Bringing Opportunity to Our Small Business and Taxpayers (BOOST) Act

TABLE OF CONTENTS:

Title I: Taxpayer Bill of Rights 2

Subtitle A: Taxpayer Advocate

Subtitle B: Modifications to Installment Agreement

Provisions

Subtitle C: Interest

Subtitle D: Joint Returns

Subtitle E: Collection Activities

Subtitle F: Information Returns

Subtitle G: Modifications to Penalty for Failure to

Collect and Pay Over Tax

Subtitle H: Awarding of Costs and Certain Fees

Subtitle I: Other Provisions

Subtitle J: Form Modifications; Studies

Title II: Increase of Deduction for Health Insurance Costs

of Self-Employed Individuals

Title III: S Corporation Reform Act of 1995

Subtitle A: Eligible Shareholders of S Corporation

Subtitle B: Qualification and Eligibility Requirements

for S Corporations

Subtitle C: Taxation of S Corporation Shareholders

Subtitle D: Effective Date

Title IV: Pension Simplification

Subtitle A: Simplification of Nondiscrimination

Provisions

Subtitle B: Targeted Access to Pension Plans for Small

Employers

Title V: Estate Tax Exclusion for Family-Owned Business

Title VI: Spending Reductions

Bringing Opportunity to Our Small Business and Taxpayers (BOOST) Act - Title I: Taxpayer Bill of Rights 2 - Taxpayer Bill of Rights 2 - Subtitle A: Taxpayer Advocate - Amends the Internal Revenue Code to establish in the Internal Revenue Service (IRS) the Office of Taxpayer Advocate, headed by the Taxpayer Advocate, to: (1) assist taxpayers in resolving problems with the IRS; (2) identify areas in which taxpayers have problems in dealings with the IRS; (3) propose changes in the administrative practices of the IRS to mitigate such problems; and (4) identify potential legislative changes which may be appropriate to mitigate such problems.

(Sec. 1011) Requires the Commissioner of Internal Revenue to establish procedures requiring a formal response to all recommendations submitted to the Commissioner by the Taxpayer Advocate.

Replaces the Office of the Ombudsman with the Office of the Taxpayer Advocate.

(Sec. 1012) Revises the terms of a Taxpayer Assistance Order to: (1) allow the Order to require the Secretary of the Treasury to act within a specified time period; and (2) require the Secretary to take certain actions (currently, only to cease or refrain from taking certain actions).

Subtitle B: Modifications to Installment Agreement Provisions - Grants certain taxpayers the right to an installment agreement for the payment of tax liability less than $10,000.

(Sec. 1022) Suspends any penalties during the period the installment agreement is in effect.

(Sec. 1023) Requires prior notification, with explanation, to taxpayers before termination of an installment agreement to pay a tax liability, or before denial of a taxpayer request for such an agreement.

(Sec. 1024) Provides for administrative review of denials of requests for, or terminations of, installment agreements.

Subtitle C: Interest - Limits to unreasonable error only the Secretary of the Treasury's authority to abate interest in the case of an assessment due on deficiencies attributable to errors of an Internal Revenue Service (IRS) officer or employee. Repeals the Secretary's authority to abate interest on deficiencies attributable to errors or delays in IRS performance of a ministerial act. Mandates abatement of interest in such circumstances for certain parties prevailing in tax actions against the United States, including a party with a net worth of less than $2 million.

(Sec. 1032) Extends from ten to 21 days the period for which interest will not be imposed after notice and demand for payment, if such payment is less than $100,000.

Subtitle D: Joint Returns - Allows an individual no longer married to or residing in the same household as another individual with whom the first has filed a joint tax return to request disclosure of any attempts to collect deficiencies from the other joint filer.

(Sec. 1042) Repeals the requirement that a joint return filed by eligible individuals after the filing of separate returns be accompanied or preceded by full payment of the tax shown upon such joint return.

Subtitle E: Collection Activities - Authorizes the Secretary, in certain circumstances, to: (1) withdraw a notice of a lien; (2) return property that has been levied upon; and (3) offer compromises in civil or criminal cases. Requires the Secretary to provide a copy of such notice of withdrawal to the taxpayer and, at the taxpayer's request, to make reasonable efforts to notify credit reporting agencies and financial institutions of such withdrawal notice.

(Sec. 1053) Requires prior notification, with certain exceptions, to the taxpayer that the taxpayer is under examination and an explanation of the process.

(Sec. 1054) Increases from $100,000 to $1 million the dollar limit on the recovery of civil damages for unauthorized collection actions.

(Sec. 1055) Revises standard of review and notice requirements for issuance with respect to a designated summons.

Subtitle F: Information Returns - Requires payee statements to provide the phone number of the person providing such statements.

(Sec. 1062) Establishes civil damages for the fraudulent filing of information returns.

(Sec. 1063) Places the burden of proof about such income upon the Secretary, in any court proceeding where a taxpayer asserts a reasonable dispute with respect to income reported on an information return filed by a third party, unless the Secretary has conducted a reasonable investigation to corroborate the information return's accuracy.

Subtitle G: Modifications to Penalty for Failure to Collect and Pay Over Tax - Establishes preliminary notice requirements with respect to penalties for failure to collect and pay over tax, or attempt to evade or defeat tax.

(Sec. 1072) Directs the Secretary to: (1) disclose certain information, upon request, to liable persons where more than one person is liable for such a penalty; and (2) ensure that IRS employees are aware of their responsibilities under the tax depository system, the circumstances under which they may be liable for such penalties, and their responsibility to report promptly any violations subject to such penalties.

(Sec. 1073) Exempts from such penalties unpaid, volunteer board members of tax-exempt organizations whose role is honorary, who do not participate in the organization's daily operations, and who do not have actual knowledge of the failure on which such penalties are imposed.

Subtitle H: Awarding of Costs and Certain Fees - Authorizes a taxpayer who substantially prevails on a claim to file a motion for an order requiring the disclosure of all information and copies of relevant records in the possession of the IRS regarding such taxpayer's case and the substantial justification for the position taken by the IRS.

(Sec. 1082) Increases the limit on attorney's fees.

(Sec. 1083) Provides that any failure to agree to an extension of time for the assessment of any tax shall not be taken into account in determining whether a prevailing party has exhausted all administrative remedies.

Subtitle I: Other Provisions - Revises provisions on the required content of tax due, deficiency, and other notices.

(Sec. 1092) Sets forth provisions regarding: (1) treatment of substitute returns prepared by the Secretary with respect to penalties for a taxpayer's failure to file a tax return or to pay tax; (2) prospective application only of Treasury Department regulations; and (3) a required notice to the taxpayer of payments that the Secretary cannot associate with any outstanding tax liability of the taxpayer.

(Sec. 1095) Authorizes a taxpayer to bring a civil damage suit against the United States if any U.S. officer or employee intentionally compromises the determination or collection of any tax due from an attorney, certified public accountant (CPA), or enrolled agent representing a taxpayer in exchange for information conveyed by the taxpayer for purposes of obtaining advice concerning tax liability (unauthorized enticement of information disclosure), except where conveyed for the purpose of perpetrating a fraud or crime.

Subtitle J: Form Modifications; Studies - Chapter 1: Form Modifications - Directs the Secretary to: (1) take steps to ensure that taxpayers are aware of provisions of the Internal Revenue Code permitting payment of tax in installments, extensions, and compromises of tax liability; (2) provide improved procedures for taxpayers to notify the Secretary of changes in names and addresses; and (3) include in the IRS publication entitled "Your Rights As a Taxpayer" a section on the rights and responsibilities of divorced individuals.

Chapter 2: Studies - Directs the Secretary to: (1) establish a one-year pilot program for appeals of certain enforcement actions to the Appeals Division of the IRS; (2) study ways to assist the elderly, physically impaired, foreign-language speaking, and other taxpayers with special needs to comply with the internal revenue laws; and (3) report to the congressional tax-writing committees on the IRS's taxpayer-rights education program and on all cases involving complaints about misconduct of IRS employees.

(Sec. 1115) Requires the Comptroller General to conduct: (1) a study on IRS efforts to notify taxpayers of tax deficiencies; and (2) annual studies of the accuracy of 25 of the most commonly used IRS forms, notices, and publications.

Title II: Increase of Deduction for Health Insurance Costs of Self-Employed Individuals - Revises the income tax deduction for the health insurance costs of self-employed individuals to: (1) make the deduction permanent; and (2) increase the applicable percentage of deduction from 25 percent to 100 percent by 1997.

Title III: S Corporation Reform Act of 1995 - S Corporation Reform Act of 1995 - Subtitle A: Eligible Shareholders of S Corporation - Chapter 1: Number of Shareholders - Increases from 35 to 50 the maximum number of shareholders of an S corporation (electing small business corporation). Allows members of a family to be treated as one shareholder.

Chapter 2: Persons Allowed as Shareholders - Allows the following entities to be shareholders of S corporations: (1) certain tax-exempt organizations, including qualified pension, profit-sharing, and stock bonus plans; (2) nonresident aliens; and (3) certain small business trusts.

Chapter 3: Other Provisions - Extends from 60 days to two years the post-death qualification for certain trusts to be permitted as shareholders.

Subtitle B: Qualification and Eligibility Requirements for S Corporations - Chapter 1: One Class of Stock - Allows an S corporation to issue qualified preferred stock.

(Sec. 3202) Permits financial institutions to hold safe harbor debt.

Chapter 2: Elections and Terminations - Revises the rules on inadvertent terminations by certain trusts of the election to be an S corporation. Authorizes the Secretary of the Treasury to treat certain late elections as timely and to provide an automatic waiver procedure for certain inadvertent terminations.

(Sec. 3213) Expands the post-termination transition period until 120 days after a determination is made that the election had terminated in a prior year.

(Sec. 3214) Repeals the characterization of excessive passive investment income as a termination event.

Increases the tax imposed on such excessive income.

Chapter 3: Other Provisions - Permits an S corporation to wholly own the stock of a subsidiary.

(Sec. 3222) Provides for the treatment of distributions during loss years.

(Sec. 3223) Provides for a consent dividend for S corporation elections to by-pass amounts in the accumulated adjustments account when making distributions.

(Sec. 3224) Eliminates the rule treating an S corporation as an individual in its capacity as shareholder of another corporation for purposes of subchapter C.

(Sec. 3225) Reduces an S corporation accumulate earnings and profits by the amount of its pre-1983 earnings and profits, if it was an S corporation for any taxable year beginning before January 1, 1983, and is so characterized for its first taxable year after December 31, 1995.

(Sec. 3226) Allows S corporations to make charitable contributions of inventory and scientific property.

(Sec. 3227) Repeals the requirement that partnership rules apply for fringe benefit purposes (thus making C corporation rules applicable). Applies to two-percent shareholders of S corporations the rules regarding deduction of health insurance costs of self-employed individuals.

Subtitle C: Taxation of S Corporation Shareholders - Applies the exemption from the excise tax on pension plan prohibited transactions to plans providing benefits for S corporation shareholder-employees (as defined before the effective date of the Subchapter S Revision Act of 1982).

(Sec. 3302) Treats losses on liquidations of S corporations as ordinary to the extent the loss does not exceed the ordinary income basis of S corporation stock in the shareholder's hands.

Subtitle D: Effective Date - Makes this Act effective for taxable years beginning after December 31, 1995.

Title IV: Pension Simplification - Pension Simplification Act of 1995 - Subtitle A: Simplification of Nondiscrimination Provisions - Redefines the term "highly compensated employee" for pension, profit sharing, stock bonus plan, and related purposes. Makes such an employee one who is a five-percent owner, has compensation from the employer in excess of $80,000 (currently, $75,000, or in some instances $50,000), or was the most highly compensated officer of the employer. Provides a special rule where no employees meet those criteria. Defines "participant's compensation" and "compensation" for purposes of specified provisions.

Subtitle B: Targeted Access to Pension Plans for Small Employers - Allows a current year business credit for small employer pension plan qualified start-up costs.

(Sec. 4012) Modifies certain simplified employee pensions with respect to allowable participants and participation requirements.

(Sec. 4013) Prohibits treating a plan as a top-heavy plan if the employer has no highly compensated employees by reason of specified provisions.

(Sec. 4014) Prohibits any proposed regulation relating to qualified pension plans from taking effect unless it includes provisions to address the special needs of small employers.

Title V: Estate Tax Exclusion for Family-Owned Business - American Family-Owned Business Act - Excludes from the gross estate specified portions of the adjusted value of the qualified family-owned business interests of the decedent.

Title VI: Spending Reductions - Spending Reductions Act of 1995 - Limits spending in FY 1996 to: (1) $105 billion for service contracts; (2) $1 billion for federally funded research and development centers at the Department of Defense; and (3) $3.5 billion for the foreign military financing program.