H.R. 6506: Taxpayer Due Process Enhancement Act

This bill, titled the Taxpayer Due Process Enhancement Act, proposes several changes to the Internal Revenue Code of 1986 regarding tax collections and taxpayer disputes. The main provisions of the bill are as follows:

1. Suspension of Period of Limitations on Filing Claims

The bill aims to change how the period of limitations works for taxpayers wishing to file claims for credit or refunds during collection action proceedings. Specifically:

• It allows the period during which a taxpayer can file a claim for credit or refund to be suspended while an ongoing dispute about a tax liability is being decided at a hearing.
• However, this suspension only applies to disputes that are formally raised and does not delay the period of limitations if the taxpayer misses certain deadlines or loses the right to contest the dispute.

2. Prohibition on Crediting Overpayments

The bill introduces a rule that prohibits the Internal Revenue Service (IRS) from applying any overpayment to a disputed tax liability during collection action proceedings unless the taxpayer agrees to it. Key points include:

• When a taxpayer properly requests a hearing regarding a disputed tax liability, that liability cannot be influenced by any overpayments until the dispute is resolved.
• The clarity of how levy hearing rules apply to lien hearings is also improved to ensure consistency in handling collections and disputes.

3. Expansion of Tax Court Jurisdiction

The bill expands the jurisdiction of the Tax Court regarding petitions filed by taxpayers. The major changes include:

• Taxpayers may petition the Tax Court for a review of both the determination made at the hearing and any underlying tax liabilities in question.
• The Tax Court would have the authority to review whether certain deadlines for petitions that are missed can be equitably tolled, meaning they could be extended under certain circumstances.
• This new jurisdiction applies regardless of what actions the IRS takes afterward concerning the collection of the disputed tax.

4. Effective Dates

The amendments in the bill would take effect based on specified conditions, which include:

• The changes to the filing period would apply to claims filed after the bill's enactment.
• The prohibition on crediting overpayments against disputed liabilities would apply to any applicable periods that extend beyond the enactment date.
• The expansion of the Tax Court’s jurisdiction applies to any petitions filed after the bill is enacted.

Relevant Companies

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