Purposes and duties of Independent Office of Appeals; right of appeal clarified

(a) In general Section 7803(e) is amended— (1) in paragraph (3)— (A) in subparagraph (B), by striking and at the end, (B) in subparagraph (C), by striking the period at the end and inserting, and, and (C) by adding at the end the following new subparagraph: (D) without exception, evaluates and considers all hazards of litigation in resolving any case referred to the Internal Revenue Service Independent Office of Appeals., (2) by striking paragraph (4) and inserting the following new paragraph: (4) Right of appeal (A) In general Except as otherwise provided under this title, the resolution process described in paragraph (3) shall be available to all taxpayers with respect to any determination by the Secretary concerning a Federal tax controversy regarding subtitles A, B, or C and relating to— (i) liability for, or any claim for refund of, any tax, (ii) liability for, or any claim for refund of, any penalty or addition to tax, (iii) eligibility for alternatives to collection of a tax liability, such as an installment agreement or compromise under section 6159 or 7122, (iv) any determination to deny or revoke the tax-exempt status of an organization, or (v) any exercise of discretion by the Secretary with respect to any determination described in clauses (i) through (iv). (B) Exceptions Notwithstanding subparagraph (A), the Secretary may restrict access to the resolution process described in paragraph (3) with respect to any appeal— (i) to the extent that such appeal is based on a claim that— (I) a law is unconstitutional, unless there is a final and unreviewable decision rendered by a Federal court that the relevant provision of such law is unconstitutional, or (II) a regulation, notice, or revenue procedure which was issued by the Secretary is procedurally invalid, unless there is a final and unreviewable decision rendered by a Federal court that the relevant provision of such regulation, notice, or revenue procedure is procedurally invalid, (ii) which— (I) is based on a position which— (aa) a Federal court has determined to be frivolous, and (bb) the Secretary has identified as frivolous for purposes of subsection (c) of section 6702, (II) is substantially similar to a position described in subclause (I), or (III) relates to any penalty imposed under such section with respect to such position, (iii) which relates to any matter agreed upon pursuant to an agreement under section 7121, (iv) subject to subparagraph (C), during any period in which— (I) the Secretary is actively investigating whether to refer the taxpayer to the Attorney General for criminal prosecution, (II) a recommendation made by the Secretary to the Attorney General for the criminal prosecution of the taxpayer for any offense connected with the administration or enforcement of the internal revenue laws is pending, or (III) any criminal prosecution of the taxpayer, or of any other person in a case in which the taxpayer is a witness, for any offense connected with the administration or enforcement of the internal revenue laws is pending, or (v) with respect to any issue in a case which, based on the relevant facts and circumstances of such case, the Chief Counsel for the Internal Revenue Service— (I) has designated for litigation, and (II) is prepared to proceed with such litigation in a timely manner. (C) Exception for certain criminal prosecutions Subparagraph (B)(iv) shall not apply if the Chief Counsel for the Internal Revenue Service determines that the resolution process described in paragraph (3) would not interfere with the criminal prosecution of a taxpayer. (D) Notice to tax-exempt organizations In the case of any determination described in subparagraph (A)(iv), the Secretary shall provide written notice to the organization of the availability of the resolution process described in paragraph (3). (E) Definitions In this paragraph— (i) Federal tax controversy The term Federal tax controversy means a dispute described in paragraph (2) or (3) of section 301.7803–2 of title 26, Code of Federal Regulations (as in effect on the date of enactment of the Taxpayer Assistance and Service Act). (ii) Procedurally invalid The term procedurally invalid means, with respect to any regulation, notice, or revenue procedure, that such regulation, notice, or revenue procedure failed to comply with any applicable requirement under subchapter II of chapter 5 and chapter 7 of title 5, United States Code (commonly known as the Administrative Procedure Act). (F) Rule of construction Nothing in this paragraph shall be construed to limit the availability of the resolution process described in paragraph (3) solely to the Federal tax controversies described in subparagraph (A)., and (3) in paragraph (5)— (A) by redesignating subparagraph (D) as subparagraph (E), and (B) by inserting after subparagraph (C) the following new subparagraph: (D) Clarification of Tax Court authority In any case before the Tax Court, the Tax Court may direct the parties to request referral to the Internal Revenue Service Independent Office of Appeals in any case in which the Tax Court determines that the resolution process described in paragraph (3) is appropriate..