Small Business Taxpayer Bill of Rights Act of 2025

Under the organization plan of the Internal Revenue Service, a taxpayer shall have the right to a conference with the Internal Revenue Service Independent Office of Appeals which does not include personnel from the Office of Chief Counsel for the Internal Revenue Service or the compliance functions of the Internal Revenue Service unless the taxpayer specifically consents to the participation of such personnel.

Section 7123 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

The procedures prescribed under subsection (b)(1) and the pilot program established under subsection (b)(2) shall provide that a taxpayer may request mediation or arbitration in any case unless the Secretary has specifically excluded the type of issue involved in such case or the class of cases to which such case belongs as not appropriate for resolution under such subsection. The Secretary shall make any determination that excludes a type of issue or a class of cases public within 5 working days and provide an explanation for each determination.

The procedures prescribed under subsection (b)(1) shall provide the taxpayer an opportunity to elect to have the mediation conducted by an independent, neutral individual not employed by the Internal Revenue Service Independent Office of Appeals.

Any taxpayer making an election under subparagraph (A) shall be required—

(I) to share the costs of such independent mediator equally with the Internal Revenue Service Independent Office of Appeals, and

(II) to limit the selection of the mediator to a roster of recognized national or local neutral mediators.

Clause (i)(I) shall not apply to any taxpayer who is an individual or who was a small business in the preceding calendar year if such taxpayer had an adjusted gross income that did not exceed 250 percent of the poverty level, as determined in accordance with criteria established by the Director of the Office of Management and Budget, in the taxable year preceding the request.

For purposes of clause (ii), the term small business has the meaning given such term under section 41(b)(3)(D)(iii).

The procedures prescribed under subsection (b)(1) and the pilot program established under subsection (b)(2) shall provide the opportunity to elect mediation or arbitration at the time when the case is first filed with the Internal Revenue Service Independent Office of Appeals and at any time before deliberations in the appeal commence.

The amendment made by this section shall take effect on the date of the enactment of this Act.

Paragraphs (1), (2), (3), and (4) of section 7213(a) of the Internal Revenue Code of 1986 are each amended by striking $5,000 and inserting $10,000.

Subsection (a) of section 7213 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

In the case of any calendar year after 2025, the $10,000 amounts in paragraphs (1), (2), (3), and (4) shall each be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any amount as increased under the preceding sentence is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100.

The amendments made by this section shall apply to disclosures made after the date of the enactment of this Act.

Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

In reviewing an appeal of any determination initially made by the Internal Revenue Service, the Internal Revenue Service Independent Office of Appeals may not consider or decide any issue that is not within the scope of the initial determination.

For purposes of subsection (a), the following matters shall be considered to be not within the scope of a determination:

(1) Any issue that was not raised in a notice of deficiency or an examiner's report which is the subject of the appeal.

(2) Any deficiency in tax which was not included in the initial determination.

(3) Any theory or justification for a tax deficiency which was not considered in the initial determination.

Nothing in this section shall be construed to provide any limitation in addition to any limitations in effect on the date of the enactment of this section on the right of a taxpayer to raise an issue, theory, or justification on an appeal from a determination initially made by the Internal Revenue Service that was not within the scope of the initial determination.

The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

The amendments made by this section shall apply to matters filed or pending with the Internal Revenue Service Independent Office of Appeals on or after the date of the enactment of this Act.

Section 7403(a) of the Internal Revenue Code of 1986 is amended—

(1) by striking In any case and inserting the following:

In any case

(1) ; and

(2) by adding at the end the following new paragraph:

Paragraph (1) shall not apply to any property used as the principal residence of the taxpayer (within the meaning of section 121) unless the Secretary of the Treasury makes a written determination that—

(i) all other property of the taxpayer, if sold, is insufficient to pay the tax or discharge the liability, and

(ii) such action will not create an economic hardship for the taxpayer.

For purposes of this paragraph, the Secretary of the Treasury may not delegate any responsibilities under subparagraph (A) to any person other than—

(i) the Commissioner of Internal Revenue, or

(ii) a district director or assistant district director of the Internal Revenue Service.

The amendments made by this section shall apply to actions filed after the date of the enactment of this Act.

Section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking and at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting; and, and by adding at the end the following new paragraph:

(11) in the case of any review of an application for tax-exempt status by an organization described in section 501(c) of the Internal Revenue Code of 1986, developing or using any methodology that applies disproportionate scrutiny to any applicant based on the ideology expressed in the name or purpose of the organization.

Paragraph (1) of section 1203(c) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by adding at the end the following new sentence: Notwithstanding the preceding sentence, if the Commissioner of Internal Revenue takes a personnel action other than termination for an act or omission described in subsection (b), the Commissioner shall place the employee on unpaid administrative leave for a period of not less than 90 days..

Paragraph (1) of section 1203(c) of the Internal Revenue Service Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is amended by striking The Commissioner and inserting Except in the case of an act or omission described in subsection (b)(3)(A), the Commissioner.

Subsection (k)(1) of section 412 of title 5, United States Code, is amended—

(1) in subparagraph (C), by striking and at the end;

(2) by redesignating subparagraph (D) as subparagraph (E);

(3) by inserting after subparagraph (C) the following new subparagraph:

(D) shall—

(i) review any criteria employed by the Internal Revenue Service to select tax returns (including applications for recognition of tax-exempt status) for examination or audit, assessment or collection of deficiencies, criminal investigation or referral, refunds for amounts paid, or any heightened scrutiny or review in order to determine whether the criteria discriminates against taxpayers on the basis of race, religion, or political ideology; and

(ii) consult with the Internal Revenue Service on recommended amendments to such criteria in order to eliminate any discrimination identified pursuant to the review described in clause (i); and

(3) ; and

(4) in subparagraph (E), as so redesignated, by striking and (C) and inserting (C), and (D).

Subsection (g) of section 412 of title 5, United States Code, is amended by adding at the end the following new paragraph:

Any semiannual report made by the Treasury Inspector General for Tax Administration that is required pursuant to section 405(b) shall include—

(A) a statement affirming that the Treasury Inspector General for Tax Administration has reviewed the criteria described in subsection (k)(1)(D) and consulted with the Internal Revenue Service regarding such criteria; and

(B) a description and explanation of any such criteria that was identified as discriminatory by the Treasury Inspector General for Tax Administration.

Subsection (a) of section 62 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (21) the following new paragraph:

The deduction allowed by section 224.

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to so much of the qualified NRP expenses paid or incurred during the taxable year as does not exceed $5,000.

For purposes of this section, the term qualified NRP expenses means amounts which but for subsection (c) would be allowed as a deduction under section 162 or 212(3) in connection with an audit of the taxpayer's return of the tax imposed by this chapter for any taxable year under the National Research Program, but only if such audit results in no increase in the tax liability of the taxpayer for such taxable year.

No deduction shall be allowed under any other provision of this chapter for any amount for which a deduction is allowed under this section.

The table of sections for part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 224 and by inserting after the item relating to section 223 the following new items:

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Subparagraph (B) of section 7803(c)(1) of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause:

The term of the National Taxpayer Advocate shall be a 10-year term, beginning with a term to commence on the date which is 18 months after the date of the enactment of the Small Business Taxpayer Bill of Rights Act of 2025. Each subsequent term shall begin on the day after the date on which the previous term expires. The National Taxpayer Advocate may be appointed to serve more than 1 term.

The term of any individual serving as the National Taxpayer Advocate under section 7803(c) of the Internal Revenue Code of 1986 as of the date of the enactment of this Act shall end as of the day before the date which is 18 months after such date of enactment, unless such individual is reappointed as the National Taxpayer Advocate for a subsequent term pursuant to section 7803(c)(1)(B)(v) of such Code.

Subparagraph (D) of section 6343(a)(1) of the Internal Revenue Code of 1986 is amended by striking or and inserting including the financial condition of the taxpayer's viable trade or business, or.

Subsection (a) of section 6343 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

In determining whether to release any levy under paragraph (1)(D), the Secretary shall consider—

(A) the economic viability of the business,

(B) the nature and extent of the hardship created by the levy (including whether the taxpayer has exercised ordinary business care and prudence), and

(C) the potential harm to individuals if the business is liquidated.

The amendments made by this section shall apply to levies made after the date of the enactment of this Act.

Section 7122 of the Internal Revenue Code of 1986 is amended by striking subsection (c) and by redesignating subsections (d), (e), (f), and (g) as subsections (c), (d), (e), and (f), respectively.

(1) Paragraph (3) of section 7122(c) of the Internal Revenue Code of 1986, as redesignated by subsection (a), is amended by inserting and at the end of subparagraph (A), by striking, and at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C).

(2) Section 7122 of such Code, as amended by this section, is amended by adding at the end the following new subsection:

In the case of any assessed tax or other amounts imposed under this title with respect to such tax which is the subject of an offer-in-compromise, such tax or other amounts shall be reduced by any user fee imposed under this title with respect to such offer-in-compromise.

(3) Section 6159(g) of such Code is amended by striking section 7122(e) and inserting section 7122(d).

The amendments made by this section shall apply to offers-in-compromise submitted after the date of the enactment of this Act.