Taxpayer Due Process Enhancement Act

This bill would suspend the time limit for taxpayers to claim a federal tax refund while collection due process proceedings are ongoing. It proposes to prohibit the IRS from applying tax overpayments to a disputed tax liability during these proceedings and would expand the Tax Court's jurisdiction to include the underlying tax amount. Additionally, the bill ensures the Tax Court maintains jurisdiction over a case even if the IRS decides to stop its collection actions.

This bill primarily affects taxpayers who are engaged in collection due process (CDP) proceedings with the Internal Revenue Service (IRS). It also impacts the IRS by prohibiting the agency from applying tax overpayments to disputed liabilities during these proceedings and affects the Tax Court by expanding its jurisdiction to include the underlying tax liability amount. Additionally, the legislation impacts taxpayers seeking federal tax refunds by suspending the limitations period for filing such claims while CDP proceedings are ongoing.

• Suspension of the limitations period for tax refunds. The bill pauses the time limit allowed for taxpayers to claim a federal tax refund while collection due process (CDP) proceedings are ongoing.
• Restriction on applying overpayments to disputed liabilities. The IRS is prohibited from applying a taxpayer's overpayments to a tax liability that is currently being challenged in a CDP proceeding, unless the taxpayer waives this restriction or an exception applies.
• Expansion of Tax Court jurisdiction. The Tax Court's authority in CDP cases is expanded to include jurisdiction over the amount of the underlying tax liability if it is properly disputed.
• Retention of jurisdiction during collection abandonment. The bill ensures that the Tax Court maintains its jurisdiction over a case even if the IRS decides to abandon its collection actions.

• H.R. 6506, Taxpayer Due Process Enhancement Act
  Feb 5, 2026 · As reported by the House Committee on Ways and Means on January 7, 2026

The bill modifies existing Internal Revenue Service (IRS) collection due process (CDP) procedures by suspending the statute of limitations for tax refund claims during proceedings and expanding the Tax Court’s jurisdiction to include underlying tax liabilities. It also addresses legal precedents established in Commissioner v. Zuch by ensuring the Tax Court retains jurisdiction even if the IRS abandons collection actions or if tax overpayments are applied to a liability.

The bill aims to enhance taxpayer due process by ensuring the Tax Court retains jurisdiction over disputed tax liabilities during collection proceedings and by preventing the IRS from applying overpayments to satisfy those liabilities before a final determination is reached.