This bill improves transparency and taxpayer rights by requiring the IRS to provide clear notice for tax credit denials and granting the U.S. Tax Court authority to review multi-year bans on claiming major tax credits.
Michael Bennet
Senator
CO
This bill improves transparency and fairness for taxpayers by requiring the IRS to provide clear, detailed notices when denying major tax credits like the Child Tax Credit and Earned Income Tax Credit. It grants the U.S. Tax Court authority to review multi-year bans on these credits and shifts the burden of proof to the IRS to justify such penalties. Additionally, the legislation protects taxpayer rights by suspending refund deadlines while these cases are under judicial review.
IRS Must Provide Detailed Justification for Multi-Year Tax Credit Bans and Grants Taxpayers New Court Appeal Rights.
If you’ve ever claimed the Child Tax Credit (CTC) or the Earned Income Tax Credit (EITC), you know how much that money matters for covering rent or school supplies. But under current rules, if the IRS decides you made a mistake, they can slap you with a 'disallowance period'—essentially banning you from claiming those credits for two to ten years. This bill changes the game by requiring the IRS to send a detailed deficiency notice that explains exactly why a credit was denied and the specific grounds for any multi-year ban. No more guessing why your refund disappeared; the IRS has to show their work starting 36 months after this becomes law.
Your Day in Court
For the first time, this legislation gives the U.S. Tax Court the explicit power to review these multi-year bans. Think of it like a referee finally being allowed to check the replay on a penalty that would bench a player for multiple seasons. If the IRS tries to ban a gig worker or a single parent from claiming the CTC, that taxpayer can now ask a judge to decide if the ban was actually fair. The bill even includes a 'look-back' rule: if you were hit with a ban before this law kicked off and the IRS didn't explain why, you can still ask the court to step in and potentially order a refund for those lost years.
Shifting the Burden
In a major shift for taxpayer rights, the bill moves the 'burden of production' to the IRS. In plain English, this means if the IRS wants to ban you for 'reckless or intentional disregard' of the rules, they are the ones who have to prove you actually did it—using the same high legal standard used in fraud cases. Imagine a nurse who accidentally miscalculates their eligibility; instead of the nurse having to prove they weren't being shady, the IRS has to prove they were. This protects honest people from being punished for complicated paperwork errors that shouldn't cost them years of future support.
Protecting Your Refund Clock
Usually, there is a strict time limit (a statute of limitations) on how long you have to claim a tax refund. This bill hits the pause button on that clock while your case is tied up in Tax Court. This ensures that if it takes a year or two to prove the IRS was wrong about your ban, you don't lose out on the money you were owed just because the calendar ran out. It’s a common-sense safeguard that keeps the legal process from accidentally stripping away the very financial relief it’s meant to protect.