I.          Introduction

On January 30, 2025, Mike Crapo (R-ID), the Chairman of the Senate Finance Committee, and Senator Ron Wyden (D-OR), the Ranking Member of the Senate Finance Committee released a discussion draft of the “Taxpayer Assistance and Service Act” (the “bill”), a bipartisan taxpayer rights bill intended to streamline tax compliance and procedure.[1]

Many of the provisions are based on recommendations by the Taxpayer Advocate Service, an independent organization within the Internal Revenue Service (the “IRS”).

The Senators request comments on the discussion draft of the bill by March 31, 2025.[2] This blog post summarizes the bill’s key provisions.  

II.        Summary of the Bill’s Key Provisions

a.         IRS Office of Appeals

The bill would include several provisions related to the IRS Independent Office of Appeals (“IRS Appeals”).

When a taxpayer receives a notice of deficiency (a “30-day letter’) from the IRS and disagrees with the IRS’ proposed adjustment(s), the taxpayer has the option, within 30 days of receiving the 30-day letter, to request an administrative appeal in IRS Appeals.[3] Many tax disputes are settled or compromised in IRS Appeals and without going to Tax Court. Section 7803(e)(4) provides that access to IRS Appeals is “generally available to all taxpayers”, but the regulations under section 7803(e)(4) provides a list of 24 exceptions to IRS Appeals’ consideration.[4]

In the IRS Appeals process, the taxpayer submits a protest of the IRS revenue agent’s findings, which the revenue agent submits to IRS Appeals (sometimes with the revenue agent’s rebuttal). The IRS Appeals officers review the protest and rebuttal, then request a conference to negotiate the settlement or compromise. IRS Appeals have the discretion to consider the “hazards of litigation”, or the probability that the revenue agent’s position would not be sustained in court. 

IRS Appeals functions as an independent organization within the IRS and is independent of the IRS office that proposed the adjustment. Further, the revenue agent and other IRS employees are generally prohibited from engaging in ex parte communications on substantive issues with IRS Appeals without the presence of the taxpayer or their representative.[5] Still, IRS Appeals reports directly to the Commissioner. In addition, IRS Appeals may not hire its own attorneys and, instead, receives advice from IRS Chief Counsel attorneys, who often attend initial conferences.

The Taxpayer Advocate Service has previously criticized the apparent lack of impartiality in IRS Appeals and has stated that for IRS Appeals to have its own independent legal counsel “would ensure that the IRS appeals process is free of agency influence in both reality and public perception, thereby bolstering taxpayer morale and confidence in the system’s impartiality.” 

The bill would authorize IRS Appeals to hire its own attorneys who report directly to the Chief of IRS Appeals (an official appointed by the Commissioner to supervise and direct IRS Appeals)[6] but would not otherwise change the role of Chief Counsel attorneys who provide advice to IRS Appeals.

Another provision in the bill would authorize IRS Appeals to directly hire candidates that are not IRS employees engaged in enforcement functions.

In addition, the bill would explicitly require IRS Appeals to evaluate and consider, “without exception”, all “hazards of litigation” in resolving tax disputes. As stated above, under current law, this is a discretionary right.

Finally, the bill would codify certain exceptions to taxpayers’ broad access to IRS Appeals, including:

• Disputes that do not involve liability for tax, penalties or additions thereto;
• Disputes based solely on the argument that a statute, regulation or other guidance is unconstitutional or otherwise invalid (unless there is an unreviewable decision from a federal court holding that the item is unconstitutional or otherwise invalid);
• Positions rejected in federal court or identified by the Secretary of the Treasury as frivolous;
• Issues resolved by closing agreements;
• Matters that could interfere with criminal prosecutions of tax-related offenses; and
• Cases designated by Chief Counsel for litigation.

If codified, these exceptions would enable IRS Appeals and the IRS audit function generally to avoid challenges under Loper Bright,[7] which we are seeing in many docketed cases. 

Each of these provisions would be effective on the date of enactment.

b.         Extend “Mailbox Rule” to Electronic Submissions So Taxpayers Have Certainty Their Materials Are Submitted on Time

Under section 7502, documents (including tax returns) and payments to the IRS are treated as timely filed and paid if they are postmarked by certain couriers by the due date, even if the IRS physically receives them after that date (the “mailbox rule”). The mailbox rule does not apply to electronic submissions and payments.  If the IRS receives a document or payment late, it is treated as timely if the taxpayer can show it was timely mailed using certain delivery services. While the mailbox rule applies to electronic submissions of tax returns through electronic return transmitters, it does not apply to most electronic payments (including the Electronic Federal Tax Payment System). Accordingly, if a taxpayer whose tax return and payment is due on April 15 electronically submits the return and mails a check to the IRS on April 15, the check will be postmarked as of the due date, and the payment will be considered timely. However, if the same taxpayer instead makes the payment electronically on April 15, the payment may not be debited from the taxpayer’s account until after that date, and the payment would be considered late.

The bill would extend the mailbox rule to electronic submissions using any method permitted by the Secretary of the Treasury. The bill would also require the Secretary of the Treasury to issue regulations or other guidance not later than the date that is one year after the date of enactment, and the provision would be effective for documents and payments sent on or after that one-year anniversary.

c.         Tax Court Jurisdiction & Powers

The Tax Court is one of the courts in which taxpayers may litigate tax disputes with the IRS.[8] Taxpayers do not need to pre-pay any portion of the disputed taxes in order to bring a case to the Tax Court. Appeals from the Tax Court can be made to the U.S. Court of Appeals in which, at the time the Tax Court petition was filed, the taxpayer resided or had a principal place of business, principal office or principal agency of the corporation.[9]

1. Tax Court jurisdiction & certain powers

While most cases lodged in Tax Court involve tax deficiencies and collection due process cases (i.e., “lien and levy actions”), the Tax Court also has jurisdiction over TEFRA[10] items, BBA[11] actions, certain declaratory judgment actions (including those related to an organization’s tax-exempt status), section 6110 disclosure actions and determinations of relief from joint and several liability on returns in “innocent spouse relief” cases.[12]

The bill would clarify that the Tax Court has jurisdiction to:

• Redetermine IRS bans on taxpayers’ ability to claim the Earned Income Tax Credit, Child Tax Credit and American Opportunity Tax Credit (effective as of the date of enactment);
• Apply equitable tolling to extend the 30-day deadline in section 6213(a) for filing a petition in a collection due process case (applies to filings made after the date of enactment);
• Determine tax liabilities in collection due process appeals (effective as of the date of enactment); and
• Issue refunds and credits in refund cases (effective for actions filed after the date that is 18 months after the date of enactment).

In addition, the bill would expand the Tax Court’s power to review de novo and consider all relevant evidence in “innocent spouse relief” cases; under current law, a taxpayer is only permitted to submit to the Tax Court evidence that it has not yet submitted to the IRS if the evidence is “newly discovered.”[13] The provision would be effective for petitions and requests for “innocent spouse relief” filed or pending on or after the date of enactment.

The bill would also expand the Tax Court’s pre-trial discovery powers by authorizing the Tax Court to issue pre-trial third-party subpoenas. As a result, the Tax Court would have the power to issue subpoenas for the attendance of parties or witnesses, and the production of books, papers and other documents. The provision explicitly states that this grant of power is intended to facilitate pre-trial settlements. This provision would be effective on the date of enactment.

Further, bill would authorize the Tax Court to issue refunds and credits in collection due process cases in which it has jurisdiction to determine the taxpayer’s liability. The provision would be effective on the date of enactment.

                        2. Relaxation of “finality rule”

To appeal a Tax Court decision, a taxpayer must file a notice of appeal with the Tax Court clerk within 90 days after the decision was made.[14] If a Tax Court decision is not appealed to a higher court, it is not appealable or the deadline for filing a notice of appeal passes, the decision becomes final 90 days after it was made (the “finality rule”).[15]

Because of the finality rule, the Tax Court has less authority than other courts to modify or revise decisions that have become final. However, in certain cases, the Tax Court has relied on Rule 60(b) of the Federal Rules of Civil Procedure to vacate or alter a judgment, order or other part of the record to make corrections,[16] but some appellate courts have held that the Tax Court does not have the authority to rely on Rule 60 for this purpose.[17]

The bill would authorize the Tax Court to provide relief from a final judgment or order in certain circumstances where justice so requires, the standards for which are consistent with Rule 60. The bill would also clarify that the Tax Court has the authority to correct clerical errors, or mistakes from oversights or omissions, in judgments, orders or other parts of the record. The provision would be effective as of the date of enactment.

                        3. Judges in Tax Court

The Tax Court is made up of 19 presidentially appointed judges,[18] who are assisted in certain cases by special trial judges appointed by the Chief Judge of the Tax Court.[19]

The bill would authorize the parties to a tax case to consent to the assignment of the case to a special trial judge. This provision would be effective when the Tax Court adopts implementing rules. In addition, the bill would grant contempt authority to special trial judges in certain cases. This provision would be effective on the date of enactment.

Finally, the bill would extend the disqualification standards applicable to all federal judges to Tax Court judges and special trial judges. This provision would be effective on the date of enactment.

d.         Notices of Math or Clerical Error

When a math or clerical error is identified on a taxpayer’s tax return, the IRS has the authority under section 6213(b) to send the taxpayer a notice, stating an additional amount of tax due (along with interest and penalties) or an amount of a refund (along with interest). The notices are not sent via certified or registered mail. Taxpayers have 60 days from the date of the notice to request abatement; otherwise, the assessment in the notice is final, and taxpayers lose the right to challenge the IRS in Tax Court. The notices do not always state this 60-day response period. Further, the process for screening returns for errors is highly automated, and the notices do not contain specific information on the cause or causes of the error. Given the short response period, lack of specificity and lack of guidelines on procedure, commentators (including the Taxpayer Advocate Service) have noted that many taxpayers lose their rights before they have the chance to respond. 

The bill would require the IRS to provide specific information about the math or clerical error (i.e., the type and nature of the error, the Code section to which it relates, the specific line of the tax return to which it relates, and the IRS’ computation of adjustments). Further, it would require the IRS to include a response date near the top of the notice. Finally, it would require the IRS to send the notices by certified or registered mail. The provision would be effective for notices sent after the date which is 12 months after the date of enactment.

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[1] A section-by-section summary of the bill is accessible at TAS Act Discussion Draft Section by Section. 

[2] Comments can be sent to discussiondraft@finance.senate.gov.

[3] Taxpayers that initially bypass the IRS Appeals process and go directly to Tax Court generally still have the right and opportunity to settle the dispute in IRS Appeals.

[4] See generally T.D. 10030.

[5] See, e.g., Internal Revenue Service Restructuring and Reform Act of 1988, Pub. L. No. 105-206, 112 Stat. 685 (July 22, 1998); Rev. Proc. 2012-18, 2012-1 C.B. 455.

[6] Section 7804(e)(2).

[7] See generally Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).

[8] The Tax Court is established under section 7441, pursuant to Article 1 of the U.S. Constitution.

[9] Section 7482.

[10] Tax Equity and Fiscal Responsibility Act.

[11] Bipartisan Budget Act of 2015.

[12] See Tax Court Rule 13.

[13] Section 6015(e).

[14] Section 7483.

[15] Section 7481.

[16] When there is no applicable Tax Court procedural rule, Tax Court Rule 1(b) authorizes the Tax Court to rely on the Federal Rules of Civil Procedure “to the extent that they are suitably adaptable to govern the matter at hand.”

[17] See, e.g., Heim v. Comm’r, 872 F.2d 245 (8th Cir. 1989).

[18] Section 7443(a).

[19] Section 7443A.