Small Business Taxpayer Bill of Rights Act of 2025
Sponsored By: Representative Kustoff
Introduced
Summary
Small Business Taxpayer Bill of Rights would create statutory protections for small businesses to strengthen dispute rights, limit certain lien and levy actions, and tighten oversight and penalties for IRS misconduct. It centers on expanded dispute-resolution options, stronger remedies for unauthorized IRS conduct, and new reporting by the Treasury Inspector General for Tax Administration (TIGTA).
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- Small businesses and taxpayers would get more dispute tools. The bill would create a right to an independent conference with the IRS Independent Office of Appeals, expand alternative dispute resolution to include mediation and arbitration, repeal the partial-payment requirement for offers-in-compromise, allow a deduction for certain audit-related expenses, and add rules to consider business viability before levying a taxpayer’s principal residence.
- IRS personnel and enforcement would face tougher limits and discipline. The bill would ban ex parte communications between Appeals officers and other IRS staff, increase civil damages and monetary penalties for misconduct and unauthorized disclosures, extend filing periods for related actions, and require mandatory termination or unpaid administrative leave for specified misconduct.
- Oversight and timing changes would add accountability and limits. TIGTA would be required to review examination selection criteria for possible discrimination and report semiannually, many thresholds and damages would be indexed for inflation, and the National Taxpayer Advocate would be limited to a 10-year term.
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Bill Overview
Analyzed Economic Effects
9 provisions identified: 9 benefits, 0 costs, 0 mixed.
Deduction for NRP audit expenses
If enacted, individuals picked for a National Research Program audit could deduct up to $5,000 of qualifying out‑of‑pocket costs. You could claim this only if the audit ends with no increase in your tax. You could not deduct the same expense elsewhere. This would apply to tax years that start after enactment.
Stronger penalties and higher taxpayer damages
If enacted, taxpayers could recover more money when the IRS breaks the rules. Damages in lawsuits for reckless or intentional misconduct would rise up to $5,000,000, or up to $500,000 for negligence. Minimum damages for each unauthorized look at or disclosure of your return would be $10,000. Criminal fines and employee penalties for misconduct would also increase. You would have up to five years to file these claims, and dollar limits would rise with inflation after 2025.
Extra protection for your primary home
If enacted, the IRS could not force a lien sale of your primary home unless senior officials first sign a written finding. They would have to show that selling all your other property would not cover the tax and that the action would not cause economic hardship. This would apply to cases filed after the bill becomes law.
Fairer, more independent IRS Appeals process
If enacted, IRS Appeals would be more independent. Appeals officers could not have private talks with other IRS staff about your case. You could have a conference without IRS lawyers or compliance staff unless you agree. Appeals could not add new issues that were not in the original notice. You could ask for mediation or arbitration, and if your income was at or below 250% of the poverty level (or you were a qualifying small business), you would not have to split the mediator’s cost. Any excluded issues would need quick public notice with reasons, and TIGTA would report on compliance.
IRS must weigh business hardship before levies
If enacted, the IRS would have to weigh business hardship before levying business assets. The review would consider if the business is viable, whether you used ordinary business care, and how a levy could harm workers, customers, or dependents. This could lead to more levy releases for small businesses after enactment.
More small firms can recover IRS costs
If enacted, more small firms could recover IRS administrative costs and some fees after disputes. A business would qualify if its average gross receipts over the prior three years were at or below $50 million. That limit would rise with inflation after 2025. The new test would apply to proceedings started after enactment.
Stop biased audits and exempt reviews
If enacted, the watchdog for tax administration would check IRS selection rules for bias. TIGTA would review how returns and cases are picked to make sure criteria do not discriminate by race, religion, or political ideology, and report every six months. The bill would also ban IRS staff from using methods that single out tax‑exempt applicants by ideology, with firing or at least 90 days unpaid leave for violations.
Lower upfront costs for tax settlements
If enacted, settling with the IRS through an offer‑in‑compromise would cost less up front. The bill would remove the current partial payment requirement in law. The IRS would also subtract any user fee from the assessed amount covered by the offer. These changes would apply to offers submitted after enactment.
Longer term for Taxpayer Advocate
If enacted, the National Taxpayer Advocate would serve 10‑year terms. The first new term would start 18 months after enactment. The current Advocate’s term would end the day before that date unless reappointed.
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Sponsors & CoSponsors
Sponsor
Kustoff
TN • R
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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