House panel advances tax administration bills

House committee advances tax administration bills

Pedestrian passing by the U.S. Capitol in Washington, D.C. — The U.S. Capitol in Washington, D.C.

The tax-writing House Ways and Means Committee held a hearing Wednesday to consider and pass seven bills related to tax administration and the Internal Revenue Service.

Several of the bills came from recommendations promoted by National Taxpayer Advocate Erin Collins, who has also been pushing for the Taxpayer Assistance and Service Act, a bipartisan set of tax administration fixes introduced in January 2025 by the leaders of the Senate Finance Committee.

End Tax Penalties on American Hostages Act

The End Tax Penalties on American Hostages Act, introduced by Rep. Claudia Tenney, R-New York, and Don Beyer, D-Virginia, would add a new provision to the Tax Code to extend due dates for hostages and persons who have been wrongfully detained by providing that the period of detention is disregarded in determining deadlines, interest, penalties, similar to the rules for members of the military who are deployed in a combat zone. It would also extend the relief to the spouse of the hostage or detainee.

"Upon their return home, these hostages could be greeted with a stack of bills from the IRS seeking to collect the income tax they owe from the time they were detained abroad. That's not right," said House Ways and Means Committee chairman Jason Smith, R-Missouri, in a statement, before the markup. "The IRS shouldn't add insult to injury with demands for payment while these Americans were held in captivity. Representatives Tenney and Beyer have introduced legislation that extends the tax deadlines for Americans held hostage or wrongfully detained and their spouse."

The bill passed in a unanimous vote of 40 to 0.

Tax Relief for Fraud Victims Act

The Tax Relief for Fraud Victims Act, introduced by Rep. Max Miller, R-Ohio, and Tom Suozzi, D-New York, would permanently repeal the suspension on personal casualty and theft loss deductions and allow victims to file amended returns to claim refunds on past scam-related losses.

"Today, Americans face countless scams, and many victims may not find out they have become the target of one until years later," said Smith. "Unfortunately, current tax rules require victims to pay tax on their scam-related losses. This bill helps make taxpayers whole again by allowing them to deduct the losses incurred from scams, and if they discover they have become a fraud victim years after the fact, allowing them to file an amended return to receive a tax refund on those losses."

The bill passed by a vote of 39 to 0.

Taxpayer Advocate Participation Act

The Taxpayer Advocate Participation Act, sponsored by Rep. Greg Steube, R-Florida, and Suzan DelBene, D-Washington, would authorize the National Taxpayer Advocate to file amicus curiae, or friend-of-the-court, briefs in federal courts to defend fundamental taxpayer rights, particularly those contained in the Taxpayer Bill of Rights.

"As an independent watchdog within the Internal Revenue Service (IRS), the Office of the Taxpayer Advocate possesses extensive knowledge of the challenges taxpayers face when navigating an increasingly complex tax code," said the National Taxpayers Union in a letter supporting the bill and others. "Allowing the Advocate to provide courts with its expertise isn't just a question of promoting a more efficient tax system; it's fundamentally about restoring trust in government by ensuring the American people have an independent voice that advocates for the fair and consistent application of tax laws whenever fundamental taxpayer rights are at stake."

The bill passed in a vote of 39 to 0.

AI Tax Integrity Act of 2026

The AI Tax Integrity Act of 2026, introduced by Rep. Vern Buchanan, R-Florida, and Steven Horsford, D-Nevada, would direct the Treasury Department to test the use of artificial intelligence for identifying inaccurate and fraudulent tax returns in a pilot program, including those that are the result of identity theft; fraudulent claims for tax credits, deductions, or refunds by individual or business taxpayers; and improperly prepared returns by third-party return tax professionals.

"AI could make the IRS workforce more efficient, and ensuring the IRS is prepared to utilize this technology is important to the future of the agency," said Smith. "That's why this legislation creates a new pilot program for the use of AI in identifying tax returns to test the best approaches for keeping private information secure."

The bill would require a mandatory, independent report by the Government Accountability Office to the Ways and Means and Finance Committees to ensure Congress can could the program on hard results and decide whether to expand, modify or end it.

The bill passed by a unanimous vote of 40 to 0.

Protecting Taxpayers from Ghost Preparers Act

The Protecting Taxpayers from Ghost Preparers Act, introduced by Rep. Nicole Malliotakis, R-New York, would amend the Internal Revenue Code to apply tax return preparation penalties to improperly altered returns, and for other purposes, closing a loophole where the IRS had unlimited time to audit and penalize taxpayers involved in fraud and clarifying that the unlimited statute of limitations applies only when the taxpayer intended to commit fraud, not when a "ghost" preparer acts without the client's knowledge. This bill would clarify that the exception to the general statute of limitation for fraudulent returns applies only when it is the taxpayer who seeks to evade their tax obligations.

"Too many Americans have encountered so-called ghost tax preparers, shady businesses who, unbeknownst to the taxpayer, file income tax returns that appear as if the taxpayer prepared the return themselves," said Smith. "This illegal act can cause taxpayers to become entangled with the IRS through no fault of their own. This bill from Representative Malliotakis cracks down on these illegal operators and clarifies the tax law so innocent Americans deceived by these fraudulent tax preparers are not on the hook for assessments, taxes, or penalties for the indefinite future."

The bill passed by a unanimous vote of 40 to 0.

Taxpayer Workforce Modernization Act

The Taxpayer Workforce Modernization Act, introduced by Rep. David Schweikert, R-Arizona, would require the IRS to establish a fellowship program to recruit qualified data scientists from the private sector to partner with tax law specialists and provide insights and identify emerging and complex issues in tax administration, ranging from data acquisition and quality through developing advanced analytics, AI, statistics and models to improve tax administration activities in services and enforcement.

"Equipping the IRS with private-sector talent would empower the Service to more efficiently address complex regulatory and tax compliance issues," said the National Taxpayers Union. "Critically, this legislation promotes long-term institutional capacity building by requiring fellows to train existing IRS employees on how to leverage data analysis in the workplace. Mandating annual reports to Congress about this fellowship's return on investment ensures accountability and measurable results."

The bill would require the IRS to establish a task force, staffed by the data scientist fellows, to tackle the most complex tax cases using innovative means, including developing data-driven methodologies to support audit case selection and provide support for audits through data-driven analytics; educating and training IRS employees on the use and interpretation of data analytics, models, and emerging analytic techniques to identify risk; and reviewing the IRS's current use of AI and provide data-driven recommendations for improving audit effectiveness and efficiency.

The bill passed by a vote of 24 to 16.

Tax Exempt Hospital Transparency Act

The Tax Exempt Hospital Transparency Act, introduced by Rep. Greg Murphy, R-North Carolina, would update the Form 990 Schedule H, the annual disclosure form required of all U.S. tax-exempt hospitals, to require them to report more detailed information regarding community benefits, executive compensation, and billing and debt collection practices.

The bill would require nonprofit hospitals to show their work through additional reporting, with extra requirements for large tax-exempt hospitals that have more than 100 inpatient beds and/or more than $100 million in net patient revenue. Updated reporting requirements include the CMS certification number for each hospital facility; the value of the financial assistance provided; the number of completed financial assistance applications received, granted and denied; and spending to address the three highest priority health needs identified in the most recent Community Health Needs Assessment and a description of the actions taken. That includes the amount of spending on quality improvement, nonclinical programming and advertising costs, along with information on health service lines and the 340B drug discount program.

"Nonprofit hospitals receive significant tax benefits in exchange for providing meaningful community benefits and charitable care," Murphy posted on Facebook after the committee voted to advance the bill. "Patients and taxpayers deserve transparency regarding how these institutions are meeting those obligations and serving the communities that rely on them. My legislation promotes greater accountability by improving transparency requirements and helping ensure nonprofit hospitals remain focused on their charitable mission. Increased transparency empowers patients, informs policymakers, and strengthens trust in our healthcare system.Greater transparency leads to better accountability, and I will continue working to advance policies that strengthen our healthcare system and put patients first."

However, the Association of American Medical Colleges, a group representing the industry, registered its objections. "The legislation would impose burdensome reporting requirements based on an institution's size and revenue while disregarding the unique, complex financial structures and mission-related costs inherent to academic medicine," said AAMC president and CEO David Skorton and chief public policy officer Danielle Turnipseed in a statement Wednesday. "The legislation also includes misguided 340B reporting requirements that misrepresent and overstate the program's financial value to participating hospitals without yielding meaningful data about how hospitals use the program to benefit patients and communities. Instead of ensuring AAMC member institutions are able to focus their valuable resources on treating patients and serving their communities, this bill would divert crucial resources and staff to navigate administratively burdensome reporting mandates. The AAMC urges policymakers to reject this approach and instead work with the hospital community on meaningful solutions that support, rather than penalize, the institutions anchoring our nation's health care safety net."

The bill passed by a vote of 25 to 15.

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