WASHINGTON – U.S. Senator John Cornyn (R-TX) today introduced the Small Business Taxpayer Bill of Rights Act, which would strengthen taxpayer protections against improper targeting and abuse by the Internal Revenue Service (IRS):

“Each year, Tax Day reminds us that small business owners must spend thousands of hours conforming to IRS requirements instead of boosting the economy and creating jobs,” said Sen. Cornyn. “This bill lowers the compliance burden, strengthens taxpayer protections, and ensures small businesses are not targeted for additional scrutiny based on their politics.”

U.S. Congressman David Kustoff (TN-08) introduced companion legislation in the House of Representatives.

Background:

The Small Business Taxpayer Bill of Rights Act would strengthen taxpayer protections by:

• Prohibiting secret conversations between IRS employees and the IRS Independent Office of Appeals when discussing a taxpayer’s case and makes a violation of this prohibition a fireable offense;
• Prohibiting the IRS Independent Office of Appeals from raising new issues or theories during a conference with taxpayers and the IRS, ensuring Appeals will be a neutral party;
• Requiring taxpayers’ consent before allowing IRS Counsel or compliance officials to participate in Appeals conference;
• Increasing the penalty on rogue IRS agents who commit extortion, fraud, or bribery;
• And adding additional protection against unnecessary lien foreclosures on a taxpayer’s home.

The legislation would protect taxpayers from improper IRS targeting by:

• Making it a fireable offense for the development or use by an IRS employee of any methodology that applies disproportionate scrutiny to any applicant who is applying for tax-exempt status based on the ideology expressed in the name or purpose of the organization;
• Requiring the Inspector General to review and consult with the IRS on any criteria it uses to select tax returns for audit, assessment, or any heightened scrutiny or review, to ensure that the criteria does not discriminate against taxpayers on the basis of race, religion, or political ideology;
• And requiring the IRS Commissioner to fire any IRS employee who violates taxpayers’ Constitutional rights, including their First Amendment rights.

The legislation would compensate taxpayers for IRS abuses by: 

• Allowing more small businesses to petition for attorney’s fees when a court determines the IRS’s legal actions are not substantially justified;
• Increasing the amount of civil damages and providing more time that small businesses can be awarded when the IRS recklessly or intentionally disregards the law or its own regulations;   
• Increasing the amount of civil damages a taxpayer can be awarded when their tax return information is unlawfully disclosed by the IRS;
• And compensating individuals for burdensome “No Change” National Research Program (NPP) audits.

Lastly, the legislation would lower the compliance burden for taxpayers by:

• Creating a new alternative dispute resolution procedure program that would allow taxpayers to request mediation by an independent, neutral party not employed by the IRS, allowing for a speedier and less costly resolution of audits;
• Giving small businesses the opportunity to become compliant without going out of business or firing workers because of the economic hardship faced by paying a harsh levy;
• And improving taxpayer access to the Offer-in-Compromise program by repealing partial payment requirement.