A bill to amend the Internal Revenue Code of 1986 to improve the process for providing refunds to taxpayers.

Bill Number: S. 5142
Origin Chamber: Senate
Congress: 119th Congress, Session 2
Policy Area: Taxation
Status: Introduced
Latest Action: 2026-07-28: Read twice and referred to the Committee on Finance.
Last Updated: 2026-09-28T20:31:00Z

AI-Generated Summary

Purpose The legislation aims to modify the Internal Revenue Code to protect certain refund amounts from automatic offsets, specifically ensuring that Earned Income Tax Credit refunds are provided to eligible low-income taxpayers who have been classified as unable to pay other tax debts.

Key Provisions

Amends section 6402(a) of the Internal Revenue Code of 1986 to add a new rule for "applicable taxpayers."
An "applicable taxpayer" is defined as one classified by the IRS as "currently not collectible" before requesting the refund.
For overpayments tied to the credit under section 32 (Earned Income Tax Credit), the IRS must refund that credit amount without offset, subject to existing rules in subsections (c), (d), (e), and (f).
The change applies only to offsets occurring more than 12 months after the bill's enactment.

Significant Changes to Existing Law

Current law allows the IRS broad authority to offset any overpayment against other tax liabilities or debts.
This bill creates an exception that prevents offsets of Earned Income Tax Credit amounts for taxpayers already deemed unable to pay, overriding the general offset process in those specific cases.
No other sections of the tax code are altered.

Potential Impacts

Government agencies: The IRS may see reduced collection from offsets in these cases, while other federal or state agencies relying on offsets could receive fewer funds.
Citizens: Affected taxpayers could receive full refund amounts sooner, potentially improving short-term financial stability for those in hardship.
International relations: No direct effects identified.

Main Stakeholders Affected

Taxpayers receiving the Earned Income Tax Credit who are in "currently not collectible" status.
The Internal Revenue Service, responsible for implementing the new refund rule.
Other government entities that use tax refund offsets to collect debts.

Notable Legal, Constitutional, or Political Implications

The provision strengthens taxpayer protections in the tax refund process without altering core constitutional authorities over taxation.
It introduces a targeted exception to offset rules, which could lead to future legislative refinements if collection shortfalls occur.
No apparent conflicts with existing constitutional limits on congressional power in this area.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Bennet, Michael F. [D-CO]

Cosponsors (1)

Sen. Cassidy, Bill [R-LA]

Recent Actions

2026-07-28: Read twice and referred to the Committee on Finance.
2026-07-28: Introduced in Senate

Bill Versions

To amend the Internal Revenue Code of 1986 to improve the process for providing refunds to taxpayers. — issued 2026-07-28 — PDF (2 pages)