Responses to claims for refund required; appeal of claims for refund authorized

(a) In general Subsection (l) of section 6402 is amended to read as follows: (l) Explanation of reason for refund disallowance; appeals (1) In general Not later than the applicable date, the Secretary shall review any claim for refund, make a determination with respect to such claim, and, in the case of a disallowance of such claim (in whole or in part), provide the taxpayer with a detailed written explanation for such disallowance, which shall— (A) be mailed to the last known address of the taxpayer, and (B) in the case of any taxpayer entitled to an appeal of such determination, include instructions for appealing such disallowance to the Internal Revenue Service Independent Office of Appeals. (2) Failure to make timely determination (A) In general In the case of any claim for refund for which the Secretary fails to satisfy the requirements of paragraph (1) by the applicable date, for purposes of determining interest on any overpayment for any period subsequent to such date, the overpayment rate (as established under section 6621(a)(1)) shall be increased by 1 percentage point. (B) Limitation With respect to any claim for refund described in subparagraph (A), the amount of any increase in interest on any overpayment pursuant to such subparagraph shall not exceed $500. (C) Adjustment for inflation (i) In general In the case of any claim for refund filed during any calendar year beginning after 2026, the $500 amount in subparagraph (B) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2024 for calendar year 2016 in subparagraph (A)(ii) thereof. (ii) Rounding If any amount determined under clause (i) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50. (3) Appeals (A) In general Any disallowance of a claim for refund may, within 30 days after the date such disallowance is mailed (or, if mailed to an address outside of the United States, 90 days), be appealed to the Internal Revenue Service Independent Office of Appeals. Notwithstanding paragraph (4) of section 6532(a), during the period in which any such appeal is pending before the Internal Revenue Service Independent Office of Appeals (and for 30 days thereafter), the 2-year period in paragraph (1) of such section for filing suit for refund after disallowance of a claim shall be suspended. (B) Deemed disallowance For purposes of subparagraph (A), in the case of any claim for refund for which the Secretary has failed to make a determination with respect to such claim by the date described in paragraph (5)(A), the taxpayer may elect for such claim to be deemed to have been disallowed by the Secretary as of such date. (4) Frivolous claims (A) In general In the case of any frivolous claim— (i) paragraphs (1) and (3) shall not apply, and (ii) not later than the applicable date, written notification of the denial of such claim shall be mailed to the last known address of the taxpayer. (B) Definition For purposes of this paragraph, the term frivolous claim means a claim for refund which is based on— (i) a position which the Secretary has identified as frivolous for purposes of subsection (c) of section 6702, or (ii) a position which is substantially similar to a position described in clause (i). (5) Applicable date For purposes of this subsection, the term applicable date means, with respect to any claim for refund— (A) the date which is 12 months after the date of receipt of such claim by the Secretary, or (B) such other date as is agreed to by the Secretary and the taxpayer.. (b) Effective date The amendment made by this section shall apply to any claim for refund received after the date which is 12 months after the date of enactment of this Act.