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TAXPAYER BILL OF RIGHTS 3: 1998 TAX LAW PART 3: ATTORNEYS' FEES AND DAMAGES FOR IRS ABUSES, March 9, 1999 1 (March 9, 1999)

handle is hein.tera/crstax0570 and id is 1 raw text is: Order Code RS20108 March 9, 1999 CRS Report for Congress Received through the CRS Web Taxpayer Bill of Rights 3: 1998 Tax Law Part 3: Attorneys' Fees and Damages for IRS Abuses Marie B. Morris Legislative Attorney American Law Division Summary This is oTne ofa series of Rigeots designed to IIIal ze taxpyer protection andm rits provisions made by the Tax payer Bill of Rights 3, einacted as Title III of the IRS Restrutictuiring, aid Reform Act of 1998. P.L. 105-206. Th-is r-ep~ort discuIsses thle erovisiois expoatdiug ss autho rist n to eawndi attorres' fees ad costs in certain cases ad peermitting a taxpayer to collect aaiages for negligent collection actions by IRS agentsts. Specific stattory chag ec inclue a 1 oicrese II thie rlios stttory cap on attorney 's fees, the Rovnisi of fees to accotints and erolled agenits, anr thle athripaty to pa fees fr successful pro bonio reresetion . These plrovision s are foIC in sections 3101 and 3102 of the statute and i IRC §§ 7430, 7433, and 7426. The Taxpayer Bill of Rights 3, title III of P.L. 105-206, contains a number of provisions designed to strengthen taxpayer rights in dealings with the Internal Revenue Service. This report discusses the provisions expanding a court's authority to award attorneys' fees and costs in certain cases and permitting a taxpayer to collect damages for negligent collection actions by IRS agents. Section 3 101 of the law liberalizes the rules on attorneys' fees in Internal Revenue Code §7430, and section 3102 permits taxpayers and third parties to collect damages for negligent actions of IRS collection agents under IRC §§ 7433 and 7426. Attorneys' Fees and Costs Under prior law, any person who substantially prevailed in a tax case involving determination, collection, or refund of taxes, interest, or penalties could be awarded reasonable administrative costs (incurred after the earlier of the date the taxpayer receives the notice of the decision of the IRS Office of Appeals or the date of the notice of deficiency) and reasonable litigation costs. Only individuals with a net worth of $2 million or less and corporations with a net worth of $7 million or less could be awarded costs. The biggest component of reasonable costs is attorneys' fees, but reimbursement for attorneys' fees was limited to $110 per hour (as adjusted for inflation). In certain cases, Congressional Research Service o+o The Library of Congress

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