IRS Reform Legislation Advances in Congress

Mike Sorohan msorohan@mba.org

April 16, 2019

The first legislative reform to the Internal Revenue Service in nearly two decades took a major step last week in Congress.

H.R. 1957, the Taxpayer First Act of 2019 introduced by Rep. John Lewis, D-Ga., passed Apr. 9 by voice vote. Its Senate companion piece, S. 928, introduced by Sens. Charles Grassley, R-Iowa, and Ron Wyden, D-Ore.; was referred to the Senate Finance Committee.

Among its provisions, the bill (https://www.congress.gov/bill/116th-congress/house-bill/1957) includes Mortgage Bankers Association-supported language to automate the 4506T tax transcript process.

Ahead of a Senate Finance Committee hearing last week--the first step toward passage in the Senate--MBA submitted a letter supporting validation of income as an important component of sound residential mortgage lending.

"We strongly support the introduction of S. 928, the Senate companion to this important piece of legislation," MBA said. "The bill would provide necessary reforms for the IRS to restructure the agency, improve customer service and increase vital taxpayer protections."

MBA noted the bill includes language to automate the third-party income verification process. "Validation of income is an important component of sound residential mortgage lending, while automation will greatly enhance the customer experience by reducing the time needed for a lender to determine how to most suitably serve their clients," the letter said.

Other bill provisions:

--Establish the IRS Independent Office of Appeals to resolve federal tax controversies without litigation;

--Require the IRS to develop a comprehensive customer service strategy;

--Continue the IRS Free File Program;

--Exempt certain low-income taxpayers from payments required to submit an offer-in-compromise;

--Modify tax enforcement procedures that address issues such as the seizure of property, issuing a summons, joint liability, referral for private debt collection, and contacting third parties;

--Establish requirements for responding to Taxpayer Advocate Directives;

--Permanently authorize the Volunteer Income Tax Assistance Matching Grant Program;

--Modify procedures for whistle-blowers;

--Establish requirements for cybersecurity and identify protection;

--Prohibit the rehiring of certain IRS employees who were removed for misconduct;

--Allow the IRS to require additional taxpayers to file returns electronically; and

--Increase the penalty for failing to file a return.

The bill also requires the IRS Commissioner to appoint a Chief Information Officer, modifies the requirements for managing information technology and authorizes streamlined critical pay authority for certain IRS information technology positions.

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