Taxpayer Fairness and IRS Accountability Act

[Congressional Bills 119th Congress] [From the U.S. Government Publishing Office] [S. 5695 Introduced in Senate (IS)]

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119th CONGRESS 2d Session S. 5695

To amend the Internal Revenue Code of 1986 to eliminate duplicative and misguided enforcement units of the Internal Revenue Service.

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IN THE SENATE OF THE UNITED STATES

November 9, 2026

Mrs. Blackburn introduced the following bill; which was read twice and referred to the Committee on Finance

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A BILL

To amend the Internal Revenue Code of 1986 to eliminate duplicative and misguided enforcement units of the Internal Revenue Service.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Taxpayer Fairness and IRS Accountability Act''.

SEC. 2. ELIMINATION OF DUPLICATIVE AND MISGUIDED IRS ENFORCEMENT UNITS.

(a) Findings.--Congress finds the following: (1) The following entities constitute materially duplicative examination structures within the Internal Revenue Service with respect to pass-through entities, as the Small Business/Self-Employed Division and the Large Business and International Division already possess authority to examine such pass-through entities and related taxpayer returns: (A) The pass-through field operations unit within the Large Business and International Division, as announced in September 2023 and placed into operation in October 2024. (B) The Pass-Through Entities practice area and compliance area within the Large Business and International Division. (2) The entities identified in subparagraphs (A) and (B) of paragraph (1) unfairly assume that large partnerships are in violation of internal revenue laws and investigate and determine tax liability in conformity with that assumption. (3) Partnerships should be treated the same as other entities provided for under Federal law, and it is grossly unfair for businesses to be targeted because they organize as one lawful type of business association rather than another. (4) The entities identified in subparagraphs (A) and (B) of paragraph (1) are implicated in, or related to, past actions that have raised legitimate concerns about unjustified targeting, lack of neutrality, potential partisan manipulation, and the infliction of undue burdens in the administration of the Internal Revenue Code of 1986. (b) Purposes.--The purposes of this Act are to-- (1) prohibit the establishment, maintenance, or operation of any entity within the Internal Revenue Service (including any office, division, practice area, unit, task force, or other organizational structure) for which the substantial function is to select, initiate, conduct, or resolve civil tax examinations if such entity materially duplicates an examination function assigned to another organizational unit of the Internal Revenue Service; (2) protect taxpayers against unjustified targeting, lack of neutrality, potential partisan manipulation, and the infliction of undue burdens in the administration of the Internal Revenue Code of 1986; (3) help restore a reputation of impartiality to the administration of such Code by the Commissioner of Internal Revenue and the officers, employees, agents, and representatives acting under the Commissioner; and (4) improve public trust in, and compliance with, the administration of such Code. (c) Prohibition.--Subchapter A of chapter 80 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

``SEC. 7813. ELIMINATION OF DUPLICATIVE AND MISGUIDED ENFORCEMENT UNITS.

``(a) In General.--Notwithstanding any other provision of this title-- ``(1) Elimination of duplicative pass-through unit activity by the commissioner.--The Commissioner shall not establish, maintain, operate, fund, or assign civil examination cases to-- ``(A) the pass-through field operations unit within the Large Business and International Division, ``(B) the Pass-Through Entities practice area and compliance area within the Large Business and International Division, or ``(C) any entity which materially duplicates the examination authority of, or the legal, examination- support, or case-development functions assigned to, the Small Business/Self-Employed Division or the Large Business and International Division with respect to pass-through entities. ``(2) Termination of duplicative pass-through units.--Any activity conducted in violation of the prohibitions established under paragraph (1) shall be discontinued, and any office, division, practice area, unit, task force, or other organizational structure prohibited under such paragraph shall be abolished. ``(b) Definitions.--For purposes of this section-- ``(1) Commissioner.--The term `Commissioner' means the Commissioner of Internal Revenue or delegate thereof, including the Chief Counsel and any officer, employee, or agent of the Internal Revenue Service. ``(2) Materially duplicates.--The term `materially duplicates' means, with respect to any entity, having substantially overlapping authority to examine the same taxpayer segment, tax type, taxable period, or principal legal or factual issue. ``(c) Anti-Abuse Rule.--The prohibitions established under subsection (a) shall be applied without regard to any change or alteration with respect to the name, organizational placement, reporting relationship, or administrative designation of any entity. ``(d) Rule of Construction.--Nothing in this section shall be construed to prohibit any action by the Commissioner to transfer personnel, records, examinations, matters, or cases from any entity described in paragraph (1) of subsection (a) to any other entity that is not in violation of the prohibitions under such subsection.''. (d) Enforcement.--Section 7813 of the Internal Revenue Code of 1986, as added under subsection (c), is amended by adding at the end the following new subsections: ``(e) Compliance.-- ``(1) In general.--None of the following actions may begin or otherwise be maintained, made, notified, issued, or prosecuted if such action is conducted in violation of the prohibitions established under subsection (a): ``(A) Any examination, assessment or collection of deficiencies, or proceeding in court with respect to any tax imposed under this title. ``(B) Any examination, assessment, imposition, or proceeding in court with respect to any penalty imposed under this title. ``(C) Any levy or proceeding in court with respect to any collection of a tax liability. ``(2) Notice.-- ``(A) In general.--In the case of any notice described in subparagraph (B) which-- ``(i) is prepared by an entity described in paragraph (1) of subsection (a) in violation of the prohibitions established under such subsection, and ``(ii) fails to identify such violation, such notice shall be deemed void. ``(B) Notices.--The notices described in this subparagraph are the following: ``(i) Notice of deficiency, including a notice of deficiency under section 6212 due to failure to file a return of tax. ``(ii) Notice of selection of partnership return for examination. ``(iii) Notice of penalty under section 6751. ``(iv) Notice of unpaid tax under section 6303. ``(v) Notice of right to a hearing prior to levy under section 6330. ``(vi) Any other notice which is substantially similar to the notices described in clauses (i) through (v). ``(3) Enforcement.--Notwithstanding section 7421(a), in the case of any action described in paragraph (1) which is in violation of the prohibitions established under subsection (a)-- ``(A) such action may be enjoined by any court of competent jurisdiction (including the Tax Court), and ``(B) such court may order a refund to the taxpayer with respect to any amount collected during any period in which such violation occurred. ``(f) Civil Cause of Action.-- ``(1) In general.--If the Commissioner knowingly, or by reason of negligence, violates any of the prohibitions established under subsection (a) in connection with an examination of any taxpayer, such taxpayer may bring a civil action against the United States in a district court of the United States for-- ``(A) actual damages sustained by such individual as a result of the violation, and ``(B) reasonable attorneys' fees and costs of the action. ``(2) Payment authority.--Amounts awarded under this subsection shall be made from amounts appropriated under section 1304 of title 31, United States Code. ``(3) Limitations.-- ``(A) Requirement that administrative remedies be exhausted.--A judgment for damages, fees, or costs shall not be awarded under paragraph (1) in any court proceeding unless the court determines that the taxpayer has exhausted the administrative remedies available to such taxpayer within the Internal Revenue Service. ``(B) Period of limitation on suits.--No suit or proceeding under this subsection shall be begun after the expiration of 2 years after discovery by the taxpayer of the violation described in paragraph (1).''. (e) Clerical Amendment.--The table of sections for subchapter A of chapter 80 of such Code is amended by inserting after the item related to section 7812 the following new item:

``Sec. 7813. Elimination of duplicative and misguided enforcement units.''. (f) Severability.--If any provision of this Act or an amendment made by this Act, or any application of such provision to any person or circumstance, is held to be unconstitutional or otherwise invalid, the remainder of this Act, the amendments made by this Act, and the application of this Act and the amendments made by this Act to any other person or circumstance shall not be affected. (g) Effective Dates.-- (1) Prohibition.--Except as provided under paragraph (2), the amendments made by this section shall be applied as if in effect on September 1, 2023. (2) Enforcement.-- (A) In general.--Except as provided under subparagraph (B), the amendments made by subsection (d) shall take effect on the date of enactment of this Act. (B) Notice.--Section 7813(e)(2) of the Internal Revenue Code of 1986 (as added by subsection (d)) shall apply to any notice described in subparagraph (B) of such section which was issued on or after September 1, 2023. <all>