Taxpayer Due Process Enhancement Act
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The bill would pause the deadline for taxpayers to claim a tax refund while they are disputing an IRS collection action, and would bar the IRS from applying overpayments to that disputed liability during the dispute.
It would also expand the Tax Court's jurisdiction to rule on the underlying disputed tax amount itself, addressing a gap the Supreme Court identified in Commissioner v. Zuch where the Tax Court lost jurisdiction once the IRS satisfied a liability through an overpayment offset.
What this bill would do
What it would do
The bill would amend the Internal Revenue Code's collection due process rules. It would suspend the statute of limitations for filing a tax refund claim while a taxpayer's underlying tax liability is properly disputed in a collection due process hearing, with exceptions if the taxpayer forfeits the dispute. It would also prohibit the IRS from crediting overpayments against that disputed liability during the suspended period unless the taxpayer consents. The bill would further rewrite the Tax Court's jurisdiction provision so the court can review not just the IRS's collection determination but also the underlying disputed tax liability, and would specify the Tax Court keeps that jurisdiction even if the IRS abandons the collection action. It would not change other IRS collection procedures or dispute categories outside collection due process hearings.
Key provisions
- 1Would suspend the statute of limitations for filing a tax refund claim while the underlying tax liability is properly disputed in a collection due process hearing
- 2Would end the suspension if a deadline lapse, court filing, or court order shows the taxpayer forfeited the right to pursue the dispute
- 3Would prohibit the IRS from crediting overpayments against a properly disputed tax liability during the suspended limitations period, absent taxpayer consent
- 4Would clarify that certain levy hearing procedural rules also apply to lien hearings
- 5Would expand Tax Court jurisdiction to review the underlying disputed tax liability, not just the collection determination, and any equitable tolling of the 30-day filing deadline
- 6Would provide that the Tax Court retains jurisdiction even if the IRS abandons the collection action at issue
Who would be affected
Taxpayers who request a collection due process hearing to dispute an IRS levy or lien action and the underlying tax liability, the Internal Revenue Service (which administers refund claims and overpayment crediting), and the U.S. Tax Court, which would gain expanded review authority over these disputes.
Why it matters
Taxpayers currently risk losing their ability to claim a refund or have a court rule on their liability if the IRS applies overpayments to satisfy a disputed debt while a case is pending, cutting off Tax Court review. The bill would close that gap, preserving both the refund window and judicial review during ongoing disputes.
What would change
Changes to existing law
Amends 26 U.S.C. § 6330 (Internal Revenue Code) (Sec. 2, Sec. 4)
Adds a suspension of the refund limitations period during collection due process disputes and rewrites Tax Court jurisdiction to cover the underlying liability.
Amends 26 U.S.C. § 6402 (Internal Revenue Code) (Sec. 3)
Adds a new subsection barring the IRS from crediting overpayments against a properly disputed tax liability during collection due process proceedings.
Amends 26 U.S.C. § 6511 (Internal Revenue Code) (Sec. 2)
Adds a cross-reference noting the new limitations suspension rule for collection action proceedings under section 6330(e).
Agencies directed to act
Effective dates
- Refund limitations suspension amendments
- Prohibition on crediting overpayments against disputed liability
- Clarification applying levy hearing rules to lien hearings
- Expanded Tax Court jurisdiction
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 6506 would increase the federal deficit by $1 million over the 2026–2035 period, entirely due to a reduction in revenues.
The Joint Committee on Taxation estimates that enacting H.R. 6506 would reduce federal revenues by $1 million over the 2026–2035 period, primarily because changes to collection due process hearing procedures would result in reduced IRS tax collections. The bill would have no effect on direct (mandatory) spending. CBO also estimates the IRS's administrative costs would increase by less than $500,000 over the 2026–2030 period, which would be subject to appropriation (i.e., dependent on Congress providing the funding). CBO identified no intergovernmental or private-sector mandates in the bill.
How implementation would work
The IRS would need to track when a collection due process hearing is properly requested and a tax liability is properly disputed, then withhold crediting overpayments against that liability and suspend the refund limitations period accordingly, unless the taxpayer consents or forfeits the dispute through a missed deadline or court ruling. The Tax Court would apply expanded jurisdiction to petitions filed after enactment, reviewing both the collection determination and the disputed liability itself, and retaining jurisdiction even if the IRS drops the collection action.
Legislative status & sources
Latest action
Received in the Senate and Read twice and referred to the Committee on Finance.
Official CRS summary
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This bill suspends the period of time allowed for claiming a federal tax refund (limitations period) during collection due process (CDP) proceedings, prohibits the Internal Revenue Service (IRS) from applying tax overpayments to a tax liability that is disputed in such proceedings, and expands the Tax Court’s jurisdiction.
As background, IRS collection actions and the underlying tax liability (in some circumstances) may be disputed in a CDP hearing. Collection actions are suspended during CDP proceedings, but the IRS may apply tax overpayments from other tax years to the disputed tax liability. The Tax Court may review an appeal of a CDP hearing determination. However, the Supreme Court held in Commissioner v. Zuch that the Tax Court loses jurisdiction over a CDP appeal if the CDP hearing determination is revoked because tax overpayments are applied to and fully satisfy the tax liability. In such circumstances, the taxpayer may claim a refund and seek redress in federal district court. Currently, the limitations period to file a refund claim is not suspended during CDP proceedings.
The bill
- suspends the limitations period for claiming a tax refund during CDP proceedings (with exceptions),
- prohibits the IRS from applying tax overpayments to a properly disputed tax liability during CDP proceedings (unless waived or an exception applies),
- expands the Tax Court's jurisdiction in CDP cases to include jurisdiction over the underlying tax liability amount (if properly disputed), and
- provides that the Tax Court retains its jurisdiction if the IRS abandons collection actions.
Legislative subjects
Income tax credits; Jurisdiction and venue; Specialized courts; Tax administration and collection, taxpayers; Taxation
Committee report
H. Rept. 119-428