H. Rpt. 119-428 accompanies tax legislation related to federal tax provisions. Tax bills modify the Internal Revenue Code — the federal tax statute — either by creating new provisions, extending expiring ones, or changing existing rules that affect individuals, businesses, or specific industries. The Ways and Means Committee prepared this report to explain the tax changes, estimate their revenue impact (how much they cost or raise), and describe who is affected. Tax reports are technical documents that include detailed analysis from the Joint Committee on Taxation (JCT) and often reveal the policy priorities driving tax changes.
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House Report 119-428 - TAXPAYER DUE PROCESS ENHANCEMENT ACT
[House Report 119-428]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
2nd Session } { 119-428
======================================================================
TAXPAYER DUE PROCESS ENHANCEMENT ACT
_______
January 7, 2026.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following
R E P O R T
[To accompany H.R. 6506]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6506) to amend the Internal Revenue Code of 1986 to
suspend the period of limitations on filing a claim for credit
or refund during collection action proceedings, to prohibit the
crediting of overpayments against disputed tax liability during
such proceedings, and to expand the jurisdiction of the Tax
Court, having considered the same, reports favorably thereon
with an amendment and recommends that the bill as amended do
pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND............................................3
A. Purpose and Summary................................... 3
B. Background and Need for Legislation................... 3
C. Legislative History................................... 4
D. Designated Hearing.................................... 4
II. EXPLANATION OF THE BILL...........................................4
A. Collection Due Process Hearings, Tax Court Review, and
Claims for Credit or Refund.......................... 4
B. Explanation of Provisions............................. 8
C. Effective Date........................................ 9
III.VOTE OF COMMITTEE.................................................9
IV. BUDGET EFFECTS OF THE BILL.......................................10
A. Committee Estimate of Budgetary Effects............... 10
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 10
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 11
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......11
A. Committee Oversight Findings and Recommendations...... 11
B. Statement of General Performance Goals and Objectives. 11
C. Applicability of House Rule XXI, Clause 5(b).......... 11
D. Information Relating to Unfunded Mandates............. 11
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 11
F. Duplication of Federal Programs....................... 12
G. Tax Complexity Analysis............................... 12
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............12
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taxpayer Due Process Enhancement
Act''.
SEC. 2. SUSPENSION OF PERIOD OF LIMITATIONS ON FILING A CLAIM FOR
CREDIT OR REFUND DURING COLLECTION ACTION
PROCEEDINGS.
(a) In General.--Section 6330(e)(1) of the Internal Revenue Code of
1986 is amended by inserting ``subsection (a), (b), or (c) of section
6511 (relating to limitations on credit or refund),'' after ``section
6502 (relating to collection after assessment),''.
(b) Period of Limitations on Filing a Claim for Credit or Refund.--
Section 6330(e) of such Code is amended by adding at the end the
following new paragraph:
``(3) Period of limitations on filing a claim for credit or
refund.--In the case of the running of any period of
limitations under subsection (a), (b), or (c) of section 6511
with respect to the filing of any claim for credit or refund,
paragraph (1)--
``(A) shall apply only to the extent that such credit
or refund relates to an underlying tax liability
properly disputed at the hearing requested under this
section, and
``(B) shall not result in a suspension of the running
of such period of limitations after any date on which a
lapse of a deadline, a court filing, or a court order
establishes that the taxpayer has forfeited or
otherwise lost the right to pursue such dispute.''.
(c) Cross Reference.--Section 6511(i) of such Code is amended by
adding at the end the following new paragraph:
``(8) For limitations in case of collection action
proceedings, see section 6330(e).''.
(d) Effective Date.--The amendments made by this section shall apply
to the running of any period of limitations if such period (determined
without regard to the amendments made by this section) ends on or after
the date of the enactment of this Act.
SEC. 3. PROHIBITION ON CREDITING OF OVERPAYMENTS AGAINST DISPUTED TAX
LIABILITY DURING COLLECTION ACTION PROCEEDINGS.
(a) In General.--Section 6402 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subsection:
``(o) Prohibition on Crediting of Overpayments Against Disputed Tax
Liability During Collection Action Proceedings.--If a hearing is
properly requested under section 6320(a)(3)(B) or 6330(a)(3)(B), and an
underlying tax liability referred to in section 6330(c)(2)(B) is
properly disputed at such hearing, such tax liability shall not, except
with the consent of the taxpayer, be taken into account under
subsection (a) for the period during which the period of limitations
for filing a claim for credit or refund relating to such tax liability
is suspended by reason of section 6330(e).''.
(b) Clarification of Application of Certain Levy Hearing Rules to
Lien Hearings.--Section 6330(c)(2)(A) of such Code is amended by
striking ``unpaid tax or the proposed levy'' and inserting ``unpaid
tax, collection action, or proposed collection action''.
(c) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply with respect to any period described in section 6402(o)
of the Internal Revenue Code of 1986 (as added by this section)
if any portion of such period is after the date of the
enactment of this Act.
(2) Clarification of application of certain levy hearing
rules to lien hearings.--The amendment made by subsection (b)
shall take effect on the date of the enactment of this Act.
SEC. 4. EXPANSION OF JURISDICTION OF TAX COURT.
(a) In General.--Section 6330(d)(1) of the Internal Revenue Code of
1986 is amended to read as follows:
``(1) Petition for review by tax court.--
``(A) In general.--In the case of a determination
under this section, the person may, within 30 days of
such determination, petition the Tax Court for review
of--
``(i) such determination, and
``(ii) any underlying tax liability referred
to in subsection (c)(2)(B) which is properly
disputed at the hearing in which such
determination is made.
``(B) Jurisdiction of tax court.--Upon the filing of
a petition, the Tax Court shall have jurisdiction with
respect to--
``(i) the determination referred to in
subparagraph (A)(i),
``(ii) any underlying tax liability referred
to in subparagraph (A)(ii), and
``(iii) any equitable tolling of the 30-day
deadline referred to in subparagraph (A).
``(C) Retention of jurisdiction.--Upon a
determination being made under this section,
subparagraphs (A) and (B) shall apply whether or not
the Secretary abandons the collection action or
proposed collection action at issue in such
determination.''.
(b) Effective Date.--The amendment made by this section shall apply
with respect to petitions filed after the date of the enactment of this
Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 6506, the ``Taxpayer Due Process Enhancement
Act,'' as amended, was ordered reported by the Committee on
Ways and Means on December 10, 2025.
The bill provides additional safeguards for taxpayers
contesting collection actions by the Internal Revenue Service
(``IRS''). Specifically, the bill suspends the period of
limitations for filing certain claims for credit or refund
while certain collection action disputes are pending, prohibits
the IRS from crediting overpayments against certain tax
liabilities at issue in collection action disputes, and
provides the United States Tax Court with continuing
jurisdiction over collection determinations and certain tax
liabilities in collection action disputes.
B. Background and Need for Legislation
The U.S. Tax Court is a federal trial court established by
Congress under Article I of the Constitution which specializes
in adjudicating disputes over federal income tax, generally
prior to formal tax assessments made by the IRS. The Tax Court
is the only forum in which taxpayers may litigate tax matters
without having first paid the disputed tax in full. If a
taxpayer owes federal taxes and does not pay, in most cases the
IRS can issue a levy on the taxpayer's property or file a lien
notice against the taxpayer's property. The IRS must inform the
taxpayer by notice before making the levy or within five days
of filing the notice of lien, and the IRS's notice must
indicate the taxpayer's right to request a hearing with the IRS
Independent Office of Appeals to dispute the collection action,
generally called a ``collection due process'' hearing. After
IRS Appeals issues a determination from a collection due
process hearing, the taxpayer can petition the Tax Court to
challenge that decision.
In June 2025, the Supreme Court ruled in Commissioner v.
Zuch that the Tax Court cannot hear a CDP appeal if the IRS
drops its levy and chooses a different method to take the
taxpayer's assets. The Court also said the IRS acted properly
when it used the taxpayer's refunds to settle disputed tax
liability. This legislation is a response to the Supreme
Court's ruling with the goal of ensuring that taxpayers' due
process rights are protected.
This bill suspends the period of limitations for filing a
claim for credit or refund during a CDP proceeding, giving
taxpayers an extended opportunity to receive their refunds;
blocks the IRS from applying a taxpayer's overpayments to any
tax they are currently disputing, meaning the IRS cannot use a
taxpayer's old refunds against them during collection action
proceedings; and expands the Tax Court's collection due process
jurisdiction, so taxpayers can choose Tax Court over district
court, which is more accessible and cheaper.
C. Legislative History
Background
H.R. 6506 was introduced on December 9, 2025, and was
referred to the Committee on Ways and Means.
Committee Hearings
On February 11, 2025, the Committee on Ways and Means
Oversight Subcommittee held a hearing titled, ``IRS Return on
Investment and the Need for Modernization'' to examine the lack
of return on investment from funding provided to the IRS by the
Inflation Reduction Act and the need for information technology
modernization at the agency.
Committee Action
The Committee on Ways and Means marked up H.R. 6506, the
Taxpayer Due Process Enhancement Act, on December 10, 2025, and
favorably reported the bill, as amended, to the House of
Representatives (with quorum being present).
D. Designated Hearing
Pursuant to clause 3(c)(6) of rule XIII, the following
hearing was used to develop and consider H.R. 6506:
On February 11, 2025, the Committee on Ways and Means
Oversight Subcommittee held a hearing titled, ``IRS Return on
Investment and the Need for Modernization'' to examine the lack
of return on investment from funding provided to the IRS by the
Inflation Reduction Act and the need for information technology
modernization at the agency.
II. EXPLANATION OF THE BILL
A. Collection Due Process Hearings, Tax Court Review,
and Claims for Credit or Refund
PRESENT LAW
Collection due process hearings
When a taxpayer neglects or refuses to pay an internal
revenue tax liability, in most cases the Internal Revenue
Service (``IRS'') may levy on the taxpayer's property or file a
notice of Federal tax lien against the taxpayer's property.\1\
Generally the IRS must inform the taxpayer by notice before
making the levy or within five days of filing the notice of
lien, and the notice must indicate the taxpayer's right to
request a hearing with the IRS Independent Office of Appeals
(``IRS Appeals'') to dispute the collection action, generally
called a ``collection due process'' hearing.\2\ If the taxpayer
properly requests a hearing, the IRS Appeals officer generally
must (1) verify that the requirements of any applicable law or
administrative procedure relating to the collection action have
been met, (2) consider any relevant issues raised by the
taxpayer, including collection alternatives such as an
installment agreement or offer-in-compromise, and (3) determine
whether the collection action balances the need for efficient
collection of taxes with the taxpayer's legitimate concern that
collection be no more intrusive than necessary.\3\
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\1\Secs. 6321, 6331.
\2\Secs. 6320(a), 6330(a).
\3\Sec. 6330(c).
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The taxpayer may raise challenges to the existence or
amount of the underlying tax liability only if the taxpayer did
not receive a notice of deficiency for the liability or did not
otherwise have a prior opportunity to dispute the liability.\4\
Examples of a prior opportunity include (1) a bankruptcy case
in which the IRS filed a proof of claim for the liability
(whether or not the taxpayer disputed the claim),\5\ and (2) an
opportunity (whether or not availed of) for a conference with
IRS Appeals regarding the liability, unless the liability is
for a tax subject to deficiency procedures.\6\
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\4\Sec. 6330(c)(2)(B).
\5\See, e.g., Kendricks v. Commissioner, 124 T.C. 69 (2005).
\6\Treas. Reg. sec. 301.6330-1(e)(3), Q&A-E2; Lewis v.
Commissioner, 128 T.C. 48 (2007). The taxes subject to deficiency
procedures are income tax, gift tax, estate tax, and certain excise
taxes. See secs. 6211(a), 6212(a).
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The taxpayer generally may not raise an issue (including an
underlying tax liability) at a collection due process hearing
if, among other reasons, the issue was raised and considered at
a previous collection due process hearing or in any other
previous administrative or judicial proceeding in which the
taxpayer meaningfully participated.\7\
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\7\Sec. 6330(c)(4)(A).
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Once a taxpayer has properly requested a collection due
process hearing relating to a proposed levy, in most cases the
IRS may not pursue a levy for the tax liability at issue for
the duration of the hearing and any appeals of the hearing
determination.\8\ Also, the following periods of limitation
generally are suspended for the duration of the hearing and any
appeals:\9\ (1) any period of limitation for the post-
assessment collection of a tax liability regarding which the
hearing was requested (typically a 10-year period),\10\ (2) any
period of limitation to bring criminal charges against the
taxpayer with respect to a tax liability regarding which the
hearing was requested (typically a three- or six-year period
following commission of the offense),\11\ (3) any period of
limitation for the taxpayer to bring suit against the United
States to remedy the wrongful collection of a tax regarding
which the hearing was requested (typically a two-year period
following the IRS's disallowance of the prerequisite claim for
credit or refund),\12\ (4) any period of limitation for the
United States to bring suit against the taxpayer to recover an
erroneous refund of a tax regarding which the hearing was
requested (typically a two-year period following the making of
the refund),\13\ and (5) any period of limitation for certain
third parties to bring suit against the United States relating
to levies and liens used to collect a tax regarding which the
hearing was requested (typically a two-year period following
the levy or the sale of property subject to lien).\14\
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\8\Sec. 6330(e)(1); Treas. Reg. sec. 1.6330-1(g)(1). The
prohibition on levy activity while an appeal is pending does not apply
if the underlying tax liability is not at issue in the appeal and the
court determines that the IRS has shown good cause not to suspend the
levy. Sec. 6330(e)(2); see also sec. 6330(f) (providing that the
collection due process protections generally do not apply in the
following circumstances: (1) the IRS duly determines that collection of
the tax in question is in jeopardy; (2) the IRS levies on a taxpayer's
State tax refund; (3) the IRS levies to collect employment taxes owed
by a person who requested a collection due process hearing with respect
to unpaid employment taxes arising in the two-year period preceding the
beginning of the taxable period in which the levy is served; and (4)
the IRS levies on a Federal contractor).
\9\Sec. 6330(e)(1); Treas. Reg. secs. 1.6330-1(g)(2) Q&A-G1,
1.6320-1(g)(2) Q&A-G1.
\10\See sec. 6502.
\11\See sec. 6531.
\12\See sec. 6532(a).
\13\See sec. 6532(b).
\14\See sec. 6532(c).
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The pendency of a collection due process hearing or an
appeal therefrom does not affect the general rule that the IRS
may credit overpayments made by the taxpayer for one tax and
tax period to other taxes and tax periods with outstanding
assessed liabilities.\15\ Therefore, while a collection due
process hearing or appeal is pending, the IRS may credit
overpayments for taxes and tax periods not at issue in the
hearing or appeal against the tax liabilities subject to the
liens or levies at issue in the hearing or appeal.
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\15\See sec. 6402(a).
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Tax Court review
Once IRS Appeals issues a notice of determination after a
collection due process hearing, the taxpayer may file a
petition with the United States Tax Court (``Tax Court'') to
appeal the determination.\16\ The petition generally must be
filed within 30 days of the mailing of the notice of
determination.\17\ However, the Supreme Court has held that the
30-day deadline is not jurisdictional (that is, the Tax Court
has jurisdiction over late-filed petitions) and is subject to
equitable tolling.\18\
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\16\Sec. 6330(d).
\17\Sec. 6330(d)(1).
\18\Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022).
``[E]quitable tolling pauses the running of, or `tolls,' a [period] of
limitations when a litigant has pursued his rights diligently but some
extraordinary circumstance prevents him from bringing a timely
action.'' Lozano v. Montoya Alvarez, 572 U.S. 1, 10 (2014).
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In a collection due process appeal, the Tax Court considers
a challenge to the underlying tax liability only if the
taxpayer challenged the liability during the IRS Appeals
hearing and was entitled to do so.\19\ When the underlying
liability is reviewable, the Tax Court reviews it de novo (that
is, not giving deference to the IRS's determination of the
liability) and considers evidence introduced at trial beyond
what is contained in the IRS's administrative record of the
hearing.\20\
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\19\See Goza v. Commissioner, 114 T.C. 176, 181-82 (2000).
\20\Ibid.; Jordan v. Commissioner, 134 T.C. 1, 8-9 (2010).
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In Commissioner v. Zuch, the Supreme Court held that the
Tax Court loses jurisdiction over a collection due process
appeal when, after the petition is filed, the IRS revokes its
determination to maintain or pursue the lien or levy at issue--
for instance, because the IRS has applied the taxpayer's
overpayments from other tax years to fully satisfy the
liability at issue in the Tax Court case.\21\ Therefore, even
if the underlying liability was otherwise reviewable, the Tax
Court may not review it if the IRS revokes its
determination.\22\ Instead, if the taxpayer believes that
amounts have been improperly credited towards the alleged
underlying liability, the taxpayer must fully pay the alleged
liability (if not already fully paid) and, if the relevant
period of limitations has not expired, may file a claim for
credit or refund. If the IRS rejects the claim or fails to act
on it, the taxpayer may file suit in a U.S. district court or
the U.S. Court of Federal Claims.\23\
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\21\Commissioner v. Zuch, 605 U.S. 422 (2025).
\22\Ibid. at 431-32.
\23\Secs. 6532(a)(1), 7422; 28 U.S.C. sec. 1346(a)(1).
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Limitations on claims for credit or refund
If a taxpayer wishes to recover an overpayment\24\ of any
internal revenue tax, generally the taxpayer must file a claim
for credit or refund with the IRS within three years of filing
the relevant tax return or (if later) within two years of
paying the tax.\25\ If the taxpayer did not file a return for
the tax in question, the claim must be filed within two years
of paying the tax.\26\ If the taxpayer and the IRS have
executed an agreement to extend the period for assessing a tax
(which normally runs for three years after the return is
filed),\27\ and the agreement was executed before the
expiration of the usual period for filing a claim for credit or
refund of the tax at issue, then the deadline for filing the
claim typically is extended to six months after the agreed-upon
deadline for assessment.\28\
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\24\According to the Supreme Court, an overpayment occurs ``when a
taxpayer pays more than is owed, for whatever reason or no reason at
all.'' United States v. Dalm, 494 U.S. 596, 609 n.6 (1990). Section
6401(a) also provides: ``The term `overpayment' includes that part of
the amount of the payment of any internal revenue tax which is assessed
or collected after the expiration of the period of limitation properly
applicable thereto.''
\25\Sec. 6511(a). If the IRS determines, in response to a timely
claim, that an overpayment was made, generally it may credit the
overpayment (plus interest) against any other internal revenue tax
liabilities of the taxpayer and refund the balance, if any. Sec.
6402(a).
\26\Sec. 6511(a).
\27\See sec. 6501(a), (c)(4).
\28\Sec. 6511(c)(1).
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The normal period of limitations for filing a claim for
credit or refund may be replaced by or supplemented with a
longer or additional period in certain enumerated cases, such
as an overpayment attributable to a deduction for a worthless
debt or security (in which case the claim may be filed within
seven years of the due date for the relevant return) or an
overpayment attributable to the foreign tax credit (in which
case the claim may be filed within 10 years of the due date for
filing a return for the year in which the foreign taxes were
paid or accrued).\29\ Additionally, the normal period of
limitations generally is suspended for an individual taxpayer
during periods when that taxpayer is financially disabled.\30\
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\29\See sec. 6511(d); see also secs. 547(b)(2), 1314(b), 2014(e),
2058(b), 6013(b)(3)(B), 6411, 6427(i)(2), 6512(b), 7508(a)(1)(E),
7508A.
\30\Sec. 6511(h). For these purposes, an individual is financially
disabled if such individual is unable to manage his financial affairs
by reason of a medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months.
Sec. 6511(h)(2)(A).
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Even if a taxpayer properly and timely files a claim for
credit or refund, the amount of credit or refund allowed may
not exceed the amount of the relevant tax paid during the
applicable ``lookback'' period. If the claim for credit or
refund was filed within three years of filing the relevant tax
return, the lookback period generally is the three years (plus
any extension of time granted for filing the return)
immediately preceding the filing of the claim.\31\ If the claim
for credit or refund was filed within two years of paying the
tax but more than three years after filing the relevant return,
the lookback period generally is the two years immediately
preceding the filing of the claim.\32\ If the IRS allows a
credit or refund other than in response to a filed claim, the
lookback period is the period that would apply if the taxpayer
had filed a claim on the date the credit or refund is
allowed.\33\ In cases where the taxpayer and the IRS have
executed an agreement to extend the period for assessing a tax,
and a claim is filed (or a credit or refund otherwise allowed)
after the agreement's execution and before the expiration of
six months following the agreed-upon assessment deadline, the
amount of credit or refund allowed with respect to the tax in
question may not exceed the sum of (1) the amount of the tax
paid in the lookback period that would apply if a claim had
been filed on the date of the agreement's execution, plus (2)
the amount of the tax paid between the agreement's execution
and the filing of the claim (or the making of the credit or
refund).\34\
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\31\Sec. 6511(b)(2)(A).
\32\Sec. 6511(b)(2)(B).
\33\Sec. 6511(b)(2)(C).
\34\Sec. 6511(c)(2).
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REASONS FOR CHANGE
The Committee believes that the IRS should not be permitted
to credit overpayments against tax liabilities that are
properly under dispute in a collection due process hearing or
appeal. The Committee further believes that taxpayers properly
disputing the IRS's assertion of tax liability in a collection
due process hearing or appeal should have an extension of time
to file a claim for credit or refund regarding that liability.
Finally, the Committee does not believe that the IRS should be
able to deprive the Tax Court of jurisdiction over a collection
due process determination or an underlying liability dispute
simply by abandoning collection efforts.
B. Explanation of Provisions
Suspension of period of limitations on filing a claim for credit or
refund during collection due process proceedings
If a taxpayer requests a collection due process hearing,
the provision in some cases suspends the running of the normal
period of limitations for filing a claim for credit or refund
from the date the IRS receives the taxpayer's hearing request
until the hearing concludes and all appeal rights have lapsed
or been exhausted. The suspension applies only to a claim for
credit or refund of a tax properly disputed at the hearing, and
the suspension ends after any date on which a lapse of a
deadline, a court filing, or a court order establishes that the
taxpayer has forfeited or otherwise lost the right to dispute
the amount of the tax liability.
The suspension provided by the provision applies to the
extended period for filing a claim for credit or refund in the
case of an agreement between the taxpayer and the IRS to extend
the period for assessing tax,\35\ and it also applies to the
lookback periods for determining the amount of credit or refund
allowed in response to a timely claim.\36\ The suspension
provided by the provision does not apply to the extended
periods of limitations for certain enumerated types of
overpayments, such as those attributable to a deduction for a
worthless debt or security or the foreign tax credit.\37\
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\35\See sec. 6511(c).
\36\See sec. 6511(b), (c)(2). For example, if the taxpayer pays a
tax on Date 1, properly requests a collection due process hearing
related to that tax on Date 2, and files a claim for credit or refund
related to that tax on Date 3 (the first date on which the hearing and
all appeals have ended), and the conditions for suspension apply, the
lookback period does not include the period between Dates 2 and 3
(i.e., the period during which the hearing and appeals were pending).
\37\See e.g., sec. 6511(d).
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Prohibition on crediting of overpayments against disputed tax liability
during collection action proceedings
In the case of a taxpayer who properly disputes the
liability amount at a collection due process hearing, the
provision generally prohibits the IRS, from the time it
receives the hearing request until the hearing concludes and
all appeal rights have lapsed or been exhausted, from crediting
any overpayments made by the taxpayer for other taxes or tax
periods against the liability in dispute. The prohibition may
be waived by the taxpayer, and the prohibition ends after any
date on which a lapse of a deadline, a court filing, or a court
order establishes that the taxpayer has forfeited or otherwise
lost the right to dispute the amount of the tax liability.
Expansion of the Tax Court's collection due process jurisdiction
The provision provides that when a taxpayer files a Tax
Court petition to contest a collection due process hearing
determination to sustain a lien or levy, the Tax Court acquires
jurisdiction not only over the determination (as under present
law) but also and independently over the tax liability amount,
in cases where the taxpayer properly disputed the liability
amount at the hearing and petitions for review of it. The
provision provides that the Tax Court retains jurisdiction over
both the hearing determination and the liability amount whether
or not the IRS abandons any lien or proposed levy at issue.
Accordingly, the provision abrogates the Supreme Court's
holding in Commissioner v. Zuch.
C. Effective Date
The part of the provision concerning the suspension of the
period of limitations for filing a claim for credit or refund
applies to any period of limitations that (as determined
without regard to the amendments) ends on or after the date of
enactment. The part of the provision concerning the crediting
of overpayments during periods when certain collection due
process hearings or appeals are pending applies to any such
period if any portion of it falls after the date of enactment.
The part of the provision concerning the jurisdiction of the
Tax Court applies to petitions filed after the date of
enactment.
III. VOTE OF COMMITTEE
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 6506, the ``Taxpayer Due Process
Enhancement Act,'' on December 10, 2025.
H.R. 6506 was ordered favorably reported to the House of
Representatives as amended by a roll call vote of 41 yeas to 0
nays (with a quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... X ...... .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... X ...... ......... Mr. Davis............ X ...... .........
Mr. LaHood......................... X ...... ......... Ms. Sanchez.......... ...... ...... .........
Mr. Arrington...................... X ...... ......... Ms. Sewell........... X ...... .........
Mr. Estes.......................... X ...... ......... Ms. DelBene.......... X ...... .........
Mr. Smucker........................ ...... ...... ......... Ms. Chu.............. X ...... .........
Mr. Hern........................... X ...... ......... Ms. Moore (WI)....... X ...... .........
Mrs. Miller (WV)................... X ...... ......... Mr. Boyle............ X ...... .........
Dr. Murphy......................... X ...... ......... Mr. Beyer............ X ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Evans............ X ...... .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Schneider........ X ...... .........
Mr. Steube......................... X ...... ......... Mr. Panetta.......... X ...... .........
Ms. Tenney......................... X ...... ......... Mr. Gomez............ X ...... .........
Mrs. Fischbach..................... X ...... ......... Mr. Horsford......... X ...... .........
Mr. Moore (UT)..................... X ...... ......... Ms. Plaskett......... ...... ...... .........
Ms. Van Duyne...................... X ...... ......... Mr. Suozzi........... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
Mr. Yakym.......................... X ...... .........
Mr. Miller (OH).................... ...... ...... .........
Mr. Bean........................... X ...... .........
Mr. Moran.......................... X ...... .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
With respect to clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6506,
the Taxpayer Due Process Enhancement Act, as reported. The
estimate prepared by the Congressional Budget Office is
included below.
The staff of the Joint Committee on Taxation estimates the
bill to have the following effect on Federal fiscal year budget
receipts for the period 2026 through 2035:
FISCAL YEARS
[Millions of dollars]
----------------------------------------------------------------------------------------------------------------
2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2026-35
----------------------------------------------------------------------------------------------------------------
[1] [1] [1] [1] [1] [1] [1] [1] [1] [1] -1
----------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding. The date of enactment is assumed to be December 31, 2025.
[1] Loss of less than $500,000.
B. Statement Regarding New Budget Authority and
Tax Expenditures Budget Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involved no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. Cost Estimate Prepared by the
Congressional Budget Office
The Congressional Budget Act of 1974, as amended stipulates
that revenue estimates provided by the staff of the Joint
Committee on Taxation (``JCT'') will be the official estimates
for all tax legislation considered by Congress. As such CBO
incorporates these estimates into its cost estimates of the
effects of the legislation. The estimates for the revenue
provisions of H.R. 6506, the Taxpayer Due Process Enhancement
Act, as reported were provided by JCT (see Part IV, A).
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Applicability of House Rule XXI, Clause 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.''
The Committee has carefully reviewed the bill and states
that the bill does not provide such a Federal income tax rate
increase.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
E. Congressional Earmarks, Limited Tax Benefits,
and Limited Tariff Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
F. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
G. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
The staff of the Joint Committee on Taxation has determined
that there are no provisions that are of widespread
applicability to individuals or small businesses.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL,
AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 64--COLLECTION
Subchapter D--SEIZURE OF PROPERTY FOR COLLECTION OF TAXES
* * * * * * *
PART I--DUE PROCESS FOR COLLECTIONS
* * * * * * *
SEC. 6330. NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.
(a) Requirement of notice before levy.--
(1) In general.--No levy may be made on any property
or right to property of any person unless the Secretary
has notified such person in writing of their right to a
hearing under this section before such levy is made.
Such notice shall be required only once for the taxable
period to which the unpaid tax specified in paragraph
(3)(A) relates.
(2) Time and method for notice.--The notice required
under paragraph (1) shall be--
(A) given in person;
(B) left at the dwelling or usual place of
business of such person; or
(C) sent by certified or registered mail,
return receipt requested, to such person's last
known address;
not less than 30 days before the day of the first levy
with respect to the amount of the unpaid tax for the
taxable period.
(3) Information included with notice.--The notice
required under paragraph (1) shall include in simple
and nontechnical terms--
(A) the amount of unpaid tax;
(B) the right of the person to request a
hearing during the 30-day period under
paragraph (2); and
(C) the proposed action by the Secretary and
the rights of the person with respect to such
action, including a brief statement which sets
forth--
(i) the provisions of this title
relating to levy and sale of property;
(ii) the procedures applicable to the
levy and sale of property under this
title;
(iii) the administrative appeals
available to the taxpayer with respect
to such levy and sale and the
procedures relating to such appeals;
(iv) the alternatives available to
taxpayers which could prevent levy on
property (including installment
agreements under section 6159); and
(v) the provisions of this title and
procedures relating to redemption of
property and release of liens on
property.
(b) Right to fair hearing.--
(1) In general.--If the person requests a hearing in
writing under subsection (a)(3)(B) and states the
grounds for the requested hearing, such hearing shall
be held by the Internal Revenue Service Independent
Office of Appeals.
(2) One hearing per period.--A person shall be
entitled to only one hearing under this section with
respect to the taxable period to which the unpaid tax
specified in subsection (a)(3)(A) relates.
(3) Impartial officer.--The hearing under this
subsection shall be conducted by an officer or employee
who has had no prior involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the
first hearing under this section or section 6320. A
taxpayer may waive the requirement of this paragraph.
(c) Matters considered at hearing.--In the case of any
hearing conducted under this section--
(1) Requirement of investigation.--The appeals
officer shall at the hearing obtain verification from
the Secretary that the requirements of any applicable
law or administrative procedure have been met.
(2) Issues at hearing.--
(A) In general.--The person may raise at the
hearing any relevant issue relating to the
[unpaid tax or the proposed levy] unpaid tax,
collection action, or proposed collection
action, including--
(i) appropriate spousal defenses;
(ii) challenges to the
appropriateness of collection actions;
and
(iii) offers of collection
alternatives, which may include the
posting of a bond, the substitution of
other assets, an installment agreement,
or an offer-in-compromise.
(B) Underlying liability.--The person may
also raise at the hearing challenges to the
existence or amount of the underlying tax
liability for any tax period if the person did
not receive any statutory notice of deficiency
for such tax liability or did not otherwise
have an opportunity to dispute such tax
liability.
(3) Basis for the determination.--The determination
by an appeals officer under this subsection shall take
into consideration--
(A) the verification presented under
paragraph (1);
(B) the issues raised under paragraph (2);
and
(C) whether any proposed collection action
balances the need for the efficient collection
of taxes with the legitimate concern of the
person that any collection action be no more
intrusive than necessary.
(4) Certain issues precluded.--An issue may not be
raised at the hearing if--
(A)(i) the issue was raised and considered at
a previous hearing under section 6320 or in any
other previous administrative or judicial
proceeding; and
(ii) the person seeking to raise the issue
participated meaningfully in such hearing or
proceeding;
(B) the issue meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A); or
(C) a final determination has been made with
respect to such issue in a proceeding brought
under subchapter C of chapter 63.
This paragraph shall not apply to any issue with
respect to which subsection (d)(3)(B) applies.
(d) Proceeding after hearing.--
[(1) Petition for review by Tax Court.--The person
may, within 30 days of a determination under this
section, petition the Tax Court for review of such
determination (and the Tax Court shall have
jurisdiction with respect to such matter).]
(1) Petition for review by tax court.--
(A) In general.--In the case of a
determination under this section, the person
may, within 30 days of such determination,
petition the Tax Court for review of--
(i) such determination, and
(ii) any underlying tax liability
referred to in subsection (c)(2)(B)
which is properly disputed at the
hearing in which such determination is
made.
(B) Jurisdiction of tax court.--Upon the
filing of a petition, the Tax Court shall have
jurisdiction with respect to--
(i) the determination referred to in
subparagraph (A)(i),
(ii) any underlying tax liability
referred to in subparagraph (A)(ii),
and
(iii) any equitable tolling of the
30-day deadline referred to in
subparagraph (A).
(C) Retention of jurisdiction.--Upon a
determination being made under this section,
subparagraphs (A) and (B) shall apply whether
or not the Secretary abandons the collection
action or proposed collection action at issue
in such determination.
(2) Suspension of running of period for filing
petition in title 11 cases.--In the case of a person
who is prohibited by reason of a case under title 11,
United States Code, from filing a petition under
paragraph (1) with respect to a determination under
this section, the running of the period prescribed by
such subsection for filing such a petition with respect
to such determination shall be suspended for the period
during which the person is so prohibited from filing
such a petition, and for 30 days thereafter.
(3) Jurisdiction retained at IRS Independent Office
of Appeals.--The Internal Revenue Service Independent
Office of Appeals shall retain jurisdiction with
respect to any determination made under this section,
including subsequent hearings requested by the person
who requested the original hearing on issues
regarding--
(A) collection actions taken or proposed with
respect to such determination; and
(B) after the person has exhausted all
administrative remedies, a change in
circumstances with respect to such person which
affects such determination.
(e) Suspension of collections and statute of limitations.--
(1) In general.--Except as provided in paragraph (2),
if a hearing is requested under subsection (a)(3)(B),
the levy actions which are the subject of the requested
hearing and the running of any period of limitations
under section 6502 (relating to collection after
assessment), subsection (a), (b), or (c) of section
6511 (relating to limitations on credit or refund),
section 6531 (relating to criminal prosecutions), or
section 6532 (relating to other suits) shall be
suspended for the period during which such hearing, and
appeals therein, are pending. In no event shall any
such period expire before the 90th day after the day on
which there is a final determination in such hearing.
Notwithstanding the provisions of section 7421(a), the
beginning of a levy or proceeding during the time the
suspension under this paragraph is in force may be
enjoined by a proceeding in the proper court, including
the Tax Court. The Tax Court shall have no jurisdiction
under this paragraph to enjoin any action or proceeding
unless a timely appeal has been filed under subsection
(d)(1) and then only in respect of the unpaid tax or
proposed levy to which the determination being appealed
relates.
(2) Levy upon appeal.--Paragraph (1) shall not apply
to a levy action while an appeal is pending if the
underlying tax liability is not at issue in the appeal
and the court determines that the Secretary has shown
good cause not to suspend the levy.
(3) Period of limitations on filing a claim for
credit or refund.--In the case of the running of any
period of limitations under subsection (a), (b), or (c)
of section 6511 with respect to the filing of any claim
for credit or refund, paragraph (1)--
(A) shall apply only to the extent that such
credit or refund relates to an underlying tax
liability properly disputed at the hearing
requested under this section, and
(B) shall not result in a suspension of the
running of such period of limitations after any
date on which a lapse of a deadline, a court
filing, or a court order establishes that the
taxpayer has forfeited or otherwise lost the
right to pursue such dispute.
(f) Exceptions.--If--
(1) the Secretary has made a finding under the last
sentence of section 6331(a) that the collection of tax
is in jeopardy,
(2) the Secretary has served a levy on a State to
collect a Federal tax liability from a State tax
refund,
(3) the Secretary has served a disqualified
employment tax levy, or
(4) the Secretary has served a Federal contractor
levy,
this section shall not apply, except that the taxpayer shall be
given the opportunity for the hearing described in this section
within a reasonable period of time after the levy.
(g) Frivolous requests for hearing, etc..--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.
(h) Definitions related to exceptions.--For purposes of
subsection (f)--
(1) Disqualified employment tax levy.--A disqualified
employment tax levy is any levy in connection with the
collection of employment taxes for any taxable period
if the person subject to the levy (or any predecessor
thereof) requested a hearing under this section with
respect to unpaid employment taxes arising in the most
recent 2-year period before the beginning of the
taxable period with respect to which the levy is
served. For purposes of the preceding sentence, the
term ``employment taxes'' means any taxes under chapter
21, 22, 23, or 24.
(2) Federal contractor levy.--A Federal contractor
levy is any levy if the person whose property is
subject to the levy (or any predecessor thereof) is a
Federal contractor.
* * * * * * *
CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS
Subchapter A--PROCEDURE IN GENERAL
* * * * * * *
SEC. 6402. AUTHORITY TO MAKE CREDITS OR REFUNDS.
(a) General rule.--In the case of any overpayment, the
Secretary, within the applicable period of limitations, may
credit the amount of such overpayment, including any interest
allowed thereon, against any liability in respect of an
internal revenue tax on the part of the person who made the
overpayment and shall, subject to subsections (c), (d), (e),
and (f), refund any balance to such person.
(b) Credits against estimated tax.--The Secretary is
authorized to prescribe regulations providing for the crediting
against the estimated income tax for any taxable year of the
amount determined by the taxpayer or the Secretary to be an
overpayment of the income tax for a preceding taxable year.
(c) Offset of past-due support against overpayments.--The
amount of any overpayment to be refunded to the person making
the overpayment shall be reduced by the amount of any past-due
support (as defined in section 464(c) of the Social Security
Act) owed by that person of which the Secretary has been
notified by a State in accordance with section 464 of such Act.
The Secretary shall remit the amount by which the overpayment
is so reduced to the State collecting such support and notify
the person making the overpayment that so much of the
overpayment as was necessary to satisfy his obligation for
past-due support has been paid to the State. The Secretary
shall apply a reduction under this subsection first to an
amount certified by the State as past due support under section
464 of the Social Security Act before any other reductions
allowed by law. This subsection shall be applied to an
overpayment prior to its being credited to a person's future
liability for an internal revenue tax. For purposes of this
subsection, any reference to a State shall include a reference
to any Indian tribe or tribal organization receiving a grant
under section 455(f) of the Social Security Act.
(d) Collection of debts owed to Federal agencies.--
(1) In general.--Upon receiving notice from any
Federal agency that a named person owes a past-due
legally enforceable debt (other than past-due support
subject to the provisions of subsection (c)) to such
agency, the Secretary shall--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
debt;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such
agency; and
(C) notify the person making such overpayment
that such overpayment has been reduced by an
amount necessary to satisfy such debt.
(2) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection
after such overpayment is reduced pursuant to
subsection (c) with respect to past-due support
collected pursuant to an assignment under section
408(a)(3) of the Social Security Act (42 U.S.C.
608(a)(3)) and before such overpayment is reduced
pursuant to subsections (e) and (f) and before such
overpayment is credited to the future liability for tax
of such person pursuant to subsection (b). If the
Secretary receives notice from a Federal agency or
agencies of more than one debt subject to paragraph (1)
that is owed by a person to such agency or agencies,
any overpayment by such person shall be applied against
such debts in the order in which such debts accrued.
(3) Treatment of OASDI overpayments.--
(A) Requirements.--Paragraph (1) shall apply
with respect to an OASDI overpayment only if
the requirements of paragraphs (1) and (2) of
section 3720A(f) of title 31, United States
Code, are met with respect to such overpayment.
(B) Notice; protection of other persons
filing joint return.--
(i) Notice.--In the case of a debt
consisting of an OASDI overpayment, if
the Secretary determines upon receipt
of the notice referred to in paragraph
(1) that the refund from which the
reduction described in paragraph (1)(A)
would be made is based upon a joint
return, the Secretary shall--
(I) notify each taxpayer
filing such joint return that
the reduction is being made
from a refund based upon such
return, and
(II) include in such
notification a description of
the procedures to be followed,
in the case of a joint return,
to protect the share of the
refund which may be payable to
another person.
(ii) Adjustments based on protections
given to other taxpayers on joint
return.--If the other person filing a
joint return with the person owing the
OASDI overpayment takes appropriate
action to secure his or her proper
share of the refund subject to
reduction under this subsection, the
Secretary shall pay such share to such
other person. The Secretary shall
deduct the amount of such payment from
amounts which are derived from
subsequent reductions in refunds under
this subsection and are payable to a
trust fund referred to in subparagraph
(C).
(C) Deposit of amount of reduction into
appropriate trust fund.--In lieu of payment,
pursuant to paragraph (1)(B), of the amount of
any reduction under this subsection to the
Commissioner of Social Security, the Secretary
shall deposit such amount in the Federal Old-
Age and Survivors Insurance Trust Fund or the
Federal Disability Insurance Trust Fund,
whichever is certified to the Secretary as
appropriate by the Commissioner of Social
Security.
(D) OASDI overpayment.--For purposes of this
paragraph, the term ``OASDI overpayment'' means
any overpayment of benefits made to an
individual under title II of the Social
Security Act.
(e) Collection of past-due, legally enforceable State income
tax obligations.--
(1) In general.--Upon receiving notice from any State
that a named person owes a past-due, legally
enforceable State income tax obligation to such State,
the Secretary shall, under such conditions as may be
prescribed by the Secretary--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
State income tax obligation;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such State
and notify such State of such person's name,
taxpayer identification number, address, and
the amount collected; and
(C) notify the person making such overpayment
that the overpayment has been reduced by an
amount necessary to satisfy a past-due, legally
enforceable State income tax obligation.
If an offset is made pursuant to a joint return, the
notice under subparagraph (B) shall include the names,
taxpayer identification numbers, and addresses of each
person filing such return.
(2) Offset permitted only against residents of State
seeking offset.--Paragraph (1) shall apply to an
overpayment by any person for a taxable year only if
the address shown on the Federal return for such
taxable year of the overpayment is an address within
the State seeking the offset.
(3) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection--
(A) after such overpayment is reduced
pursuant to--
(i) subsection (a) with respect to
any liability for any internal revenue
tax on the part of the person who made
the overpayment;
(ii) subsection (c) with respect to
past-due support; and
(iii) subsection (d) with respect to
any past-due, legally enforceable debt
owed to a Federal agency; and
(B) before such overpayment is credited to
the future liability for any Federal internal
revenue tax of such person pursuant to
subsection (b).
If the Secretary receives notice from one or more
agencies of the State of more than one debt subject to
paragraph (1) or subsection (f) that is owed by such
person to such an agency, any overpayment by such
person shall be applied against such debts in the order
in which such debts accrued.
(4) Notice; consideration of evidence.--No State may
take action under this subsection until such State--
(A) notifies by certified mail with return
receipt the person owing the past-due State
income tax liability that the State proposes to
take action pursuant to this section;
(B) gives such person at least 60 days to
present evidence that all or part of such
liability is not past-due or not legally
enforceable;
(C) considers any evidence presented by such
person and determines that an amount of such
debt is past-due and legally enforceable; and
(D) satisfies such other conditions as the
Secretary may prescribe to ensure that the
determination made under subparagraph (C) is
valid and that the State has made reasonable
efforts to obtain payment of such State income
tax obligation.
(5) Past-due, legally enforceable State income tax
obligation.--For purposes of this subsection, the term
``past-due, legally enforceable State income tax
obligation'' means a debt--
(A)(i) which resulted from--
(I) a judgment rendered by a court of
competent jurisdiction which has
determined an amount of State income
tax to be due; or
(II) a determination after an
administrative hearing which has
determined an amount of State income
tax to be due; and
(ii) which is no longer subject to judicial
review; or
(B) which resulted from a State income tax
which has been assessed but not collected, the
time for redetermination of which has expired,
and which has not been delinquent for more than
10 years.
For purposes of this paragraph, the term ``State income
tax'' includes any local income tax administered by the
chief tax administration agency of the State.
(6) Regulations.--The Secretary shall issue
regulations prescribing the time and manner in which
States must submit notices of past-due, legally
enforceable State income tax obligations and the
necessary information that must be contained in or
accompany such notices. The regulations shall specify
the types of State income taxes and the minimum amount
of debt to which the reduction procedure established by
paragraph (1) may be applied. The regulations may
require States to pay a fee to reimburse the Secretary
for the cost of applying such procedure. Any fee paid
to the Secretary pursuant to the preceding sentence
shall be used to reimburse appropriations which bore
all or part of the cost of applying such procedure.
(7) Erroneous payment to State.--Any State receiving
notice from the Secretary that an erroneous payment has
been made to such State under paragraph (1) shall pay
promptly to the Secretary, in accordance with such
regulations as the Secretary may prescribe, an amount
equal to the amount of such erroneous payment (without
regard to whether any other amounts payable to such
State under such paragraph have been paid to such
State).
(f) Collection of unemployment compensation debts.--
(1) In general.--Upon receiving notice from any State
that a named person owes a covered unemployment
compensation debt to such State, the Secretary shall,
under such conditions as may be prescribed by the
Secretary--
(A) reduce the amount of any overpayment
payable to such person by the amount of such
covered unemployment compensation debt;
(B) pay the amount by which such overpayment
is reduced under subparagraph (A) to such State
and notify such State of such person's name,
taxpayer identification number, address, and
the amount collected; and
(C) notify the person making such overpayment
that the overpayment has been reduced by an
amount necessary to satisfy a covered
unemployment compensation debt.
If an offset is made pursuant to a joint return, the
notice under subparagraph (C) shall include information
related to the rights of a spouse of a person subject
to such an offset.
(2) Priorities for offset.--Any overpayment by a
person shall be reduced pursuant to this subsection--
(A) after such overpayment is reduced
pursuant to--
(i) subsection (a) with respect to
any liability for any internal revenue
tax on the part of the person who made
the overpayment;
(ii) subsection (c) with respect to
past-due support; and
(iii) subsection (d) with respect to
any past-due, legally enforceable debt
owed to a Federal agency; and
(B) before such overpayment is credited to
the future liability for any Federal internal
revenue tax of such person pursuant to
subsection (b).
If the Secretary receives notice from a State or States
of more than one debt subject to paragraph (1) or
subsection (e) that is owed by a person to such State
or States, any overpayment by such person shall be
applied against such debts in the order in which such
debts accrued.
(3) Notice; consideration of evidence.--No State may
take action under this subsection until such State--
(A) notifies the person owing the covered
unemployment compensation debt that the State
proposes to take action pursuant to this
section;
(B) provides such person at least 60 days to
present evidence that all or part of such
liability is not legally enforceable or is not
a covered unemployment compensation debt;
(C) considers any evidence presented by such
person and determines that an amount of such
debt is legally enforceable and is a covered
unemployment compensation debt; and
(D) satisfies such other conditions as the
Secretary may prescribe to ensure that the
determination made under subparagraph (C) is
valid and that the State has made reasonable
efforts to obtain payment of such covered
unemployment compensation debt.
(4) Covered unemployment compensation debt.--For
purposes of this subsection, the term ``covered
unemployment compensation debt'' means--
(A) a past-due debt for erroneous payment of
unemployment compensation due to fraud or the
person's failure to report earnings which has
become final under the law of a State certified
by the Secretary of Labor pursuant to section
3304 and which remains uncollected;
(B) contributions due to the unemployment
fund of a State for which the State has
determined the person to be liable and which
remain uncollected; and
(C) any penalties and interest assessed on
such debt.
(5) Regulations.--
(A) In general.--The Secretary may issue
regulations prescribing the time and manner in
which States must submit notices of covered
unemployment compensation debt and the
necessary information that must be contained in
or accompany such notices. The regulations may
specify the minimum amount of debt to which the
reduction procedure established by paragraph
(1) may be applied.
(B) Fee payable to Secretary.--The
regulations may require States to pay a fee to
the Secretary, which may be deducted from
amounts collected, to reimburse the Secretary
for the cost of applying such procedure. Any
fee paid to the Secretary pursuant to the
preceding sentence shall be used to reimburse
appropriations which bore all or part of the
cost of applying such procedure.
(C) Submission of notices through Secretary
of Labor.--The regulations may include a
requirement that States submit notices of
covered unemployment compensation debt to the
Secretary via the Secretary of Labor in
accordance with procedures established by the
Secretary of Labor. Such procedures may require
States to pay a fee to the Secretary of Labor
to reimburse the Secretary of Labor for the
costs of applying this subsection. Any such fee
shall be established in consultation with the
Secretary of the Treasury. Any fee paid to the
Secretary of Labor may be deducted from amounts
collected and shall be used to reimburse the
appropriation account which bore all or part of
the cost of applying this subsection.
(6) Erroneous payment to State.--Any State receiving
notice from the Secretary that an erroneous payment has
been made to such State under paragraph (1) shall pay
promptly to the Secretary, in accordance with such
regulations as the Secretary may prescribe, an amount
equal to the amount of such erroneous payment (without
regard to whether any other amounts payable to such
State under such paragraph have been paid to such
State).
(g) Review of reductions.--No court of the United States
shall have jurisdiction to hear any action, whether legal or
equitable, brought to restrain or review a reduction authorized
by subsection (c), (d), (e), or (f). No such reduction shall be
subject to review by the Secretary in an administrative
proceeding. No action brought against the United States to
recover the amount of any such reduction shall be considered to
be a suit for refund of tax. This subsection does not preclude
any legal, equitable, or administrative action against the
Federal agency or State to which the amount of such reduction
was paid or any such action against the Commissioner of Social
Security which is otherwise available with respect to
recoveries of overpayments of benefits under section 204 of the
Social Security Act.
(h) Federal agency.--For purposes of this section, the term
``Federal agency'' means a department, agency, or
instrumentality of the United States, and includes a Government
corporation (as such term is defined in section 103 of title 5,
United States Code).
(i) Treatment of payments to States.--The Secretary may
provide that, for purposes of determining interest, the payment
of any amount withheld under subsection (c), (e), or (f) to a
State shall be treated as a payment to the person or persons
making the overpayment.
(j) Cross reference.--For procedures relating to agency
notification of the Secretary, see section 3721 of title 31,
United States Code.
(k) Refunds to certain fiduciaries of insolvent members of
affiliated groups.--Notwithstanding any other provision of law,
in the case of an insolvent corporation which is a member of an
affiliated group of corporations filing a consolidated return
for any taxable year and which is subject to a statutory or
court-appointed fiduciary, the Secretary may by regulation
provide that any refund for such taxable year may be paid on
behalf of such insolvent corporation to such fiduciary to the
extent that the Secretary determines that the refund is
attributable to losses or credits of such insolvent
corporation.
(l) Explanation of reason for refund disallowance.--In the
case of a disallowance of a claim for refund, the Secretary
shall provide the taxpayer with an explanation for such
disallowance.
(m) Earliest date for certain refunds.--No credit or refund
of an overpayment for a taxable year shall be made to a
taxpayer before the 15th day of the second month following the
close of such taxable year if a credit is allowed to such
taxpayer under section 24 (by reason of subsection (d) thereof)
or 32 for such taxable year.
(n) Misdirected direct deposit refund.--Not later than the
date which is 6 months after the date of the enactment of the
Taxpayer First Act, the Secretary shall prescribe regulations
to establish procedures to allow for--
(1) taxpayers to report instances in which a refund
made by the Secretary by electronic funds transfer was
not transferred to the account of the taxpayer;
(2) coordination with financial institutions for the
purpose of--
(A) identifying the accounts to which
transfers described in paragraph (1) were made;
and
(B) recovery of the amounts so transferred;
and
(3) the refund to be delivered to the correct account
of the taxpayer.
(o) Prohibition on Crediting of Overpayments Against Disputed
Tax Liability During Collection Action Proceedings.--If a
hearing is properly requested under section 6320(a)(3)(B) or
6330(a)(3)(B), and an underlying tax liability referred to in
section 6330(c)(2)(B) is properly disputed at such hearing,
such tax liability shall not, except with the consent of the
taxpayer, be taken into account under subsection (a) for the
period during which the period of limitations for filing a
claim for credit or refund relating to such tax liability is
suspended by reason of section 6330(e).
* * * * * * *
CHAPTER 66--LIMITATIONS
* * * * * * *
Subchapter B--LIMITATIONS ON CREDIT OR REFUND
* * * * * * *
SEC. 6511. LIMITATIONS ON CREDIT OR REFUND.
(a) Period of limitation on filing claim.--Claim for credit
or refund of an overpayment of any tax imposed by this title in
respect of which tax the taxpayer is required to file a return
shall be filed by the taxpayer within 3 years from the time the
return was filed or 2 years from the time the tax was paid,
whichever of such periods expires the later, or if no return
was filed by the taxpayer, within 2 years from the time the tax
was paid. Claim for credit or refund of an overpayment of any
tax imposed by this title which is required to be paid by means
of a stamp shall be filed by the taxpayer within 3 years from
the time the tax was paid.
(b) Limitation on allowance of credits and refunds.--
(1) Filing of claim within prescribed period.--No
credit or refund shall be allowed or made after the
expiration of the period of limitation prescribed in
subsection (a) for the filing of a claim for credit or
refund, unless a claim for credit or refund is filed by
the taxpayer within such period.
(2) Limit on amount of credit or refund.--
(A) Limit where claim filed within 3-year
period.--If the claim was filed by the taxpayer
during the 3-year period prescribed in
subsection (a), the amount of the credit or
refund shall not exceed the portion of the tax
paid within the period, immediately preceding
the filing of the claim, equal to 3 years plus
the period of any extension of time for filing
the return. If the tax was required to be paid
by means of a stamp, the amount of the credit
or refund shall not exceed the portion of the
tax paid within the 3 years immediately
preceding the filing of the claim.
(B) Limit where claim not filed within 3-year
period.--If the claim was not filed within such
3-year period, the amount of the credit or
refund shall not exceed the portion of the tax
paid during the 2 years immediately preceding
the filing of the claim.
(C) Limit if no claim filed.--If no claim was
filed, the credit or refund shall not exceed
the amount which would be allowable under
subparagraph (A) or (B), as the case may be, if
claim was filed on the date the credit or
refund is allowed.
(c) Special rules applicable in case of extension of time by
agreement.--If an agreement under the provisions of section
6501(c)(4) extending the period for assessment of a tax imposed
by this title is made within the period prescribed in
subsection (a) for the filing of a claim for credit or refund--
(1) Time for filing claim.--The period for filing
claim for credit or refund or for making credit or
refund if no claim is filed, provided in subsections
(a) and (b)(1), shall not expire prior to 6 months
after the expiration of the period within which an
assessment may be made pursuant to the agreement or any
extension thereof under section 6501(c)(4).
(2) Limit on amount.--If a claim is filed, or a
credit or refund is allowed when no claim was filed,
after the execution of the agreement and within 6
months after the expiration of the period within which
an assessment may be made pursuant to the agreement or
any extension thereof, the amount of the credit or
refund shall not exceed the portion of the tax paid
after the execution of the agreement and before the
filing of the claim or the making of the credit or
refund, as the case may be, plus the portion of the tax
paid within the period which would be applicable under
subsection (b)(2) if a claim had been filed on the date
the agreement was executed.
(3) Claims not subject to special rule.--This
subsection shall not apply in the case of a claim
filed, or credit or refund allowed if no claim is
filed, either--
(A) prior to the execution of the agreement
or
(B) more than 6 months after the expiration
of the period within which an assessment may be
made pursuant to the agreement or any extension
thereof.
(d) Special rules applicable to income taxes.--
(1) Seven-year period of limitation with respect to
bad debts and worthless securities.--If the claim for
credit or refund relates to an overpayment of tax
imposed by subtitle A on account of--
(A) The deductibility by the taxpayer, under
section 166 or section 832(c), of a debt as a
debt which became worthless, or, under section
165(g), of a loss from worthlessness of a
security, or
(B) The effect that the deductibility of a
debt or loss described in subparagraph (A) has
on the application to the taxpayer of a
carryover,
in lieu of the 3-year period of limitation prescribed
in subsection (a), the period shall be 7 years from the
date prescribed by law for filing the return for the
year with respect to which the claim is made. If the
claim for credit or refund relates to an overpayment on
account of the effect that the deductibility of such a
debt or loss has on the application to the taxpayer of
a carryback, the period shall be either 7 years from
the date prescribed by law for filing the return for
the year of the net operating loss which results in
such carryback or the period prescribed in paragraph
(2) of this subsection, whichever expires the later. In
the case of a claim described in this paragraph the
amount of the credit or refund may exceed the portion
of the tax paid within the period prescribed in
subsection (b)(2) or (c), whichever is applicable, to
the extent of the amount of the overpayment
attributable to the deductibility of items described in
this paragraph.
(2) Special period of limitation with respect to net
operating loss or capital loss carrybacks.--
(A) Period of limitation.--If the claim for
credit or refund relates to an overpayment
attributable to a net operating loss carryback
or a capital loss carryback, in lieu of the 3-
year period of limitation prescribed in
subsection (a), the period shall be that period
which ends 3 years after the time prescribed by
law for filing the return (including extensions
thereof) for the taxable year of the net
operating loss or net capital loss which
results in such carryback, or the period
prescribed in subsection (c) in respect of such
taxable year, whichever expires later. In the
case of such a claim, the amount of the credit
or refund may exceed the portion of the tax
paid within the period provided in subsection
(b)(2) or (c), whichever is applicable, to the
extent of the amount of the overpayment
attributable to such carryback.
(B) Applicable rules.--
(i) In general.--If the allowance of
a credit or refund of an overpayment of
tax attributable to a net operating
loss carryback or a capital loss
carryback is otherwise prevented by the
operation of any law or rule of law
other than section 7122 (relating to
compromises), such credit or refund may
be allowed or made, if claim therefor
is filed within the period provided in
subparagraph (A) of this paragraph.
(ii) Tentative carryback
adjustments.--If the allowance of an
application, credit, or refund of a
decrease in tax determined under
section 6411(b) is otherwise prevented
by the operation of any law or rule of
law other than section 7122, such
application, credit, or refund may be
allowed or made if application for a
tentative carryback adjustment is made
within the period provided in section
6411(a).
(iii) Determinations by courts to be
conclusive.--In the case of any such
claim for credit or refund or any such
application for a tentative carryback
adjustment, the determination by any
court, including the Tax Court, in any
proceeding in which the decision of the
court has become final, shall be
conclusive except with respect to--
(I) the net operating loss
deduction and the effect of
such deduction, and
(II) the determination of a
short-term capital loss and the
effect of such short-term
capital loss, to the extent
that such deduction or short-
term capital loss is affected
by a carryback which was not an
issue in such proceeding.
(3) Special rules relating to foreign tax credit.--
(A) Special period of limitation with respect
to foreign taxes paid or accrued.--If the claim
for credit or refund relates to an overpayment
attributable to any taxes paid or accrued to
any foreign country or to any possession of the
United States for which credit is allowed
against the tax imposed by subtitle A in
accordance with the provisions of section 901
or the provisions of any treaty to which the
United States is a party, in lieu of the 3-year
period of limitation prescribed in subsection
(a), the period shall be 10 years from the date
prescribed by law for filing the return for the
year in which such taxes were actually paid or
accrued.
(B) Exception in the case of foreign taxes
paid or accrued.--In the case of a claim
described in subparagraph (A), the amount of
the credit or refund may exceed the portion of
the tax paid within the period provided in
subsection (b) or (c), whichever is applicable,
to the extent of the amount of the overpayment
attributable to the allowance of a credit for
the taxes described in subparagraph (A).
(4) Special period of limitation with respect to
certain credit carrybacks.--
(A) Period of limitation.--If the claim for
credit or refund relates to an overpayment
attributable to a credit carryback, in lieu of
the 3-year period of limitation prescribed in
subsection (a), the period shall be that period
which ends 3 years after the time prescribed by
law for filing the return (including extensions
thereof) for the taxable year of the unused
credit which results in such carryback (or,
with respect to any portion of a credit
carryback from a taxable year attributable to a
net operating loss carryback, capital loss
carryback, or other credit carryback from a
subsequent taxable year, the period shall be
that period which ends 3 years after the time
prescribed by law for filing the return,
including extensions thereof, for such
subsequent taxable year) or the period
prescribed in subsection (c) in respect of such
taxable year, whichever expires later. In the
case of such a claim, the amount of the credit
or refund may exceed the portion of the tax
paid within the period provided in subsection
(b)(2) or (c), whichever is applicable, to the
extent of the amount of the overpayment
attributable to such carryback.
(B) Applicable rules.--If the allowance of a
credit or refund of an overpayment of tax
attributable to a credit carryback is otherwise
prevented by the operation of any law or rule
of law other than section 7122, relating to
compromises, such credit or refund may be
allowed or made, if claim therefor is filed
within the period provided in subparagraph (A)
of this paragraph. In the case of any such
claim for credit or refund, the determination
by any court, including the Tax Court, in any
proceeding in which the decision of the court
has become final, shall not be conclusive with
respect to any credit, and the effect of such
credit, to the extent that such credit is
affected by a credit carryback which was not in
issue in such proceeding.
(C) Credit carryback defined.--For purposes
of this paragraph, the term ``credit
carryback'' means any business carryback under
section 39.
(5) Special period of limitation with respect to
self-employment tax in certain cases.--If the claim for
credit or refund relates to an overpayment of the tax
imposed by chapter 2 (relating to the tax on self-
employment income) attributable to an agreement, or
modification of an agreement, made pursuant to section
218 of the Social Security Act (relating to coverage of
State and local employees), and if the allowance of a
credit or refund of such overpayment is otherwise
prevented by the operation of any law or rule of law
other than section 7122 (relating to compromises), such
credit or refund may be allowed or made if claim
therefor is filed on or before the last day of the
second year after the calendar year in which such
agreement (or modification) is agreed to by the State
and the Commissioner of Social Security.
(6) Special period of limitation with respect to
amounts included in income subsequently recaptured
under qualified plan termination.--If the claim for
credit or refund relates to an overpayment of tax
imposed by subtitle A on account of the recapture,
under section 4045 of the Employee Retirement Income
Security Act of 1974, of amounts included in income for
a prior taxable year, the 3-year period of limitation
prescribed in subsection (a) shall be extended, for
purposes of permitting a credit or refund of the amount
of the recapture, until the date which occurs one year
after the date on which such recaptured amount is paid
by the taxpayer.
(7) Special period of limitation with respect to
self-employment tax in certain cases.--If--
(A) the claim for credit or refund relates to
an overpayment of the tax imposed by chapter 2
(relating to the tax on self-employment income)
attributable to Tax Court determination in a
proceeding under section 7436, and
(B) the allowance of a credit or refund of
such overpayment is otherwise prevented by the
operation of any law or rule of law other than
section 7122 (relating to compromises),
such credit or refund may be allowed or made if claim
therefor is filed on or before the last day of the
second year after the calendar year in which such
determination becomes final.
(8) Special rules when uniformed services retired pay
is reduced as a result of award of disability
compensation.--
(A) Period of limitation on filing claim.--If
the claim for credit or refund relates to an
overpayment of tax imposed by subtitle A on
account of--
(i) the reduction of uniformed
services retired pay computed under
section 1406 or 1407 of title 10,
United States Code, or
(ii) the waiver of such pay under
section 5305 of title 38 of such Code,
as a result of an award of compensation under
title 38 of such Code pursuant to a
determination by the Secretary of Veterans
Affairs, the 3-year period of limitation
prescribed in subsection (a) shall be extended,
for purposes of permitting a credit or refund
based upon the amount of such reduction or
waiver, until the end of the 1-year period
beginning on the date of such determination.
(B) Limitation to 5 taxable years.--
Subparagraph (A) shall not apply with respect
to any taxable year which began more than 5
years before the date of such determination.
(f) Special rule for chapter 42 and similar taxes.--For
purposes of any tax imposed by section 4912, chapter 42, or
section 4975, the return referred to in subsection (a) shall be
the return specified in section 6501(l)(1).
(h) Running of periods of limitation suspended while taxpayer
is unable to manage financial affairs due to disability.--
(1) In general.--In the case of an individual, the
running of the periods specified in subsections (a),
(b), and (c) shall be suspended during any period of
such individual's life that such individual is
financially disabled.
(2) Financially disabled.--
(A) In general.--For purposes of paragraph
(1), an individual is financially disabled if
such individual is unable to manage his
financial affairs by reason of a medically
determinable physical or mental impairment of
the individual which can be expected to result
in death or which has lasted or can be expected
to last for a continuous period of not less
than 12 months. An individual shall not be
considered to have such an impairment unless
proof of the existence thereof is furnished in
such form and manner as the Secretary may
require.
(B) Exception where individual has guardian,
etc..--An individual shall not be treated as
financially disabled during any period that
such individual's spouse or any other person is
authorized to act on behalf of such individual
in financial matters.
(i) Cross references.--
(1) For time return deemed filed and tax
considered paid, see section 6513.
(2) For limitations with respect to certain
credits against estate tax, see sections
2014(b) and 2015.
(3) For limitations in case of floor stocks
refunds, see section 6412.
(4) For a period of limitations for credit or
refund in the case of joint income returns
after separate returns have been filed, see
section 6013(b)(3).
(5) For limitations in case of payments under
section 6420 (relating to gasoline used on
farms), see section 6420(b).
(6) For limitations in case of payments under
section 6421 (relating to gasoline used for
certain nonhighway purposes or by local transit
systems), see section 6421(d).
(7) For a period of limitations for refund of
an overpayment of penalties imposed under
section 6694 or 6695, see section 6696(d)(2).
(8) For limitations in case of collection
action proceedings, see section 6330(e).
* * * * * * *
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