President, under the Senate's budget rules, the first year, first five years, and second five years of revenue losses in a tax bill must be offset with either mandatory savings or revenue increases. When the Finance Committee marked up the underlying bill, the first five years of revenue loss were offset. The second five years of revenue loss were not fully offset. The IRS Restructuring bill was short in excess of $9 billion in the last five years. During the markup, I indicated that I would work with the Budget Committee to attempt to find offsets so that the bill would be fully paid for over the last five years. Finding offsets was not an easy task. Every major revenue raiser I considered brought forth opposition from different members. After several weeks of reviewing options, I have developed a package, in consultation with the leadership. Mr. President, this pay-for package contains three new revenue raisers and a change to a revenue raiser in the underlying bill. The first revenue raiser comes from the Administration's budget. This proposal would tighten the definition of operating losses that are eligible for a special ten year carry back. Congress intended this treatment to be limited to a narrow category of activities. This proposal simply clarifies the types of losses eligible for this special treatment. This proposal is noncontroversial. The second new revenue raiser relates to the rollover rules for Roth IRAs. Under current law, individuals or married couples with adjusted gross income over $100,000 cannot rollover a traditional IRA into a Roth IRA. For purposes of the $100,000 test, minimum distributions which are required when an IRA beneficiary reaches 70\1/2\ are counted as income. This second new raiser would modify current law by excluding minimum distributions from the $100,000 test. The effect of this proposal is to allow more taxpayers, at age 70\1/2\ and above, to rollover from a traditional IRA to a Roth IRA. This proposal will enlarge the group of taxpayers who can enjoy the benefits of the Roth IRA. The third new raiser would extend the current law user fees charge by the IRS for private letter rulings. This extension would be effective for four years. Let me note that the IRS restructuring bill uses the balance on the pay-go scorecard of $406 million in the last five years as an offset. We have been informed by the Budget Committee staff that the use of the pay-go balance is appropriate in this instance. Finally, this amendment modifies an effective date of a revenue raiser in the Finance Committee bill. The proposal modified is the proposal to limit the carry back period of the foreign tax credit. Under this amendment, the effective date of the foreign tax credit raiser has been moved out one year to tax years beginning after 1998. Now, Mr. President, some on the other side may criticize the most significant new revenue raiser in this package. The target of their criticism is the proposal to allow more older taxpayers to convert to Roth IRAs. As I see it, those criticizing the rollover provision have the objective of limiting retirement savings choices for taxpayers who reach the end of their working years. For taxpayers who reach 70\1/2\, the opponents of the rollover provision are saying those taxpayers should fall under a more restrictive rule than those taxpayers under 70\1/2\. If you are over 70\1/2\ and you are a middle income person who has a healthy IRA or pension plan, the opponents of the rollover provision are arguing you should not have the choice of a Roth IRA. Alan Greenspan says America's most important economic problem is its low savings rate. It is a problem that we must address. The rollover provision in this amendment is a small step toward resolving our number 1 economic problem. [[Page S4381]] Mr. President, I ask unanimous consent that a technical description of this amendment, and a revised revenue table for the IRS restructuring bill, prepared by the Joint Committee on Taxation, be printed in the Record. There being no objection, the material was ordered to be printed in the Record, as follows: Description of Roth Financing Amendment to the Internal Revenue Service Restructuring and Reform Act of 1998 as Reported by the Senate Committee on Finance a. foreign tax credit carryback and carryover periods (sec. 5002 of the bill) Under the bill, the provision is effective with respect to credits arising in taxable years ending after the date of enactment. Under the modification, the provision would be effective with respect to credits arising in taxable years beginning after December 31, 1998. b. restrict special net operating loss carryback rules for specified liability losses Present law Under present law, that portion of a net operating loss that qualifies as a ``specified liability loss'' may be carried back 10 years rather than being limited to the general two-year carryback period. A specified liability loss includes amounts allowable as a deduction with respect to product liability, and also certain liabilities that arise under Federal or State law or out of any tort of the taxpayer. In the case of a liability arising out of a Federal or State law, the act (or failure to act) giving rise to the liability must occur at least 3 years before the beginning of the taxable year. In the case of a liability arising out of a tort, the liability must arise out of a series of actions (or failures to act) over an extended period of time a substantial portion of which occurred at least 3 years before the beginning of the taxable year. A specified liability loss cannot exceed the amount of the net operating loss, and is only available to taxpayers that used an accrual method throughout the period that the acts (or failures to act) giving rise to the liability occurred. Description of proposal Under the proposal, specified liability losses would be defined and limited to include (in addition to product liability losses) only amounts allowable as a deduction that are attributable to a liability that arises under Federal or State law for reclamation of land, decommissioning of a nuclear power plant (or any unit thereof), dismantlement of an offshore oil drilling platform, remediation of environmental contamination, or payments arising under a workers' compensation statute, if the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year. No inference regarding the interpretation of the specified liability loss carryback rules under current law would be intended by this proposal. Effective date The proposal would be effective for net operating losses arising in taxable years beginning after the date of enactment. C. Modification of Minimum Distribution Requirements to Determine AGI for Roth IRA Conversions Present law Under present law, uniform minimum distribution rules generally apply to all types of tax-favored retirement vehicles, including qualified retirement plans and annuities, individual retirement arrangements (``IRAs'') other than Roth IRAs, and tax-sheltered annuities (sec 403(b)). Under present law, distributions are required to begin no later than the participant's required beginning date (sec. 401(a)(9)). The required beginning date means the April 1 of the calendar year following the later of (1) the calendar year in which the employee attains age 70\1/2\, or (2) the calendar year in which the employee retires. In the case of an employee who is a 5-percent owner (as defined in section 416), the required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 70\1/2\. The Internal Revenue Service has issued extensive Regulations for purposes of calculating minimum distributions. In general, minimum distributions are includible in gross income in the year of distribution. An excise tax equal to 50 percent of the required distribution applies to the extent a required distribution is not made. Under present law, all or any part of amounts held in a deductible or nondeductible IRA may be converted into a Roth IRA. Only taxpayers with adjusted gross income (``AGI'') of $100,000 or less are eligible to convert an IRA into a Roth IRA. In the case of a married taxpayer, AGI is the combined AGI of the couple. Married taxpayers filing a separate return are not eligible to make a conversion. Description of proposal The proposal would modify the definition of AGI to exclude required minimum distributions from the taxpayer's AGI solely for purposes of determining eligibility to convert from an IRA to a Roth IRA. As under present law, the required minimum distribution would not be eligible for conversion and would be includible in gross income. Effective date The proposal would be effective for taxable years beginning after December 31, 2004. D. Extension of IRS User Fees Present law The IRS provides written responses to questions of individuals, corporations, and organizations relating to their tax status or the effects of particular transactions for tax purposes in the form of ruling letters, determination letters, opinion letters, and other similar rulings or determinations. The IRS is directed by statute to establish a user fee program with respect to such rulings and determinations. Pursuant to this statutory authorization, the IRS establishes a schedule of user fees. The statutory authorization for the IRS use fee program is in effect for requests made before October 1, 2003 (P.L. 104-117). Description of proposal The proposal would extend the IRS user fee program for requests made before October 1, 2007. Effective date The proposal would be effective on the date of enactment. ESTIMATED REVENUE EFFECTS OF H.R. 2676, THE ``INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998,'' AS REPORTED BY THE SENATE COMMITTEE ON FINANCE AND MODIFIED BY THE ROTH FINANCING AMENDMENT [Fiscal Years 1998-2007, in millions of dollars] ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Provision Effective 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998-2002 2003-2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Title I. Executive Branch Governance.. .............................. (11)No Revenue Effect Title II. Electronic Filing........... .............................. (11)No Revenue Effect Title III. Taxpayer Bill of Rights 3: A. Burden of Proof................ eca DOE (\1\) -221 -232 -243 -256 -269 -282 -295 -311 -326 -953 -1,483 B. Proceedings by Taxpayers: 1. Expansion of authority to 180da DOE ........ -14 -15 -16 -17 -20 -21 -22 -23 -25 -62 -111 award costs and certain fees at prevailing rate and CFR rule 68 provision with net worth limitation (includes outlay effects). 2. Civil damages with respect DOE -2 -15 -25 -50 -30 -25 -25 -25 -25 -25 -122 -125 to unauthorized collection actions (includes outlay effects). 3. Increase in size of cases pca DOE permitted on small case calendar to $50,000. (11)No Revenue Effect 4. Expand Tax Court pca DOE -11 -15 -13 -7 -7 -7 -7 -8 -8 -8 -53 -38 jurisdiction to include responsible person penalties. 5. Actions for refund with rfa DOE respect to certain estates which have elected the installment method of payment. (11)Negligible Revenue Effect 6. Provide Tax Court pfa DOE (\1\) -5 -2 -2 -2 -2 -2 -2 -2 -2 -11 -10 jurisdiction to review adverse IRS determination of a bond issuer's tax-exempt status. C. Relief for Innocent Spouses and Persons with Disabilities: 1. Innocent spouse relief-- iaa & ulb DOE -58 -350 -288 -273 -346 -480 -608 -773 -910 -1,071 -1,315 -3,842 innocent spouses would be able to elect to be liable only for tax attributable to their income (assumes no interaction with any other proposal; includes anti-abuse rule; not innocent if have actual knowledge of understatement of tax). 2. Reports on collection bi 1999 activity against spouses. (11)No Revenue Effect 3. Suspension of statute of (\2\) -10 -70 -35 -15 -16 -17 -18 -19 -20 -21 -146 -95 limitations on filing refund claims during periods of disability. 4. Require the IRS to send -nma DOE separate notification to both spouses by certified mail. (11)No Revenue Effect D. Provisions Relating to Interest and Penalties: 1. Elimination of interest cqba DOE -(\1\) -9 -28 -42 -54 -57 -60 -63 -66 -69 -134 -315 rate differential on overlapping periods of interest on income tax overpayments and underpayments. 2. Increase refund interest cqba DOE -5 -51 -54 -56 -59 -62 -65 -69 -72 -76 -225 -344 rate to Applicable Federal Rate (``AFR'') + 3 for individual taxpayers (includes outlay effects) \3\. 3. Elimination of penalty on iapma DOE -29 -272 -287 -302 -317 -338 -354 -372 -390 -410 -1,207 -1,864 individual's failure to pay during installment agreements (for individuals and timely filed returns only). 4. Mitigations of failure to dma 180da DOE ........ -47 -64 -64 -65 -66 -66 -67 -68 -68 -240 -335 deposit penalty cascading (all taxpayers). [[Page S4382]] 5. Suspend accrual of interest tyea DOE ........ ........ -358 -428 -482 -514 -609 -615 -622 -628 -1,268 -2,988 and penalties if IRS fails to contact taxpayer within 12 months after a timely-filed return (except for fraud and criminal penalties). 6. Notices of interest and na 180da DOE penalties must show computation. (11)No Revenue Effect 7. Require management to pa 180da DOE approve non-computer generated penalties (excluding failure to file, pay, or estimated tax payment). (11)Negligible Revenue Effect E. Protections for Taxpayers Subject to Audit or Collection: 1. Due process for IRS caia 6ma DOE ........ -45 -1 -1 -1 -1 -1 -1 -1 -1 -48 -5 collection actions. 2. Extend the attorney client DOE (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) privilege to accountants and other tax practitioners for tax advice of accountant and other tax practitioners. 3. Expand the Taxpayer DOE (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\4\) (\4\) Advocate's authority to issue taxpayer assistance orders. 4. Limitation on financial DOE status audit techniques. (11)No Revenue Effect 5. IRS summons of computer sia DOE & pfsib DOE ........ -26 -32 -39 -45 -53 -61 -66 -72 -74 -142 -326 source code. 6. Prohibition on extension of (\6\) -6 -44 -38 -31 -25 -25 -25 -25 -25 -25 -144 -125 statute of limitations for collection beyond 10 years with estate tax exception. 7. Notice of deficiency to nma 12/31/98 specify deadlines for filing Tax Court petition. (11)Negligible Revenue Effect 8. Refund or credit of DOE overpayments before final determination. (11)Negligible Revenue Effect 9. Prohibition on improper DOE threat of audit activity for tip reporting. (11)No Revenue Effect 10. Codify existing IRS DOE procedures relating to appeal of examinations and collections and increase independence of appeals function. (11)No Revenue Effect 11. Appeals videoconferencing DOE alternative for rural areas. (11)No Revenue Effect 12. Require IRS to notify 180da DOE ........ (\4\) (\4\) (\4\ (\4\) (\4\) (\4\) (\4\) (\4\) (\4\) (\5\) (\5\) taxpayer before contacting third parties regarding IRS examination or collection activities with respect to the taxpayer (does not apply for criminal cases). F. Disclosures to Taxpayers: 1. Explanation of joint and 180da DOE several liability. (11)No Revenue Effect 2. Explanation of taxpayers' 180da DOE ........ -13 (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\5\) (\4\) rights in interviews with IRS. 3. Disclosure of criteria for 180da DOE examination selection. (11)No Revenue Effect 4. Explanations of appeals and 180da DOE collection process. (11)No Revenue Effect 5. Require IRS to explain 180da DOE reason for denial for refund. (11)No Revenue Effect 6. Statement to taxpayers with 180da DOE installment agreements. (11)No Revenue Effect G. Low-Income Taxpayer Clinics H. Other Taxpayer Rights Provisions: 1. Cataloging complaints of DOE IRS employee misconduct. (11)No Revenue Effect 2. Archive of records of IRS.. DOE (11)No Revenue Effect 3. Payment of taxes to the DOE U.S. Treasury\3\. (11)No Revenue Effect 4. Clarification of authority DOE of Secretary relating to the making of elections. (11)No Revenue Effect I. Studies: 1. Study of penalty and 9ma DOE interest administration and implementation. (11)No Revenue Effect 2. Study of confidentiality of 1ya DOE tax return information. (11)No Revenue Effect J. Limits on Seizure Authority: 1. IRS to implement approval caca DOE process for liens, levies, or seizures. (11)No Revenue Effect 2. Prohibit the IRS from Soa DOE selling taxpayer's property for less than the minimum bid. (11)No Revenue Effect 3. Require the IRS to provide soa DOE an accounting and receipt to the taxpayer (including the amount credited to the taxpayer's account) for property seized and sold. (11)Negligible Revenue Effect 4. Require the IRS to study DOE & 2 years and implement a uniform asset disposal mechanism for sales of seized property to prevent revenue officers from conducting sales. (11)No Revenue Effect 5. Increase the amount exempt cata DOE (\1\) -5 -5 -5 -5 -6 -6 -6 -6 -6 -21 -30 from levy to $10,000 for personal property and $5,000 for books and tools of trade, indexed for inflation. 6. Require the IRS to lia DOE immediately release a levy upon agreement that the amount is not collectible. (11)Negligible Revenue Effect 7. Codify IRS administrative DOE procedures for seizure of taxpayer's property. (11)No Revenue Effect 8. Suspend collection by levy tyba 12/31/98 during refund suit. (11)Negligible Revenue Effect 9. Require District Counsel taa DOE review of jeopardy and termination assessments and jeopardy levies. (11)Negligible Revenue Effect 10. Codify certain fair debt DOE collection procedures. (11)No Revenue Effect 11. Ensure availability of DOE installment agreements.