H.R. 6506 — Taxpayer Due Process Enhancement Act, as amended
Executive Summary
The Taxpayer Due Process Enhancement Act (H.R. 6506) strengthens taxpayer rights and closes procedural loopholes during IRS Collection Due Process (CDP) hearings. Under the status quo, taxpayers disputing IRS liens or levies can lose their right to a refund if the statute of limitations expires during the dispute, or the IRS can seize unrelated refunds to satisfy the disputed debt before the hearing concludes. This bill suspends the refund statute of limitations during CDP proceedings, prohibits the IRS from automatically applying overpayments to disputed liabilities without taxpayer consent, and expands Tax Court jurisdiction to ensure taxpayers get a definitive ruling even if the IRS withdraws the underlying collection action.
Arguments For
- Taxpayer Protection: Closes procedural loopholes that allow the IRS to run out the clock on taxpayer refund claims or seize unrelated refunds while a dispute is still pending.
- Judicial Efficiency & Fairness: Prevents the IRS from playing games by withdrawing a collection action just to moot a Tax Court case, ensuring taxpayers get a definitive ruling on their underlying liability.
- Bipartisan Appeal: Enhancing due process and protecting low-to-middle income taxpayers from aggressive IRS collection tactics generally garners broad bipartisan support.
Likely Supporters
Arguments Against
- Administrative Burden: The IRS may argue that tracking suspended statutes of limitations and manually preventing automated refund offsets will require costly IT system updates.
- Delayed Revenue Collection: Suspending the ability to offset overpayments against disputed liabilities delays the collection of potentially valid tax debts.
Likely Opponents
📋 Key Provisions
- Suspends the statute of limitations for filing a claim for credit or refund while a Collection Due Process (CDP) hearing is pending, provided the claim relates to the disputed tax liability.
- Prohibits the IRS from automatically crediting a taxpayer's overpayment (refund) against a disputed tax liability during a CDP proceeding without the taxpayer's explicit consent.
- Expands Tax Court jurisdiction to explicitly cover the underlying tax liability and any equitable tolling of the 30-day petition deadline.
- Prevents the IRS from mooting a Tax Court case by abandoning the collection action, ensuring the court retains jurisdiction to resolve the underlying dispute.
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Verification Guide
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Suspends the period of limitations for filing a refund claim during collection proceedings.
"PERIOD OF LIMITATIONS ON FILING A"
Prohibits the IRS from crediting overpayments against disputed tax liabilities without taxpayer consent.
"except with the consent of the tax-"
Grants the Tax Court jurisdiction to review equitable tolling of the 30-day petition deadline.
"any equitable tolling of the 30-"
Ensures the Tax Court retains jurisdiction even if the IRS abandons the collection action.
"whether or not the Secretary abandons"