WASHINGTON, D.C. – Americans that are held hostage or wrongfully detained abroad will no longer return home to massive tax bills, taxpayers will be better protected from fraud and have a more empowered advocate in their corner, and the IRS will be forced to modernize its workforce and technology – including adopting artificial intelligence (AI) – to improve its service to the American people under legislation approved by the Ways and Means Committee.
As part of its oversight of America’s nonprofit sector, the Committee also approved legislation requiring hospitals that enjoy generous financial benefits due to their tax-exempt status to be more transparent with the American taxpayer about the type of services and resources they are providing – including charity care – to justify their tax-exempt designation.
In total, the Committee advanced seven pieces of legislation covering specific areas of tax administration and tax code integrity that need attention to protect the rights and interests of American taxpayers.
Ways and Means Committee Chairman Jason Smith (MO-08) issued the following statement:
“The Ways and Means Committee has been systematically identifying weaknesses in how our tax code is administered – or in the case of American hostages being penalized by the IRS for delinquent tax payments, identifying absurd flaws – and pushing forward with solutions that will have a meaningful impact on the lives of the American people. No citizen who has had to endure the horror of being held captive abroad should have their homecoming overshadowed by a massive tax bill from the IRS. Similarly, victims of fraud deserve tax relief when rebuilding their financial lives and should never be held liable for crimes committed by tax preparers who attempt to defraud the government in their name. Ensuring this type of fair treatment under the law should also extend to the court room where if Americans find themselves before a judge in a case that has the potential to impact their taxpayer rights, the National Taxpayer Advocate should be allowed to speak up on their behalf before that court. One of the best ways to avoid mistreatment of taxpayers and defend against fraud in the first place is to tap the expertise of outside experts to help modernize IRS operations while deploying more modern technology like artificial intelligence to identify and stop criminals.
“When it comes to defending the rights of taxpayers, we must also ensure that nonprofit organizations are not taking advantage of their tax status. Large, consolidated hospital systems enjoy significant tax breaks to provide low-cost or no charge charity care to vulnerable Americans. The American people are owed transparency about whether tax-exempt hospitals are providing the charity care they use to justify the $37.4 billion tax break they received in 2021 alone. It’s a shame that Ways and Means Democrats voted against shedding sunlight on the activities of these multi-billion dollar hospital systems.”
End Tax Penalties on American Hostages Act (H.R. 9496)
- Under current law, the IRS can provide tax relief to some Americans who are held hostage or wrongfully detained abroad, but that authority is limited in several ways.
- In some instances, reports suggest that Americans have returned to the U.S. after being held hostage abroad only to find that they owe thousands of dollars in tax penalties and fines to the IRS.
- This critical gap in the tax code results in Americans who were held hostage or wrongfully detained abroad facing additional and onerous burdens upon returning home, due to no fault of their own.
- This bill aids hostages held abroad and their families by providing the IRS with tools to ensure these American citizens and their families do not incur penalties for late tax payments due to captivity.
Read a fact sheet on the bill here.
The bill passed the Committee 40-0.
Tax Relief for Fraud Victims Act (H.R. 9500)
- Under current law, the deduction for personal casualty and theft losses is largely suspended, unless the loss is attributable to a federally (or in some instances, state) declared disaster.
- Many victims of private-sector fraud – like Ponzi schemes, identity theft, or investment scams – have no ability to deduct their significant financial losses, essentially taxing them on the money that was stolen from them as a result.
- This bill repeals the limitation on personal casualty losses to strike the requirement that a loss must be linked to a federally or State declared disaster.
- Provides flexible reporting for fraud victims.
- Extends the timeframe for victims to file claims for credits or refunds related to theft losses.
- Provides special rules for distributions from retirement plans related to fraudulent theft losses, allowing victims to repay these distributions into an account and seek refunds for taxes previously paid on these distributions.
Read a fact sheet on the bill here.
The bill passed the Committee 39-0.
AI Tax Integrity Act of 2026 (H.R. 9501)
- The IRS issues tens of billions of dollars in improper refunds annually, driven by identity theft, fraudulent claims, and incompetent or unscrupulous return preparers, all of which take money from honest taxpayers.
- During a Ways and Means Committee hearing, witnesses testified that the IRS should be leveraging AI rather than relying on outdated legacy systems and tens of thousands of new auditors.
- This bill requires the Treasury Secretary to establish a pilot program to use AI to identify inaccurate tax returns, including those which are the result of:
- Identity theft.
- Fraudulent claims for tax credits, deductions, or refunds by individual or business taxpayers.
- Improperly prepared returns by third-party return preparers.
- Tests proven technology on a limited basis generating real data on fraud detection before any further investment of taxpayer dollars.
- Requires a mandatory, independent GAO report to the Ways and Means and Finance Committees to ensure Congress can judge the program on hard results and decide whether to expand, modify, or end it.
Read a fact sheet on the bill here.
The bill passed the Committee 40-0.
Taxpayer Workforce Modernization Act (H.R. 7972)
- President Trump has prioritized taxpayer services and IT modernization at the IRS, aiming to provide Americans with a more efficient, high-quality experience by upgrading IT systems to improve customer service and combat fraud.
- Modernizing legacy systems at the IRS will bring the IRS into the 21st century and will require qualified experts to ensure proper implementation.
- This bill requires IRS to establish a new fellowship program to hire data-scientists and technology experts to assist modernization efforts at IRS.
- Requires IRS to establish a taskforce, staffed by the fellows, to tackle the most complex tax cases using innovative means – including:
- Developing data-driven methodologies to support audit case selection and provide support for audits through data-driven analytics.
- Educating and training IRS employees on the use and interpretation of data analytics, models, and emerging analytic techniques to identify risk.
- Reviewing current use of AI and provide data-driven recommendations for improving audit effectiveness and efficiency.
- Combining system modernization efforts with this fellowship program will increase the return on investment for taxpayer funds.
Read a fact sheet on the bill here.
The bill passed the Committee 24-16.
Tax Exempt Hospital Transparency Act (H.R. 9504)
- As of 2023, the U.S. hospital sector was a $1.4 trillion industry, with nonprofit hospitals making up nearly 60% of all community hospitals.
- Tax-exempt health systems are taxpayer subsidized, yet they are also sophisticated profit-seeking institutions that provide little charity care.
- These hospitals must annually disclose financial information and how they are meeting the community benefit standard to the IRS via Form 990, Schedule H, which details charity care, community health needs assessments, and facility policies.
- Currently, nonprofit hospitals do not have to report on a facility-to-facility basis.
- This bill requires nonprofit hospitals to show their work through additional reporting – with additional requirements for large tax-exempt hospitals that have more than 100 inpatient beds and/or more than $100 million in net patient revenue.
- Updated reporting requirements include:
- CMS certification number for each hospital facility.
- Value of the financial assistance provided.
- Number of completed financial assistance applications received, granted, and denied.
- Spending to address the 3 highest priority health needs identified in the most recent Community Health Needs Assessment and a description of actions taken.
- Amount of spending on:
- Quality improvement.
- Nonclinical programming.
- Advertising costs.
- Information on health service lines.
- Information on 340B drug discount program.
Read a fact sheet on the bill here.
The bill passed the Committee 25-15.
Protecting Taxpayers from Ghost Preparers Act (H.R. 9499)
- Misconduct solely by a taxpayer’s return preparer can indefinitely suspend the assessment limitation period which is 3 years.
- This occurs when an unlicensed tax professional refuses to sign your tax return – so called “ghost preparers” – and makes the return appear as if the taxpayer prepared it themselves.
- This bill clarifies that the exception to the general statute of limitation for fraudulent returns applies only when it is the taxpayer who seeks to evade their tax obligations.
Read a fact sheet on the bill here.
The bill passed the Committee 40-0.
Taxpayer Advocate Participation Act (H.R. 9498)
- The National Taxpayer Advocate is currentlynot authorized to represent the interests of taxpayers who appear in litigated cases as an amicus curiae.
- While trial lawyers advocate on behalf of clients to win individual cases, precedential issues that could affect all or many taxpayers sometimes come before the courts with no one representing the interests of taxpayers as a group.
- This bill protects taxpayer rights by allowing the National Taxpayer Advocate to weigh in on cases impacting taxpayers.
- Amends the Internal Revenue Code to allow the National Taxpayer Advocate to appear as amicus curiae in any action brought in a court of the United States related to Federal tax law.
Read a fact sheet on the bill here.
The bill passed the Committee 39-0.