[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2337 Enrolled Bill (ENR)]

        H.R.2337

                       One Hundred Fourth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
   the third day of January, one thousand nine hundred and ninety-six


                                 An Act


 
  To amend the Internal Revenue Code of 1986 to provide for increased 
                          taxpayer protections.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Taxpayer Bill of 
Rights 2''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--
Sec. 1. Short title; amendment of 1986 Code; table of contents.

                       TITLE I--TAXPAYER ADVOCATE

Sec. 101. Establishment of position of Taxpayer Advocate within Internal 
          Revenue Service.
Sec. 102. Expansion of authority to issue Taxpayer Assistance Orders.

       TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

Sec. 201. Notification of reasons for termination of installment 
          agreements.
Sec. 202. Administrative review of termination of installment agreement.

             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

Sec. 301. Expansion of authority to abate interest.
Sec. 302. Review of IRS failure to abate interest.
Sec. 303. Extension of interest-free period for payment of tax after 
          notice and demand.
Sec. 304. Abatement of penalty for failure to make required deposits of 
          payroll taxes in certain cases.

                         TITLE IV--JOINT RETURNS

Sec. 401. Studies of joint return-related issues.
Sec. 402. Joint return may be made after separate returns without full 
          payment of tax.
Sec. 403. Disclosure of collection activities.

                     TITLE V--COLLECTION ACTIVITIES

Sec. 501. Modifications to lien and levy provisions.
Sec. 502. Modifications to certain levy exemption amounts.
Sec. 503. Offers-in-compromise.

                      TITLE VI--INFORMATION RETURNS

Sec. 601. Civil damages for fraudulent filing of information returns.
Sec. 602. Requirement to conduct reasonable investigations of 
          information returns.

              TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

Sec. 701. United States must establish that its position in proceeding 
          was substantially justified.
Sec. 702. Increased limit on attorney fees.
Sec. 703. Failure to agree to extension not taken into account.
Sec. 704. Award of litigation costs permitted in declaratory judgment 
          proceedings.

 TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

Sec. 801. Increase in limit on recovery of civil damages for 
          unauthorized collection actions.
Sec. 802. Court discretion to reduce award for litigation costs for 
          failure to exhaust administrative remedies.

 TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                   TAX

Sec. 901. Preliminary notice requirement.
Sec. 902. Disclosure of certain information where more than 1 person 
          liable for penalty for failure to collect and pay over tax.
Sec. 903. Right of contribution where more than 1 person liable for 
          penalty for failure to collect and pay over tax.
Sec. 904. Volunteer board members of tax-exempt organizations exempt 
          from penalty for failure to collect and pay over tax.

          TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

Sec. 1001. Enrolled agents included as third-party recordkeepers.
Sec. 1002. Safeguards relating to designated summonses.
Sec. 1003. Annual report to Congress concerning designated summonses.

  TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                               REGULATIONS

Sec. 1101. Relief from retroactive application of Treasury Department 
          regulations.

                   TITLE XII--MISCELLANEOUS PROVISIONS

Sec. 1201. Phone number of person providing payee statements required to 
          be shown on such statement.
Sec. 1202. Required notice of certain payments.
Sec. 1203. Unauthorized enticement of information disclosure.
Sec. 1204. Annual reminders to taxpayers with outstanding delinquent 
          accounts.
Sec. 1205. 5-year extension of authority for undercover operations.
Sec. 1206. Disclosure of Form 8300 information on cash transactions.
Sec. 1207. Disclosure of returns and return information to designee of 
          taxpayer.
Sec. 1208. Study of netting of interest on overpayments and liabilities.
Sec. 1209. Expenses of detection of underpayments and fraud, etc.
Sec. 1210. Use of private delivery services for timely-mailing-as-
          timely-filing rule.
Sec. 1211. Reports on misconduct of IRS employees.

                       TITLE XIII--REVENUE OFFSETS

 Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

Sec. 1301. Application of failure-to-pay penalty to substitute returns.

     Subtitle B--Excise Taxes on Amounts of Private Excess Benefits

Sec. 1311. Excise taxes for failure by certain charitable organizations 
          to meet certain qualification requirements.
Sec. 1312. Reporting of certain excise taxes and other information.
Sec. 1313. Exempt organizations required to provide copy of return.
Sec. 1314. Increase in penalties on exempt organizations for failure to 
          file complete and timely annual returns.

                       TITLE I--TAXPAYER ADVOCATE

SEC. 101. ESTABLISHMENT OF POSITION OF TAXPAYER ADVOCATE WITHIN 
              INTERNAL REVENUE SERVICE.

    (a) General Rule.--Section 7802 (relating to Commissioner of 
Internal Revenue; Assistant Commissioner (Employee Plans and Exempt 
Organizations)) is amended by adding at the end the following new 
subsection:
    ``(d) Office of Taxpayer Advocate.--
        ``(1) In general.--There is established in the Internal Revenue 
    Service an office to be known as the `Office of the Taxpayer 
    Advocate'. Such office shall be under the supervision and direction 
    of an official to be known as the `Taxpayer Advocate' who shall be 
    appointed by and report directly to the Commissioner of Internal 
    Revenue. The Taxpayer Advocate shall be entitled to compensation at 
    the same rate as the highest level official reporting directly to 
    the Deputy Commissioner of the Internal Revenue Service.
        ``(2) Functions of office.--
            ``(A) In general.--It shall be the function of the Office 
        of Taxpayer Advocate to--
                ``(i) assist taxpayers in resolving problems with the 
            Internal Revenue Service,
                ``(ii) identify areas in which taxpayers have problems 
            in dealings with the Internal Revenue Service,
                ``(iii) to the extent possible, propose changes in the 
            administrative practices of the Internal Revenue Service to 
            mitigate problems identified under clause (ii), and
                ``(iv) identify potential legislative changes which may 
            be appropriate to mitigate such problems.
            ``(B) Annual reports.--
                ``(i) Objectives.--Not later than June 30 of each 
            calendar year after 1995, the Taxpayer Advocate shall 
            report to the Committee on Ways and Means of the House of 
            Representatives and the Committee on Finance of the Senate 
            on the objectives of the Taxpayer Advocate for the fiscal 
            year beginning in such calendar year. Any such report shall 
            contain full and substantive analysis, in addition to 
            statistical information.
                ``(ii) Activities.--Not later than December 31 of each 
            calendar year after 1995, the Taxpayer Advocate shall 
            report to the Committee on Ways and Means of the House of 
            Representatives and the Committee on Finance of the Senate 
            on the activities of the Taxpayer Advocate during the 
            fiscal year ending during such calendar year. Any such 
            report shall contain full and substantive analysis, in 
            addition to statistical information, and shall--

                    ``(I) identify the initiatives the Taxpayer 
                Advocate has taken on improving taxpayer services and 
                Internal Revenue Service responsiveness,
                    ``(II) contain recommendations received from 
                individuals with the authority to issue Taxpayer 
                Assistance Orders under section 7811,
                    ``(III) contain a summary of at least 20 of the 
                most serious problemsencountered by taxpayers, 
including a description of the nature of such problems,

                    ``(IV) contain an inventory of the items described 
                in subclauses (I), (II), and (III) for which action has 
                been taken and the result of such action,
                    ``(V) contain an inventory of the items described 
                in subclauses (I), (II), and (III) for which action 
                remains to be completed and the period during which 
                each item has remained on such inventory,
                    ``(VI) contain an inventory of the items described 
                in subclauses (II) and (III) for which no action has 
                been taken, the period during which each item has 
                remained on such inventory, the reasons for the 
                inaction, and identify any Internal Revenue Service 
                official who is responsible for such inaction,
                    ``(VII) identify any Taxpayer Assistance Order 
                which was not honored by the Internal Revenue Service 
                in a timely manner, as specified under section 7811(b),
                    ``(VIII) contain recommendations for such 
                administrative and legislative action as may be 
                appropriate to resolve problems encountered by 
                taxpayers,
                    ``(IX) describe the extent to which regional 
                problem resolution officers participate in the 
                selection and evaluation of local problem resolution 
                officers, and
                    ``(X) include such other information as the 
                Taxpayer Advocate may deem advisable.

                ``(iii) Report to be submitted directly.--Each report 
            required under this subparagraph shall be provided directly 
            to the Committees referred to in clauses (i) and (ii) 
            without any prior review or comment from the Commissioner, 
            the Secretary of the Treasury, any other officer or 
            employee of the Department of the Treasury, or the Office 
            of Management and Budget.
        ``(3) Responsibilities of commissioner.--The Commissioner of 
    Internal Revenue shall establish procedures requiring a formal 
    response to all recommendations submitted to the Commissioner by 
    the Taxpayer Advocate within 3 months after submission to the 
    Commissioner.''.
    (b) Conforming Amendments.--
        (1) Section 7811 (relating to Taxpayer Assistance Orders) is 
    amended--
            (A) by striking ``the Office of Ombudsman'' in subsection 
        (a) and inserting ``the Office of the Taxpayer Advocate'', and
            (B) by striking ``Ombudsman'' each place it appears 
        (including in the headings of subsections (e) and (f)) and 
        inserting ``Taxpayer Advocate''.
        (2) The heading for section 7802 is amended to read as follows:

``SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT COMMISSIONERS; 
              TAXPAYER ADVOCATE.''.

        (3) The table of sections for subchapter A of chapter 80 is 
    amended by striking the item relating to section 7802 and inserting 
    the following new item:
``Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioners; 
          Taxpayer Advocate.''.

    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 102. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE ORDERS.

    (a) Terms of Orders.--Subsection (b) of section 7811 (relating to 
terms of Taxpayer Assistance Orders) is amended--
        (1) by inserting ``within a specified time period'' after ``the 
    Secretary'', and
        (2) by inserting ``take any action as permitted by law,'' after 
    ``cease any action,''.
    (b) Limitation on Authority To Modify or Rescind.--Section 7811(c) 
(relating to authority to modify or rescind) is amended to read as 
follows:
    ``(c) Authority To Modify or Rescind.--Any Taxpayer Assistance 
Order issued by the Taxpayer Advocate under this section may be 
modified or rescinded--
        ``(1) only by the Taxpayer Advocate, the Commissioner of 
    Internal Revenue, or the Deputy Commissioner of Internal Revenue, 
    and
        ``(2) only if a written explanation of the reasons for the 
    modification or rescission is provided to the Taxpayer Advocate.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

      TITLE II--MODIFICATIONS TO INSTALLMENT AGREEMENT PROVISIONS

SEC. 201. NOTIFICATION OF REASONS FOR TERMINATION OF INSTALLMENT 
              AGREEMENTS.

    (a) Terminations.--Subsection (b) of section 6159 (relating to 
extent to which agreements remain in effect) is amended by adding at 
the end the following new paragraph:
        ``(5) Notice requirements.--The Secretary may not take any 
    action under paragraph (2), (3), or (4) unless--
            ``(A) a notice of such action is provided to the taxpayer 
        not later than the day 30 days before the date of such action, 
        and
            ``(B) such notice includes an explanation why the Secretary 
        intends to take such action.
    The preceding sentence shall not apply in any case in which the 
    Secretary believes that collection of any tax to which an agreement 
    under this section relates is in jeopardy.''.
    (b) Conforming Amendment.--Paragraph (3) of section 6159(b) is 
amended to read as follows:
        ``(3) Subsequent change in financial conditions.--If the 
    Secretary makes a determination that the financial condition of a 
    taxpayer with whom the Secretary has entered into an agreement 
    under subsection (a) has significantly changed, the Secretary may 
    alter, modify, or terminate such agreement.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date 6 months after the date of the enactment of this 
Act.

SEC. 202. ADMINISTRATIVE REVIEW OF TERMINATION OF INSTALLMENT 
              AGREEMENT.

    (a) General Rule.--Section 6159 (relating to agreements for payment 
of tax liability in installments) is amended by adding at the end the 
following new subsection:
    ``(c) Administrative Review.--The Secretary shall establish 
procedures for an independent administrative review of terminations of 
installment agreements under this section for taxpayers who request 
such a review.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 1997.

             TITLE III--ABATEMENT OF INTEREST AND PENALTIES

SEC. 301. EXPANSION OF AUTHORITY TO ABATE INTEREST.

    (a) General Rule.--Paragraph (1) of section 6404(e) (relating to 
abatement of interest in certain cases) is amended--
        (1) by inserting ``unreasonable'' before ``error'' each place 
    it appears in subparagraphs (A) and (B), and
        (2) by striking ``in performing a ministerial act'' each place 
    it appears and inserting ``in performing a ministerial or 
    managerial act''.
    (b) Clerical Amendment.--The subsection heading for subsection (e) 
of section 6404 is amended--
        (1) by striking ``Assessments'' and inserting ``Abatement'', 
    and
        (2) by inserting ``Unreasonable'' before ``Errors''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest accruing with respect to deficiencies or payments for 
taxable years beginning after the date of the enactment of this Act.

SEC. 302. REVIEW OF IRS FAILURE TO ABATE INTEREST.

    (a) In General.--Section 6404 is amended by adding at the end the 
following new subsection:
    ``(g) Review of Denial of Request for Abatement of Interest.--
        ``(1) In general.--The Tax Court shall have jurisdiction over 
    any action brought by a taxpayer who meets the requirements 
    referred to in section 7430(c)(4)(A)(iii) to determine whether the 
    Secretary's failure to abate interest under this section was an 
    abuse of discretion, and may order an abatement, if such action is 
    brought within 180 days after the date of the mailing of the 
    Secretary's final determination not to abate such interest.
        ``(2) Special rules.--
            ``(A) Date of mailing.--Rules similar to the rules of 
        section 6213 shall apply for purposes of determining the date 
        of the mailing referred to in paragraph (1).
            ``(B) Relief.--Rules similar to the rules of section 
        6512(b) shall apply for purposes of this subsection.
            ``(C) Review.--An order of the Tax Court under this 
        subsection shall be reviewable in the same manner as a decision 
        of the Tax Court, but only with respect to the matters 
        determined in such order.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to requests for abatement after the date of the enactment of this Act.

SEC. 303. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF TAX AFTER 
              NOTICE AND DEMAND.

    (a) General Rule.--Paragraph (3) of section 6601(e) (relating to 
payments made within 10 days after notice and demand) is amended to 
read as follows:
        ``(3) Payments made within specified period after notice and 
    demand.--If notice and demand is made for payment of any amount and 
    if such amount is paid within 21 calendar days (10 business days if 
    the amount for which such notice and demand is made equals or 
    exceeds $100,000) after the date of such notice and demand, 
    interest under this section on the amount so paid shall not be 
    imposed for the period after the date of such notice and demand.''.
    (b) Conforming Amendments.--
        (1) Subparagraph (A) of section 6601(e)(2) is amended by 
    striking ``10 days from the date of notice and demand therefor'' 
    and inserting ``21 calendar days from the date of notice and demand 
    therefor (10 business days if the amount for which such notice and 
    demand is made equals or exceeds $100,000)''.
        (2) Paragraph (3) of section 6651(a) is amended by striking 
    ``10 days of the date of the notice and demand therefor'' and 
    inserting ``21 calendar days from the date of notice and demand 
    therefor (10 business days if the amount for which such notice and 
    demand is made equals or exceeds $100,000)''.
    (c) Effective Date.--The amendments made by this section shall 
apply in the case of any notice and demand given after December 31, 
1996.

SEC. 304. ABATEMENT OF PENALTY FOR FAILURE TO MAKE REQUIRED DEPOSITS OF 
              PAYROLL TAXES IN CERTAIN CASES.

    (a) In General.--Section 6656 (relating to failure to make deposit 
of taxes) is amended by adding at the end the following new 
subsections:
    ``(c) Exception for First-Time Depositors of Employment Taxes.--The 
Secretary may waive the penalty imposed by subsection (a) on a person's 
inadvertent failure to deposit any employment tax if--
        ``(1) such person meets the requirements referred to in section 
    7430(c)(4)(A)(iii),
        ``(2) such failure occurs during the 1st quarter that such 
    person was required to deposit any employment tax, and
        ``(3) the return of such tax was filed on or before the due 
    date.
For purposes of this subsection, the term `employment taxes' means the 
taxes imposed by subtitle C.
    ``(d) Authority To Abate Penalty Where Deposit Sent to Secretary.--
The Secretary may abate the penalty imposed by subsection (a) with 
respect to the first time a depositor is required to make a deposit if 
the amount required to be deposited is inadvertently sent to the 
Secretary instead of to the appropriate government depository.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to deposits required to be made after the date of the enactment 
of this Act.

                        TITLE IV--JOINT RETURNS

SEC. 401. STUDIES OF JOINT RETURN-RELATED ISSUES.

    The Secretary of the Treasury or his delegate and the Comptroller 
General of the United States shall each conduct separate studies of--
        (1) the effects of changing the liability for tax on a joint 
    return from being joint and several to being proportionate to the 
    tax attributable to each spouse,
        (2) the effects of providing that, if a divorce decree 
    allocates liability for tax on a joint return filed before the 
    divorce, the Secretary may collect such liability only in 
    accordance with the decree,
        (3) whether those provisions of the Internal Revenue Code of 
    1986 intended to provide relief to innocent spouses provide 
    meaningful relief in all cases where such relief is appropriate, 
    and
        (4) the effect of providing that community income (as defined 
    in section 66(d) of such Code) which, in accordance with the rules 
    contained in section 879(a) of such Code, would be treated as the 
    income of one spouse is exempt from a levy for failure to pay any 
    tax imposed by subtitle A by the other spouse for a taxable year 
    ending before their marriage.
The reports of such studies shall be submitted to the Committee on Ways 
and Means of the House of Representatives and the Committee on Finance 
of the Senate within 6 months after the date of the enactment of this 
Act.

SEC. 402. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS WITHOUT FULL 
              PAYMENT OF TAX.

    (a) General Rule.--Paragraph (2) of section 6013(b) (relating to 
limitations on filing of joint return after filing separate returns) is 
amended by striking subparagraph (A) and redesignating the following 
subparagraphs accordingly.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 403. DISCLOSURE OF COLLECTION ACTIVITIES.

    (a) In General.--Subsection (e) of section 6103 (relating to 
disclosure to persons having material interest) is amended by adding at 
the end the following new paragraph:
        ``(8) Disclosure of collection activities with respect to joint 
    return.--If any deficiency of tax with respect to a joint return is 
    assessed and the individuals filing such return are no longer 
    married or no longer reside in the same household, upon request in 
    writing by either of such individuals, the Secretary shall disclose 
    in writing to the individual making the request whether the 
    Secretary has attempted to collect such deficiency from such other 
    individual, the general nature of such collection activities, and 
    the amount collected. The preceding sentence shall not apply to any 
    deficiency which may not be collected by reason of section 6502.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to requests made after the date of the enactment of this Act.

                     TITLE V--COLLECTION ACTIVITIES

SEC. 501. MODIFICATIONS TO LIEN AND LEVY PROVISIONS.

    (a) Withdrawal of Certain Notices.--Section 6323 (relating to 
validity and priority against certain persons) is amended by adding at 
the end the following new subsection:
    ``(j) Withdrawal of Notice in Certain Circumstances.--
        ``(1) In general.--The Secretary may withdraw a notice of a 
    lien filed under this section and this chapter shall be applied as 
    if the withdrawn notice had not been filed, if the Secretary 
    determines that--
            ``(A) the filing of such notice was premature or otherwise 
        not in accordance with administrative procedures of the 
        Secretary,
            ``(B) the taxpayer has entered into an agreement under 
        section 6159 to satisfy the tax liability for which the lien 
        was imposed by means of installment payments, unless such 
        agreement provides otherwise,
            ``(C) the withdrawal of such notice will facilitate the 
        collection of the tax liability, or
            ``(D) with the consent of the taxpayer or the Taxpayer 
        Advocate, the withdrawal of such notice would be in the best 
        interests of the taxpayer (as determined by the Taxpayer 
        Advocate) and the United States.
    Any such withdrawal shall be made by filing notice at the same 
    office as the withdrawn notice. A copy of such notice of withdrawal 
    shall be provided to the taxpayer.
        ``(2) Notice to credit agencies, etc.--Upon written request by 
    the taxpayer with respect to whom a notice of a lien was withdrawn 
    under paragraph (1), the Secretary shall promptly make reasonable 
    efforts to notify credit reporting agencies, and any financial 
    institution or creditor whose name and address is specified in such 
    request, of the withdrawal of such notice. Any such request shall 
    be in such form as the Secretary may prescribe.''.
    (b) Return of Levied Property in Certain Cases.--Section 6343 
(relating to authority to release levy and return property) is amended 
by adding at the end the following new subsection:
    ``(d) Return of Property in Certain Cases.--If--
        ``(1) any property has been levied upon, and
        ``(2) the Secretary determines that--
            ``(A) the levy on such property was premature or otherwise 
        not in accordance with administrative procedures of the 
        Secretary,
            ``(B) the taxpayer has entered into an agreement under 
        section 6159 to satisfy the tax liability for which the levy 
        was imposed by means of installment payments, unless such 
        agreement provides otherwise,
            ``(C) the return of such property will facilitate the 
        collection of the tax liability, or
            ``(D) with the consent of the taxpayer or the Taxpayer 
        Advocate, the return of such property would be in the best 
        interests of the taxpayer (as determined by the Taxpayer 
        Advocate) and the United States,
the provisions of subsection (b) shall apply in the same manner as if 
such property had been wrongly levied upon, except that no interest 
shall be allowed under subsection (c).''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 502. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating to fuel, 
provisions, furniture, and personal effects exempt from levy) is 
amended--
        (1) by striking ``If the taxpayer is the head of a family, so'' 
    and inserting ``So'',
        (2) by striking ``his household'' and inserting ``the 
    taxpayer's household'', and
        (3) by striking ``$1,650 ($1,550 in the case of levies issued 
    during 1989)'' and inserting ``$2,500''.
    (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating to 
books and tools of a trade, business, or profession) is amended by 
striking ``$1,100 ($1,050 in the case of levies issued during 1989)'' 
and inserting ``$1,250''.
    (c) Inflation Adjustment.--Section 6334 (relating to property 
exempt from levy) is amended by adding at the end the following new 
subsection:
    ``(f) Inflation Adjustment.--
        ``(1) In general.--In the case of any calendar year beginning 
    after 1997, each dollar amount referred to in paragraphs (2) and 
    (3) of subsection (a) shall be increased by an amount equal to--
            ``(A) such dollar amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year, by substituting 
        `calendar year 1996' for `calendar year 1992' in subparagraph 
        (B) thereof.
        ``(2) Rounding.--If any dollar amount after being increased 
    under paragraph (1) is not a multiple of $10, such dollar amount 
    shall be rounded to the nearest multiple of $10.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect with respect to levies issued after December 31, 1996.

SEC. 503. OFFERS-IN-COMPROMISE.

    (a) Review Requirements.--Subsection (b) of section 7122 (relating 
to records) is amended by striking ``$500.'' and inserting ``$50,000. 
However, such compromise shall be subject to continuing quality review 
by the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                     TITLE VI--INFORMATION RETURNS

SEC. 601. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION RETURNS.

    (a) General Rule.--Subchapter B of chapter 76 (relating to 
proceedings by taxpayers and third parties) isamended by redesignating 
section 7434 as section 7435 and by inserting after section 7433 the 
following new section:

``SEC. 7434. CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION 
              RETURNS.

    ``(a) In General.--If any person willfully files a fraudulent 
information return with respect to payments purported to be made to any 
other person, such other person may bring a civil action for damages 
against the person so filing such return.
    ``(b) Damages.--In any action brought under subsection (a), upon a 
finding of liability on the part of the defendant, the defendant shall 
be liable to the plaintiff in an amount equal to the greater of $5,000 
or the sum of--
        ``(1) any actual damages sustained by the plaintiff as a 
    proximate result of the filing of the fraudulent information return 
    (including any costs attributable to resolving deficiencies 
    asserted as a result of such filing),
        ``(2) the costs of the action, and
        ``(3) in the court's discretion, reasonable attorneys fees.
    ``(c) Period for Bringing Action.--Notwithstanding any other 
provision of law, an action to enforce the liability created under this 
section may be brought without regard to the amount in controversy and 
may be brought only within the later of--
        ``(1) 6 years after the date of the filing of the fraudulent 
    information return, or
        ``(2) 1 year after the date such fraudulent information return 
    would have been discovered by exercise of reasonable care.
    ``(d) Copy of Complaint Filed With IRS--Any person bringing an 
action under subsection (a) shall provide a copy of the complaint to 
the Internal Revenue Service upon the filing of such complaint with the 
court.
    ``(e) Finding of Court To Include Correct Amount of Payment.--The 
decision of the court awarding damages in an action brought under 
subsection (a) shall include a finding of the correct amount which 
should have been reported in the information return.
    ``(f) Information Return.--For purposes of this section, the term 
`information return' means any statement described in section 
6724(d)(1)(A).''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 76 is amended by striking the item relating to section 7434 and 
inserting the following:
``Sec. 7434. Civil damages for fraudulent filing of information returns.
``Sec. 7435. Cross references.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to fraudulent information returns filed after the date of the 
enactment of this Act.

SEC. 602. REQUIREMENT TO CONDUCT REASONABLE INVESTIGATIONS OF 
              INFORMATION RETURNS.

    (a) General Rule.--Section 6201 (relating to assessment authority) 
is amended by redesignating subsection (d) as subsection (e) and by 
inserting after subsection (c) the following new subsection:
    ``(d) Required Reasonable Verification of Information Returns.--In 
any court proceeding, if a taxpayer asserts a reasonable dispute with 
respect to any item of income reported on an information return filed 
with the Secretary under subpart B or C of part III of subchapter A of 
chapter 61 by a third party and the taxpayer has fully cooperated with 
the Secretary (including providing, within a reasonable period of time, 
access to and inspection of all witnesses, information, and documents 
within the control of the taxpayer as reasonably requested by the 
Secretary), the Secretary shall have the burden of producing reasonable 
and probative information concerning such deficiency in addition to 
such information return.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

             TITLE VII--AWARDING OF COSTS AND CERTAIN FEES

SEC. 701. UNITED STATES MUST ESTABLISH THAT ITS POSITION IN PROCEEDING 
              WAS SUBSTANTIALLY JUSTIFIED.

    (a) General Rule.--Subparagraph (A) of section 7430(c)(4) (defining 
prevailing party) is amended by striking clause (i) and by 
redesignating clauses (ii) and (iii) as clauses (i) and (ii), 
respectively.
    (b) Burden of Proof on United States.--Paragraph (4) of section 
7430(c) is amended by redesignating subparagraph (B) as subparagraph 
(C) and by inserting after subparagraph (A) the following new 
subparagraph:
            ``(B) Exception if united states establishes that its 
        position was substantially justified.--
                ``(i) General rule.--A party shall not be treated as 
            the prevailing party in a proceeding to which subsection 
            (a) applies if the United States establishes that the 
            position of the United States in the proceeding was 
            substantially justified.
                ``(ii) Presumption of no justification if internal 
            revenue service did not follow certain published 
            guidance.--For purposes of clause (i), the position of the 
            United States shall be presumed not to be substantially 
            justified if the Internal Revenue Service did not follow 
            its applicable published guidance in the administrative 
            proceeding. Such presumption may be rebutted.
                ``(iii) Applicable published guidance.--For purposes of 
            clause (ii), the term `applicable published guidance' 
            means--

                    ``(I) regulations, revenue rulings, revenue 
                procedures, information releases, notices, and 
                announcements, and
                    ``(II) any of the following which are issued to the 
                taxpayer: private letter rulings, technical advice 
                memoranda, and determination letters.''.

    (c) Conforming Amendments.--
        (1) Subparagraph (B) of section 7430(c)(2) is amended by 
    striking ``paragraph (4)(B)'' and inserting ``paragraph (4)(C)''.
        (2) Subparagraph (C) of section 7430(c)(4), as redesignated by 
    subsection (b), is amended by striking ``subparagraph (A)'' and 
    inserting ``this paragraph''.
        (3) Sections 6404(g) and 6656(c)(1), as amended by this Act, 
    are each amended by striking ``section 7430(c)(4)(A)(iii)'' and 
    inserting ``section 7430(c)(4)(A)(ii)''.
    (d) Effective Date.--The amendments made by this section shall 
apply in the case of proceedings commenced after the date of the 
enactment of this Act.

SEC. 702. INCREASED LIMIT ON ATTORNEY FEES.

    (a) In General.--Paragraph (1) of section 7430(c) (defining 
reasonable litigation costs) is amended--
        (1) by striking ``$75'' in clause (iii) of subparagraph (B) and 
    inserting ``$110'',
        (2) by striking ``an increase in the cost of living or'' in 
    clause (iii) of subparagraph (B), and
        (3) by adding after clause (iii) the following:
    ``In the case of any calendar year beginning after 1996, the dollar 
    amount referred to in clause (iii) shall be increased by an amount 
    equal to such dollar amount multiplied by the cost-of-living 
    adjustment determined under section 1(f)(3) for such calendar year, 
    by substituting `calendar year 1995' for `calendar year 1992' in 
    subparagraph (B) thereof. If any dollar amount after being 
    increased under the preceding sentence is not a multiple of $10, 
    such dollar amount shall be rounded to the nearest multiple of 
    $10.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

SEC. 703. FAILURE TO AGREE TO EXTENSION NOT TAKEN INTO ACCOUNT.

    (a) In General.--Paragraph (1) of section 7430(b) (relating to 
requirement that administrative remedies be exhausted) is amended by 
adding at the end the following new sentence: ``Any failure to agree to 
an extension of the time for the assessment of any tax shall not be 
taken into account for purposes of determining whether the prevailing 
party meets the requirements of the preceding sentence.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

SEC. 704. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY JUDGMENT 
              PROCEEDINGS.

    (a) In General.--Subsection (b) of section 7430 is amended by 
striking paragraph (3) and by redesignating paragraph (4) as paragraph 
(3).
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

TITLE VIII--MODIFICATION TO RECOVERY OF CIVIL DAMAGES FOR UNAUTHORIZED 
                           COLLECTION ACTIONS

SEC. 801. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES FOR 
              UNAUTHORIZED COLLECTION ACTIONS.

    (a) General Rule.--Subsection (b) of section 7433 (relating to 
damages) is amended by striking ``$100,000'' and inserting 
``$1,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to actions by officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 802. COURT DISCRETION TO REDUCE AWARD FOR LITIGATION COSTS FOR 
              FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.

    (a) General Rule.--Paragraph (1) of section 7433(d) (relating to 
civil damages for certain unauthorized collection actions) is amended 
to read as follows:
        ``(1) Award for damages may be reduced if administrative 
    remedies not exhausted.--The amount of damages awarded under 
    subsection (b) may be reduced if the court determines that the 
    plaintiff has not exhausted the administrative remedies available 
    to such plaintiff within the Internal Revenue Service.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
                                  TAX

SEC. 901. PRELIMINARY NOTICE REQUIREMENT.

    (a) In General.--Section 6672 (relating to failure to collect and 
pay over tax, or attempt to evade or defeat tax) is amended by 
redesignating subsection (b) as subsection (c) and by inserting after 
subsection (a) the following new subsection:
    ``(b) Preliminary Notice Requirement.--
        ``(1) In general.--No penalty shall be imposed under subsection 
    (a) unless the Secretary notifies the taxpayer in writing by mail 
    to an address as determined under section 6212(b) that the taxpayer 
    shall be subject to an assessment of such penalty.
        ``(2) Timing of notice.--The mailing of the notice described in 
    paragraph (1) shall precede any notice and demand of any penalty 
    under subsection (a) by at least 60 days.
        ``(3) Statute of limitations.--If a notice described in 
    paragraph (1) with respect to any penalty is mailed before the 
    expiration of the period provided by section 6501 for the 
    assessment of such penalty (determined without regard to this 
    paragraph), the period provided by such section for the assessment 
    of such penalty shall not expire before the later of--
            ``(A) the date 90 days after the date on which such notice 
        was mailed, or
            ``(B) if there is a timely protest of the proposed 
        assessment, the date 30 days after the Secretary makes a final 
        administrative determination with respect to such protest.
        ``(4) Exception for jeopardy.--This subsection shall not apply 
    if the Secretary finds that the collection of the penalty is in 
    jeopardy.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to proposed assessments made after June 30, 1996.

SEC. 902. DISCLOSURE OF CERTAIN INFORMATION WHERE MORE THAN 1 PERSON 
              LIABLE FOR PENALTY FOR FAILURE TO COLLECT AND PAY OVER 
              TAX.

    (a) In General.--Subsection (e) of section 6103 (relating to 
disclosure to persons having material interest), as amended by section 
403, isamended by adding at the end the following new paragraph:
        ``(9) Disclosure of certain information where more than 1 
    person subject to penalty under section 6672.--If the Secretary 
    determines that a person is liable for a penalty under section 
    6672(a) with respect to any failure, upon request in writing of 
    such person, the Secretary shall disclose in writing to such 
    person--
            ``(A) the name of any other person whom the Secretary has 
        determined to be liable for such penalty with respect to such 
        failure, and
            ``(B) whether the Secretary has attempted to collect such 
        penalty from such other person, the general nature of such 
        collection activities, and the amount collected.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 903. RIGHT OF CONTRIBUTION WHERE MORE THAN 1 PERSON LIABLE FOR 
              PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX.

    (a) In General.--Section 6672 (relating to failure to collect and 
pay over tax, or attempt to evade or defeat tax) is amended by adding 
at the end the following new subsection:
    ``(d) Right of Contribution Where More Than 1 Person Liable for 
Penalty.--If more than 1 person is liable for the penalty under 
subsection (a) with respect to any tax, each person who paid such 
penalty shall be entitled to recover from other persons who are liable 
for such penalty an amount equal to the excess of the amount paid by 
such person over such person's proportionate share of the penalty. Any 
claim for such a recovery may be made only in a proceeding which is 
separate from, and is not joined or consolidated with--
        ``(1) an action for collection of such penalty brought by the 
    United States, or
        ``(2) a proceeding in which the United States files a 
    counterclaim or third-party complaint for the collection of such 
    penalty.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to penalties assessed after the date of the enactment of this 
Act.

SEC. 904. VOLUNTEER BOARD MEMBERS OF TAX-EXEMPT ORGANIZATIONS EXEMPT 
              FROM PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX.

    (a) In General.--Section 6672 is amended by adding at the end the 
following new subsection:
    ``(e) Exception for Voluntary Board Members of Tax-Exempt 
Organizations.--No penalty shall be imposed by subsection (a) on any 
unpaid, volunteer member of any board of trustees or directors of an 
organization exempt from tax under subtitle A if such member--
        ``(1) is solely serving in an honorary capacity,
        ``(2) does not participate in the day-to-day or financial 
    operations of the organization, and
        ``(3) does not have actual knowledge of the failure on which 
    such penalty is imposed.
The preceding sentence shall not apply if it results in no person being 
liable for the penalty imposed by subsection (a).''.
    (b) Public Information Requirements.--
        (1) In general.--The Secretary of the Treasury or the 
    Secretary's delegate (hereafter in this subsection referred to as 
    the ``Secretary'') shall take such actions as may be appropriate to 
    ensure that employees are aware of their responsibilities under the 
    Federal tax depository system, the circumstances under which 
    employees may be liable for the penalty imposed by section 6672 of 
    the Internal Revenue Code of 1986, and the responsibility to 
    promptly report to the Internal Revenue Service any failure 
    referred to in subsection (a) of such section 6672. Such actions 
    shall include--
            (A) printing of a warning on deposit coupon booklets and 
        the appropriate tax returns that certain employees may be 
        liable for the penalty imposed by such section 6672, and
            (B) the development of a special information packet.
        (2) Development of explanatory materials.--The Secretary shall 
    develop materials explaining the circumstances under which board 
    members of tax-exempt organizations (including voluntary and 
    honorary members) may be subject to penalty under section 6672 of 
    such Code. Such materials shall be made available to tax-exempt 
    organizations.
        (3) IRS instructions.--The Secretary shall clarify the 
    instructions to Internal Revenue Service employees on the 
    application of the penalty under section 6672 of such Code with 
    regard to voluntary members of boards of trustees or directors of 
    tax-exempt organizations.

         TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES

SEC. 1001. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORDKEEPERS.

    (a) In General.--Paragraph (3) of section 7609(a) (relating to 
third-party recordkeeper defined) is amended by striking ``and'' at the 
end of subparagraph (G), by striking the period at the end of 
subparagraph (H) and inserting ``; and'', and by adding at the end the 
following the subparagraph:
            ``(I) any enrolled agent.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to summonses issued after the date of the enactment of this Act.

SEC. 1002. SAFEGUARDS RELATING TO DESIGNATED SUMMONSES.

    (a) Standard of Review.--Subparagraph (A) of section 6503(k)(2) 
(defining designated summons) is amended by redesignating clauses (i) 
and (ii) as clauses (ii) and (iii), respectively, and by inserting 
before clause (ii) (as so redesignated) the following new clause:
                ``(i) the issuance of such summons is preceded by a 
            review of such issuance by the regional counsel of the 
            Office of Chief Counsel for the region in which the 
            examination of the corporation is being conducted,''.
    (b) Limitation on Persons to Whom Designated Summons May Be 
Issued.--Paragraph (1) of section 6503(k) is amended by striking ``with 
respect to any return of tax by a corporation'' and inserting ``to a 
corporation (or to any other person to whom the corporation has 
transferred records) with respect to any return of tax by such 
corporation for a taxable year (or other period) for which such 
corporation is being examined under the coordinated examination program 
(or any successor program) of the Internal Revenue Service''.
    (c) Clerical Amendment.--Section 6503 is amended by redesignating 
subsections (k) and (l) (as amended by this section) as subsections (j) 
and (k), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to summonses issued after the date of the enactment of this Act.

SEC. 1003. ANNUAL REPORT TO CONGRESS CONCERNING DESIGNATED SUMMONSES.

    Not later than December 31 of each calendar year after 1995, the 
Secretary of the Treasury or his delegate shall report to the Committee 
on Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate on the number of designated summonses (as defined 
in section 6503(j) of the Internal Revenue Code of 1986) which were 
issued during the preceding 12 months.

 TITLE XI--RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
                              REGULATIONS

SEC. 1101. RELIEF FROM RETROACTIVE APPLICATION OF TREASURY DEPARTMENT 
              REGULATIONS.

    (a) In General.--Subsection (b) of section 7805 (relating to rules 
and regulations) is amended to read as follows:
    ``(b) Retroactivity of Regulations.--
        ``(1) In general.--Except as otherwise provided in this 
    subsection, no temporary, proposed, or final regulation relating to 
    the internal revenue laws shall apply to any taxable period ending 
    before the earliest of the following dates:
            ``(A) The date on which such regulation is filed with the 
        Federal Register.
            ``(B) In the case of any final regulation, the date on 
        which any proposed or temporary regulation to which such final 
        regulation relates was filed with the Federal Register.
            ``(C) The date on which any notice substantially describing 
        the expected contents of anytemporary, proposed, or final 
regulation is issued to the public.
        ``(2) Exception for promptly issued regulations.--Paragraph (1) 
    shall not apply to regulations filed or issued within 18 months of 
    the date of the enactment of the statutory provision to which the 
    regulation relates.
        ``(3) Prevention of abuse.--The Secretary may provide that any 
    regulation may take effect or apply retroactively to prevent abuse.
        ``(4) Correction of procedural defects.--The Secretary may 
    provide that any regulation may apply retroactively to correct a 
    procedural defect in the issuance of any prior regulation.
        ``(5) Internal regulations.--The limitation of paragraph (1) 
    shall not apply to any regulation relating to internal Treasury 
    Department policies, practices, or procedures.
        ``(6) Congressional authorization.--The limitation of paragraph 
    (1) may be superseded by a legislative grant from Congress 
    authorizing the Secretary to prescribe the effective date with 
    respect to any regulation.
        ``(7) Election to apply retroactively.--The Secretary may 
    provide for any taxpayer to elect to apply any regulation before 
    the dates specified in paragraph (1).
        ``(8) Application to rulings.--The Secretary may prescribe the 
    extent, if any, to which any ruling (including any judicial 
    decision or any administrative determination other than by 
    regulation) relating to the internal revenue laws shall be applied 
    without retroactive effect.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to regulations which relate to statutory provisions 
enacted on or after the date of the enactment of this Act.

                  TITLE XII--MISCELLANEOUS PROVISIONS

SEC. 1201. PHONE NUMBER OF PERSON PROVIDING PAYEE STATEMENTS REQUIRED 
              TO BE SHOWN ON SUCH STATEMENT.

    (a) General Rule.--The following provisions are each amended by 
striking ``name and address'' and inserting ``name, address, and phone 
number of the information contact'':
        (1) Section 6041(d)(1).
        (2) Section 6041A(e)(1).
        (3) Section 6042(c)(1).
        (4) Section 6044(e)(1).
        (5) Section 6045(b)(1).
        (6) Section 6049(c)(1)(A).
        (7) Section 6050B(b)(1).
        (8) Section 6050H(d)(1).
        (9) Section 6050I(e)(1).
        (10) Section 6050J(e).
        (11) Section 6050K(b)(1).
        (12) Section 6050N(b)(1).
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to statements required to be furnished after December 31, 1996 
(determined without regard to any extension).

SEC. 1202. REQUIRED NOTICE OF CERTAIN PAYMENTS.

    If any payment is received by the Secretary of the Treasury or his 
delegate from any taxpayer and the Secretary cannot associate such 
payment with such taxpayer, the Secretary shall make reasonable efforts 
to notify the taxpayer of such inability within 60 days after the 
receipt of such payment.

SEC. 1203. UNAUTHORIZED ENTICEMENT OF INFORMATION DISCLOSURE.

    (a) In General.--Subchapter B of chapter 76 (relating to 
proceedings by taxpayers and third parties), as amended by section 
601(a), is amended by redesignating section 7435 as section 7436 and by 
inserting after section 7434 the following new section:

``SEC. 7435. CIVIL DAMAGES FOR UNAUTHORIZED ENTICEMENT OF INFORMATION 
              DISCLOSURE.

    ``(a) In General.--If any officer or employee of the United States 
intentionally compromises the determination or collection of any tax 
due from an attorney, certified public accountant, or enrolled agent 
representing a taxpayer in exchange for information conveyed by the 
taxpayer to the attorney, certified public accountant, or enrolled 
agent for purposes of obtaining advice concerning the taxpayer's tax 
liability, such taxpayer may bring a civil action for damages against 
the United States in a district court of the United States. Such civil 
action shall be the exclusive remedy for recovering damages resulting 
from such actions.
    ``(b) Damages.--In any action brought under subsection (a), upon a 
finding of liability on the part of the defendant, the defendant shall 
be liable to the plaintiff in an amount equal to the lesser of $500,000 
or the sum of--
        ``(1) actual, direct economic damages sustained by the 
    plaintiff as a proximate result of the information disclosure, and
        ``(2) the costs of the action.
Damages shall not include the taxpayer's liability for any civil or 
criminal penalties, or other losses attributable to incarceration or 
the imposition of other criminal sanctions.
    ``(c) Payment Authority.--Claims pursuant to this section shall be 
payable out of funds appropriated under section 1304 of title 31, 
United States Code.
    ``(d) Period for Bringing Action.--Notwithstanding any other 
provision of law, an action to enforce liability created under this 
section may be brought without regard to the amount in controversy and 
may be brought only within 2 years after the date the actions creating 
such liability would have been discovered by exercise of reasonable 
care.
    ``(e) Mandatory Stay.--Upon a certification by the Commissioner or 
the Commissioner's delegate that there is an ongoing investigation or 
prosecution of the taxpayer, the district court before which an action 
under this section is pending shall stay all proceedings with respect 
to such action pending the conclusion of the investigation or 
prosecution.
    ``(f) Crime-Fraud Exception.--Subsection (a) shall not apply to 
information conveyed to an attorney, certified public accountant, or 
enrolled agent for the purpose of perpetrating a fraud or crime.''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 76, as amended by section 601(b), is amended by striking the 
item relating to section 7435 and by adding at the end the following 
new items:
``Sec. 7435. Civil damages for unauthorized enticement of information 
          disclosure.
``Sec. 7436. Cross references.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to actions after the date of the enactment of this Act.

SEC. 1204. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING DELINQUENT 
              ACCOUNTS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

    ``Not less often than annually, the Secretary shall send a written 
notice to each taxpayer who has a tax delinquent account of the amount 
of the tax delinquency as of the date of the notice.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:
``Sec. 7524. Annual notice of tax delinquency.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years after 1996.

SEC. 1205. 5-YEAR EXTENSION OF AUTHORITY FOR UNDERCOVER OPERATIONS.

    (a) In General.--Paragraph (3) of section 7601(c) of the Anti-Drug 
Abuse Act of 1988 is amended by striking all that follows ``this Act'' 
and inserting a period.
    (b) Restoration of Authority for 5 Years.--Subsection (c) of 
section 7608 is amended by adding at the end the following new 
paragraph:
        ``(6) Application of section.--The provisions of this 
    subsection--
            ``(A) shall apply after November 17, 1988, and before 
        January 1, 1990, and
            ``(B) shall apply after the date of the enactment of this 
        paragraph and before January 1, 2001.
    All amounts expended pursuant to this subsection during the period 
    described in subparagraph (B) shall be recovered to the extent 
    possible, and deposited in the Treasury of the United States as 
    miscellaneous receipts, before January 1, 2001.''.
    (c) Enhanced Oversight.--
        (1) Additional information required in reports to congress.--
    Subparagraph (B) of section 7608(c)(4) is amended--
            (A) by striking ``preceding the period'' in clause (ii),
            (B) by striking ``and'' at the end of clause (ii), and
            (C) by striking clause (iii) and inserting the following:
                ``(iii) the number, by programs, of undercover 
            investigative operations closed in the 1-year period for 
            which such report is submitted, and
                ``(iv) the following information with respect to each 
            undercover investigative operation pending as of the end of 
            the 1-year period for which such report is submitted or 
            closed during such 1-year period--

                    ``(I) the date the operation began and the date of 
                the certification referred to in the last sentence of 
                paragraph (1),
                    ``(II) the total expenditures under the operation 
                and the amount and use of the proceeds from the 
                operation,
                    ``(III) a detailed description of the operation 
                including the potential violation being investigated 
                and whether the operation is being conducted under 
                grand jury auspices, and
                    ``(IV) the results of the operation including the 
                results of criminal proceedings.''.

        (2) Audits required without regard to amounts involved.--
    Subparagraph (C) of section 7608(c)(5) is amended to read as 
    follows:
            ``(C) Undercover investigative operation.--The term 
        `undercover investigative operation' means any undercover 
        investigative operation of the Service; except that, for 
        purposes of subparagraphs (A) and (C) of paragraph (4), such 
        term only includes an operation which is exempt from section 
        3302 or 9102 of title 31, United States Code.''.
        (3) Effective date.--The amendments made by this subsection 
    shall take effect on the date of the enactment of this Act.

SEC. 1206. DISCLOSURE OF FORM 8300 INFORMATION ON CASH TRANSACTIONS.

    (a) In General.--Subsection (l) of section 6103 (relating to 
disclosure of returns and return information for purposes other than 
tax administration) is amended by adding at the end the following new 
paragraph:
        ``(15) Disclosure of returns filed under section 6050i.--The 
    Secretary may, upon written request, disclose to officers and 
    employees of--
            ``(A) any Federal agency,
            ``(B) any agency of a State or local government, or
            ``(C) any agency of the government of a foreign country,
    information contained on returns filed under section 6050I. Any 
    such disclosure shall be made on the same basis, and subject to the 
    same conditions, as apply to disclosures of information on reports 
    filed under section 5313 of title 31, United States Code; except 
    that no disclosure under this paragraph shall be made for purposes 
    of the administration of any tax law.''.
    (b) Conforming Amendments.--
        (1) Subsection (i) of section 6103 is amended by striking 
    paragraph (8).
        (2) Subparagraph (A) of section 6103(p)(3) is amended--
            (A) by striking ``(7)(A)(ii), or (8)'' and inserting ``or 
        (7)(A)(ii)'', and
            (B) by striking ``or (14)'' and inserting ``(14), or 
        (15)''.
        (3) The material preceding subparagraph (A) of section 
    6103(p)(4) is amended--
            (A) by striking ``(5), or (8)'' and inserting ``or (5)'',
            (B) by striking ``(i)(3)(B)(i), or (8)'' and inserting 
        ``(i)(3)(B)(i),'', and
            (C) by striking ``or (12)'' and inserting ``(12), or 
        (15)''.
        (4) Clause (ii) of section 6103(p)(4)(F) is amended--
            (A) by striking ``(5), or (8)'' and inserting ``or (5)'', 
        and
            (B) by striking ``or (14)'' and inserting ``(14), or 
        (15)''.
        (5) Paragraph (2) of section 7213(a) is amended by striking 
    ``or (12)'' and inserting ``(12), or (15)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 1207. DISCLOSURE OF RETURNS AND RETURN INFORMATION TO DESIGNEE OF 
              TAXPAYER.

    Subsection (c) of section 6103 (relating to disclosure of returns 
and return information to designee of taxpayer) is amended by striking 
``written request for or consent to such disclosure'' and inserting 
``request for or consent to such disclosure''.

SEC. 1208. STUDY OF NETTING OF INTEREST ON OVERPAYMENTS AND 
              LIABILITIES.

    (a) In General.--The Secretary of the Treasury or his delegate 
shall--
        (1) conduct a study of the manner in which the Internal Revenue 
    Service has implemented the netting of interest on overpayments and 
    underpayments and of the policy and administrative implications of 
    global netting, and
        (2) before submitting the report of such study, hold a public 
    hearing to receive comments on the matters included in such study.
    (b) Report.--The report of such study shall be submitted not later 
than 6 months after the date of the enactment of this Act to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate.

SEC. 1209. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, ETC.

    (a) In General.--Section 7623 (relating to expenses of deduction 
and punishment of frauds) is amended to read as follows:

``SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS AND FRAUD, ETC.

    ``The Secretary, under regulations prescribed by the Secretary, is 
authorized to pay such sums as he deems necessary for--
        ``(1) detecting underpayments of tax, and
        ``(2) detecting and bringing to trial and punishment persons 
    guilty of violating the internal revenue laws or conniving at the 
    same,
in cases where such expenses are not otherwise provided for by law. Any 
amount payable under the preceding sentence shall be paid from the 
proceeds of amounts (other than interest) collected by reason of the 
information provided, and any amount so collected shall be available 
for such payments.''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 78 is amended by striking the item relating to section 7623 and 
inserting the following new item:
``Sec. 7623. Expenses of detection of underpayments and fraud, etc.''.

    (c) Effective Date.--The amendments made by this section shall take 
effect on the date which is 6 months after the date of the enactment of 
this Act.
    (d) Report.--The Secretary of the Treasury or his delegate shall 
submit an annual report to the Committeeon Ways and Means of the House 
of Representatives and the Committee on Finance of the Senate on the 
payments under section 7623 of the Internal Revenue Code of 1986 during 
the year and on the amounts collected for which such payments were 
made.

SEC. 1210. USE OF PRIVATE DELIVERY SERVICES FOR TIMELY-MAILING-AS-
              TIMELY-FILING RULE.

    Section 7502 (relating to timely mailing treated as timely filing 
and paying) is amended by adding at the end the following new 
subsection:
    ``(f) Treatment of Private Delivery Services.--
        ``(1) In general.--Any reference in this section to the United 
    States mail shall be treated as including a reference to any 
    designated delivery service, and any reference in this section to a 
    postmark by the United States Postal Service shall be treated as 
    including a reference to any date recorded or marked as described 
    in paragraph (2)(C) by any designated delivery service.
        ``(2) Designated delivery service.--For purposes of this 
    subsection, the term `designated delivery service' means any 
    delivery service provided by a trade or business if such service is 
    designated by the Secretary for purposes of this section. The 
    Secretary may designate a delivery service under the preceding 
    sentence only if the Secretary determines that such service--
            ``(A) is available to the general public,
            ``(B) is at least as timely and reliable on a regular basis 
        as the United States mail,
            ``(C) records electronically to its data base, kept in the 
        regular course of its business, or marks on the cover in which 
        any item referred to in this section is to be delivered, the 
        date on which such item was given to such trade or business for 
        delivery, and
            ``(D) meets such other criteria as the Secretary may 
        prescribe.
        ``(3) Equivalents of registered and certified mail.--The 
    Secretary may provide a rule similar to the rule of paragraph (1) 
    with respect to any service provided by a designated delivery 
    service which is substantially equivalent to United States 
    registered or certified mail.''.

SEC. 1211. REPORTS ON MISCONDUCT OF IRS EMPLOYEES.

    On or before June 1 of each calendar year after 1996, the Secretary 
of the Treasury shall submit to the Committee on Ways and Means of the 
House of Representatives and the Committee on Finance of the Senate a 
report on--
        (1) all categories of instances involving the misconduct of 
    employees of the Internal Revenue Service during the preceding 
    calendar year, and
        (2) the disposition during the preceding calendar year of any 
    such instances (without regard to the year of the misconduct).

                      TITLE XIII--REVENUE OFFSETS
Subtitle A--Application of Failure-to-Pay Penalty to Substitute Returns

SEC. 1301. APPLICATION OF FAILURE-TO-PAY PENALTY TO SUBSTITUTE RETURNS.

    (a) General Rule.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(g) Treatment of Returns Prepared by Secretary Under Section 
6020(b).--In the case of any return made by the Secretary under section 
6020(b)--
        ``(1) such return shall be disregarded for purposes of 
    determining the amount of the addition under paragraph (1) of 
    subsection (a), but
        ``(2) such return shall be treated as the return filed by the 
    taxpayer for purposes of determining the amount of the addition 
    under paragraphs (2) and (3) of subsection (a).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply in the case of any return the due date for which (determined 
without regard to extensions) is after the date of the enactment of 
this Act.

     Subtitle B--Exicse Taxes on Amounts of Private Excess Benefits

SEC. 1311. EXCISE TAXES FOR FAILURE BY CERTAIN CHARITABLE ORGANIZATIONS 
              TO MEET CERTAIN QUALIFICATION REQUIREMENTS.

    (a) In General.--Chapter 42 (relating to private foundations and 
certain other tax-exempt organizations) is amended by redesignating 
subchapter D as subchapter E and by inserting after subchapter C the 
following new subchapter:

  ``Subchapter D--Failure by Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

``Sec. 4958. Taxes on excess benefit transactions.

``SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

    ``(a) Initial Taxes.--
        ``(1) On the disqualified person.--There is hereby imposed on 
    each excess benefit transaction a tax equal to 25 percent of the 
    excess benefit. The tax imposed by this paragraph shall be paid by 
    any disqualified person referred to in subsection (f)(1) with 
    respect to such transaction.
        ``(2) On the management.--In any case in which a tax is imposed 
    by paragraph (1), there is hereby imposed on the participation of 
    any organization manager in the excess benefit transaction, knowing 
    that it is such a transaction, a tax equal to 10 percent of the 
    excess benefit, unless such participation is not willful and is due 
    to reasonable cause. The tax imposed by this paragraph shall be 
    paid by any organization manager who participated in the excess 
    benefit transaction.
    ``(b) Additional Tax on the Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a)(1) on an excess 
benefit transaction and the excess benefit involved in such transaction 
is not corrected within the taxable period, there is hereby imposed a 
tax equal to 200 percent of the excess benefit involved. The tax 
imposed by this subsection shall be paid by any disqualified person 
referred to in subsection (f)(1) with respect to such transaction.
    ``(c) Excess Benefit Transaction; Excess Benefit.--For purposes of 
this section--
        ``(1) Excess benefit transaction.--
            ``(A) In general.--The term `excess benefit transaction' 
        means any transaction in which an economic benefit is provided 
        by an applicable tax-exempt organization directly or indirectly 
        to or for the use of any disqualified person if the value of 
        the economic benefit provided exceeds the value of the 
        consideration (including the performance of services) received 
        for providing such benefit. For purposes of the preceding 
        sentence, an economic benefit shall not be treated as 
        consideration for the performance of services unless such 
        organization clearly indicated its intent to so treat such 
        benefit.
            ``(B) Excess benefit.--The term `excess benefit' means the 
        excess referred to in subparagraph (A).
        ``(2) Authority to include certain other private inurement.--To 
    the extent provided in regulations prescribed by the Secretary, the 
    term `excess benefit transaction' includes any transaction in which 
    the amount of any economic benefit provided to or for the use of a 
    disqualified person is determined in whole or in part by the 
    revenues of 1 or more activities of the organization but only if 
    such transaction results in inurement not permitted under paragraph 
    (3) or (4) of section 501(c), as the case may be. In the case of 
    any such transaction, the excess benefit shall be the amount of the 
    inurement not so permitted.
    ``(d) Special Rules.--For purposes of this section--
        ``(1) Joint and several liability.--If more than 1 person is 
    liable for any tax imposed by subsection (a) or subsection (b), all 
    such persons shall be jointly and severally liable for such tax.
        ``(2) Limit for management.--With respect to any 1 excess 
    benefit transaction, the maximum amount of the tax imposed by 
    subsection (a)(2) shall not exceed $10,000.
    ``(e) Applicable Tax-Exempt Organization.--For purposes of this 
subchapter, the term `applicable tax-exempt organization' means--
        ``(1) any organization which (without regard to any excess 
    benefit) would be described in paragraph (3) or (4) of section 
    501(c) and exempt from tax under section 501(a), and
        ``(2) any organization which was described in paragraph (1) at 
    any time during the 5-year period ending on the date of the 
    transaction.
Such term shall not include a private foundation (as defined in section 
509(a)).
    ``(f) Other Definitions.--For purposes of this section--
        ``(1) Disqualified person.--The term `disqualified person' 
    means, with respect to any transaction--
            ``(A) any person who was, at any time during the 5-year 
        period ending on the date of such transaction, in a position to 
        exercise substantial influence over the affairs of the 
        organization,
            ``(B) a member of the family of an individual described in 
        subparagraph (A), and
            ``(C) a 35-percent controlled entity.
        ``(2) Organization manager.--The term `organization manager' 
    means, with respect to any applicable tax-exempt organization, any 
    officer, director, or trustee of such organization (or any 
    individual having powers or responsibilities similar to those of 
    officers, directors, or trustees of the organization).
        ``(3) 35-percent controlled entity.--
            ``(A) In general.--The term `35-percent controlled entity' 
        means--
                ``(i) a corporation in which persons described in 
            subparagraph (A) or (B) of paragraph (1) own more than 35 
            percent of the total combined voting power,
                ``(ii) a partnership in which such persons own more 
            than 35 percent of the profits interest, and
                ``(iii) a trust or estate in which such persons own 
            more than 35 percent of the beneficial interest.
            ``(B) Constructive ownership rules.--Rules similar to the 
        rules of paragraphs (3) and (4) of section 4946(a) shall apply 
        for purposes of this paragraph.
        ``(4) Family members.--The members of an individual's family 
    shall be determined under section 4946(d); except that such members 
    also shall include the brothers and sisters (whether by the whole 
    or half blood) of the individual and their spouses.
        ``(5) Taxable period.--The term `taxable period' means, with 
    respect to any excess benefit transaction, the period beginning 
    with the date on which the transaction occurs and ending on the 
    earliest of--
            ``(A) the date of mailing a notice of deficiency under 
        section 6212 with respect to the tax imposed by subsection 
        (a)(1), or
            ``(B) the date on which the tax imposed by subsection 
        (a)(1) is assessed.
        ``(6) Correction.--The terms `correction' and `correct' mean, 
    with respect to any excess benefit transaction, undoing the excess 
    benefit to the extent possible, and taking any additional measures 
    necessary to place the organization in a financial position not 
    worse than that in which it would be if the disqualified person 
    were dealing under the highest fiduciary standards.''.
    (b) Application of Private Inurement Rule to Tax-Exempt 
Organizations Described in Section 501(c)(4).--
        (1) In general.--Paragraph (4) of section 501(c) is amended by 
    inserting ``(A)'' after ``(4)'' and by adding at the end the 
    following:
        ``(B) Subparagraph (A) shall not apply to an entity unless no 
    part of the net earnings of such entity inures to the benefit of 
    any private shareholder or individual.''.
        (2) Special rule for certain cooperatives.--In the case of an 
    organization operating on a cooperative basis which, before the 
    date of the enactment of this Act, was determined by the Secretary 
    of the Treasury or his delegate, to be described in section 
    501(c)(4) of the Internal Revenue Code of 1986 and exempt from tax 
    under section 501(a) of such Code,the allocation or return of net 
margins or capital to the members of such organization in accordance 
with its incorporating statute and bylaws shall not be treated for 
purposes of such Code as the inurement of the net earnings of such 
organization to the benefit of any private shareholder or individual. 
The preceding sentence shall apply only if such statute and bylaws are 
substantially as such statute and bylaws were in existence on the date 
of the enactment of this Act.
    (c) Technical and Conforming Amendments.--
        (1) Subsection (e) of section 4955 is amended--
            (A) by striking ``Section 4945'' in the heading and 
        inserting ``Sections 4945 and 4958'', and
            (B) by inserting before the period ``or an excess benefit 
        for purposes of section 4958''.
        (2) Subsections (a), (b), and (c) of section 4963 are each 
    amended by inserting ``4958,'' after ``4955,''.
        (3) Subsection (e) of section 6213 is amended by inserting 
    ``4958 (relating to private excess benefit),'' before ``4971''.
        (4) Paragraphs (2) and (3) of section 7422(g) are each amended 
    by inserting ``4958,'' after ``4955,''.
        (5) Subsection (b) of section 7454 is amended by inserting ``or 
    whether an organization manager (as defined in section 4958(f)(2)) 
    has `knowingly' participated in an excess benefit transaction (as 
    defined in section 4958(c)),'' after ``section 4912(b),''.
        (6) The table of subchapters for chapter 42 is amended by 
    striking the last item and inserting the following:
``Subchapter D. Failure by certain charitable organizations to meet 
          certain qualification requirements.
``Subchapter E. Abatement of first and second tier taxes in certain 
          cases.''.

    (d) Effective Dates.--
        (1) In general.--The amendments made by this section (other 
    than subsection (b)) shall apply to excess benefit transactions 
    occurring on or after September 14, 1995.
        (2) Binding contracts.--The amendments referred to in paragraph 
    (1) shall not apply to any benefit arising from a transaction 
    pursuant to any written contract which was binding on September 13, 
    1995, and at all times thereafter before such transaction occurred.
        (3) Application of private inurement rule to tax-exempt 
    organizations described in section 501(c)(4).--
            (A) In general.--The amendment made by subsection (b) shall 
        apply to inurement occurring on or after September 14, 1995.
            (B) Binding contracts.--The amendment made by subsection 
        (b) shall not apply to any inurement occurring before January 
        1, 1997, pursuant to a written contract which was binding on 
        September 13, 1995, and at all times thereafter before such 
        inurement occurred.

SEC. 1312. REPORTING OF CERTAIN EXCISE TAXES AND OTHER INFORMATION.

    (a) Reporting by Organizations Described in Section 501(c)(3).--
Subsection (b) of section 6033 (relating to certain organizations 
described in section 501(c)(3)) is amended by striking ``and'' at the 
end of paragraph (9), by redesignating paragraph (10) as paragraph 
(14), and by inserting after paragraph (9) the following new 
paragraphs:
        ``(10) the respective amounts (if any) of the taxes paid by the 
    organization during the taxable year under the following 
    provisions:
            ``(A) section 4911 (relating to tax on excess expenditures 
        to influence legislation),
            ``(B) section 4912 (relating to tax on disqualifying 
        lobbying expenditures of certain organizations), and
            ``(C) section 4955 (relating to taxes on political 
        expenditures of section 501(c)(3) organizations),
        ``(11) the respective amounts (if any) of the taxes paid by the 
    organization, or any disqualified person with respect to such 
    organization, during the taxable year under section 4958 (relating 
    to taxes on private excess benefit from certain charitable 
    organizations),
        ``(12) such information as the Secretary may require with 
    respect to any excess benefit transaction (as defined in section 
    4958),
        ``(13) such information with respect to disqualified persons as 
    the Secretary may prescribe, and''.
    (b) Organizations Described in Section 501(c)(4).--Section 6033 is 
amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Certain Organizations Described in Section 501(c)(4).--Every 
organization described in section 501(c)(4) which is subject to the 
requirements of subsection (a) shall include on the return required 
under subsection (a) the information referred to in paragraphs (11), 
(12) and (13) of subsection (b) with respect to such organization.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years beginning after the date of the 
enactment of this Act.

SEC. 1313. EXEMPT ORGANIZATIONS REQUIRED TO PROVIDE COPY OF RETURN.

    (a) Requirement To Provide Copy.--
        (1) Subparagraph (A) of section 6104(e)(1) (relating to public 
    inspection of annual returns) is amended to read as follows:
            ``(A) In general.--During the 3-year period beginning on 
        the filing date--
                ``(i) a copy of the annual return filed under section 
            6033 (relating to returns by exempt organizations) by any 
            organization to which this paragraph applies shall be made 
            available by such organization for inspection during 
            regular business hours by any individual at the principal 
            office of such organization and, if such organization 
            regularly maintains 1 or more regional or district offices 
            having 3 or more employees, at each such regional or 
            district office, and
                ``(ii) upon request of an individual made at such 
            principal office or such a regional or district office, a 
            copy of such annual return shall be provided to such 
            individual without charge other than a reasonable fee for 
            any reproduction and mailing costs.
        The request described in clause (ii) must be made in person or 
        in writing. If the request under clause (ii) is made in person, 
        such copy shall be provided immediately and, if made in 
        writing, shall be provided within 30 days.''.
        (2) Clause (ii) of section 6104(e)(2)(A) is amended by 
    inserting before the period at the end the following: ``(and, upon 
    request of an individual made at such principal office or such a 
    regional or district office, a copy of the material requested to be 
    available for inspection under this subparagraph shall be provided 
    (in accordance with the last sentence of paragraph (1)(A)) to such 
    individual without charge other than reasonable fee for any 
    reproduction and mailing costs)''.
        (3) Subsection (e) of section 6104 is amended by adding at the 
    end the following new paragraph:
        ``(3) Limitation.--Paragraph (1)(A)(ii) (and the corresponding 
    provision of paragraph (2)) shall not apply to any request if, in 
    accordance with regulations promulgated by the Secretary, the 
    organizationhas made the requested documents widely available, or, 
the Secretary determines, upon application by an organization, that 
such request is part of a harassment campaign and that compliance with 
such request is not in the public interest.''.
    (b) Increase in Penalty for Willful Failure To Allow Public 
Inspection of Certain Returns, Etc.--Section 6685 is amended by 
striking ``$1,000'' and inserting ``$5,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made on or after the 60th day after the Secretary of 
the Treasury first issues the regulations referred to section 
6104(e)(3) of the Internal Revenue Code of 1986 (as added by subsection 
(a)(3)).

SEC. 1314. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR FAILURE TO 
              FILE COMPLETE AND TIMELY ANNUAL RETURNS.

    (a) In General.--Subparagraph (A) of section 6652(c)(1) (relating 
to annual returns under section 6033) is amended by striking ``$10'' 
and inserting ``$20'' and by striking ``$5,000'' and inserting 
``$10,000''.
    (b) Larger Penalty on Organizations Having Gross Receipts in Excess 
of $1,000,000.--Subparagraph (A) of section 6652(c)(1) is amended by 
adding at the end the following new sentence: ``In the case of an 
organization having gross receipts exceeding $1,000,000 for any year, 
with respect to the return required under section 6033 for such year, 
the first sentence of this subparagraph shall be applied by 
substituting `$100' for `$20' and, in lieu of applying the second 
sentence of this subparagraph, the maximum penalty under this 
subparagraph shall not exceed $50,000.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years ending on or after the date of the 
enactment of this Act.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.