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S. 5141

A bill to amend the Internal Revenue Code of 1986 to improve the notice and review procedure with respect to multi-year bans on claiming credits.

Shown here: Introduced in Senate (2026-07-28)

To amend the Internal Revenue Code of 1986 to improve the notice and review procedure with respect to multi-year bans on claiming credits.

1. Notice and review with respect to multi-year bans on claiming credits

(a) Notice

(1) In general

Section 6212(a) of the Internal Revenue Code of 1986 is amended—

(A) by striking “If the” and inserting the following:

(1) Notice
If the

(B) by striking “Such notice shall include a notice” and inserting the following:

(2) Matters included
Such notice shall include—
(A) a notice

(C) by striking the period at the end of the second sentence and inserting “, and”, and

(D) by adding at the end the following new subparagraph:

(B) in any case in which such deficiency for a taxable year is attributable to the denial of a credit under section 24, 25A, or 32, a statement—
(i) identifying the credit or credits which are denied and providing the grounds for each such denial,
(ii) informing the taxpayer that, unless the denial is overturned on appeal, the taxpayer will not be able to claim such credit for any subsequent taxable year unless the taxpayer provides information required by the Secretary to demonstrate eligibility for the credit, and
(iii) in any case in which the Secretary has made a determination to impose a disallowance period under section 24(g)(1), 25A(b)(4)(A), or 32(k)(1), providing the grounds for such disallowance period (and the length of the disallowance period unless overturned on appeal).

(2) Effective date

The amendments made by this subsection shall apply to notices mailed 36 months after the date of enactment of this Act.

(b) Authority of the tax court

(1) In general

Section 6214 of the Internal Revenue Code of 1986 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

(e) Jurisdiction with respect to multi-Year bans with respect to certain credits
(1) In general
The Tax Court shall have jurisdiction—
(A) to redetermine the imposition of any disallowance period with respect to any credit under section 24, 25A, or 32 for the taxable year in which such disallowance period was imposed if the deficiency relates to such taxable year, and
(B) to determine whether any such disallowance period should be imposed if claim therefor is asserted by the Secretary in the answer or an amended answer filed in accordance with the rules of the Tax Court.
(2) Disallowance period
For purposes of this subsection, the term disallowance period has the meaning given such term under section 6751(d).

(2) Effective date

The amendments made by this subsection apply to petitions filed on or after the date of enactment of this Act.

(3) Transition rule for review of previously imposed disallowance periods

(A) In general

In the case of any deficiency which is attributable to an entry on the return claiming a credit under section 24, 25A, or 32 of the Internal Revenue Code of 1986 for a taxable year in a disallowance period described in subparagraph (B), the Tax Court shall have jurisdiction to redetermine whether the disallowance period was properly imposed.

(B) Disallowance period described

A disallowance period is described in this subparagraph if the notice of the deficiency under section 6212 of such Code for the taxable year with respect to which the determination to impose the disallowance period was made—

(i) did not include the grounds for such disallowance period, and

(ii) was mailed before the date that is 36 months after the date of the enactment of this Act.

(C) Disallowance period

For purposes of this paragraph, the term disallowance period has the meaning given such term under section 6751(d) of the Internal Revenue Code of 1986 (as added by this Act).

(D) Refunds

Notwithstanding section 6512(b)(1) of the Internal Revenue Code of 1986, in the case of a petition with respect to a disallowance period described in subparagraph (B), the Tax Court shall have jurisdiction to determine the amount of an overpayment for any taxable year in the disallowance period, and such amount shall, notwithstanding section 6511, when the decision of the Tax Court has become final, be credited or refunded to the taxpayer. If a notice of appeal in respect of the decision of the Tax Court is filed under section 7483 of such Code, the Secretary of the Treasury (or the Secretary's delegate) is authorized to refund or credit the overpayment determined by the Tax Court to the extent the overpayment is not contested on appeal.

(c) Burden of production

(1) In general

Section 7491(c) of the Internal Revenue Code of 1986 is amended—

(A) by striking “Notwithstanding” and inserting the following:

(1) In general
Notwithstanding

(B) by striking “with respect to the liability” and inserting

with respect to—
(A) the liability

(C) by striking the period after “title” and inserting “, and”,

(D) by adding at the end the following new paragraph:

(A) the application of any disallowance period (as defined in section 6751(d)) to any individual.

(E) by adding at the end the following new paragraph:

(2) Standard of proof for certain disallowance periods
In the case of any court proceeding with respect to any disallowance period described in section 24(g)(1)(B)(i), 25A(b)(4)(A)(ii)(I), or 32(k)(1)(B)(i), the standard of proof shall be the same standard as required in a proceeding under section 7454(a).

(2) Effective date

The amendments made by this subsection shall apply to court proceedings beginning after the date that is 36 months after the date of the enactment of this Act in connection with disallowance periods (as defined in section 6751(d) of the Internal Revenue Code of 1986, as added by this Act) determined after such date.

(d) Modification of disallowance period

(1) Child tax credit

Section 24(g)(1) of the Internal Revenue Code of 1986 is amended—

(A) in subparagraph (B), by striking “for which there was a final determination that the taxpayer's claim of credit under this section was” each place it appears in clauses (i) and (ii) and inserting “for which a notice of deficiency has been sent under section 6212(a) which notifies the taxpayer that the taxpayer's claim of credit under this section was denied, or a determination that has become final under section 7481 has been made by the Tax Court to deny such claim,”, and

(B) by adding at the end the following new subparagraph:

(C) Allowance of previously denied credits after Tax Court consideration
Notwithstanding subparagraphs (A) and (B), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(2) American opportunity tax credit

Section 25A(b)(4)(A) of the Internal Revenue Code of 1986 is amended—

(A) in clause (ii), by striking “for which there was a final determination that the taxpayer's claim of the American Opportunity Credit under this section was” each place it appears in subclauses (I) and (II) and inserting “for which a notice of deficiency has been sent under section 6212(a) which notifies the taxpayer that the taxpayer's claim of credit under this section was denied, or a determination that has become final under section 7481 has been made by the Tax Court to deny such claim,”, and

(B) by adding at the end the following new clause:

(iii) Allowance of previously denied credits after Tax Court consideration
Notwithstanding clauses (i) and (ii), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(3) Earned income tax credit

Section 32(k)(1) of the Internal Revenue Code of 1986 is amended—

(B) by adding at the end the following new subparagraph:

(C) Allowance of previously denied credits after Tax Court consideration
Notwithstanding subparagraphs (A) and (B), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(4) Suspension of running of limitations period filing of a claim for credit or refund

Section 6511(d) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(9) Special rules relating to disallowance periods
The running of the periods described in subsections (a) and (b)(2) with respect to any claim for a credit allowed under section 24, 25A, or 32 for any taxable year in a disallowance period (as defined in section 6751(d)) shall be suspended during any period in which the imposition of such disallowance period is pending before the Tax Court.

(5) Effective date

(A) In general

The amendments made by paragraphs (1), (2), and (3) shall apply to—

(i) taxable years beginning after the date that is 36 months after the date of the enactment of this Act, and

(ii) disallowance periods (as defined in section 6751(d) of the Internal Revenue Code of 1986, as added by this Act) in taxable years beginning on or before such date if the notice of deficiency for the taxable year with respect to which the determination to impose such disallowance period was made was sent after such date.

(B) Suspension of running of limitations period

The amendment made by paragraph (4) shall apply to petitions filed after the date of the enactment of this Act.

Workspace/Typeset/Bill

S. 5141

A bill to amend the Internal Revenue Code of 1986 to improve the notice and review procedure with respect to multi-year bans on claiming credits.

Shown here: Introduced in Senate (2026-07-28)

To amend the Internal Revenue Code of 1986 to improve the notice and review procedure with respect to multi-year bans on claiming credits.

1. Notice and review with respect to multi-year bans on claiming credits

(a) Notice

(1) In general

Section 6212(a) of the Internal Revenue Code of 1986 is amended—

(A) by striking “If the” and inserting the following:

(1) Notice
If the

(B) by striking “Such notice shall include a notice” and inserting the following:

(2) Matters included
Such notice shall include—
(A) a notice

(C) by striking the period at the end of the second sentence and inserting “, and”, and

(D) by adding at the end the following new subparagraph:

(B) in any case in which such deficiency for a taxable year is attributable to the denial of a credit under section 24, 25A, or 32, a statement—
(i) identifying the credit or credits which are denied and providing the grounds for each such denial,
(ii) informing the taxpayer that, unless the denial is overturned on appeal, the taxpayer will not be able to claim such credit for any subsequent taxable year unless the taxpayer provides information required by the Secretary to demonstrate eligibility for the credit, and
(iii) in any case in which the Secretary has made a determination to impose a disallowance period under section 24(g)(1), 25A(b)(4)(A), or 32(k)(1), providing the grounds for such disallowance period (and the length of the disallowance period unless overturned on appeal).

(2) Effective date

The amendments made by this subsection shall apply to notices mailed 36 months after the date of enactment of this Act.

(b) Authority of the tax court

(1) In general

Section 6214 of the Internal Revenue Code of 1986 is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

(e) Jurisdiction with respect to multi-Year bans with respect to certain credits
(1) In general
The Tax Court shall have jurisdiction—
(A) to redetermine the imposition of any disallowance period with respect to any credit under section 24, 25A, or 32 for the taxable year in which such disallowance period was imposed if the deficiency relates to such taxable year, and
(B) to determine whether any such disallowance period should be imposed if claim therefor is asserted by the Secretary in the answer or an amended answer filed in accordance with the rules of the Tax Court.
(2) Disallowance period
For purposes of this subsection, the term disallowance period has the meaning given such term under section 6751(d).

(2) Effective date

The amendments made by this subsection apply to petitions filed on or after the date of enactment of this Act.

(3) Transition rule for review of previously imposed disallowance periods

(A) In general

(B) Disallowance period described

(i) did not include the grounds for such disallowance period, and

(ii) was mailed before the date that is 36 months after the date of the enactment of this Act.

(C) Disallowance period

For purposes of this paragraph, the term disallowance period has the meaning given such term under section 6751(d) of the Internal Revenue Code of 1986 (as added by this Act).

(D) Refunds

(c) Burden of production

(1) In general

Section 7491(c) of the Internal Revenue Code of 1986 is amended—

(A) by striking “Notwithstanding” and inserting the following:

(1) In general
Notwithstanding

(B) by striking “with respect to the liability” and inserting

with respect to—
(A) the liability

(C) by striking the period after “title” and inserting “, and”,

(D) by adding at the end the following new paragraph:

(A) the application of any disallowance period (as defined in section 6751(d)) to any individual.

(E) by adding at the end the following new paragraph:

(2) Standard of proof for certain disallowance periods
In the case of any court proceeding with respect to any disallowance period described in section 24(g)(1)(B)(i), 25A(b)(4)(A)(ii)(I), or 32(k)(1)(B)(i), the standard of proof shall be the same standard as required in a proceeding under section 7454(a).

(2) Effective date

(d) Modification of disallowance period

(1) Child tax credit

Section 24(g)(1) of the Internal Revenue Code of 1986 is amended—

(B) by adding at the end the following new subparagraph:

(C) Allowance of previously denied credits after Tax Court consideration
Notwithstanding subparagraphs (A) and (B), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(2) American opportunity tax credit

Section 25A(b)(4)(A) of the Internal Revenue Code of 1986 is amended—

(B) by adding at the end the following new clause:

(iii) Allowance of previously denied credits after Tax Court consideration
Notwithstanding clauses (i) and (ii), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(3) Earned income tax credit

Section 32(k)(1) of the Internal Revenue Code of 1986 is amended—

(B) by adding at the end the following new subparagraph:

(C) Allowance of previously denied credits after Tax Court consideration
Notwithstanding subparagraphs (A) and (B), a taxable year shall not be treated as a taxable year in the disallowance period if the Tax Court determines that the disallowance period was not properly imposed for such year pursuant to section 6214(e).

(4) Suspension of running of limitations period filing of a claim for credit or refund

Section 6511(d) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(9) Special rules relating to disallowance periods
The running of the periods described in subsections (a) and (b)(2) with respect to any claim for a credit allowed under section 24, 25A, or 32 for any taxable year in a disallowance period (as defined in section 6751(d)) shall be suspended during any period in which the imposition of such disallowance period is pending before the Tax Court.

(5) Effective date

(A) In general

The amendments made by paragraphs (1), (2), and (3) shall apply to—

(i) taxable years beginning after the date that is 36 months after the date of the enactment of this Act, and

(B) Suspension of running of limitations period

The amendment made by paragraph (4) shall apply to petitions filed after the date of the enactment of this Act.