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On January 30, 2025, Senator Mike Crapo, chairman of the Senate Finance Committee, and Senator Ron Wyden, the Committee’s ranking member, introduced a discussion draft of the Taxpayer Assistance and Service Act (TAS Act). This broad and sweeping bill seeks to improve tax administration and address long-standing challenges faced by taxpayers.
Among its many provisions, Section 603 of the TAS Act is especially significant for its potential to reform the way the IRS processes refund claims. If enacted, Section 603 could remedy long-standing inefficiencies and delays in IRS refund processing and adjudication, similar to our prior legislative recommendation.
Taxpayers who file timely administrative refund claims under IRC § 6511 sometimes find themselves in procedural limbo. While the IRS has discretion to allow or disallow refund claims, it has historically had no fixed timeline to act. The absence of statutory deadlines means refund claims can languish for years without administrative resolution, leaving taxpayers to either wait indefinitely or initiate premature litigation.
IRS refund processing delays undermine taxpayers’ procedural due process rights and force them to navigate a convoluted administrative process just to recover their own overpaid taxes.
This undermines fundamental taxpayer rights, including the rights to quality service, to pay no more than the correct amount of tax, to challenge the IRS’s position and be heard, to finality, and to a fair and just tax system.
Section 603 imposes a specific timeframe for IRS action on refund claims, thus offering taxpayers clarity and predictability. The core of Section 603 is a mandate that the IRS review timely claims for refund and mail a notice of determination to the taxpayer within 36 months, or another date agreed to by both parties. If the IRS disallows the claim, it must issue a notice of determination that outlines the reasons for denial and informs the taxpayer of their appeal rights. If the IRS fails to meet the new 36-month deadline, the taxpayer can elect to treat the IRS’s inaction as a deemed claim disallowance. Further, if the IRS does not comply with the 36-month deadline, it must pay additional interest (an additional one percent, up to $1,000, adjusted annually for inflation) on any refund ultimately due.
In concept, this provision is consistent with a recommendation we have made in the National Taxpayer Advocate’s Purple Book. In terms of the specifics, it is similar to a recommendation we proposed in our 2024 Purple Book but have since revised. After further consideration and discussions with stakeholders, we modified the proposal in our 2025 Purple Book to recommend that the IRS be required to process refund claims within 12 months (rather than 36 months).
Our rationale: Congress has demonstrated its expectation that six months is sufficient time for the IRS to process refund claims by authorizing taxpayers to file a refund suit in a U.S. district court or the U.S. Court of Federal Claims if the IRS has not acted on an administrative refund claim within six months of filing. Recognizing that the agency may lack the resources to process all refund claims within six months, particularly in complex cases, we believe the IRS should receive a “grace period” of an additional six months before consequences kick in.
We also would provide the IRS with additional flexibility. Whereas the TAS Act provision would require the IRS to make a determination by the deadline, our proposal would give the IRS the option to allow the claim (in whole or in part), disallow the claim (in whole or in part), or initiate an audit by the deadline. If the IRS fails to take one of these actions within 12 months, our proposal would require that it pay the taxpayer an additional two percentage points of interest beyond the first year.
TAS Act Section 603 incentivizes the IRS to prioritize refund claims and resolve them efficiently, and it compensates taxpayers when the IRS takes longer than it should to do so. Section 603 would compel the agency to treat refunds with more urgency. Furthermore, the required additional explanation in the notice of determination enhances transparency and enables a fairer review process. These changes will help restore taxpayer confidence in the system, especially at a time when public faith in the IRS has been eroded by delays, backlogs, and data security breaches.
Section 603 of the TAS Act, if enacted, will mark a pivotal step forward in strengthening the refund claim process and protecting taxpayer rights. While we recommend the committee consider revising this provision along the lines we have more recently recommended, TAS Act Section 603 would better protect taxpayer rights and reduce taxpayer burden by mandating timely IRS responses, ensuring transparency in decision-making, and offering structured avenues for appeals.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.