S-5141-119
Read twice and referred to the Committee on Finance.
Sponsored by Michael Bennet (D-CO)
What it does
This bill would require the IRS to explain in deficiency notices why it denied a Child Tax Credit, American Opportunity Tax Credit, or Earned Income Tax Credit claim, and to disclose the grounds and length of any multi-year ban on reclaiming that credit. It would also give the Tax Court explicit jurisdiction to review whether such multi-year bans were properly imposed, shift the burden of production onto the IRS in those disputes, allow refunds for years wrongly covered by a ban, and suspend the refund-claim deadline while a ban is being litigated.
Who benefits
Taxpayers, largely lower- and middle-income working families who claim the Earned Income Tax Credit, Child Tax Credit, or American Opportunity Tax Credit, who would gain clearer notice of why a credit was denied and a formal path to challenge multi-year bans in Tax Court. Tax preparers and low-income taxpayer clinics that represent these filers would also benefit from clearer procedural rules.
Who is hurt
The IRS would bear additional administrative burden from producing detailed notices and defending disallowance determinations in Tax Court under a shifted burden of production. Taxpayers with legitimate ineligibility for these credits would see little change, and some administrative delay could occur for all filers during the phase-in period as the IRS updates systems.
Supporters argue
Supporters argue that taxpayers currently can be barred from claiming credits like the EITC for up to 10 years with little explanation or meaningful review, disproportionately affecting lower-income families who cannot afford tax attorneys. They contend that requiring clear written grounds for denial and giving the Tax Court explicit jurisdiction to review these bans would correct a due-process gap and let taxpayers wrongly barred recover the credits and any refunds owed.
Opponents argue
Opponents argue that shifting the burden of production onto the IRS and creating new suspension-of-limitations and refund rules could increase administrative costs and slow enforcement against improper claims, which the IRS estimates cost billions annually in EITC error payments. They contend the 36-month delayed effective dates and added litigation avenues could strain Tax Court resources and complicate IRS compliance efforts without a clear offsetting reduction in erroneous denials.
Constitutional context
This bill involves Congress's taxing power under Article I, Section 8 and procedural due process protections under the Fifth Amendment, since it concerns notice and an opportunity to be heard before a taxpayer is barred from a benefit for multiple years; no landmark case directly governs these administrative procedure details, though due process notice principles generally inform such requirements.
Checks and balances
Congress expands the judicial branch's role by granting the Tax Court explicit jurisdiction to review IRS disallowance determinations, while imposing new procedural constraints on the executive branch's IRS enforcement discretion.
Historical precedent
Congress has previously expanded Tax Court jurisdiction and taxpayer procedural protections, such as through the IRS Restructuring and Reform Act of 1998, though no directly analogous multi-year credit ban notice provision has been enacted before.