EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES.

SEC. 3101. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES. (a) Increase in Attorney’s Fees.— (1) Increase in hourly amount.— Clause (iii) of section 7430(c)(1)(B) (relating to reasonable litigation costs) is amended by striking “$110” and inserting “$125”. (2) Award of higher attorney’s fees based on complexity of issues.— Clause (iii) of section 7430(c)(1)(B) (relating to the award of costs and certain fees) is amended by inserting112 STAT. 728 “the difficulty of the issues presented in the case, or the local availability of tax expertise,” before “justifies a higher rate”. (b) Award of Administrative Costs Incurred After 30-Day Letter.— Paragraph (2) of section 7430(c) is amended by striking the last sentence and inserting the following new flush sentence: “Such term shall only include costs incurred on or after whichever of the following is the earliest: (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals; (ii) the date of the notice of deficiency; or (iii) the date on which the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent.”. (c) Award of Fees for Certain Additional Services.— Paragraph (3) of section 7430(c) is amended to read as follows: “(3) Attorneys fees.— “(A) In general.— For purposes of paragraphs (1) and (2), fees for the services of an individual (whether or not an attorney) who is authorized to practice before the Tax Court or before the Internal Revenue Service shall be treated as fees for the services of an attorney. “(B) Pro bono services.— The court may award reasonable attorneys fees under subsection (a) in excess of the attorneys fees paid or incurred if such fees are less than the reasonable attorneys fees because an individual is representing the prevailing party for no fee or for a fee which (taking into account all the facts and circumstances) is no more than a nominal fee. This subparagraph shall apply only if such award is paid to such individual or such individual’s employer.”. (d) Determination of Whether Position of United States Is Substantially Justified.— Subparagraph (B) of section 7430(c)(4) is amended by redesignating clause (iii) as clause (iv) and by inserting after clause (ii) the following new clause: “(iii) Effect of losing on substantially similar issues In determining for purposes of clause (i) whether the position of the United States was substantially justified, the court shall take into account whether the United States has lost in courts of appeal for other circuits on substantially similar issues.”. (e) Taxpayer Treated as Prevailing if Judgment Is Less Than Taxpayer’s Offer.— (1) In general.— Section 7430(c)(4) (defining prevailing party) is amended by adding at the end the following new subparagraph: “(E) Special rules where judgment less than taxpayer’s offer.— “(i) In general.— A party to a court proceeding meeting the requirements of subparagraph (A)(ii) shall be treated as the prevailing party if the liability of the taxpayer pursuant to the judgment in the proceeding (determined without regard to interest) is equal to or less than the liability of the taxpayer which would have been so determined if the United States had accepted a qualified offer of the party under subsection (g).112 STAT. 729 “(ii) Exceptions.— This subparagraph shall not apply to— “(I) any judgment issued pursuant to a settlement; or “(II) any proceeding in which the amount of tax liability is not in issue, including any declaratory judgment proceeding, any proceeding to enforce or quash any summons issued pursuant to this title, and any action to restrain disclosure under section 6110(f). “(iii) Special rules.— If this subparagraph applies to any court proceeding— “(I) the determination under clause (i) shall be made by reference to the last qualified offer made with respect to the tax liability at issue in the proceeding; and “(II) reasonable administrative and litigation costs shall only include costs incurred on and after the date of such offer. “(iv) Coordination.— This subparagraph shall not apply to a party which is a prevailing party under any other provision of this paragraph.”. (2) Qualified offer.— Section 7430 is amended by adding at the end the following new subsection: “(g) Qualified Offer.— For purposes of subsection (c)(4)— “(1) In general.— The term ‘qualified offer’ means a written offer which— “(A) is made by the taxpayer to the United States during the qualified offer period; “(B) specifies the offered amount of the taxpayer’s liability (determined without regard to interest); “(C) is designated at the time it is made as a qualified offer for purposes of this section; and “(D) remains open during the period beginning on the date it is made and ending on the earliest of the date the offer is rejected, the date the trial begins, or the 90th day after the date the offer is made. “(2) Qualified offer period.— For purposes of this subsection, the term ‘qualified offer period’ means the period— “(A) beginning on the date on which the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent, and “(B) ending on the date which is 30 days before the date the case is first set for trial”. (f) Award of Attorneys Fees in Unauthorized Inspection and Disclosure Cases.— Section 7431(c) (relating to damages) is amended by striking the period at the end of paragraph (2) and inserting “, plus”, and by adding at the end the following new paragraph: “(3) in the case of a plaintiff which is described in section 7430(c)(4)(A)(ii), reasonable attorneys fees, except that if the defendant is the United States, reasonable attorneys fees may be awarded only if the plaintiff is the prevailing party (as determined under section 7430(c)(4)).”. (g) Effective Date.— The amendments made by this section shall apply to costs incurred (and, in the case of the amendment 112 STAT. 730made by subsection (c), services performed) more than 180 days after the date of the enactment of this Act.