Taxpayers contesting IRS collection actions — such as a lien (a legal claim on property) or levy (seizure of wages or bank accounts) — face a timing problem: the deadline to file a claim for a tax refund can expire while their hearing is still pending. This law freezes that refund deadline for the duration of the hearing, so taxpayers do not lose their right to a refund simply because their dispute is unresolved. It also bars the IRS from applying a taxpayer's overpayment (money owed back to the taxpayer) against a disputed tax bill without the taxpayer's consent while the deadline is paused. The Tax Court's authority is expanded to review the disputed tax amount directly — not just the collection procedure — and to consider late petitions on fairness grounds, even if the IRS later drops the collection action.
Civil Liberties
- Refund claim statute of limitations — suspended during active collection hearings, preserving access to refund claims
- Tax Court jurisdiction — expanded to review underlying disputed tax amounts, not just collection procedures
- Equitable tolling — added to Tax Court review authority, allowing late petitions to be considered on fairness grounds
- Tax Court authority — retained even after IRS abandons a collection action post-determination
Average Household Impact
- Refund offset protection — IRS barred from applying overpayments against disputed tax debts without taxpayer consent during hearings
Congressional Summary
Taxpayer Due Process Enhancement ActThis 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 billsuspends 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), andprovides that the Tax Court retains its jurisdiction if the IRS abandons collection actions.
Legislative Subjects
Details
- Congress
- 119th
- Chamber
- House
- Status
- summarized
- Action
- Placed on the Union Calendar, Calendar No. 373.
- Action Date
- 2026-01-07
- Date Added
- 2026-04-25
- Source
- Congress.gov →
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