HR 6506, Passed by the US House of Representatives, May 19, 2026

On May 19, 2026, the House of Representatives passed H.R. 6506, the Taxpayer Due Process Enhancement Act. For tax practitioners who represent clients in Collection Due Process (CDP) proceedings, this legislation is a welcome and highly necessary development. The bill was drafted as a direct congressional override of the Supreme Court’s controversial June 2025 decision in Commissioner v. Zuch, which severely curtailed the jurisdiction of the U.S. Tax Court and created dangerous procedural traps for taxpayers fighting IRS collection actions.

If fully enacted into law by the Senate and signed by the President, H.R. 6506 will substantially alter the Internal Revenue Code (IRC) to protect taxpayer rights, ensure the Tax Court remains an accessible forum, and prevent the IRS from weaponizing taxpayer overpayments to moot ongoing litigation.

Below is a detailed analysis of the bill’s individual provisions, how they specifically respond to the Zuch decision, and the exact legal citations for how they will modify the existing IRC.

The Problem: The Legacy of Commissioner v. Zuch

To understand the mechanics of H.R. 6506, we must first look at the procedural nightmare taxpayers have faced since the Zuch ruling. The U.S. Tax Court is an Article I court and is famously the only judicial forum where taxpayers can litigate tax disputes without first paying the disputed amount in full. When the IRS issues a notice of intent to levy property, the taxpayer has a statutory right to request a CDP hearing before the IRS Independent Office of Appeals. Following the hearing, the taxpayer may petition the Tax Court to review the IRS's "determination".

In the Zuch case, Ms. Zuch properly challenged a 2010 tax liability at her CDP hearing and subsequently petitioned the Tax Court for review. While she spent years litigating this case in the Tax Court, she filed tax returns for subsequent years (such as 2013-2016 and 2019) that resulted in overpayments. Rather than refunding this money to Ms. Zuch, the IRS utilized its broad authority under 26 U.S.C. § 6402(a) to credit those overpayments against her disputed 2010 liability.

Once the IRS had successfully seized enough of her subsequent refunds to zero out the 2010 debt, the agency abandoned its proposed levy and filed a motion to dismiss the Tax Court case for lack of jurisdiction. The Supreme Court ruled in favor of the IRS, holding that the Tax Court's jurisdiction under § 6330(d)(1) is strictly tied to an active, proposed levy. Without an active levy, the Court reasoned, there is no "determination" for the Tax Court to review.

This forced taxpayers like Zuch out of the accessible Tax Court and required them to file post-payment refund suits in federal district court to recover their money. As Justice Gorsuch pointed out in his dissent, this created a massive trap: while the taxpayer was distracted in Tax Court, the rigid two-year or three-year statute of limitations for claiming a refund on those overpayments under § 6511(a) often quietly expired, permanently depriving the taxpayer of relief.

How H.R. 6506 Modifies the Internal Revenue Code

The House has structured H.R. 6506 to systematically close the loopholes the IRS exploited in Zuch. The bill tackles the problem through three primary modifications to the IRC.

1. Expanding and Preserving Tax Court Jurisdiction

Statutory Modification: Amending 26 U.S.C. § 6330(d)(1)

The Provision: Under current law, § 6330(d)(1) merely states that a person may "petition the Tax Court for review of such determination" following a CDP hearing. The Supreme Court interpreted this narrowly to mean review of the levy itself, not the underlying liability. H.R. 6506 rewrites this section to explicitly expand and protect the Tax Court's jurisdiction.

If enacted, the new 26 U.S.C. § 6330(d)(1)(A) will state that a person may petition the Tax Court for review of both the IRS determination and "any underlying tax liability referred to in subsection (c)(2)(B) which is properly disputed at the hearing".

Crucially, to directly counter the IRS’s maneuver in Zuch, the bill adds 26 U.S.C. § 6330(d)(1)(C) (Retention of Jurisdiction). This brand-new clause legally dictates that the Tax Court retains jurisdiction to hear the case "whether or not the Secretary abandons the collection action or proposed collection action at issue in such determination".

Practical Impact: This ensures that if you are representing a client in Tax Court regarding a CDP determination, the IRS can no longer unilaterally moot your case and strip the court of jurisdiction by dropping the levy. The taxpayer's right to an accessible, prepayment forum is preserved.

2. Prohibiting the Offsetting of Overpayments During CDP Proceedings

Statutory Modification: Adding 26 U.S.C. § 6402(o) and Amending 26 U.S.C. § 6330(c)(2)(A)

The Provision: Currently, § 6402(a) provides the IRS with general authority to credit the amount of any overpayment against "any liability in respect of an internal revenue tax". The IRS used this broad authority in Zuch to siphon the taxpayer's refunds during active litigation.

H.R. 6506 curtails this by adding a new subsection: 26 U.S.C. § 6402(o). This new law will explicitly prohibit the crediting of overpayments against disputed tax liability during collection action proceedings. It dictates that if an underlying tax liability is properly disputed at a CDP hearing under § 6320 or § 6330, the IRS cannot use that liability as a basis for offsetting current refunds under § 6402(a) without the express consent of the taxpayer. This prohibition remains in effect as long as the statute of limitations is suspended under § 6330(e).

Additionally, the bill amends 26 U.S.C. § 6330(c)(2)(A). It replaces the phrase "unpaid tax or the proposed levy" with "unpaid tax, collection action, or proposed collection action". This subtle change broadens the scope of issues a taxpayer can raise at a CDP hearing to encompass alternative collection maneuvers by the IRS.

Practical Impact: The IRS is now blocked from using a client's current refunds to settle old, actively disputed debts. Taxpayers will not be financially starved out of their litigation, nor will their cases be mooted by administrative accounting maneuvers.

3. Tolling the Refund Statute of Limitations

Statutory Modification: Amending 26 U.S.C. § 6330(e) and adding 26 U.S.C. § 6511(i)(8)

The Provision: To remedy the statute of limitations trap highlighted in the Zuch dissent, H.R. 6506 ensures taxpayers have an extended opportunity to actually receive their refunds. Currently, § 6330(e)(1) suspends the running of the period of limitations for collections (§ 6502) and criminal prosecutions (§ 6531) while a CDP hearing is pending.

H.R. 6506 amends 26 U.S.C. § 6330(e)(1) to also suspend the running of "subsection (a), (b), or (c) of section 6511 (relating to limitations on credit or refund)" during the pendency of a CDP proceeding.

Furthermore, the bill adds 26 U.S.C. § 6330(e)(3), which clarifies that this suspension of the refund statute of limitations only applies to the extent the credit or refund relates to the underlying tax liability properly disputed at the CDP hearing. The tolling stops on any date that a missed deadline, court filing, or court order establishes the taxpayer has definitively lost the right to pursue the dispute. Finally, the bill inserts a cross-reference at 26 U.S.C. § 6511(i)(8) linking the general refund limitation statute directly to these new CDP tolling rules.

Practical Impact: If a client accidentally has funds swept by the IRS, or if they later need to file a refund suit for the disputed amounts, their time to file administrative claims under § 6511 will have been paused while they were actively fighting the CDP case. They will no longer be penalized for attempting to exhaust their Tax Court remedies.

Conclusion

H.R. 6506 is a robust defense of taxpayer due process. By stripping the IRS of its ability to seize overpayments to moot Tax Court jurisdiction, and by officially expanding the Tax Court's authority to hear disputes on the underlying tax liability irrespective of a withdrawn levy, this bill entirely unravels the troubling precedent set by Commissioner v. Zuch. Tax practitioners should closely monitor this bill as it advances to the Senate, as its enactment will fundamentally secure a fairer, more predictable dispute resolution process for our clients.

Prepared with assistance from NotebookLM.