[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2676 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                           May 7, 1998.
      Resolved, That the bill from the House of Representatives (H.R. 
2676) entitled ``An Act to amend the Internal Revenue Code of 1986 to 
restructure and reform the Internal Revenue Service, and for other 
purposes.'', do pass with the following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

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

    (a) Short Title.--This Act may be cited as the ``Internal Revenue 
Service Restructuring and Reform Act of 1998''.
    (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.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

  TITLE I--REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE INTERNAL 
                            REVENUE SERVICE

       Subtitle A--Reorganization of the Internal Revenue Service

Sec. 1001. Reorganization of the Internal Revenue Service.
Sec. 1002. IRS mission to focus on taxpayers' needs.

     Subtitle B--Executive Branch Governance and Senior Management

Sec. 1101. Internal Revenue Service Oversight Board.
Sec. 1102. Commissioner of Internal Revenue; other officials.
Sec. 1103. Treasury Inspector General for Tax Administration.
Sec. 1104. Other personnel.
Sec. 1105. Prohibition on executive branch influence over taxpayer 
                            audits and other investigations.
Sec. 1106. Review of Milwaukee and Waukesha Internal Revenue Service 
                            offices.

                  Subtitle C--Personnel Flexibilities

Sec. 1201. Improvements in personnel flexibilities.
Sec. 1202. Voluntary separation incentive payments.
Sec. 1203. Termination of employment for misconduct.
Sec. 1204. Basis for evaluation of Internal Revenue Service employees.
Sec. 1205. Employee training program.

                      TITLE II--ELECTRONIC FILING

Sec. 2001. Electronic filing of tax and information returns.
Sec. 2002. Due date for certain information returns.
Sec. 2003. Paperless electronic filing.
Sec. 2004. Return-free tax system.
Sec. 2005. Access to account information.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 3000. Short title.

                      Subtitle A--Burden of Proof

Sec. 3001. Burden of proof.

                  Subtitle B--Proceedings by Taxpayers

Sec. 3101. Expansion of authority to award costs and certain fees.
Sec. 3102. Civil damages for collection actions.
Sec. 3103. Increase in size of cases permitted on small case calendar.
Sec. 3104. Expansion of Tax Court jurisdiction to responsible person 
                            penalties.
Sec. 3105. Actions for refund with respect to certain estates which 
                            have elected the installment method of 
                            payment.
Sec. 3106. Tax Court jurisdiction to review adverse IRS determination 
                            of tax-exempt status of bond issue.
Sec. 3107. Civil action for release of erroneous lien.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 3201. Spousal election to limit joint and several liability on 
                            joint return.
Sec. 3202. Suspension of statute of limitations on filing refund claims 
                            during periods of disability.

       Subtitle D--Provisions Relating to Interest and Penalties

Sec. 3301. Elimination of interest rate differential on overlapping 
                            periods of interest on tax overpayments and 
                            underpayments.
Sec. 3101A. Property subject to a liability treated in same manner as 
                            assumption of liability.
Sec. 3302. Increase in overpayment rate payable to taxpayers other than 
                            corporations.
Sec. 3303. Elimination of penalty on individual's failure to pay for 
                            months during period of installment 
                            agreement.
Sec. 3304. Mitigation of failure to deposit penalty.
Sec. 3305. Suspension of interest and certain penalties where Secretary 
                            fails to contact individual taxpayer.
Sec. 3306. Procedural requirements for imposition of penalties and 
                            additions to tax.
Sec. 3307. Personal delivery of notice of penalty under section 6672.
Sec. 3308. Notice of interest charges.
Sec. 3309. Abatement of interest on underpayments by taxpayers in 
                            Presidentially declared disaster areas.

 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

                          Part I--Due Process

Sec. 3401. Due process in IRS collection actions.

                    Part II--Examination Activities

Sec. 3411. Uniform application of confidentiality privilege to taxpayer 
                            communications with federally authorized 
                            practitioners.
Sec. 3412. Limitation on financial status audit techniques.
Sec. 3413. Software trade secrets protection.
Sec. 3414. Threat of audit prohibited to coerce tip reporting 
                            alternative commitment agreements.
Sec. 3415. Taxpayers allowed motion to quash all third-party summonses.
Sec. 3416. Service of summonses to third-party recordkeepers permitted 
                            by mail.
Sec. 3417. Prohibition on IRS contact of third parties without prior 
                            notice.

                    Part III--Collection Activities

                      subpart a--approval process
Sec. 3421. Approval prsubpart b--liens and leviesd seizures.
Sec. 3431. Modifications to certain levy exemption amounts.
Sec. 3432. Release of levy upon agreement that amount is uncollectible.
Sec. 3433. Levy prohibited during pendency of refund proceedings.
Sec. 3434. Approval required for jeopardy and termination assessments 
                            and jeopardy levies.
Sec. 3435. Increase in amount of certain property on which lien not 
                            valid.
Sec. 3436. Waiver of early withdrawal tax for IRS levies on employer-
                          subpart c--seizuresent plans or IRAs.
Sec. 3441. Prohibition of sales of seized property at less than minimum 
                            bid.
Sec. 3442. Accounting of sales of seized property.
Sec. 3443. Uniform asset disposal mechanism.
Sec. 3444. Codification of IRS administrative procedures for seizure of 
                            taxpayer's property.
Sec. 3445. Procedures for seizure of residences and businesses.

 Part IV--Provisions Relating to Examination and Collection Activities

Sec. 3461. Procedures relating to extensions of statute of limitations 
                            by agreement.
Sec. 3462. Offers-in-compromise.
Sec. 3463. Notice of deficiency to specify deadlines for filing Tax 
                            Court petition.
Sec. 3464. Refund or credit of overpayments before final determination.
Sec. 3465. IRS procedures relating to appeals of examinations and 
                            collections.
Sec. 3466. Application of certain fair debt collection procedures.
Sec. 3467. Guaranteed availability of installment agreements.
Sec. 3468. Prohibition on requests to taxpayers to give up rights to 
                            bring actions.

                  Subtitle F--Disclosures to Taxpayers

Sec. 3501. Explanation of joint and several liability.
Sec. 3502. Explanation of taxpayers' rights in interviews with the 
                            Internal Revenue Service.
Sec. 3503. Disclosure of criteria for examination selection.
Sec. 3504. Explanations of appeals and collection process.
Sec. 3505. Explanation of reason for refund denial.
Sec. 3506. Statements regarding installment agreements.
Sec. 3507. Notification of change in tax matters partner.
Sec. 3508. Disclosure to taxpayers.

                Subtitle G--Low Income Taxpayer Clinics

Sec. 3601. Low income taxpayer clinics.

                       Subtitle H--Other Matters

Sec. 3701. Cataloging complaints.
Sec. 3702. Archive of records of Internal Revenue Service.
Sec. 3703. Payment of taxes.
Sec. 3704. Clarification of authority of Secretary relating to the 
                            making of elections.
Sec. 3705. IRS employee contacts.
Sec. 3706. Use of pseudonyms by IRS employees.
Sec. 3707. Conferences of right in the National Office of IRS.
Sec. 3708. Illegal tax protester designation.
Sec. 3709. Provision of confidential information to Congress by 
                            whistleblowers.
Sec. 3710. Listing of local IRS telephone numbers and addresses.
Sec. 3711. Identification of return preparers.
Sec. 3712. Offset of past-due, legally enforceable State income tax 
                            obligations against overpayments.
Sec. 3713. Treatment of IRS notices on foreign tax provisions.
Sec. 3714. Study of payments made for detection of underpayments and 
                            fraud.
Sec. 3715. Combined employment tax reporting demonstration project.
Sec. 3716. Reporting requirements in connection with education tax 
                            credit.

                          Subtitle I--Studies

Sec. 3801. Administration of penalties and interest.
Sec. 3802. Confidentiality of tax return information.
Sec. 3803. Study of transfer pricing enforcement.
Sec. 3804. Willful noncompliance with internal revenue laws by 
                            taxpayers.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

Sec. 4001. Century date change.
Sec. 4002. Tax law complexity analysis.

                      TITLE V--REVENUE PROVISIONS

Sec. 5001. Clarification of deduction for deferred compensation.
Sec. 5002. Modification to foreign tax credit carryback and carryover 
                            periods.
Sec. 5003. Clarification and expansion of mathematical error assessment 
                            procedures.
Sec. 5004. Termination of exception for certain real estate investment 
                            trusts from the treatment of stapled 
                            entities.
Sec. 5005. Certain customer receivables ineligible for mark-to-market 
                            treatment.
Sec. 5006. Inclusion of rotavirus gastroenteritis to list of taxable 
                            vaccines.
Sec. 5007. Clarification of definition of specified liability loss.
Sec. 5008. Modification of AGI limit for conversions to roth IRAs.
Sec. 5009. Extension of Internal Revenue Service user fees.

                    TITLE VI--TECHNICAL CORRECTIONS

Sec. 6001. Short title.
Sec. 6002. Definitions.
Sec. 6003. Amendments related to title I of 1997 Act.
Sec. 6004. Amendments related to title II of 1997 Act.
Sec. 6005. Amendments related to title III of 1997 Act.
Sec. 6006. Amendment related to title IV of 1997 Act.
Sec. 6007. Amendments related to title V of 1997 Act.
Sec. 6008. Amendments related to title VII of 1997 Act.
Sec. 6009. Amendments related to title IX of 1997 Act.
Sec. 6010. Amendments related to title X of 1997 Act.
Sec. 6011. Amendments related to title XI of 1997 Act.
Sec. 6012. Amendments related to title XII of 1997 Act.
Sec. 6013. Amendments related to title XIII of 1997 Act.
Sec. 6014. Amendments related to title XIV of 1997 Act.
Sec. 6015. Amendments related to title XV of 1997 Act.
Sec. 6016. Amendments related to title XVI of 1997 Act.
Sec. 6017. Amendments related to Small Business Job Protection Act of 
                            1996.
Sec. 6018. Amendments related to Taxpayer Bill of Rights 2.
Sec. 6019. Amendment related to Omnibus Budget Reconciliation Act of 
                            1993.
Sec. 6020. Amendment related to Revenue Reconciliation Act of 1990.
Sec. 6021. Amendment related to Tax Reform Act of 1986.
Sec. 6022. Miscellaneous clerical and deadwood changes.
Sec. 6023. Effective date.

  TITLE I--REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE INTERNAL 
                            REVENUE SERVICE

       Subtitle A--Reorganization of the Internal Revenue Service

SEC. 1001. REORGANIZATION OF THE INTERNAL REVENUE SERVICE.

    (a) In General.--The Commissioner of Internal Revenue shall develop 
and implement a plan to reorganize the Internal Revenue Service. The 
plan shall--
            (1) supersede any organization or reorganization of the 
        Internal Revenue Service based on any statute or reorganization 
        plan applicable on the effective date of this section;
            (2) eliminate or substantially modify the existing 
        organization of the Internal Revenue Service which is based on 
        a national, regional, and district structure;
            (3) establish organizational units serving particular 
        groups of taxpayers with similar needs; and
            (4) ensure an independent appeals function within the 
        Internal Revenue Service, including the prohibition in the plan 
        of ex parte communications between appeals officers and other 
        Internal Revenue Service employees to the extent that such 
        communications appear to compromise the independence of the 
        appeals officers.
    (b) Savings Provisions.--
            (1) Preservation of specific tax rights and remedies.--
        Nothing in the plan developed and implemented under subsection 
        (a) shall be considered to impair any right or remedy, 
        including trial by jury, to recover any internal revenue tax 
        alleged to have been erroneously or illegally assessed or 
        collected, or any penalty claimed to have been collected 
        without authority, or any sum alleged to have been excessive or 
        in any manner wrongfully collected under the internal revenue 
        laws. For the purpose of any action to recover any such tax, 
        penalty, or sum, all statutes, rules, and regulations referring 
        to the collector of internal revenue, the principal officer for 
        the internal revenue district, or the Secretary, shall be 
        deemed to refer to the officer whose act or acts referred to in 
        the preceding sentence gave rise to such action. The venue of 
        any such action shall be the same as under existing law.
            (2) Continuing effect of legal documents.--All orders, 
        determinations, rules, regulations, permits, agreements, 
        grants, contracts, certificates, licenses, registrations, 
        privileges, and other administrative actions--
                    (A) which have been issued, made, granted, or 
                allowed to become effective by the President, any 
                Federal agency or official thereof, or by a court of 
                competent jurisdiction, in the performance of any 
                function transferred or affected by the reorganization 
                of the Internal Revenue Service or any other 
                administrative unit of the Department of the Treasury 
                under this section, and
                    (B) which are in effect at the time this section 
                takes effect, or were final before the effective date 
                of this section and are to become effective on or after 
                the effective date of this section,
        shall continue in effect according to their terms until 
        modified, terminated, superseded, set aside, or revoked in 
        accordance with law by the President, the Secretary of the 
        Treasury, the Commissioner of Internal Revenue, or other 
        authorized official, a court of competent jurisdiction, or by 
        operation of law.
            (3) Proceedings not affected.--The provisions of this 
        section shall not affect any proceedings, including notices of 
        proposed rulemaking, or any application for any license, 
        permit, certificate, or financial assistance pending before the 
        Department of the Treasury (or any administrative unit of the 
        Department, including the Internal Revenue Service) at the time 
        this section takes effect, with respect to functions 
        transferred or affected by the reorganization under this 
        section but such proceedings and applications shall continue. 
        Orders shall be issued in such proceedings, appeals shall be 
        taken therefrom, and payments shall be made pursuant to such 
        orders, as if this section had not been enacted, and orders 
        issued in any such proceedings shall continue in effect until 
        modified, terminated, superseded, or revoked by a duly 
        authorized official, by a court of competent jurisdiction, or 
        by operation of law. Nothing in this paragraph shall be deemed 
        to prohibit the discontinuance or modification of any such 
        proceeding under the same terms and conditions and to the same 
        extent that such proceeding could have been discontinued or 
        modified if this section had not been enacted.
            (4) Suits not affected.--The provisions of this section 
        shall not affect suits commenced before the effective date of 
        this section, and in all such suits, proceedings shall be had, 
        appeals taken, and judgments rendered in the same manner and 
        with the same effect as if this section had not been enacted.
            (5) Nonabatement of actions.--No suit, action, or other 
        proceeding commenced by or against the Department of the 
        Treasury (or any administrative unit of the Department, 
        including the Internal Revenue Service), or by or against any 
        individual in the official capacity of such individual as an 
        officer of the Department of the Treasury, shall abate by 
        reason of the enactment of this section.
            (6) Administrative actions relating to promulgation of 
        regulations.--Any administrative action relating to the 
        preparation or promulgation of a regulation by the Department 
        of the Treasury (or any administrative unit of the Department, 
        including the Internal Revenue Service) relating to a function 
        transferred or affected by the reorganization under this 
        section may be continued by the Department of the Treasury 
        through any appropriate administrative unit of the Department, 
        including the Internal Revenue Service with the same effect as 
        if this section had not been enacted.

SEC. 1002. IRS MISSION TO FOCUS ON TAXPAYERS' NEEDS.

    The Internal Revenue Service shall review and restate its mission 
to place a greater emphasis on serving the public and meeting 
taxpayers' needs.

     Subtitle B--Executive Branch Governance and Senior Management

SEC. 1101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    (a) In General.--Section 7802 (relating to the Commissioner of 
Internal Revenue) is amended to read as follows:

``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

    ``(a) Establishment.--There is established within the Department of 
the Treasury the Internal Revenue Service Oversight Board (hereafter in 
this subchapter referred to as the `Oversight Board').
    ``(b) Membership.--
            ``(1) Composition.--The Oversight Board shall be composed 
        of 9 members, as follows:
                    ``(A) 6 members shall be individuals who are not 
                otherwise Federal officers or employees and who are 
                appointed by the President, by and with the advice and 
                consent of the Senate.
                    ``(B) 1 member shall be the Secretary of the 
                Treasury or, if the Secretary so designates, the Deputy 
                Secretary of the Treasury.
                    ``(C) 1 member shall be the Commissioner of 
                Internal Revenue.
                    ``(D) 1 member shall be an individual who is a 
                representative of an organization that represents a 
                substantial number of Internal Revenue Service 
                employees and who is appointed by the President, by and 
                with the advice and consent of the Senate.
            ``(2) Qualifications and terms.--
                    ``(A) Qualifications.--Members of the Oversight 
                Board described in paragraph (1)(A) shall be appointed 
                without regard to political affiliation and solely on 
                the basis of their professional experience and 
                expertise in 1 or more of the following areas:
                            ``(i) Management of large service 
                        organizations.
                            ``(ii) Customer service.
                            ``(iii) Federal tax laws, including tax 
                        administration and compliance.
                            ``(iv) Information technology.
                            ``(v) Organization development.
                            ``(vi) The needs and concerns of taxpayers.
                            ``(vii) The needs and concerns of small 
                        businesses.
                In the aggregate, the members of the Oversight Board 
                described in paragraph (1)(A) should collectively bring 
                to bear expertise in all of the areas described in the 
                preceding sentence.
                    ``(B) Terms.--Each member who is described in 
                subparagraph (A) or (D) of paragraph (1) shall be 
                appointed for a term of 5 years, except that of the 
                members first appointed under paragraph (1)(A)--
                            ``(i) 2 members shall be appointed for a 
                        term of 2 years,
                            ``(ii) 2 members shall be appointed for a 
                        term of 4 years, and
                            ``(iii) 2 members shall be appointed for a 
                        term of 5 years.
                    ``(C) Reappointment.--An individual who is 
                described in paragraph (1)(A) may be appointed to no 
                more than two 5-year terms on the Oversight Board.
                    ``(D) Vacancy.--Any vacancy on the Oversight Board 
                shall be filled in the same manner as the original 
                appointment. Any member appointed to fill a vacancy 
                occurring before the expiration of the term for which 
                the member's predecessor was appointed shall be 
                appointed for the remainder of that term.
            ``(3) Ethical considerations.--
                    ``(A) Financial disclosure.--
                            ``(i) In general.--During the entire period 
                        that an individual appointed under subparagraph 
                        (A) or (D) of paragraph (1) is a member of the 
                        Oversight Board, such individual shall be 
                        treated as serving as an officer or employee 
                        referred to in section 101(f) of the Ethics in 
                        Government Act of 1978 for purposes of title I 
                        of such Act, except that section 101(d) of such 
                        Act shall apply without regard to the number of 
                        days of service in the position.
                            ``(ii) Represented organization.--The 
                        organization represented by the individual 
                        appointed under paragraph (1)(D) shall file an 
                        annual financial report with the Committee on 
                        Finance in the Senate and the Committee on Ways 
                        and Means in the House of Representatives. Such 
                        report shall include information regarding 
                        compensation paid to the individual so 
                        appointed, other individuals employed by the 
                        organization, and membership dues collected by 
                        the organization.
                    ``(B) Restrictions on post-employment.--For 
                purposes of section 207(c) of title 18, United States 
                Code, except as provided in subparagraph (D)(i)(II), an 
                individual appointed under subparagraph (A) or (D) of 
                paragraph (1) shall be treated as an employee referred 
                to in section 207(c)(2)(A)(i) of such title during the 
                entire period the individual is a member of the Board, 
                except that subsections (c)(2)(B) and (f) of section 
                207 of such title shall not apply.
                    ``(C) Private members who are special government 
                employees.--If an individual appointed under paragraph 
                (1)(A) is a special Government employee, the following 
                additional rules apply for purposes of chapter 11 of 
                title 18, United States Code:
                            ``(i) Restriction on representation.--In 
                        addition to any restriction under section 
                        205(c) of title 18, United States Code, except 
                        as provided in subsections (d) through (i) of 
                        section 205 of such title, such individual 
                        (except in the proper discharge of official 
                        duties) shall not, with or without 
                        compensation, represent anyone to or before any 
                        officer or employee of--
                                    ``(I) the Oversight Board or the 
                                Internal Revenue Service on any matter,
                                    ``(II) the Department of the 
                                Treasury on any matter involving the 
                                internal revenue laws or involving the 
                                management or operations of the 
                                Internal Revenue Service, or
                                    ``(III) the Department of Justice 
                                with respect to litigation involving a 
                                matter described in subclause (I) or 
                                (II).
                            ``(ii) Compensation for services provided 
                        by another.--For purposes of section 203 of 
                        such title--
                                    ``(I) such individual shall not be 
                                subject to the restrictions of 
                                subsection (a)(1) thereof for sharing 
                                in compensation earned by another for 
                                representations on matters covered by 
                                such section, and
                                    ``(II) a person shall not be 
                                subject to the restrictions of 
                                subsection (a)(2) thereof for sharing 
                                such compensation with such individual.
                    ``(D) Exemptions for member from employee 
                organization.--
                            ``(i) Exemption from criminal conflict 
                        laws.--An individual appointed under paragraph 
                        (1)(D) shall not be subject to--
                                    ``(I) section 203 or 205 of title 
                                18, United States Code, for acting as 
                                an agent or attorney for (or otherwise 
                                representing), with or without 
                                compensation, the organization 
                                described in paragraph (1)(D),
                                    ``(II) section 207 of such title 
                                for making, with the intent to 
                                influence, any communication or 
                                appearance before an officer or 
                                employee of the United States on behalf 
                                of the organization which such 
                                individual represented while a member 
                                of the Board, or
                                    ``(III) section 208 of such title 
                                for personal and substantial 
                                participation in a particular matter in 
                                which all financial interests which 
                                would otherwise prohibit the 
                                individual's participation are 
                                interests of such organization.
                            ``(ii) Compensation.--Nothing in section 
                        203 of title 18, United States Code, shall 
                        prohibit an organization represented by the 
                        individual appointed under paragraph (1)(D) 
                        from giving, promising, or offering 
                        compensation to the individual for acting as 
                        its agent or attorney or for otherwise 
                        representing such organization.
            ``(4) Quorum.--5 members of the Oversight Board shall 
        constitute a quorum. A majority of members present and voting 
        shall be required for the Oversight Board to take action.
            ``(5) Removal.--
                    ``(A) In general.--Any member of the Oversight 
                Board appointed under paragraph (1) (A) or (D) may be 
                removed at the will of the President.
                    ``(B) Secretary and commissioner.--An individual 
                described in subparagraph (B) or (C) of paragraph (1) 
                shall be removed upon termination of service in the 
                office described in such subparagraph.
            ``(6) Claims.--
                    ``(A) In general.--Members of the Oversight Board 
                who are described in paragraph (1) (A) or (D) shall 
                have no personal liability under Federal law with 
                respect to any claim arising out of or resulting from 
                an act or omission by such member within the scope of 
                service as a member.
                    ``(B) Effect on other law.--This paragraph shall 
                not be construed--
                            ``(i) to affect any other immunities and 
                        protections that may be available to such 
                        member under applicable law with respect to 
                        such transactions,
                            ``(ii) to affect any other right or remedy 
                        against the United States under applicable law, 
                        or
                            ``(iii) to limit or alter in any way the 
                        immunities that are available under applicable 
                        law for Federal officers and employees.
    ``(c) General Responsibilities.--
            ``(1) Oversight.--
                    ``(A) In general.--The Oversight Board shall 
                oversee the Internal Revenue Service in its 
                administration, management, conduct, direction, and 
                supervision of the execution and application of the 
                internal revenue laws or related statutes and tax 
                conventions to which the United States is a party.
                    ``(B) Mission of irs.--As part of its oversight 
                functions described in subparagraph (A), the Oversight 
                Board shall ensure that the organization and operation 
                of the Internal Revenue Service allows it to carry out 
                its mission.
                    ``(C) Confidentiality.--The Oversight Board shall 
                ensure that appropriate confidentiality is maintained 
                in the exercise of its duties.
            ``(2) Exceptions.--The Oversight Board shall have no 
        responsibilities or authority with respect to--
                    ``(A) the development and formulation of Federal 
                tax policy relating to existing or proposed internal 
                revenue laws, related statutes, and tax conventions,
                    ``(B) specific law enforcement activities of the 
                Internal Revenue Service, including specific compliance 
                activities such as examinations, collection activities, 
                and criminal investigations,
                    ``(C) specific procurement activities of the 
                Internal Revenue Service, or
                    ``(D) except as provided in subsection (d)(3), 
                specific personnel actions.
    ``(d) Specific Responsibilities.--The Oversight Board shall have 
the following specific responsibilities:
            ``(1) Strategic plans.--To review and approve strategic 
        plans of the Internal Revenue Service, including the 
        establishment of--
                    ``(A) mission and objectives, and standards of 
                performance relative to either, and
                    ``(B) annual and long-range strategic plans.
            ``(2) Operational plans.--To review the operational 
        functions of the Internal Revenue Service, including--
                    ``(A) plans for modernization of the tax system,
                    ``(B) plans for outsourcing or managed competition, 
                and
                    ``(C) plans for training and education.
            ``(3) Management.--To--
                    ``(A) recommend to the President candidates for 
                appointment as the Commissioner of Internal Revenue and 
                recommend to the President the removal of the 
                Commissioner,
                    ``(B) recommend to the Secretary of the Treasury, 
                after taking into consideration any recommendations of 
                the Commissioner, 3 candidates for appointment as the 
                National Taxpayer Advocate from individuals who have--
                            ``(i) a background in customer service as 
                        well as tax law, and
                            ``(ii) experience in representing 
                        individual taxpayers,
                    ``(C) recommend to the Secretary of the Treasury 
                the removal of the National Taxpayer Advocate,
                    ``(D) review the Commissioner's selection, 
                evaluation, and compensation of Internal Revenue 
                Service senior executives who have program management 
                responsibility over significant functions of the 
                Internal Revenue Service,
                    ``(E) review and approve the Commissioner's plans 
                for any major reorganization of the Internal Revenue 
                Service, and
                    ``(F) review procedures of the Internal Revenue 
                Service relating to financial audits required by law.
            ``(4) Budget.--To--
                    ``(A) review and approve the budget request of the 
                Internal Revenue Service prepared by the Commissioner,
                    ``(B) submit such budget request to the Secretary 
                of the Treasury, and
                    ``(C) ensure that the budget request supports the 
                annual and long-range strategic plans.
            ``(5) Taxpayer protection.--To ensure the proper treatment 
        of taxpayers by the employees of the Internal Revenue Service.
The Secretary shall submit the budget request referred to in paragraph 
(4)(B) for any fiscal year to the President who shall submit such 
request, without revision, to Congress together with the President's 
annual budget request for the Internal Revenue Service for such fiscal 
year.
    ``(e) Board Personnel Matters.--
            ``(1) Compensation of members.--
                    ``(A) In general.--Each member of the Oversight 
                Board who is described in subsection (b)(1)(A) shall be 
                compensated at a rate of $30,000 per year. All other 
                members shall serve without compensation for such 
                service.
                    ``(B) Chairperson.--In lieu of the amount specified 
                in subparagraph (A), the Chairperson of the Oversight 
                Board shall be compensated at a rate of $50,000 per 
                year.
            ``(2) Travel expenses.--The members of the Oversight Board 
        shall be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        for purposes of duties as a member of the Oversight Board.
            ``(3) Staff.--
                    ``(A) In general.--The Chairperson of the Oversight 
                Board may appoint and terminate any personnel that may 
                be necessary to enable the Board to perform its duties.
                    ``(B) Detail of government employees.--Upon request 
                of the Chairperson of the Oversight Board, a Federal 
                agency shall detail a Federal Government employee to 
                the Oversight Board without reimbursement. Such detail 
                shall be without interruption or loss of civil service 
                status or privilege.
            ``(4) Procurement of temporary and intermittent services.--
        The Chairperson of the Oversight Board may procure temporary 
        and intermittent services under section 3109(b) of title 5, 
        United States Code.
    ``(f) Administrative Matters.--
            ``(1) Chair.--
                    ``(A) Term.--The members of the Oversight Board 
                shall elect for a 2-year term a chairperson from among 
                the members appointed under subsection (b)(1)(A).
                    ``(B) Powers.--Except as otherwise provided by a 
                majority vote of the Oversight Board, the powers of the 
                Chairperson shall include--
                            ``(i) establishing committees,
                            ``(ii) setting meeting places and times,
                            ``(iii) establishing meeting agendas, and
                            ``(iv) developing rules for the conduct of 
                        business.
            ``(2) Meetings.--The Oversight Board shall meet at least 
        quarterly and at such other times as the Chairperson determines 
        appropriate.
            ``(3) Reports.--
                    ``(A) Annual.--The Oversight Board shall each year 
                report with respect to the conduct of its 
                responsibilities under this title to the President, the 
                Committees on Ways and Means, Government Reform and 
                Oversight, and Appropriations of the House of 
                Representatives and the Committees on Finance, 
                Governmental Affairs, and Appropriations of the Senate.
                    ``(B) Additional report.--Upon a determination by 
                the Oversight Board under subsection (c)(1)(B) that the 
                organization and operation of the Internal Revenue 
                Service are not allowing it to carry out its mission, 
                the Oversight Board shall report such determination to 
                the Committee on Ways and Means of the House of 
                Representatives, and the Committee on Finance of the 
                Senate.
    ``(g) Termination of Board.--The Internal Revenue Service Oversight 
Board established under subsection (a) shall terminate on September 30, 
2008.''.
    (b) Restriction on Disclosure of Return Information to Oversight 
Board Members.--Section 6103(h) (relating to disclosure to certain 
Federal officers and employees for purposes of tax administration, 
etc.) is amended by adding at the end the following new paragraph:
            ``(5) Internal revenue service oversight board.--
                    ``(A) In general.--Notwithstanding paragraph (1), 
                and except as provided in subparagraph (B), no return 
                or return information may be disclosed to any member of 
                the Oversight Board described in subparagraph (A) or 
                (D) of section 7802(b)(1) or to any employee or 
                detailee of such Board by reason of their service with 
                the Board. Any request for information not permitted to 
                be disclosed under the preceding sentence, and any 
                contact relating to a specific taxpayer, made by any 
                such individual to an officer or employee of the 
                Internal Revenue Service shall be reported by such 
                officer or employee to the Secretary, the Treasury 
                Inspector General for Tax Administration, and the Joint 
                Committee on Taxation.
                    ``(B) Exception for reports to the board.--If--
                            ``(i) the Commissioner or the Treasury 
                        Inspector General for Tax Administration 
                        prepares any report or other matter for the 
                        Oversight Board in order to assist the Board in 
                        carrying out its duties, and
                            ``(ii) the Commissioner or such Inspector 
                        General determines it is necessary to include 
                        any return or return information in such report 
                        or other matter to enable the Board to carry 
                        out such duties,
                such return or return information (other than 
                information regarding taxpayer identity) may be 
                disclosed to members, employees, or detailees of the 
                Board solely for the purpose of carrying out such 
                duties.''.
    (c) Conforming Amendments.--
            (1) Section 4946(c) (relating to definitions and special 
        rules for chapter 42) is amended by striking ``or'' at the end 
        of paragraph (5), by striking the period at the end of 
        paragraph (6) and inserting ``, or'', and by adding at the end 
        the following new paragraph:
            ``(7) a member of the Internal Revenue Service Oversight 
        Board.''.
            (2) 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. Internal Revenue Service 
                                        Oversight Board.''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Initial nominations to internal revenue service 
        oversight board.--The President shall submit the initial 
        nominations under section 7802 of the Internal Revenue Code of 
        1986, as added by this section, to the Senate not later than 6 
        months after the date of the enactment of this Act.
            (3) Effect on actions prior to appointment of oversight 
        board.--Nothing in this section shall be construed to 
        invalidate the actions and authority of the Internal Revenue 
        Service prior to the appointment of the members of the Internal 
        Revenue Service Oversight Board.
            (4) Special rule for reorganization plan.--The authority of 
        the Internal Revenue Service Oversight Board under section 
        7802(d)(3)(E) of such Code (as so added) to approve major 
        reorganization plans shall not apply to the reorganization plan 
        under section 1001 of this Act.

SEC. 1102. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    (a) In General.--Section 7803 (relating to other personnel) is 
amended to read as follows:

``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

    ``(a) Commissioner of Internal Revenue.--
            ``(1) Appointment.--
                    ``(A) In general.--There shall be in the Department 
                of the Treasury a Commissioner of Internal Revenue who 
                shall be appointed by the President, by and with the 
                advice and consent of the Senate, to a 5-year term. 
                Such appointment shall be made from individuals who, 
                among other qualifications, have a demonstrated ability 
                in management.
                    ``(B) Vacancy.--Any individual appointed to fill a 
                vacancy in the position of Commissioner occurring 
                before the expiration of the term for which such 
                individual's predecessor was appointed shall be 
                appointed only for the remainder of that term.
                    ``(C) Removal.--The Commissioner may be removed at 
                the will of the President.
                    ``(D) Reappointment.--The Commissioner may be 
                appointed to more than one 5-year term.
            ``(2) Duties.--The Commissioner shall have such duties and 
        powers as the Secretary may prescribe, including the power to--
                    ``(A) administer, manage, conduct, direct, and 
                supervise the execution and application of the internal 
                revenue laws or related statutes and tax conventions to 
                which the United States is a party,
                    ``(B) recommend to the President a candidate for 
                appointment as Chief Counsel for the Internal Revenue 
                Service when a vacancy occurs, and recommend to the 
                President the removal of such Chief Counsel, and
                    ``(C) recommend to the Oversight Board candidates 
                for appointment as National Taxpayer Advocate when a 
                vacancy occurs.
        If the Secretary determines not to delegate a power specified 
        in subparagraph (A), (B), or (C), such determination may not 
        take effect until 30 days after the Secretary notifies the 
        Committees on Ways and Means, Government Reform and Oversight, 
        and Appropriations of the House of Representatives and the 
        Committees on Finance, Governmental Affairs, and Appropriations 
        of the Senate.
            ``(3) Consultation with board.--The Commissioner shall 
        consult with the Oversight Board on all matters set forth in 
        paragraphs (2) and (3) (other than paragraph (3)(A)) of section 
        7802(d).
    ``(b) Chief Counsel for the Internal Revenue Service.--
            ``(1) Appointment.--There shall be in the Department of the 
        Treasury a Chief Counsel for the Internal Revenue Service who 
        shall be appointed by the President, by and with the consent of 
        the Senate.
            ``(2) Duties.--The Chief Counsel shall be the chief law 
        officer for the Internal Revenue Service and shall perform such 
        duties as may be prescribed by the Secretary, including the 
        duty--
                    ``(A) to be legal advisor to the Commissioner and 
                the Commissioner's officers and employees,
                    ``(B) to furnish legal opinions for the preparation 
                and review of rulings and memoranda of technical 
                advice,
                    ``(C) to prepare, review, and assist in the 
                preparation of proposed legislation, treaties, 
                regulations, and Executive Orders relating to laws 
                which affect the Internal Revenue Service,
                    ``(D) to represent the Commissioner in cases before 
                the Tax Court, and
                    ``(E) to determine which civil actions should be 
                litigated under the laws relating to the Internal 
                Revenue Service and prepare recommendations for the 
                Department of Justice regarding the commencement of 
                such actions.
        If the Secretary determines not to delegate a power specified 
        in subparagraph (A), (B), (C), (D), or (E), such determination 
        may not take effect until 30 days after the Secretary notifies 
        the Committees on Ways and Means, Government Reform and 
        Oversight, and Appropriations of the House of Representatives 
        and the Committees on Finance, Governmental Affairs, and 
        Appropriations of the Senate.
            ``(3) Report to commissioner.--The Chief Counsel shall 
        report directly to the Commissioner of Internal Revenue.
    ``(c) Office of the Taxpayer Advocate.--
            ``(1) Establishment.--
                    ``(A) In general.--There is established in the 
                Internal Revenue Service an office to be known as the 
                `Office of the Taxpayer Advocate'.
                    ``(B) National taxpayer advocate.--
                            ``(i) In general.--The Office of the 
                        Taxpayer Advocate shall be under the 
                        supervision and direction of an official to be 
                        known as the `National Taxpayer Advocate'. The 
                        National Taxpayer Advocate shall report 
                        directly to the Commissioner of Internal 
                        Revenue and shall be entitled to compensation 
                        at the same rate as the highest level official 
                        reporting directly to the Commissioner of 
                        Internal Revenue.
                            ``(ii) Appointment.--The National Taxpayer 
                        Advocate shall be appointed by the Secretary of 
                        the Treasury from among the 3 individuals 
                        nominated by the Oversight Board under section 
                        7802(d)(3).
                            ``(iii) Restriction on employment.--An 
                        individual may be appointed as the National 
                        Taxpayer Advocate only if such individual was 
                        not an officer or employee of the Internal 
                        Revenue Service during the 2-year period ending 
                        with such appointment and such individual 
                        agrees not to accept any employment with the 
                        Internal Revenue Service for at least 5 years 
                        after ceasing to be the National Taxpayer 
                        Advocate.
            ``(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, the National 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 Office 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, the National 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 Office 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 
                                Office of 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 problems 
                                encountered 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 (I), 
                                (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) identify areas of the tax 
                                law that impose significant compliance 
                                burdens on taxpayers or the Internal 
                                Revenue Service, including specific 
                                recommendations for remedying these 
                                problems,
                                    ``(X) identify the 10 most 
                                litigated issues for each category of 
                                taxpayers, including recommendations 
                                for mitigating such disputes, and
                                    ``(XI) include such other 
                                information as the National Taxpayer 
                                Advocate may deem advisable.
                            ``(iii) Report to be submitted directly.--
                        Each report required under this subparagraph 
                        shall be provided directly to the committees 
                        described in clause (i) without any prior 
                        review or comment from the Commissioner, the 
                        Secretary of the Treasury, the Oversight Board, 
                        any other officer or employee of the Department 
                        of the Treasury, or the Office of Management 
                        and Budget.
                            ``(iv) Coordination with report of treasury 
                        inspector general for tax administration.--To 
                        the extent that information required to be 
                        reported under clause (ii) is also required to 
                        be reported under paragraph (1) or (2) of 
                        subsection (d) by the Treasury Inspector 
                        General for Tax Administration, the National 
                        Taxpayer Advocate shall not contain such 
                        information in the report submitted under such 
                        clause.
                    ``(C) Other responsibilities.--The National 
                Taxpayer Advocate shall--
                            ``(i) monitor the coverage and geographic 
                        allocation of local offices of taxpayer 
                        advocates,
                            ``(ii) develop guidance to be distributed 
                        to all Internal Revenue Service officers and 
                        employees outlining the criteria for referral 
                        of taxpayer inquiries to local offices of 
                        taxpayer advocates,
                            ``(iii) ensure that the local telephone 
                        number for each local office of the taxpayer 
                        advocate is published and available to 
                        taxpayers served by the office, and
                            ``(iv) in conjunction with the 
                        Commissioner, develop career paths for local 
                        taxpayer advocates choosing to make a career in 
                        the Office of the Taxpayer Advocate.
                    ``(D) Personnel actions.--
                            ``(i) In general.--The National Taxpayer 
                        Advocate shall have the responsibility and 
                        authority to--
                                    ``(I) appoint at least 1 local 
                                taxpayer advocate for each State,
                                    ``(II) evaluate and take personnel 
                                actions (including dismissal) with 
                                respect to any employee of any local 
                                office of a taxpayer advocate described 
                                in subclause (I), and
                                    ``(III) appoint a counsel in the 
                                Office of the Taxpayer Advocate to 
                                report directly to the National 
                                Taxpayer Advocate.
                            ``(ii) Consultation.--The National Taxpayer 
                        Advocate may consult with the appropriate 
                        supervisory personnel of the Internal Revenue 
                        Service in carrying out the National Taxpayer 
                        Advocate's responsibilities under this 
                        subparagraph.
            ``(3) Responsibilities of commissioner.--The Commissioner 
        shall establish procedures requiring a formal response to all 
        recommendations submitted to the Commissioner by the National 
        Taxpayer Advocate within 3 months after submission to the 
        Commissioner.
            ``(4) Operation of local offices.--
                    ``(A) In general.--Each local taxpayer advocate--
                            ``(i) shall report to the National Taxpayer 
                        Advocate,
                            ``(ii) may consult with the appropriate 
                        supervisory personnel of the Internal Revenue 
                        Service regarding the daily operation of the 
                        local office of the taxpayer advocate,
                            ``(iii) shall, at the initial meeting with 
                        any taxpayer seeking the assistance of a local 
                        office of the taxpayer advocate, notify such 
                        taxpayer that the office operates independently 
                        of any other Internal Revenue Service office 
                        and reports directly to Congress through the 
                        National Taxpayer Advocate, and
                            ``(iv) may, at the taxpayer advocate's 
                        discretion, not disclose to the Internal 
                        Revenue Service contact with, or information 
                        provided by, such taxpayer.
                    ``(B) Maintenance of independent communications.--
                Each local office of the taxpayer advocate shall 
                maintain a separate phone, facsimile, and other 
                electronic communication access, and a separate post 
                office address.
    ``(d) Additional Duties of the Treasury Inspector General for Tax 
Administration.--
            ``(1) Annual reporting.--The Treasury Inspector General for 
        Tax Administration shall include in one of the semiannual 
        reports under section 5 of the Inspector General Act of 1978--
                    ``(A) an evaluation of the compliance of the 
                Internal Revenue Service with--
                            ``(i) restrictions under section 1204 of 
                        the Internal Revenue Service Restructuring and 
                        Reform Act of 1998 on the use of enforcement 
                        statistics to evaluate Internal Revenue Service 
                        employees,
                            ``(ii) restrictions under section 7521 on 
                        directly contacting taxpayers who have 
                        indicated that they prefer their 
                        representatives be contacted,
                            ``(iii) required procedures under section 
                        6320 for approval of a notice of a lien,
                            ``(iv) required procedures under subchapter 
                        D of chapter 64 for seizure of property for 
                        collection of taxes, including required 
                        procedures under section 6330 for approval of a 
                        levy or notice of levy, and
                            ``(v) restrictions under section 3708 of 
                        the Internal Revenue Service Restructuring and 
                        Reform Act of 1998 on designation of taxpayers,
                    ``(B) a review and a certification of whether or 
                not the Secretary is complying with the requirements of 
                section 6103(e)(8) to disclose information to an 
                individual filing a joint return on collection activity 
                involving the other individual filing the return,
                    ``(C) information regarding extensions of the 
                statute of limitations for assessment and collection of 
                tax under section 6501 and the provision of notice to 
                taxpayers regarding requests for such extension,
                    ``(D) an evaluation of the adequacy and security of 
                the technology of the Internal Revenue Service,
                    ``(E) any termination or mitigation under section 
                1203 of the Internal Revenue Service Restructuring and 
                Reform Act of 1998, and
                    ``(F) information regarding improper denial of 
                requests for information from the Internal Revenue 
                Service identified under paragraph (3)(A).
            ``(2) Semiannual reports.--
                    ``(A) In general.--The Treasury Inspector General 
                for Tax Administration shall include in each semiannual 
                report under section 5 of the Inspector General Act of 
                1978--
                            ``(i) the number of taxpayer complaints 
                        during the reporting period;
                            ``(ii) the number of employee misconduct 
                        and taxpayer abuse allegations received by the 
                        Internal Revenue Service or the Inspector 
                        General during the period from taxpayers, 
                        Internal Revenue Service employees, and other 
                        sources;
                            ``(iii) a summary of the status of such 
                        complaints and allegations; and
                            ``(iv) a summary of the disposition of such 
                        complaints and allegations, including the 
                        outcome of any Department of Justice action and 
                        any monies paid as a settlement of such 
                        complaints and allegations.
                    ``(B) Clauses (iii) and (iv) of subparagraph (A) 
                shall only apply to complaints and allegations of 
                serious employee misconduct.
            ``(3) Other responsibilities.--The Treasury Inspector 
        General for Tax Administration shall--
                    ``(A) conduct periodic audits of a statistically 
                valid sample of the total number of determinations made 
                by the Internal Revenue Service to deny written 
                requests to disclose information to taxpayers on the 
                basis of section 6103 of this title or section 
                552(b)(7) of title 5, United States Code, and
                    ``(B) establish and maintain a toll-free telephone 
                number for taxpayers to use to confidentially register 
                complaints of misconduct by Internal Revenue Service 
                employees and incorporate the telephone number in the 
                statement required by section 6227 of the Omnibus 
                Taxpayer Bill of Rights (Internal Revenue Service 
                Publication No. 1).''.
    (b) Notice of Right To Contact Office Included in Notice of 
Deficiency.--Section 6212(a) (relating to notice of deficiency) is 
amended by adding at the end the following: ``Such notice shall include 
a notice to the taxpayer of the taxpayer's right to contact a local 
office of the taxpayer advocate and the location and phone number of 
the appropriate office.''.
    (c) Expansion of Authority To Issue Taxpayer Assistance Orders.--
Section 7811(a) (relating to taxpayer assistance orders) is amended to 
read as follows:
    ``(a) Authority To Issue.--
            ``(1) In general.--Upon application filed by a taxpayer 
        with the Office of the Taxpayer Advocate (in such form, manner, 
        and at such time as the Secretary shall by regulations 
        prescribe), the National Taxpayer Advocate may issue a Taxpayer 
        Assistance Order if, in the determination of the National 
        Taxpayer Advocate--
                    ``(A) the taxpayer is suffering or about to suffer 
                a significant hardship as a result of the manner in 
                which the internal revenue laws are being administered 
                by the Secretary, or
                    ``(B) the issuance of a Taxpayer Assistance Order 
                is otherwise appropriate considering the circumstances 
                of the taxpayer.
            ``(2) Determination of hardship.--For purposes of paragraph 
        (1), a significant hardship shall include--
                    ``(A) an immediate threat of adverse action,
                    ``(B) a delay of more than 30 days in resolving 
                taxpayer account problems,
                    ``(C) the incurring by the taxpayer of significant 
                costs (including fees for professional representation) 
                if relief is not granted, or
                    ``(D) irreparable injury to, or a long-term adverse 
                impact on, the taxpayer if relief is not granted.
            ``(3) Standard where administrative guidance not 
        followed.--In cases where any Internal Revenue Service employee 
        is not following applicable published administrative guidance 
        (including the Internal Revenue Manual), the National Taxpayer 
        Advocate shall construe the factors taken into account in 
        determining whether to issue a taxpayer assistance order in the 
        manner most favorable to the taxpayer.''.
    (d) Conforming Amendments Relating to National Taxpayer Advocate.--
            (1) The following provisions are each amended by striking 
        ``Taxpayer Advocate'' each place it appears and inserting 
        ``National Taxpayer Advocate'':
                    (A) Section 6323(j)(1)(D) (relating to withdrawal 
                of notice in certain circumstances).
                    (B) Section 6343(d)(2)(D) (relating to return of 
                property in certain cases).
                    (C) Section 7811(b)(2)(D) (relating to terms of a 
                Taxpayer Assistance Order).
                    (D) Section 7811(c) (relating to authority to 
                modify or rescind).
                    (E) Section 7811(d)(2) (relating to suspension of 
                running of period of limitation).
                    (F) Section 7811(e) (relating to independent action 
                of Taxpayer Advocate).
                    (G) Section 7811(f) (relating to Taxpayer 
                Advocate).
            (2) Section 7811(d)(1) (relating to suspension of running 
        of period of limitation) is amended by striking ``Taxpayer 
        Advocate's'' and inserting ``National Taxpayer Advocate's''.
            (3) The headings of subsections (e) and (f) of section 7811 
        are each amended by striking ``Taxpayer Advocate'' and 
        inserting ``National Taxpayer Advocate''.
    (e) Additional Conforming Amendments.--
            (1) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7803 and 
        inserting the following new item:

                              ``Sec. 7803. Commissioner of Internal 
                                        Revenue; other officials.''.
            (2) Section 5109 of title 5, United States Code, is amended 
        by striking subsection (b) and redesignating subsection (c) as 
        subsection (b).
            (3) Section 7611(f)(1) (relating to restrictions on church 
        tax inquiries and examinations) is amended by striking 
        ``Assistant Commissioner for Employee Plans and Exempt 
        Organizations of the Internal Revenue Service'' and inserting 
        ``Secretary''.
    (f) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Chief counsel.--Section 7803(b)(3) of the Internal 
        Revenue Code of 1986, as added by this section, shall take 
        effect on the date that is 90 days after the date of the 
        enactment of this Act.
            (3) National taxpayer advocate.--During the period before 
        the appointment of the Internal Revenue Service Oversight Board 
        and notwithstanding section 7803(c)(1)(B)(ii) of the Internal 
        Revenue Code of 1986, as added by this section, the National 
        Taxpayer Advocate shall be appointed by the Secretary of the 
        Treasury from among individuals who have a background in 
        customer service as well as tax law and who have experience in 
        representing individual taxpayers. The Commissioner of Internal 
        Revenue shall submit to the Secretary a list of nominations for 
        consideration under the preceding sentence.
            (4) Current officers.--
                    (A) In the case of an individual serving as 
                Commissioner of Internal Revenue on the date of the 
                enactment of this Act who was appointed to such 
                position before such date, the 5-year term required by 
                section 7803(a)(1) of the Internal Revenue Code of 
                1986, as added by this section, shall begin as of the 
                date of such appointment.
                    (B) Clauses (ii) and (iii) of section 7803(c)(1)(B) 
                of such Code, as added by this section, shall not apply 
                to the individual serving as Taxpayer Advocate on the 
                date of the enactment of this Act.

SEC. 1103. TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION.

    (a) Establishment of 2 Inspectors General in the Department of the 
Treasury.--Section 2 of the Inspector General Act of 1978 (5 U.S.C. 
App.) is amended by striking the matter following paragraph (3) and 
inserting the following:
``there is established--
                    ``(A) in each of such establishments an office of 
                Inspector General, subject to subparagraph (B); and
                    ``(B) in the establishment of the Department of the 
                Treasury--
                            ``(i) an Office of Inspector General of the 
                        Department of the Treasury; and
                            ``(ii) an Office of Treasury Inspector 
                        General for Tax Administration.''.
    (b) Amendments to Section 8D of the Inspector General Act of 
1978.--
            (1) Limitation on authority of inspector general.--Section 
        8D(a) of the Inspector General Act of 1978 (5 U.S.C. App.) is 
        amended by adding at the end the following:
            ``(4) The Secretary of the Treasury may not exercise any 
        power under paragraph (1) or (2) with respect to the Treasury 
        Inspector General for Tax Administration.''.
            (2) Duties of inspector general of the department of the 
        treasury; relationship to the treasury inspector general for 
        tax administration.--Section 8D(b) of such Act is amended--
                    (A) by inserting ``(1)'' after ``(b)''; and
                    (B) by adding at the end the following:
            ``(2) The Inspector General of the Department of the 
        Treasury shall exercise all duties and responsibilities of an 
        Inspector General for the Department of the Treasury other than 
        the duties and responsibilities exercised by the Treasury 
        Inspector General for Tax Administration.
            ``(3) The Secretary of the Treasury shall establish 
        procedures under which the Inspector General of the Department 
        of the Treasury and the Treasury Inspector General for Tax 
        Administration will--
                    ``(A) determine how audits and investigations are 
                allocated in cases of overlapping jurisdiction, and
                    ``(B) provide for coordination, cooperation, and 
                efficiency in the conduct of such audits and 
                investigations.''.
            (3) Access to returns and return information.--Section 
        8D(e) of such Act is amended--
                    (A) in paragraph (1), by striking ``Inspector 
                General'' and inserting ``Treasury Inspector General 
                for Tax Administration'';
                    (B) in paragraph (2), by striking all beginning 
                with ``(2)'' through subparagraph (B);
                    (C)(i) by redesignating subparagraph (C) of 
                paragraph (2) as paragraph (2) of such subsection; and
                    (ii) in such redesignated paragraph (2), by 
                striking ``Inspector General'' and inserting ``Treasury 
                Inspector General for Tax Administration''; and
                    (D)(i) by redesignating subparagraph (D) of such 
                paragraph as paragraph (3) of such subsection; and
                    (ii) in such redesignated paragraph (3), by 
                striking ``Inspector General'' and inserting ``Treasury 
                Inspector General for Tax Administration''.
            (4) Effect on certain final decisions of the secretary.--
        Section 8D(f) of such Act is amended by striking ``Inspector 
        General'' and inserting ``Inspector General of the Department 
        of the Treasury or the Treasury Inspector General for Tax 
        Administration''.
            (5) Repeal of limitation on reports to the attorney 
        general.--Section 8D of such Act is amended by striking 
        subsection (g).
            (6) Transmission of reports.--Section 8D(h) of such Act is 
        amended--
                    (A) by striking ``(h)'' and inserting ``(g)(1)'';
                    (B) by striking ``and the Committees on Government 
                Operations and Ways and Means of the House of 
                Representatives'' and inserting ``and the Committees on 
                Government Reform and Oversight and Ways and Means of 
                the House of Representatives''; and
                    (C) by adding at the end the following:
    ``(2) Any report made by the Treasury Inspector General for Tax 
Administration that is required to be transmitted by the Secretary of 
the Treasury to the appropriate committees or subcommittees of Congress 
under section 5(d) shall also be transmitted, within the 7-day period 
specified under such subsection, to the Internal Revenue Service 
Oversight Board and the Commissioner of Internal Revenue.''.
            (7) Treasury inspector general for tax administration.--
        Section 8D of the Act is amended by adding at the end the 
        following:
    ``(h) The Treasury Inspector General for Tax Administration shall 
exercise all duties and responsibilities of an Inspector General of an 
establishment with respect to the Department of the Treasury and the 
Secretary of the Treasury on all matters relating to the Internal 
Revenue Service. The Treasury Inspector General for Tax Administration 
shall have sole authority under this Act to conduct an audit or 
investigation of the Internal Revenue Service Oversight Board and the 
Chief Counsel for the Internal Revenue Service.
    ``(i) In addition to the requirements of the first sentence of 
section 3(a), the Treasury Inspector General for Tax Administration 
should have experience in tax administration and demonstrated ability 
to lead a large and complex organization.
    ``(j) An individual appointed to the position of Treasury Inspector 
General for Tax Administration, the Assistant Inspector General for 
Auditing of the Office of the Treasury Inspector General for Tax 
Administration under section 3(d)(1), the Assistant Inspector General 
for Investigations of the Office of the Treasury Inspector General for 
Tax Administration under section 3(d)(2), or any position of Deputy 
Inspector General of the Office of the Treasury Inspector General for 
Tax Administration may not be an employee of the Internal Revenue 
Service--
            ``(1) during the 2-year period preceding the date of 
        appointment to such position; or
            ``(2) during the 5-year period following the date such 
        individual ends service in such position.
    ``(k)(1) In addition to the duties and responsibilities exercised 
by an inspector general of an establishment, the Treasury Inspector 
General for Tax Administration--
            ``(A) shall have the duty to enforce criminal provisions 
        under section 7608(b) of the Internal Revenue Code of 1986;
            ``(B) in addition to the functions authorized under section 
        7608(b)(2) of such Code, may carry firearms;
            ``(C) shall be responsible for protecting the Internal 
        Revenue Service against external attempts to corrupt or 
        threaten employees of the Internal Revenue Service; and
            ``(D) may designate any employee in the Office of the 
        Treasury Inspector General for Tax Administration to enforce 
        such laws and perform such functions referred to under 
        subparagraphs (A), (B), and (C).
    ``(2)(A) In performing a law enforcement function under paragraph 
(1), the Treasury Inspector General for Tax Administration shall report 
any reasonable grounds to believe there has been a violation of Federal 
criminal law to the Attorney General at an appropriate time as 
determined by the Treasury Inspector General for Tax Administration, 
notwithstanding section 4(d).
    ``(B) In the administration of section 5(d) and subsection (g)(2) 
of this section, the Secretary of the Treasury may transmit the 
required report with respect to the Treasury Inspector General for Tax 
Administration at an appropriate time as determined by the Secretary, 
if the problem, abuse, or deficiency relates to--
            ``(i) the performance of a law enforcement function under 
        paragraph (1); and
            ``(ii) sensitive information concerning matters under 
        subsection (a)(1)(A) through (F).
    ``(3) Nothing in this subsection shall be construed to affect the 
authority of any other person to carry out or enforce any provision 
specified in paragraph (1).
    ``(l)(1) The Treasury Inspector General for Tax Administration 
shall timely conduct an audit or investigation relating to the Internal 
Revenue Service upon the written request of the Commissioner of 
Internal Revenue or the Internal Revenue Service Oversight Board.
    ``(2)(A) Any final report of an audit conducted by the Treasury 
Inspector General for Tax Administration shall be timely submitted by 
the Inspector General to the Commissioner of Internal Revenue and the 
Internal Revenue Service Oversight Board.
    ``(B) The Treasury Inspector General for Tax Administration shall 
periodically submit to the Commissioner and Board a list of 
investigations for which a final report has been completed by the 
Inspector General and shall provide a copy of any such report upon 
request of the Commissioner or Board.
    ``(C) This paragraph applies regardless of whether the applicable 
audit or investigation is requested under paragraph (1).''.
    (c) Transfer of Functions.--
            (1) In general.--Section 9(a)(1) of the Inspector General 
        Act of 1978 (5 U.S.C. App.) is amended in subparagraph (L)--
                    (A) by inserting ``(i)'' after ``(L)'';
                    (B) by inserting ``and'' after the semicolon; and
                    (C) by adding at the end the following:
                            ``(ii) of the Treasury Inspector General 
                        for Tax Administration, effective 180 days 
                        after the date of the enactment of the Internal 
                        Revenue Service Restructuring and Reform Act of 
                        1998, the Office of Chief Inspector of the 
                        Internal Revenue Service;''.
            (2) Termination of office of chief inspector.--Effective 
        upon the transfer of functions under the amendment made by 
        paragraph (1), the Office of Chief Inspector of the Internal 
        Revenue Service is terminated.
            (3) Retention of certain internal audit personnel.--In 
        making the transfer under the amendment made by paragraph (1), 
        the Commissioner of Internal Revenue shall designate and retain 
        an appropriate number (not in excess of 300) of internal audit 
        full-time equivalent employee positions necessary for 
        management relating to the Internal Revenue Service.
            (4) Additional personnel transfers.--Effective 180 days 
        after the date of the enactment of this Act, the Secretary of 
        the Treasury shall transfer 21 full-time equivalent positions 
        from the Office of the Inspector General of the Department of 
        the Treasury to the Office of the Treasury Inspector General 
        for Tax Administration.
    (d) Audits and Reports of Agency Financial Statements.--Subject to 
section 3521(g) of title 31, United States Code--
            (1) the Inspector General of the Department of the Treasury 
        shall, subject to paragraph (2)--
                    (A) audit each financial statement in accordance 
                with section 3521(e) of such title; and
                    (B) prepare and submit each report required under 
                section 3521(f) of such title; and
            (2) the Treasury Inspector General for Tax Administration 
        shall--
                    (A) audit that portion of each financial statement 
                referred to under paragraph (1)(A) that relates to 
                custodial and administrative accounts of the Internal 
                Revenue Service; and
                    (B) prepare that portion of each report referred to 
                under paragraph (1)(B) that relates to custodial and 
                administrative accounts of the Internal Revenue 
                Service.
    (e) Technical and Conforming Amendments.--
            (1) Transfer of functions.--Section 8D(b) of the Inspector 
        General Act of 1978 (5 U.S.C. App.) is amended by striking 
        ``and the internal audits and internal investigations performed 
        by the Office of Assistant Commissioner (Inspection) of the 
        Internal Revenue Service''.
            (2) Amendments relating to references to the inspector 
        general of the department of the treasury.--
                    (A) Limitation on authority.--Section 8D(a) of the 
                Inspector General Act of 1978 (5 U.S.C. App.) is 
                amended--
                            (i) in the first sentence of paragraph (1), 
                        by inserting ``of the Department of the 
                        Treasury'' after ``Inspector General'';
                            (ii) in paragraph (2), by inserting ``of 
                        the Department of the Treasury'' after 
                        ``prohibit the Inspector General''; and
                            (iii) in paragraph (3)--
                                    (I) in the first sentence, by 
                                inserting ``of the Department of the 
                                Treasury'' after ``notify the Inspector 
                                General''; and
                                    (II) in the second sentence, by 
                                inserting ``of the Department of the 
                                Treasury'' after ``notice, the 
                                Inspector General''.
                    (B) Duties.--Section 8D(b) of such Act is amended 
                in the second sentence by inserting ``of the Department 
                of the Treasury'' after ``Inspector General''.
                    (C) Audits and investigations.--Section 8D (c) and 
                (d) of such Act are amended by inserting ``of the 
                Department of the Treasury'' after ``Inspector 
                General'' each place it appears.
            (3) References.--The second section 8G of the Inspector 
        General Act of 1978 (relating to rule of construction of 
        special provisions) is amended--
                    (A) by striking ``Sec. 8G'' and inserting ``Sec. 
                8H'';
                    (B) by striking ``or 8E'' and inserting ``8E or 
                8F''; and
                    (C) by striking ``section 8F(a)'' and inserting 
                ``section 8G(a)''.
            (4) Amendment to internal revenue code of 1986.--Section 
        7608(b)(1) of the Internal Revenue Code of 1986 is amended by 
        striking ``or of the Internal Security Division''.

SEC. 1104. OTHER PERSONNEL.

    (a) In General.--Section 7804 (relating to the effect of 
reorganization plans) is amended to read as follows:

``SEC. 7804. OTHER PERSONNEL.

    ``(a) Appointment and Supervision.--Unless otherwise prescribed by 
the Secretary, the Commissioner of Internal Revenue is authorized to 
employ such number of persons as the Commissioner deems proper for the 
administration and enforcement of the internal revenue laws, and the 
Commissioner shall issue all necessary directions, instructions, 
orders, and rules applicable to such persons.
    ``(b) Posts of Duty of Employees in Field Service or Traveling.--
Unless otherwise prescribed by the Secretary--
            ``(1) Designation of post of duty.--The Commissioner shall 
        determine and designate the posts of duty of all such persons 
        engaged in field work or traveling on official business outside 
        of the District of Columbia.
            ``(2) Detail of personnel from field service.--The 
        Commissioner may order any such person engaged in field work to 
        duty in the District of Columbia, for such periods as the 
        Commissioner may prescribe, and to any designated post of duty 
        outside the District of Columbia upon the completion of such 
        duty.
    ``(c) Delinquent Internal Revenue Officers and Employees.--If any 
officer or employee of the Treasury Department acting in connection 
with the internal revenue laws fails to account for and pay over any 
amount of money or property collected or received by him in connection 
with the internal revenue laws, the Secretary shall issue notice and 
demand to such officer or employee for payment of the amount which he 
failed to account for and pay over, and, upon failure to pay the amount 
demanded within the time specified in such notice, the amount so 
demanded shall be deemed imposed upon such officer or employee and 
assessed upon the date of such notice and demand, and the provisions of 
chapter 64 and all other provisions of law relating to the collection 
of assessed taxes shall be applicable in respect of such amount.''.
    (b) Conforming Amendments.--
            (1) Subsection (b) of section 6344 is amended by striking 
        ``section 7803(d)'' and inserting ``section 7804(c)''.
            (2) The table of sections for subchapter A of chapter 80 is 
        amended by striking the item relating to section 7804 and 
        inserting the following new item:

                              ``Sec. 7804. Other personnel.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 1105. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
              AUDITS AND OTHER INVESTIGATIONS.

    (a) In General.--Part I of subchapter A of chapter 75 (relating to 
crimes, other offenses, and forfeitures) is amended by adding after 
section 7216 the following new section:

``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER TAXPAYER 
              AUDITS AND OTHER INVESTIGATIONS.

    ``(a) Prohibition.--It shall be unlawful for any applicable person 
to request, directly or indirectly, any officer or employee of the 
Internal Revenue Service to conduct or terminate an audit or other 
investigation of any particular taxpayer with respect to the tax 
liability of such taxpayer.
    ``(b) Reporting Requirement.--Any officer or employee of the 
Internal Revenue Service receiving any request prohibited by subsection 
(a) shall report the receipt of such request to the Treasury Inspector 
General for Tax Administration.
    ``(c) Exceptions.--Subsection (a) shall not apply to any written 
request made--
            ``(1) to an applicable person by or on behalf of the 
        taxpayer and forwarded by such applicable person to the 
        Internal Revenue Service,
            ``(2) by an applicable person for disclosure of return or 
        return information under section 6103 if such request is made 
        in accordance with the requirements of such section, or
            ``(3) by the Secretary of the Treasury as a consequence of 
        the implementation of a change in tax policy.
    ``(d) Penalty.--Any person who willfully violates subsection (a) or 
fails to report under subsection (b) shall be punished upon conviction 
by a fine in any amount not exceeding $5,000, or imprisonment of not 
more than 5 years, or both, together with the costs of prosecution.
    ``(e) Applicable Person.--For purposes of this section, the term 
`applicable person' means--
            ``(1) the President, the Vice President, any employee of 
        the executive office of the President, and any employee of the 
        executive office of the Vice President, and
            ``(2) any individual (other than the Attorney General of 
        the United States) serving in a position specified in section 
        5312 of title 5, United States Code.''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter A of chapter 75 is amended by adding after the item relating 
to section 7216 the following new item:

                              ``Sec. 7217. Prohibition on executive 
                                        branch influence over taxpayer 
                                        audits and other 
                                        investigations.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made after the date of the enactment of this Act.

SEC. 1106. REVIEW OF MILWAUKEE AND WAUKESHA INTERNAL REVENUE SERVICE 
              OFFICES.

    (a) In General.--
            (1) Review.--The Commissioner of Internal Revenue shall 
        appoint an independent expert in employment and personnel 
        matters to conduct a review of the investigation conducted by 
        the task force, established by the Internal Revenue Service and 
        initiated in January 1998, of the equal employment opportunity 
        process of the Internal Revenue Service offices located in the 
        area of Milwaukee and Waukesha, Wisconsin.
            (2) Content.--The review conducted under paragraph (1) 
        shall include--
                    (A) a determination of the accuracy and validity of 
                such investigation; and
                    (B) if determined necessary by the expert, a 
                further investigation of such offices relating to--
                            (i) the equal employment opportunity 
                        process; and
                            (ii) any alleged discriminatory employment-
                        related actions, including any alleged 
                        violations of Federal law.
    (b) Report.--Not later than July 1, 1999, the independent expert 
shall report on the review conducted under subsection (a) (and any 
recommendations for action) to Congress and the Commissioner of 
Internal Revenue.

                  Subtitle C--Personnel Flexibilities

SEC. 1201. IMPROVEMENTS IN PERSONNEL FLEXIBILITIES.

    (a) In General.--Part III of title 5, United States Code, is 
amended by adding at the end the following new subpart:

                       ``Subpart I--Miscellaneous

``CHAPTER 95--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                SERVICE

``Sec.
``9501. Internal Revenue Service personnel flexibilities.
``9502. Pay authority for critical positions.
``9503. Streamlined critical pay authority.
``9504. Recruitment, retention, and relocation incentives.
``9505. Performance awards for senior executives.
``9506. Limited appointments to career reserved Senior Executive 
                            Service positions.
``9507. Streamlined demonstration project authority.
``9508. General workforce performance management system.
``9509. General workforce classification and pay.
``9510. General workforce staffing.
``Sec. 9501. Internal Revenue Service personnel flexibilities
    ``(a) Any flexibilities provided by sections 9502 through 9510 of 
this chapter shall be exercised in a manner consistent with--
            ``(1) chapter 23 (relating to merit system principles and 
        prohibited personnel practices);
            ``(2) provisions relating to preference eligibles;
            ``(3) except as otherwise specifically provided, section 
        5307 (relating to the aggregate limitation on pay);
            ``(4) except as otherwise specifically provided, chapter 71 
        (relating to labor-management relations); and
            ``(5) subject to subsections (b) and (c) of section 1104, 
        as though such authorities were delegated to the Secretary of 
        the Treasury under section 1104(a)(2).
    ``(b) The Secretary of the Treasury shall provide the Office of 
Personnel Management with any information that Office requires in 
carrying out its responsibilities under this section.
    ``(c) Employees within a unit to which a labor organization is 
accorded exclusive recognition under chapter 71 shall not be subject to 
any flexibility provided by sections 9507 through 9510 of this chapter 
unless the exclusive representative and the Internal Revenue Service 
have entered into a written agreement which specifically provides for 
the exercise of that flexibility. Such written agreement may be imposed 
by the Federal Services Impasses Panel under section 7119.
``Sec. 9502. Pay authority for critical positions
    ``(a) When the Secretary of the Treasury seeks a grant of authority 
under section 5377 for critical pay for 1 or more positions at the 
Internal Revenue Service, the Office of Management and Budget may fix 
the rate of basic pay, notwithstanding sections 5377(d)(2) and 5307, at 
any rate up to the salary set in accordance with section 104 of title 
3.
    ``(b) Notwithstanding section 5307, no allowance, differential, 
bonus, award, or similar cash payment may be paid to any employee 
receiving critical pay at a rate fixed under subsection (a), in any 
calendar year if, or to the extent that, the employee's total annual 
compensation will exceed the maximum amount of total annual 
compensation payable at the salary set in accordance with section 104 
of title 3.
``Sec. 9503. Streamlined critical pay authority
    ``(a) Notwithstanding section 9502, and without regard to the 
provisions of this title governing appointments in the competitive 
service or the Senior Executive Service and chapters 51 and 53 
(relating to classification and pay rates), the Secretary of the 
Treasury may, for a period of 10 years after the date of enactment of 
this section, establish, fix the compensation of, and appoint 
individuals to, designated critical administrative, technical, and 
professional positions needed to carry out the functions of the 
Internal Revenue Service, if--
            ``(1) the positions--
                    ``(A) require expertise of an extremely high level 
                in an administrative, technical, or professional field; 
                and
                    ``(B) are critical to the Internal Revenue 
                Service's successful accomplishment of an important 
                mission;
            ``(2) exercise of the authority is necessary to recruit or 
        retain an individual exceptionally well qualified for the 
        position;
            ``(3) the number of such positions does not exceed 40 at 
        any one time;
            ``(4) designation of such positions are approved by the 
        Secretary of the Treasury;
            ``(5) the terms of such appointments are limited to no more 
        than 4 years;
            ``(6) appointees to such positions were not Internal 
        Revenue Service employees immediately prior to such 
        appointment;
            ``(7) total annual compensation for any appointee to such 
        positions does not exceed the highest total annual compensation 
        payable at the rate determined under section 104 of title 3; 
        and
            ``(8) all such positions are excluded from the collective 
        bargaining unit.
    ``(b) Individuals appointed under this section shall not be 
considered to be employees for purposes of subchapter II of chapter 75.
``Sec. 9504. Recruitment, retention, and relocation incentives
    ``For a period of 10 years after the date of enactment of this 
section and subject to approval by the Office of Personnel Management, 
the Secretary of the Treasury may provide for variations from sections 
5753 and 5754 governing payment of recruitment, relocation, and 
retention incentives.
``Sec. 9505. Performance awards for senior executives
    ``(a) For a period of 10 years after the date of enactment of this 
section, Internal Revenue Service senior executives who have program 
management responsibility over significant functions of the Internal 
Revenue Service may be paid a performance bonus without regard to the 
limitation in section 5384(b)(2) if the Secretary of the Treasury finds 
such award warranted based on the executive's performance.
    ``(b) In evaluating an executive's performance for purposes of an 
award under this section, the Secretary of the Treasury shall take into 
account the executive's contributions toward the successful 
accomplishment of goals and objectives established under the Government 
Performance and Results Act of 1993, division E of the Clinger-Cohen 
Act of 1996 (Public Law 104-106; 110 Stat. 679), Revenue Procedure 64-
22 (as in effect on July 30, 1997), taxpayer service surveys, and other 
performance metrics or plans established in consultation with the 
Internal Revenue Service Oversight Board.
    ``(c) Any award in excess of 20 percent of an executive's rate of 
basic pay shall be approved by the Secretary of the Treasury.
    ``(d) Notwithstanding section 5384(b)(3), the Secretary of the 
Treasury shall determine the aggregate amount of performance awards 
available to be paid during any fiscal year under this section and 
section 5384 to career senior executives in the Internal Revenue 
Service. Such amount may not exceed an amount equal to 5 percent of the 
aggregate amount of basic pay paid to career senior executives in the 
Internal Revenue Service during the preceding fiscal year. The Internal 
Revenue Service shall not be included in the determination under 
section 5384(b)(3) of the aggregate amount of performance awards 
payable to career senior executives in the Department of the Treasury 
other than the Internal Revenue Service.
    ``(e) Notwithstanding section 5307, a performance bonus award may 
not be paid to an executive in a calendar year if, or to the extent 
that, the executive's total annual compensation will exceed the maximum 
amount of total annual compensation payable at the rate determined 
under section 104 of title 3.
``Sec. 9506. Limited appointments to career reserved Senior Executive 
              Service positions
    ``(a) In the application of section 3132, a `career reserved 
position' in the Internal Revenue Service means a position designated 
under section 3132(b) which may be filled only by--
            ``(1) a career appointee, or
            ``(2) a limited emergency appointee or a limited term 
        appointee--
                    ``(A) who, immediately upon entering the career 
                reserved position, was serving under a career or 
                career-conditional appointment outside the Senior 
                Executive Service; or
                    ``(B) whose limited emergency or limited term 
                appointment is approved in advance by the Office of 
                Personnel Management.
    ``(b)(1) The number of positions described under subsection (a) 
which are filled by an appointee as described under paragraph (2) of 
such subsection may not exceed 10 percent of the total number of Senior 
Executive Service positions in the Internal Revenue Service.
    ``(2) Notwithstanding section 3132--
            ``(A) the term of an appointee described under subsection 
        (a)(2) may be for any period not to exceed 3 years; and
            ``(B) such an appointee may serve--
                    ``(i) 2 such terms; or
                    ``(ii) 2 such terms in addition to any unexpired 
                term applicable at the time of appointment.
``Sec. 9507. Streamlined demonstration project authority
    ``(a) The exercise of any of the flexibilities under sections 9502 
through 9510 shall not affect the authority of the Secretary of the 
Treasury to implement for the Internal Revenue Service a demonstration 
project subject to chapter 47, as provided in subsection (b).
    ``(b) In applying section 4703 to a demonstration project described 
in section 4701(a)(4) which involves the Internal Revenue Service--
            ``(1) section 4703(b)(1) shall be deemed to read as 
        follows:
            ```(1) develop a plan for such project which describes its 
        purpose, the employees to be covered, the project itself, its 
        anticipated outcomes, and the method of evaluating the 
        project;';
            ``(2) section 4703(b)(3) shall not apply;
            ``(3) the 180-day notification period in section 4703(b)(4) 
        shall be deemed to be a notification period of 30 days;
            ``(4) section 4703(b)(6) shall be deemed to read as 
        follows:
            ```(6) provides each House of Congress with the final 
        version of the plan.';
            ``(5) section 4703(c)(1) shall be deemed to read as 
        follows:
            ```(1) subchapter V of chapter 63 or subpart G of part III 
        of this title;';
            ``(6) the requirements of paragraphs (1)(A) and (2) of 
        section 4703(d) shall not apply; and
            ``(7) notwithstanding section 4703(d)(1)(B), based on an 
        evaluation as provided in section 4703(h), the Office of 
        Personnel Management and the Secretary of the Treasury, except 
        as otherwise provided by this subsection, may waive the 
        termination date of a demonstration project under section 
        4703(d).
    ``(c) At least 90 days before waiving the termination date under 
subsection (b)(7), the Office of Personnel Management shall publish in 
the Federal Register a notice of its intention to waive the termination 
date and shall inform in writing both Houses of Congress of its 
intention.
``Sec. 9508. General workforce performance management system
    ``(a) In lieu of a performance appraisal system established under 
section 4302, the Secretary of the Treasury may establish for all or 
part of the Internal Revenue Service a performance management system 
that--
            ``(1) maintains individual accountability by--
                    ``(A) establishing 1 or more retention standards 
                for each employee related to the work of the employee 
                and expressed in terms of individual performance, and 
                communicating such retention standards to employees;
                    ``(B) making periodic determinations of whether 
                each employee meets or does not meet the employee's 
                established retention standards; and
                    ``(C) taking actions, in accordance with applicable 
                laws and regulations, with respect to any employee 
                whose performance does not meet established retention 
                standards, including denying any increases in basic 
                pay, promotions, and credit for performance under 
                section 3502, and taking 1 or more of the following 
                actions:
                            ``(i) Reassignment.
                            ``(ii) An action under chapter 43 or 
                        chapter 75 of this title.
                            ``(iii) Any other appropriate action to 
                        resolve the performance problem; and
            ``(2) except as provided under section 1204 of the Internal 
        Revenue Service Restructuring and Reform Act of 1998, 
        strengthens the system's effectiveness by--
                    ``(A) establishing goals or objectives for 
                individual, group, or organizational performance (or 
                any combination thereof), consistent with the Internal 
                Revenue Service's performance planning procedures, 
                including those established under the Government 
                Performance and Results Act of 1993, division E of the 
                Clinger-Cohen Act of 1996 (Public Law 104-106; 110 
                Stat. 679), Revenue Procedure 64-22 (as in effect on 
                July 30, 1997), and taxpayer service surveys, and 
                communicating such goals or objectives to employees;
                    ``(B) using such goals and objectives to make 
                performance distinctions among employees or groups of 
                employees; and
                    ``(C) using performance assessments as a basis for 
                granting employee awards, adjusting an employee's rate 
                of basic pay, and other appropriate personnel actions, 
                in accordance with applicable laws and regulations.
    ``(b)(1) For purposes of subsection (a)(2), the term `performance 
assessment' means a determination of whether or not retention standards 
established under subsection (a)(1)(A) are met, and any additional 
performance determination made on the basis of performance goals and 
objectives established under subsection (a)(2)(A).
    ``(2) For purposes of this title, the term `unacceptable 
performance' with respect to an employee of the Internal Revenue 
Service covered by a performance management system established under 
this section means performance of the employee which fails to meet a 
retention standard established under this section.
    ``(c)(1) The Secretary of the Treasury may establish an awards 
program designed to provide incentives for and recognition of 
organizational, group, and individual achievements by providing for 
granting awards to employees who, as individuals or members of a group, 
contribute to meeting the performance goals and objectives established 
under this chapter by such means as a superior individual or group 
accomplishment, a documented productivity gain, or sustained superior 
performance.
    ``(2) A cash award under subchapter I of chapter 45 may be granted 
to an employee of the Internal Revenue Service without the need for any 
approval under section 4502(b).
    ``(d)(1) In applying sections 4303(b)(1)(A) and 7513(b)(1) to 
employees of the Internal Revenue Service, `30 days' may be deemed to 
be `15 days'.
    ``(2) Notwithstanding the second sentence of section 5335(c), an 
employee of the Internal Revenue Service shall not have a right to 
appeal the denial of a periodic step increase under section 5335 to the 
Merit Systems Protection Board.
``Sec. 9509. General workforce classification and pay
    ``(a) For purposes of this section, the term `broad-banded system' 
means a system for grouping positions for pay, job evaluation, and 
other purposes that is different from the system established under 
chapter 51 and subchapter III of chapter 53 as a result of combining 
grades and related ranges of rates of pay in 1 or more occupational 
series.
    ``(b)(1)(A) The Secretary of the Treasury may, subject to criteria 
to be prescribed by the Office of Personnel Management, establish 1 or 
more broad-banded systems covering all or any portion of the Internal 
Revenue Service workforce.
    ``(B) With the approval of the Office of Personnel Management, a 
broad-banded system established under this section may either include 
or consist of positions that otherwise would be subject to subchapter 
IV of chapter 53 or section 5376.
    ``(2) The Office of Personnel Management may require the Secretary 
of the Treasury to submit information relating to broad-banded systems 
at the Internal Revenue Service.
    ``(3) Except as otherwise provided under this section, employees 
under a broad-banded system shall continue to be subject to the laws 
and regulations covering employees under the pay system that otherwise 
would apply to such employees.
    ``(4) The criteria to be prescribed by the Office of Personnel 
Management shall, at a minimum--
            ``(A) ensure that the structure of any broad-banded system 
        maintains the principle of equal pay for substantially equal 
        work;
            ``(B) establish the minimum and maximum number of grades 
        that may be combined into pay bands;
            ``(C) establish requirements for setting minimum and 
        maximum rates of pay in a pay band;
            ``(D) establish requirements for adjusting the pay of an 
        employee within a pay band;
            ``(E) establish requirements for setting the pay of a 
        supervisory employee whose position is in a pay band or who 
        supervises employees whose positions are in pay bands; and
            ``(F) establish requirements and methodologies for setting 
        the pay of an employee upon conversion to a broad-banded 
        system, initial appointment, change of position or type of 
        appointment (including promotion, demotion, transfer, 
        reassignment, reinstatement, placement in another pay band, or 
        movement to a different geographic location), and movement 
        between a broad-banded system and another pay system.
    ``(c) With the approval of the Office of Personnel Management and 
in accordance with a plan for implementation submitted by the Secretary 
of the Treasury, the Secretary may, with respect to Internal Revenue 
Service employees who are covered by a broad-banded system established 
under this section, provide for variations from the provisions of 
subchapter VI of chapter 53.
``Sec. 9510. General workforce staffing
    ``(a)(1) Except as otherwise provided by this section, an employee 
of the Internal Revenue Service may be selected for a permanent 
appointment in the competitive service in the Internal Revenue Service 
through internal competitive promotion procedures if--
            ``(A) the employee has completed, in the competitive 
        service, 2 years of current continuous service under a term 
        appointment or any combination of term appointments;
            ``(B) such term appointment or appointments were made under 
        competitive procedures prescribed for permanent appointments;
            ``(C) the employee's performance under such term 
        appointment or appointments met established retention 
        standards, or, if not covered by a performance management 
        system established under section 9508, was rated at the fully 
        successful level or higher (or equivalent thereof); and
            ``(D) the vacancy announcement for the term appointment 
        from which the conversion is made stated that there was a 
        potential for subsequent conversion to a permanent appointment.
    ``(2) An appointment under this section may be made only to a 
position in the same line of work as a position to which the employee 
received a term appointment under competitive procedures.
    ``(b)(1) Notwithstanding subchapter I of chapter 33, the Secretary 
of the Treasury may establish category rating systems for evaluating 
applicants for Internal Revenue Service positions in the competitive 
service under which qualified candidates are divided into 2 or more 
quality categories on the basis of relative degrees of merit, rather 
than assigned individual numerical ratings.
    ``(2) Each applicant who meets the minimum qualification 
requirements for the position to be filled shall be assigned to an 
appropriate category based on an evaluation of the applicant's 
knowledge, skills, and abilities relative to those needed for 
successful performance in the position to be filled.
    ``(3) Within each quality category established under paragraph (1), 
preference eligibles shall be listed ahead of individuals who are not 
preference eligibles. For other than scientific and professional 
positions at or higher than GS-9 (or equivalent), preference eligibles 
who have a compensable service-connected disability of 10 percent or 
more, and who meet the minimum qualification standards, shall be listed 
in the highest quality category.
    ``(4) An appointing authority may select any applicant from the 
highest quality category or, if fewer than 3 candidates have been 
assigned to the highest quality category, from a merged category 
consisting of the highest and second highest quality categories.
    ``(5) Notwithstanding paragraph (4), the appointing authority may 
not pass over a preference eligible in the same or higher category from 
which selection is made unless the requirements of section 3317(b) or 
3318(b), as applicable, are satisfied.
    ``(c) The Secretary of the Treasury may detail employees among the 
offices of the Internal Revenue Service without regard to the 120-day 
limitation in section 3341(b).
    ``(d) Notwithstanding any other provision of law, the Secretary of 
the Treasury may establish a probationary period under section 3321 of 
up to 3 years for Internal Revenue Service positions if the Secretary 
of the Treasury determines that the nature of the work is such that a 
shorter period is insufficient to demonstrate complete proficiency in 
the position.
    ``(e) Nothing in this section exempts the Secretary of the Treasury 
from--
            ``(1) any employment priority established under direction 
        of the President for the placement of surplus or displaced 
        employees; or
            ``(2) any obligation under a court order or decree relating 
        to the employment practices of the Internal Revenue Service or 
        the Department of the Treasury.''.
    (b) Clerical Amendment.--The table of sections for part III of 
title 5, United States Code, is amended by adding at the end the 
following:

                       ``Subpart I--Miscellaneous

``95. Personnel flexibilities relating to the Internal          9501''.
                            Revenue Service.

SEC. 1202. VOLUNTARY SEPARATION INCENTIVE PAYMENTS.

    (a) Definition.--In this section, the term ``employee'' means an 
employee (as defined by section 2105 of title 5, United States Code) 
who is employed by the Internal Revenue Service serving under an 
appointment without time limitation, and has been currently employed 
for a continuous period of at least 3 years, but does not include--
            (1) a reemployed annuitant under subchapter III of chapter 
        83 or chapter 84 of title 5, United States Code, or another 
        retirement system;
            (2) an employee having a disability on the basis of which 
        such employee is or would be eligible for disability retirement 
        under the applicable retirement system referred to in paragraph 
        (1);
            (3) an employee who is in receipt of a specific notice of 
        involuntary separation for misconduct or unacceptable 
        performance;
            (4) an employee who, upon completing an additional period 
        of service as referred to in section 3(b)(2)(B)(ii) of the 
        Federal Workforce Restructuring Act of 1994 (5 U.S.C. 5597 
        note), would qualify for a voluntary separation incentive 
        payment under section 3 of such Act;
            (5) an employee who has previously received any voluntary 
        separation incentive payment by the Federal Government under 
        this section or any other authority and has not repaid such 
        payment;
            (6) an employee covered by statutory reemployment rights 
        who is on transfer to another organization; or
            (7) any employee who, during the 24-month period preceding 
        the date of separation, has received a recruitment or 
        relocation bonus under section 5753 of title 5, United States 
        Code, or who, within the 12-month period preceding the date of 
        separation, received a retention allowance under section 5754 
        of title 5, United States Code.
    (b) Authority To Provide Voluntary Separation Incentive Payments.--
            (1) In general.--The Commissioner of Internal Revenue may 
        pay voluntary separation incentive payments under this section 
        to any employee to the extent necessary to carry out the plan 
        to reorganize the Internal Revenue Service under section 1001.
            (2) Amount and treatment of payments.--A voluntary 
        separation incentive payment--
                    (A) shall be paid in a lump sum after the 
                employee's separation;
                    (B) shall be paid from appropriations or funds 
                available for the payment of the basic pay of the 
                employees;
                    (C) shall be equal to the lesser of--
                            (i) an amount equal to the amount the 
                        employee would be entitled to receive under 
                        section 5595(c) of title 5, United States Code; 
                        or
                            (ii) an amount determined by an agency head 
                        not to exceed $25,000;
                    (D) may not be made except in the case of any 
                qualifying employee who voluntarily separates (whether 
                by retirement or resignation) before January 1, 2003;
                    (E) shall not be a basis for payment, and shall not 
                be included in the computation, of any other type of 
                Government benefit; and
                    (F) shall not be taken into account in determining 
                the amount of any severance pay to which the employee 
                may be entitled under section 5595 of title 5, United 
                States Code, based on any other separation.
    (c) Additional Internal Revenue Service Contributions to the 
Retirement Fund.--
            (1) In general.--In addition to any other payments which it 
        is required to make under subchapter III of chapter 83 of title 
        5, United States Code, the Internal Revenue Service shall remit 
        to the Office of Personnel Management for deposit in the 
        Treasury of the United States to the credit of the Civil 
        Service Retirement and Disability Fund an amount equal to 15 
        percent of the final basic pay of each employee who is covered 
        under subchapter III of chapter 83 or chapter 84 of title 5, 
        United States Code, to whom a voluntary separation incentive 
        has been paid under this section.
            (2) Definition.--In paragraph (1), the term ``final basic 
        pay'', with respect to an employee, means the total amount of 
        basic pay which would be payable for a year of service by such 
        employee, computed using the employee's final rate of basic 
        pay, and, if last serving on other than a full-time basis, with 
        appropriate adjustment therefor.
    (d) Effect of Subsequent Employment With the Government.--An 
individual who has received a voluntary separation incentive payment 
under this section and accepts any employment for compensation with the 
Government of the United States, or who works for any agency of the 
United States Government through a personal services contract, within 5 
years after the date of the separation on which the payment is based 
shall be required to pay, prior to the individual's first day of 
employment, the entire amount of the incentive payment to the Internal 
Revenue Service.
    (e) Effect on Internal Revenue Service Employment Levels.--
            (1) Intended effect.--Voluntary separations under this 
        section are not intended to necessarily reduce the total number 
        of full-time equivalent positions in the Internal Revenue 
        Service.
            (2) Use of voluntary separations.--The Internal Revenue 
        Service may redeploy or use the full-time equivalent positions 
        vacated by voluntary separations under this section to make 
        other positions available to more critical locations or more 
        critical occupations.

SEC. 1203. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

    (a) In General.--Subject to subsection (c), the Commissioner of 
Internal Revenue shall terminate the employment of any employee of the 
Internal Revenue Service if there is a final administrative or judicial 
determination that such employee committed any act or omission 
described under subsection (b) in the performance of the employee's 
official duties. Such termination shall be a removal for cause on 
charges of misconduct.
    (b) Acts or Omissions.--The acts or omissions referred to under 
subsection (a) are--
            (1) failure to obtain the required approval signatures on 
        documents authorizing the seizure of a taxpayer's home, 
        personal belongings, or business assets;
            (2) providing a false statement under oath with respect to 
        a material matter involving a taxpayer or taxpayer 
        representative;
            (3) violation of the civil rights of a taxpayer, taxpayer 
        representative, or other employee of the Internal Revenue 
        Service;
            (4) falsifying or destroying documents to conceal mistakes 
        made by the employee with respect to a matter involving a 
        taxpayer or taxpayer representative;
            (5) assault or battery on a taxpayer, taxpayer 
        representative, or other employee of the Internal Revenue 
        Service;
            (6) violations of the Internal Revenue Code of 1986, 
        Department of Treasury regulations, or policies of the Internal 
        Revenue Service (including the Internal Revenue Manual) for the 
        purpose of retaliating against, or harassing, a taxpayer, 
        taxpayer representative, or other employee of the Internal 
        Revenue Service;
            (7) willful misuse of the provisions of section 6103 of the 
        Internal Revenue Code of 1986 for the purpose of concealing 
        information from a congressional inquiry,
            (8) willful failure to file any return of tax required 
        under the Internal Revenue Code of 1986 on or before the date 
        prescribed therefor (including any extensions), unless such 
        failure is due to reasonable cause and not to willful neglect,
            (9) willful understatement of Federal tax liability, unless 
        such understatement is due to reasonable cause and not to 
        willful neglect, and
            (10) threatening to audit a taxpayer for the purpose of 
        extracting personal gain or benefit.
    (c) Determination of Commissioner.--
            (1) In general.--The Commissioner of Internal Revenue may 
        take a personnel action other than termination for an act or 
        omission under subsection (a).
            (2) Discretion.--The exercise of authority under paragraph 
        (1) shall be at the sole discretion of the Commissioner of 
        Internal Revenue and may not be delegated to any other officer. 
        The Commissioner of Internal Revenue, in his sole discretion, 
        may establish a procedure which will be used to determine 
        whether an individual should be referred to the Commissioner of 
        Internal Revenue for a determination by the Commissioner under 
        paragraph (1).
            (3) No appeal.--Any determination of the Commissioner of 
        Internal Revenue under this subsection may not be appealed in 
        any administrative or judicial proceeding.

SEC. 1204. BASIS FOR EVALUATION OF INTERNAL REVENUE SERVICE EMPLOYEES.

    (a) In General.--The Internal Revenue Service shall not use records 
of tax enforcement results--
            (1) to evaluate employees; or
            (2) to impose or suggest production quotas or goals with 
        respect to such employees.
    (b) Taxpayer Service.--The Internal Revenue Service shall use the 
fair and equitable treatment of taxpayers by employees as one of the 
standards for evaluating employee performance.
    (c) Certification.--Each appropriate supervisor shall certify 
quarterly by letter to the Commissioner of Internal Revenue that tax 
enforcement results are not used in a manner prohibited by subsection 
(a).
    (d) Technical and Conforming Amendment.--Section 6231 of the 
Technical and Miscellaneous Revenue Act of 1988 (Public Law 100-647; 
102 Stat. 3734) is repealed.
    (e) Effective Date.--This section shall apply to evaluations 
conducted on or after the date of the enactment of this Act.

SEC. 1205. EMPLOYEE TRAINING PROGRAM.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Commissioner of Internal Revenue shall 
implement an employee training program and shall submit an employee 
training plan to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.
    (b) Contents.--The plan submitted under subsection (a) shall--
            (1) detail a comprehensive employee training program to 
        ensure adequate customer service training;
            (2) detail a schedule for training and the fiscal years 
        during which the training will occur;
            (3) detail the funding of the program and relevant 
        information to demonstrate the priority and commitment of 
        resources to the plan;
            (4) review the organizational design of customer service;
            (5) provide for the implementation of a performance 
        development system; and
            (6) provide for at least 16 hours of conflict management 
        training during fiscal year 1999 for employees conducting 
        collection activities.

                      TITLE II--ELECTRONIC FILING

SEC. 2001. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

    (a) In General.--It is the policy of Congress that--
            (1) paperless filing should be the preferred and most 
        convenient means of filing Federal tax and information returns,
            (2) electronic filing should be a voluntary option for 
        taxpayers,
            (3) it should be the goal of the Internal Revenue Service 
        to have at least 80 percent of all such returns filed 
        electronically by the year 2007, and
            (4) the Internal Revenue Service should cooperate with the 
        private sector by encouraging competition to increase 
        electronic filing of such returns, consistent with the 
        provisions of the Office of Management and Budget Circular A-
        76.
    (b) Strategic Plan.--
            (1) In general.--Not later than 180 days after the date of 
        the enactment of this Act, the Secretary of the Treasury or the 
        Secretary's delegate (hereafter in this section referred to as 
        the ``Secretary'') shall establish a plan to eliminate 
        barriers, provide incentives, and use competitive market forces 
        to increase electronic filing gradually over the next 10 years 
        while maintaining processing times for paper returns at 40 
        days. To the extent practicable, such plan shall provide that 
        all returns prepared electronically for taxable years beginning 
        after 2001 shall be filed electronically.
            (2) Electronic commerce advisory group.--To ensure that the 
        Secretary receives input from the private sector in the 
        development and implementation of the plan required by 
        paragraph (1), the Secretary shall convene an electronic 
        commerce advisory group to include representatives from the 
        small business community and from the tax practitioner, 
        preparer, and computerized tax processor communities and other 
        representatives from the electronic filing industry.
    (c) Promotion of Electronic Filing and Incentives.--Section 6011 is 
amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Promotion of Electronic Filing.--
            ``(1) In general.--The Secretary is authorized to promote 
        the benefits of and encourage the use of electronic tax 
        administration programs, as they become available, through the 
        use of mass communications and other means.
            ``(2) Incentives.--The Secretary may implement procedures 
        to provide for the payment of appropriate incentives for 
        electronically filed returns.''.
    (d) Annual Reports.--Not later than June 30 of each calendar year 
after 1998, the Chairperson of the Internal Revenue Service Oversight 
Board, the Secretary of the Treasury, and the Chairperson of the 
electronic commerce advisory group established under subsection (b)(2) 
shall report to the Committees on Ways and Means, Appropriations, 
Government Reform and Oversight, and Small Business of the House of 
Representatives and the Committees on Finance, Appropriations, 
Governmental Affairs, and Small Business of the Senate on--
            (1) the progress of the Internal Revenue Service in meeting 
        the goal of receiving electronically 80 percent of tax and 
        information returns by 2007;
            (2) the status of the plan required by subsection (b);
            (3) the legislative changes necessary to assist the 
        Internal Revenue Service in meeting such goal; and
            (4) the effects on small businesses and the self-employed 
        of electronically filing tax and information returns.

SEC. 2002. DUE DATE FOR CERTAIN INFORMATION RETURNS.

    (a) Information Returns Filed Electronically.--Section 6071 
(relating to time for filing returns and other documents) is amended by 
redesignating subsection (b) as subsection (c) and by inserting after 
subsection (a) the following new subsection:
    ``(b) Electronically Filed Information Returns.--Returns made under 
subparts B and C of part III of this subchapter which are filed 
electronically shall be filed on or before March 31 of the year 
following the calendar year to which such returns relate.''.
    (b) Study Relating to Time For Providing Notice to Recipients.--
            (1) In general.--The Secretary of the Treasury shall 
        conduct a study evaluating the effect of extending the deadline 
        for providing statements to persons with respect to whom 
        information is required to be furnished under subparts B and C 
        of part III of subchapter A of chapter 61 of the Internal 
        Revenue Code of 1986 (other than section 6051 of such Code) 
        from January 31 to February 15 of the year in which the return 
        to which the statement relates is required to be filed.
            (2) Report.--Not later than December 31, 1998, the 
        Secretary of the Treasury shall submit a report on the study 
        under paragraph (1) to the Committee on Ways and Means of the 
        House of Representatives and the Committee on Finance of the 
        Senate.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to returns required to be filed after December 31, 1999.

SEC. 2003. PAPERLESS ELECTRONIC FILING.

    (a) In General.--Section 6061 (relating to signing of returns and 
other documents) is amended--
            (1) by striking ``Except as otherwise provided by'' and 
        inserting the following:
    ``(a) General Rule.--Except as otherwise provided by subsection (b) 
and'', and
            (2) by adding at the end the following new subsection:
    ``(b) Electronic Signatures.--
            ``(1) In general.--The Secretary shall develop procedures 
        for the acceptance of signatures in digital or other electronic 
        form. Until such time as such procedures are in place, the 
        Secretary may provide for alternative methods of subscribing 
        all returns, declarations, statements, or other documents 
        required or permitted to be made or written under internal 
        revenue laws and regulations.
            ``(2) Treatment of alternative methods.--Notwithstanding 
        any other provision of law, any return, declaration, statement, 
        or other document filed and verified, signed, or subscribed 
        under any method adopted under paragraph (1) shall be treated 
        for all purposes (both civil and criminal, including penalties 
        for perjury) in the same manner as though signed and 
        subscribed.
            ``(3) Published guidance.--The Secretary shall publish 
        guidance as appropriate to define and implement any method 
        adopted under paragraph (1).''.
    (b) Acknowledgment of Electronic Filing.--Section 7502(c) is 
amended to read as follows:
    ``(c) Registered and Certified Mailing; Electronic Filing.--
            ``(1) Registered mail.--For purposes of this section, if 
        any return, claim, statement, or other document, or payment, is 
        sent by United States registered mail--
                    ``(A) such registration shall be prima facie 
                evidence that the return, claim, statement, or other 
                document was delivered to the agency, officer, or 
                office to which addressed, and
                    ``(B) the date of registration shall be deemed the 
                postmark date.
            ``(2) Certified mail; electronic filing.--The Secretary is 
        authorized to provide by regulations the extent to which the 
        provisions of paragraph (1) with respect to prima facie 
        evidence of delivery and the postmark date shall apply to 
        certified mail and electronic filing.''.
    (c) Establishment of Procedures for Other Information.--In the case 
of taxable periods beginning after December 31, 1998, the Secretary of 
the Treasury or the Secretary's delegate shall, to the extent 
practicable, establish procedures to accept, in electronic form, any 
other information, statements, elections, or schedules, from taxpayers 
filing returns electronically, so that such taxpayers will not be 
required to file any paper.
    (d) Internet Availability.--In the case of taxable periods 
beginning after December 31, 1998, the Secretary of the Treasury or the 
Secretary's delegate shall establish procedures for all tax forms, 
instructions, and publications created in the most recent 5-year period 
to be made available electronically on the Internet in a searchable 
database not later than the date such records are available to the 
public in printed form. In addition, in the case of taxable periods 
beginning after December 31, 1998, the Secretary of the Treasury or the 
Secretary's delegate shall, to the extent practicable, establish 
procedures for other taxpayer guidance to be made available 
electronically on the Internet in a searchable database not later than 
the date such guidance is available to the public in printed form.
    (e) Procedures for Authorizing Disclosure Electronically.--The 
Secretary shall establish procedures for taxpayers to designate, on 
electronically filed returns, persons to whom information may be 
disclosed under section 6103(c) of the Internal Revenue Code of 1986.
    (f) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 2004. RETURN-FREE TAX SYSTEM.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall develop procedures for the implementation of a return-
free tax system under which appropriate individuals would be permitted 
to comply with the Internal Revenue Code of 1986 without making the 
return required under section 6012 of such Code for taxable years 
beginning after 2007.
    (b) Report.--Not later than June 30 of each calendar year after 
1999, such Secretary shall report to the Committee on Ways and Means of 
the House of Representatives and the Committee on Finance of the Senate 
on--
            (1) what additional resources the Internal Revenue Service 
        would need to implement such a system,
            (2) the changes to the Internal Revenue Code of 1986 that 
        could enhance the use of such a system,
            (3) the procedures developed pursuant to subsection (a), 
        and
            (4) the number and classes of taxpayers that would be 
        permitted to use the procedures developed pursuant to 
        subsection (a).

SEC. 2005. ACCESS TO ACCOUNT INFORMATION.

    (a) In General.--Not later than December 31, 2006, the Secretary of 
the Treasury or the Secretary's delegate shall develop procedures under 
which a taxpayer filing returns electronically (and their designees 
under section 6103(c) of the Internal Revenue Code of 1986) would be 
able to review the taxpayer's account electronically, but only if all 
necessary safeguards to ensure the privacy of such account information 
are in place.
    (b) Report.--Not later than December 31, 2003, the Secretary of the 
Treasury shall report on the progress the Secretary is making on the 
development of procedures under subsection (a) to the Committee on Ways 
and Means of the House of Representatives and the Committee on Finance 
of the Senate.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

SEC. 3000. SHORT TITLE.

    This title may be cited as the ``Taxpayer Bill of Rights 3''.

                      Subtitle A--Burden of Proof

SEC. 3001. BURDEN OF PROOF.

    (a) In General.--Chapter 76 (relating to judicial proceedings) is 
amended by adding at the end the following new subchapter:

                    ``Subchapter E--Burden of Proof

                              ``Sec. 7491. Burden of proof.

``SEC. 7491. BURDEN OF PROOF.

    ``(a) Burden Shifts Where Taxpayer Produces Credible Evidence.--
            ``(1) General rule.--If, in any court proceeding, a 
        taxpayer introduces credible evidence with respect to any 
        factual issue relevant to ascertaining the income tax liability 
        of the taxpayer, the Secretary shall have the burden of proof 
        with respect to such issue.
            ``(2) Limitations.--Paragraph (1) shall apply with respect 
        to an issue only if--
                    ``(A) the taxpayer has complied with the 
                requirements under this title to substantiate any item,
                    ``(B) the taxpayer has maintained all records 
                required under this title and has cooperated with 
                reasonable requests by the Secretary for witnesses, 
                information, documents, meetings, and interviews, and
                    ``(C) in the case of a partnership, corporation, or 
                trust, the taxpayer is described in section 
                7430(c)(4)(A)(ii).
            ``(3) Coordination.--Paragraph (1) shall not apply to any 
        issue if any other provision of this title provides for a 
        specific burden of proof with respect to such issue.
            ``(4) Expansion to tax liabilities other than income tax.--
        In the case of court proceedings arising in connection with 
        examinations commencing 6 months after the date of the 
        enactment of this paragraph and before June 1, 2001, this 
        subsection shall, in addition to income tax liability, apply to 
        any other tax liability of the taxpayer.
    ``(b) Use of Statistical Information on Unrelated Taxpayers.--In 
the case of an individual taxpayer, the Secretary shall have the burden 
of proof in any court proceeding with respect to any item of income 
which was reconstructed by the Secretary solely through the use of 
statistical information on unrelated taxpayers.
    ``(c) Penalties.--Notwithstanding any other provision of this 
title, the Secretary shall have the burden of production in any court 
proceeding with respect to the liability of any individual for any 
penalty, addition to tax, or additional amount imposed by this 
title.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 76 
is amended by adding at the end the following new item:

                              ``Subchapter E. Burden of proof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to court proceedings arising in connection with examinations 
commencing after the date of the enactment of this Act.

                  Subtitle B--Proceedings by Taxpayers

SEC. 3101. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES.

    (a) Award of All Reasonable Attorneys Fees.--
            (1) In general.--Section 7430(c)(1) (relating to reasonable 
        litigation costs) is amended--
                    (A) by striking clause (iii) of subparagraph (B) 
                and inserting:
                            ``(iii) reasonable fees paid or incurred 
                        for the services of attorneys in connection 
                        with the court proceeding.'', and
                    (B) by striking the last 2 sentences.
            (2) Conforming amendment.--Section 7430(c)(2)(B) is amended 
        by striking ``or (iii)''.
    (b) Award of Administrative Costs Incurred After 30-Day Letter.--
Paragraph (2) of section 7430(c) is amended by striking the last 
sentence and inserting the following new flush sentence:
        ``Such term shall only include costs incurred on or after 
        whichever of the following is the earliest: (i) the date of the 
        receipt by the taxpayer of the notice of the decision of the 
        Internal Revenue Service Office of Appeals, (ii) the date of 
        the notice of deficiency, or (iii) the date on which the 1st 
        letter of proposed deficiency which allows the taxpayer an 
        opportunity for administrative review in the Internal Revenue 
        Service Office of Appeals is sent.''.
    (c) Award of Fees for Certain Additional Services.--Paragraph (3) 
of section 7430(c) is amended to read as follows:
            ``(3) Attorneys fees.--
                    ``(A) In general.--For purposes of paragraphs (1) 
                and (2), fees for the services of an individual 
                (whether or not an attorney) who is authorized to 
                practice before the Tax Court or before the Internal 
                Revenue Service shall be treated as fees for the 
                services of an attorney.
                    ``(B) Pro bono services.--The court may award 
                reasonable attorneys fees under subsection (a) in 
                excess of the attorneys fees paid or incurred if such 
                fees are less than the reasonable attorneys fees 
                because an individual is representing the prevailing 
                party for no fee or for a fee which (taking into 
                account all the facts and circumstances) is no more 
                than a nominal fee. This subparagraph shall apply only 
                if such award is paid to such individual or such 
                individual's employer.''.
    (d) Determination of Whether Position of United States Is 
Substantially Justified.--Subparagraph (B) of section 7430(c)(4) is 
amended by redesignating clause (iii) as clause (iv) and by inserting 
after clause (ii) the following new clause:
                            ``(iii) Effect of losing on substantially 
                        similar issues.--In determining for purposes of 
                        clause (i) whether the position of the United 
                        States was substantially justified, the court 
                        shall take into account whether the United 
                        States has lost in courts of appeal for other 
                        circuits on substantially similar issues.''.
    (e) Taxpayer Treated as Prevailing if Judgment Is Less Than 
Taxpayer's Offer.--
            (1) In general.--Section 7430(c)(4) (defining prevailing 
        party) is amended by adding at the end the following new 
        subparagraph:
                    ``(E) Special rules where judgment less than 
                taxpayer's offer.--
                            ``(i) In general.--A party to a court 
                        proceeding meeting the requirements of 
                        subparagraph (A)(ii) shall be treated as the 
                        prevailing party if the liability of the 
                        taxpayer pursuant to the judgment in the 
                        proceeding (determined without regard to 
                        interest) is equal to or less than the 
                        liability of the taxpayer which would have been 
                        so determined if the United States had accepted 
                        a qualified offer of the party under subsection 
                        (g).
                            ``(ii) Exceptions.--This subparagraph shall 
                        not apply to--
                                    ``(I) any judgment issued pursuant 
                                to a settlement, or
                                    ``(II) any proceeding in which the 
                                amount of tax liability is not in 
                                issue, including any declaratory 
                                judgment proceeding, any proceeding to 
                                enforce or quash any summons issued 
                                pursuant to this title, and any action 
                                to restrain disclosure under section 
                                6110(f).
                            ``(iii) Special rules.--If this 
                        subparagraph applies to any court proceeding--
                                    ``(I) the determination under 
                                clause (i) shall be made by reference 
                                to the last qualified offer made with 
                                respect to the tax liability at issue 
                                in the proceeding, and
                                    ``(II) reasonable administrative 
                                and litigation costs shall only include 
                                costs incurred on and after the date of 
                                such offer.
                            ``(iv) Coordination.--This subparagraph 
                        shall not apply to a party which is a 
                        prevailing party under any other provision of 
                        this paragraph.''.
            (2) Qualified offer.--Section 7430 is amended by adding at 
        the end the following new subsection:
    ``(g) Qualified Offer.--For purposes of subsection (c)(4)--
            ``(1) In general.--The term `qualified offer' means a 
        written offer which--
                    ``(A) is made by the taxpayer to the United States 
                during the qualified offer period,
                    ``(B) specifies the amount of the taxpayer's 
                liability (determined without regard to interest),
                    ``(C) is designated at the time it is made as a 
                qualified offer for purposes of this section, and
                    ``(D) remains open during the period beginning on 
                the date it is made and ending on the earliest of the 
                date the offer is rejected, the date the trial begins, 
                or the 90th day after the date the offer is made.
            ``(2) Qualified offer period.--For purposes of this 
        subsection, the term `qualified offer period' means the 
        period--
                    ``(A) beginning on the date on which the 1st letter 
                of proposed deficiency which allows the taxpayer an 
                opportunity for administrative review in the Internal 
                Revenue Service Office of Appeals is sent, and
                    ``(B) ending on the date which is 30 days before 
                the date the case is first set for trial.''.
    (f) Award of Attorneys Fees in Unauthorized Inspection and 
Disclosure Cases.--Section 7431(c) (relating to damages) is amended by 
striking the period at the end of paragraph (2) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(3) in the case of a plaintiff which is described in 
        section 7430(c)(4)(A)(ii), reasonable attorneys fees, except 
        that if the defendant is the United States, reasonable 
        attorneys fees may be awarded only if the plaintiff is the 
        prevailing party (as determined under section 7430(c)(4)).''.
    (g) Effective Date.--The amendments made by this section shall 
apply to costs incurred (and, in the case of the amendment made by 
subsection (c), services performed) more than 180 days after the date 
of the enactment of this Act.

SEC. 3102. CIVIL DAMAGES FOR COLLECTION ACTIONS.

    (a) Extension to Negligence Actions.--
            (1) In general.--Section 7433 (relating to civil damages 
        for certain unauthorized collection actions) is amended--
                    (A) in subsection (a), by inserting ``, or by 
                reason of negligence,'' after ``recklessly or 
                intentionally'', and
                    (B) in subsection (b)--
                            (i) in the matter preceding paragraph (1), 
                        by inserting ``($100,000, in the case of 
                        negligence)'' after ``$1,000,000'', and
                            (ii) in paragraph (1), by inserting ``or 
                        negligent'' after ``reckless or intentional''.
            (2) Requirement that administrative remedies be 
        exhausted.--Paragraph (1) of section 7433(d) is amended to read 
        as follows:
            ``(1) Requirement that administrative remedies be 
        exhausted.--A judgment for damages shall not be awarded under 
        subsection (b) unless the court determines that the plaintiff 
        has exhausted the administrative remedies available to such 
        plaintiff within the Internal Revenue Service.''.
    (b) Damages Allowed in Civil Actions by Persons Other Than 
Taxpayers.--Section 7426 is amended by redesignating subsection (h) as 
subsection (i) and by adding after subsection (g) the following new 
subsection:
    ``(h) Recovery of Damages Permitted in Certain Cases.--
            ``(1) In general.--Notwithstanding subsection (b), if, in 
        any action brought under this section, there is a finding that 
        any officer or employee of the Internal Revenue Service 
        recklessly or intentionally, or by reason of negligence, 
        disregarded any provision of this title the defendant shall be 
        liable to the plaintiff in an amount equal to the lesser of 
        $1,000,000 ($100,000 in the case of negligence) or the sum of--
                    ``(A) actual, direct economic damages sustained by 
                the plaintiff as a proximate result of the reckless or 
                intentional or negligent actions of the officer or 
                employee (reduced by any amount of such damages awarded 
                under subsection (b)), and
                    ``(B) the costs of the action.
            ``(2) Requirement that administrative remedies be 
        exhausted.--A judgment for damages shall not be awarded under 
        this section unless the court determines that the plaintiff has 
        exhausted the administrative remedies available to such 
        plaintiff within the Internal Revenue Service.''.
    (c) Civil Damages for IRS Violations of Bankruptcy Procedures.--
            (1) In general.--Section 7433 (relating to civil damages 
        for certain unauthorized collection actions) is amended by 
        adding at the end the following new subsection:
    ``(e) Actions for Violations of Certain Bankruptcy Procedures.--
            ``(1) In general.--If, in connection with any collection of 
        Federal tax with respect to a taxpayer, any officer or employee 
        of the Internal Revenue Service willfully violates any 
        provision of section 362 (relating to automatic stay) or 524 
        (relating to effect of discharge) of title 11, United States 
        Code, or any regulation promulgated under such section, such 
        taxpayer may petition the bankruptcy court to recover damages 
        against the United States.
            ``(2) Remedy to be exclusive.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), notwithstanding section 105 of such 
                title 11, such petition shall be the exclusive remedy 
                for recovering damages resulting from such actions.
                    ``(B) Certain other actions permitted.--
                Subparagraph (A) shall not apply to an action under 
                section 362(h) of such title 11 for a violation of a 
                stay provided by section 362 of such title; except 
                that--
                            ``(i) administrative and litigation costs 
                        in connection with such an action may only be 
                        awarded under section 7430, and
                            ``(ii) administrative costs may be awarded 
                        only if incurred on or after the date that the 
                        bankruptcy petition is filed.''.
            (2) Conforming amendment.--Subsection (b) of section 7433 
        is amended by inserting ``or petition filed under subsection 
        (e)'' after ``subsection (a)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to actions of officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 3103. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE CALENDAR.

    (a) In General.--Section 7463 (relating to disputes involving 
$10,000 or less) is amended by striking ``$10,000'' each place it 
appears (including the section heading) and inserting ``$50,000''.
    (b) Conforming Amendments.--
            (1) Sections 7436(c)(1) and 7443A(b)(3) are each amended by 
        striking ``$10,000'' and inserting ``$50,000''.
            (2) The table of sections for part II of subchapter C of 
        chapter 76 is amended by striking ``$10,000'' in the item 
        relating to section 7463 and inserting ``$50,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to proceedings commencing after the date of the enactment of this 
Act.

SEC. 3104. EXPANSION OF TAX COURT JURISDICTION TO RESPONSIBLE PERSON 
              PENALTIES.

    (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 subsections (c), (d), and (e) as subsections (d), (e), 
and (f), respectively, and by inserting after subsection (b) the 
following new subsection:
    ``(c) Petition for Review by Tax Court.--
            ``(1) In general.--A person may petition the Tax Court (and 
        the Tax Court shall have jurisdiction) to determine the 
        person's liability under subsection (a) if such petition is 
        filed during the 90-day period beginning on the day on which 
        notice and demand of the penalty under subsection (a) is made 
        on such person.
            ``(2) Restrictions applicable to collection of 
        assessment.--
                    ``(A) In general.--Except as otherwise provided in 
                section 6851 or 6861, no levy or proceeding in court 
                for collection of any assessment of any penalty under 
                subsection (a) shall be made, begun, or prosecuted 
                until the expiration of the 90-day period described in 
                paragraph (1), or, if a petition has been filed with 
                the Tax Court, until the decision of the Tax Court has 
                become final. Rules similar to the rules of section 
                7485 shall apply with respect to the collection of such 
                assessment.
                    ``(B) Authority to enjoin collection actions.--
                Notwithstanding the provisions of section 7421(a), the 
                beginning of any levy or proceeding in court for 
                collection of any assessment of any penalty under 
                subsection (a) during the time the prohibition under 
                subparagraph (A) is in force may be enjoined by a 
                proceeding in the proper court, including the Tax 
                Court. The Tax Court shall have no jurisdiction under 
                this subparagraph to enjoin any action or proceeding 
                unless a timely petition has been filed under paragraph 
                (1) and then only in respect of the amount of the 
                assessment to which such petition relates.
            ``(3) Suspension of running of period of limitations.--The 
        running of the period of limitations in section 6502 on the 
        collection of the assessment to which the petition under 
        paragraph (1) relates shall be suspended for the period during 
        which the Secretary is prohibited by paragraph (2)(A) from 
        collecting by levy or a proceeding in court and for 60 days 
        thereafter.
            ``(4) Applicable rules.--
                    ``(A) Credit or refund allowed.--Notwithstanding 
                any other law or rule of law (other than section 
                6512(b), 7121, or 7122), credit or refund shall be 
                allowed or made to the extent attributable to the 
                application of this subsection.
                    ``(B) Limitation on tax court jurisdiction.--If a 
                suit for refund is begun, the Tax Court shall lose 
                jurisdiction of the action under this subsection to 
                whatever extent jurisdiction is acquired by the 
                district court or the United States Court of Federal 
                Claims over the taxable periods that are the subject of 
                the suit for refund.''.
    (b) Conforming Amendments.--
            (1) Section 7103(a)(4) is amended by striking ``6672(b)'' 
        and inserting ``6672(d)''.
            (2) Section 7421(a) is amended by striking ``6672(b)'' and 
        inserting ``6672 (c) and (d)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to penalties imposed after the date of the enactment of this Act.

SEC. 3105. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES WHICH 
              HAVE ELECTED THE INSTALLMENT METHOD OF PAYMENT.

    (a) In General.--Section 7422 is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection (i) 
the following new subsection:
    ``(j) Special Rule for Actions With Respect to Estates for Which an 
Election Under Section 6166 Is Made.--
            ``(1) In general.--The district courts of the United States 
        and the United States Court of Federal Claims shall not fail to 
        have jurisdiction over any action brought by the representative 
        of an estate to which this subsection applies to determine the 
        correct amount of the estate tax liability of such estate (or 
        for any refund with respect thereto) solely because the full 
        amount of such liability has not been paid by reason of an 
        election under section 6166 with respect to such estate.
            ``(2) Estates to which subsection applies.--This subsection 
        shall apply to any estate if, as of the date the action is 
        filed--
                    ``(A) no portion of the installments payable under 
                section 6166 have been accelerated,
                    ``(B) all such installments the due date for which 
                is on or before the date the action is filed have been 
                paid,
                    ``(C) there is no case pending in the Tax Court 
                with respect to the tax imposed by section 2001 on the 
                estate and, if a notice of deficiency under section 
                6212 with respect to such tax has been issued, the time 
                for filing a petition with the Tax Court with respect 
                to such notice has expired, and
                    ``(D) no proceeding for declaratory judgment under 
                section 7479 is pending.
            ``(3) Prohibition on collection of disallowed liability.--
        If the court redetermines under paragraph (1) the estate tax 
        liability of an estate, no part of such liability which is 
        disallowed by a decision of such court which has become final 
        may be collected by the Secretary, and amounts paid in excess 
        of the installments determined by the court as currently due 
        and payable shall be refunded.''.
    (b) Extension of Time To File Refund Suit.--Section 7479 (relating 
to declaratory judgments relating to eligibility of estate with respect 
to installment payments under section 6166) is amended by adding at the 
end the following new subsection:
    ``(c) Extension of Time To File Refund Suit.--The 2-year period in 
section 6532(a)(1) for filing suit for refund after disallowance of a 
claim shall be suspended during the 90-day period after the mailing of 
the notice referred to in subsection (b)(3) and, if a pleading has been 
filed with the Tax Court under this section, until the decision of the 
Tax Court has become final.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any claim for refund filed after the date of the enactment of 
this Act.

SEC. 3106. TAX COURT JURISDICTION TO REVIEW ADVERSE IRS DETERMINATION 
              OF TAX-EXEMPT STATUS OF BOND ISSUE.

    (a) In General.--Section 7478 (relating to declaratory judgments 
relating to status of certain governmental obligations) is amended--
            (1) by striking ``prospective obligations will be'' both 
        places it appears in subsection (a) and inserting ``previously 
        issued or prospective obligations is or will be'', and
            (2) by striking subsection (b)(1) and inserting the 
        following:
            ``(1) Petitioner.--Except as provided in subsection (c), a 
        pleading may be filed under this section only by the issuer or 
        prospective issuer.''.
    (b) Notice Requirement.--Section 7478(b) is amended by adding at 
the end the following:
            ``(4) Notice to holders of previously issued obligations.--
                    ``(A) In general.--If an issuer of previously 
                issued obligations files a pleading under this section, 
                the court shall not issue a declaratory judgment or 
                decree under this section unless it determines that the 
                petitioner has provided adequate notice to holders of 
                such obligations within 10 days of the filing of the 
                pleading.
                    ``(B) Delivery of notice.--The notice under 
                subparagraph (A) shall be given using the most 
                practicable of the following methods:
                            ``(i) In person.
                            ``(ii) By certified or registered mail sent 
                        to the holder's last known address.
                            ``(iii) By printing in appropriate 
                        publications.
                    ``(C) Contents of the notice.--The notice under 
                subparagraph (A) shall include a statement of the 
                holder's right to intervene in, and participate in, any 
                proceeding under this section with respect to 
                obligations held or formerly held by the holder.''.
    (c) Intervention; Other Rules.--Section 7478 is amended by adding 
at the end the following:
    ``(c) Bondholder Intervention.--If an issuer of previously issued 
obligations files a pleading under this section, then the Tax Court 
shall permit any person who demonstrates to the satisfaction of the 
court that such person was or is a holder of any of such previously 
issued obligations to intervene in, and participate in, the proceedings 
before the court with respect to such pleading, on such terms and 
conditions as shall be established by the court.
    ``(d) Period of Limitations, Collection, and Imposition of Interest 
and Penalties Stayed Pending Conclusion of Proceedings.--
            ``(1) In general.--If an issuer of previously issued 
        obligations files a pleading under this section--
                    ``(A) the running of the period of limitations in 
                sections 6501 and 6502 on the assessment and the 
                collection of any tax due by a person (whether or not a 
                party to a proceeding under this section) on the 
                interest paid on such previously issued obligations,
                    ``(B) the collection of such tax due, and
                    ``(C) the imposition of any interest, penalties, 
                additions to tax, or additional amounts in respect to 
                any such unpaid tax,
        shall be suspended from the date of such filing until the date 
        on which the decision of the Tax Court becomes final.
            ``(2) Cross reference.--

                                ``For additional suspension of running 
of period of limitation, see section 6503.''.
    (d) Effective Date; Special Rule.--
            (1) Effective date.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to 
        determinations made after the date of the enactment of this 
        Act.
            (2) Special rule.--Notwithstanding section 7478(b)(3) of 
        the Internal Revenue Code of 1986, in the case of a technical 
        advice memorandum which--
                    (A) provides that any interest on any obligation 
                which is part of an issue (or portion thereof) is not 
                exempt from taxation under the Internal Revenue Code of 
                1986, and
                    (B) was publicly released within 1 year of the date 
                of the enactment of this Act,
        a pleading may be filed under section 7478 of such Code with 
        respect to such memorandum not later than the 90th day after 
        such date.

SEC. 3107. CIVIL ACTION FOR RELEASE OF ERRONEOUS LIEN.

    (a) Right of Substitution of Value.--Subsection (b) of section 6325 
(relating to release of lien or discharge of property) is amended by 
adding at the end the following new paragraph:
            ``(4) Right of substitution of value.--
                    ``(A) In general.--At the request of the owner of 
                any property subject to any lien imposed by this 
                chapter, the Secretary shall issue a certificate of 
                discharge of such property if such owner--
                            ``(i) deposits with the Secretary an amount 
                        of money equal to the value of the interest of 
                        the United States (as determined by the 
                        Secretary) in the property, or
                            ``(ii) furnishes a bond acceptable to the 
                        Secretary in a like amount.
                    ``(B) Refund of deposit with interest and release 
                of bond.--The Secretary shall refund the amount so 
                deposited (and shall pay interest at the overpayment 
                rate under section 6621), and shall release such bond, 
                to the extent that the Secretary determines that--
                            ``(i) the unsatisfied liability giving rise 
                        to the lien can be satisfied from a source 
                        other than such property, or
                            ``(ii) the value of the interest of the 
                        United States in the property is less than the 
                        Secretary's prior determination of such value.
                    ``(C) Use of deposit, etc., if action to contest 
                lien not filed.--If no action is filed under section 
                7426(a)(4) within the period prescribed therefor, the 
                Secretary shall, within 60 days after the expiration of 
                such period--
                            ``(i) apply the amount deposited, or 
                        collect on such bond, to the extent necessary 
                        to satisfy the unsatisfied liability secured by 
                        the lien, and
                            ``(ii) refund (with interest as described 
                        in subparagraph (B)) any portion of the amount 
                        deposited which is not used to satisfy such 
                        liability.
                    ``(D) Exception.--Subparagraph (A) shall not apply 
                if the owner of the property is the person whose 
                unsatisfied liability gave rise to the lien.''.
    (b) Civil Action To Release Erroneous Lien.--
            (1) In general.--Subsection (a) of section 7426 (relating 
        to civil actions by persons other than taxpayers) is amended by 
        adding at the end the following new paragraph:
            ``(4) Substitution of value.--If a certificate of discharge 
        is issued to any person under section 6325(b)(4) with respect 
        to any property, such person may, within 120 days after the day 
        on which such certificate is issued, bring a civil action 
        against the United States in a district court of the United 
        States for a determination of whether the value of the interest 
        of the United States (if any) in such property is less than the 
        value determined by the Secretary. No other action may be 
        brought by such person for such a determination.''.
            (2) Form of relief.--
                    (A) In general.--Subsection (b) of section 7426 is 
                amended by adding at the end the following new 
                paragraph:
            ``(5) Substitution of value.--If the court determines that 
        the Secretary's determination of the value of the interest of 
        the United States in the property for purposes of section 
        6325(b)(4) exceeds the actual value of such interest, the court 
        shall grant a judgment ordering a refund of the amount 
        deposited, and a release of the bond, to the extent that the 
        aggregate of the amounts thereof exceeds such value determined 
        by the court.''.
                    (B) Interest allowed on refund of deposit.--
                Subsection (g) of section 7426 is amended by striking 
                ``and'' at the end of paragraph (1), by striking the 
                period at the end of paragraph (2) and inserting ``; 
                and'', and by adding at the end the following new 
                paragraph:
            ``(3) in the case of a judgment pursuant to subsection 
        (b)(5) which orders a refund of any amount, from the date the 
        Secretary received such amount to the date of payment of such 
        judgment.''.
            (3) Suspension of running of statute of limitation.--
        Subsection (f) of section 6503 is amended to read as follows:
    ``(f) Wrongful Seizure of or Lien on Property of Third Party.--
            ``(1) Wrongful seizure.--The running of the period under 
        section 6502 shall be suspended for a period equal to the 
        period from the date property (including money) of a third 
        party is wrongfully seized or received by the Secretary to the 
        date the Secretary returns property pursuant to section 6343(b) 
        or the date on which a judgment secured pursuant to section 
        7426 with respect to such property becomes final, and for 30 
        days thereafter. The running of such period shall be suspended 
        under this paragraph only with respect to the amount of such 
        assessment equal to the amount of money or the value of 
        specific property returned.
            ``(2) Wrongful lien.--In the case of any assessment for 
        which a lien was made on any property, the running of the 
        period under section 6502 shall be suspended for a period equal 
        to the period beginning on the date any person becomes entitled 
        to a certificate under section 6325(b)(4) with respect to such 
        property and ending on the date which is 30 days after the 
        earlier of--
                    ``(A) the earliest date on which the Secretary no 
                longer holds any amount as a deposit or bond provided 
                under section 6325(b)(4) by reason of such deposit or 
                bond being used to satisfy the unpaid tax or being 
                refunded or released, or
                    ``(B) the date that the judgment secured under 
                section 7426(b)(5) becomes final.
        The running of such period shall be suspended under this 
        paragraph only with respect to the amount of such assessment 
        equal to the value of the interest of the United States in the 
        property plus interest, penalties, additions to the tax, and 
        additional amounts attributable thereto.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

SEC. 3201. SPOUSAL ELECTION TO LIMIT JOINT AND SEVERAL LIABILITY ON 
              JOINT RETURN.

    (a) In General.--Subpart B of part II of subchapter A of chapter 61 
is amended by inserting after section 6014 the following new section:

``SEC. 6015. ELECTION TO LIMIT JOINT AND SEVERAL LIABILITY ON JOINT 
              RETURN.

    ``(a) Election To Limit Liability.--
            ``(1) In general.--Notwithstanding section 6013(d)(3), and 
        except as provided in paragraphs (2) and (3), if an individual 
        who has made a joint return for any taxable year elects the 
        application of this section--
                    ``(A) the individual's liability for any tax shown 
                on the return which remains unpaid as of the payment 
                due date shall not exceed the individual's separate 
                return amount determined under subsection (b), and
                    ``(B) the individual's liability for any deficiency 
                which is assessed shall not exceed the portion of such 
                deficiency properly allocable to the individual under 
                subsection (c).
            ``(2) Burden of proof.--Except as provided in paragraph (3) 
        (B) or (C), each individual who elects the application of this 
        section shall have the burden of proof with respect to 
        establishing the individual's separate return amount and the 
        portion of any deficiency allocable to such individual.
            ``(3) Election.--
                    ``(A) In general.--An election under this 
                subsection for any taxable year shall be made not later 
                than 2 years after the date on which the Secretary has 
                begun collection activities with respect to the 
                individual making the election.
                    ``(B) Certain taxpayers ineligible to elect.--If 
                the Secretary demonstrates that assets were transferred 
                between individuals filing a joint return as part of a 
                fraudulent scheme by such individuals, an election 
                under this section by either individual shall be 
                invalid (and section 6013(d)(3) shall apply to the 
                joint return).
                    ``(C) Election not valid with respect to certain 
                deficiencies.--If the Secretary demonstrates that an 
                individual making an election under this section had 
                actual knowledge, at the time such individual signed 
                the return, of any item giving rise to a deficiency (or 
                portion thereof) which is not allocable to such 
                individual under subsection (c), such election shall 
                not apply to such deficiency (or portion). This 
                subparagraph shall not apply where the individual with 
                actual knowledge establishes that such individual 
                signed the return under duress.
    ``(b) Separate Return Amount.--For purposes of this section--
            ``(1) In general.--The term `separate return amount' means, 
        with respect to an individual, an amount equal to the excess 
        (if any) of--
                    ``(A) the tax liability of the individual which 
                would have been determined (on the basis of the items 
                shown on the joint return) for the taxable year if the 
                individual had filed a separate return, over
                    ``(B) the aggregate payments of such tax properly 
                allocable to such individual.
            ``(2) Special rules for computing tax liabilities and 
        payment.--
                    ``(A) Treatment of certain credits.--The credits 
                allowed by sections 31, 33, and 34 for any taxable 
                year--
                            ``(i) shall not be taken into account in 
                        determining the amount of tax shown on a return 
                        or the tax liability of an individual filing a 
                        separate return, but
                            ``(ii) shall be taken into account in 
                        determining the aggregate payments of tax of 
                        the individual to whom such credits are 
                        properly allocable.
                    ``(B) Mathematical and clerical errors.--Tax shown 
                on a return shall include any tax assessed on account 
                of a mathematical or clerical error (within the meaning 
                of section 6213(g)(2)) appearing on the return.
            ``(3) Payment due date.--The term `payment due date' means 
        the date prescribed for payment of the tax (determined with 
        regard to any extension of time for payment).
    ``(c) Allocation of Deficiency.--For purposes of subsection 
(a)(1)(B)--
            ``(1) In general.--The portion of any deficiency on a joint 
        return allocated to an individual shall be the amount which 
        bears the same ratio to such deficiency as the net amount of 
        items taken into account in computing the deficiency and 
        allocable to the individual under paragraph (3) bears to the 
        net amount of all items taken into account in computing the 
        deficiency.
            ``(2) Separate treatment of certain items.--If a deficiency 
        (or portion thereof) is attributable to--
                    ``(A) the disallowance of a credit, or
                    ``(B) any tax (other than tax imposed by section 1 
                or 55) required to be included with the joint return,
        and such item is allocated to 1 individual under paragraph (3), 
        such deficiency (or portion) shall be allocated to such 
        individual. Any such item shall not be taken into account under 
        paragraph (1).
            ``(3) Allocation of items giving rise to the deficiency.--
        For purposes of this subsection--
                    ``(A) In general.--Any item giving rise to a 
                deficiency on a joint return shall be allocated to 
                individuals filing the return in the same manner as it 
                would have been allocated if the individuals had filed 
                separate returns for the taxable year.
                    ``(B) Exception where other spouse benefits.--Under 
                rules prescribed by the Secretary, an item otherwise 
                allocable to an individual under subparagraph (A) shall 
                be allocated to the other individual filing the joint 
                return to the extent the item gave rise to a tax 
                benefit on the joint return to the other individual.
                    ``(C) Exception for fraud.--The Secretary may 
                provide for an allocation of any item in a manner not 
                prescribed by subparagraph (A) if the Secretary 
                establishes that such allocation is appropriate due to 
                fraud of 1 or both individuals.
    ``(d) Petition for Review by Tax Court.--
            ``(1) In general.--In the case of an individual who elects 
        to have this section apply--
                    ``(A) In general.--The individual may petition the 
                Tax Court (and the Tax Court shall have jurisdiction) 
                to determine the appropriate relief available to the 
                individual under this section if such petition is filed 
                during the 90-day period beginning on the date on which 
                the Secretary mails by certified or registered mail a 
                notice to such individual of the Secretary's 
                determination of relief available to the spouse. 
                Notwithstanding the preceding sentence, an individual 
                may file such petition at any time after the date which 
                is 6 months after the date such election is filed with 
                the Secretary and before the close of such 90-day 
                period.
                    ``(B) Restrictions applicable to collection of 
                assessment.--
                            ``(i) In general.--Except as otherwise 
                        provided in section 6851 or 6861, no levy or 
                        proceeding in court shall be made, begun, or 
                        prosecuted against the spouse making an 
                        election under subsection (a) for collection of 
                        any assessment to which such election relates 
                        until the expiration of the 90-day period 
                        described in subparagraph (A), or, if a 
                        petition has been filed with the Tax Court, 
                        until the decision of the Tax Court has become 
                        final. Rules similar to the rules of section 
                        7485 shall apply with respect to the collection 
                        of such assessment.
                            ``(ii) Authority to enjoin collection 
                        actions.--Notwithstanding the provisions of 
                        section 7421(a), the beginning of such levy or 
                        proceeding during the time the prohibition 
                        under clause (i) is in force may be enjoined by 
                        a proceeding in the proper court, including the 
                        Tax Court. The Tax Court shall have no 
                        jurisdiction under this subparagraph to enjoin 
                        any action or proceeding unless a timely 
                        petition has been filed under subparagraph (A) 
                        and then only in respect of the amount of the 
                        assessment to which the election under 
                        subsection (a) relates.
            ``(2) Suspension of running of period of limitations.--The 
        running of the period of limitations in section 6502 on the 
        collection of the assessment to which the petition under 
        paragraph (1)(A) relates shall be suspended for the period 
        during which the Secretary is prohibited by paragraph (1)(B) 
        from collecting by levy or a proceeding in court and for 60 
        days thereafter.
            ``(3) Applicable rules.--
                    ``(A) Allowance of credit or refund.--Except as 
                provided in subparagraph (B), notwithstanding any other 
                law or rule of law (other than section 6512(b), 7121, 
                or 7122), credit or refund shall be allowed or made to 
                the extent attributable to the application of this 
                section.
                    ``(B) Res judicata.--In the case of any election 
                under subsection (a), if a decision of the Tax Court in 
                any prior proceeding for the same taxable year has 
                become final, such decision shall be conclusive except 
                with respect to the qualification of the individual for 
                relief which was not an issue in such proceeding. The 
                exception contained in the preceding sentence shall not 
                apply if the Tax Court determines that the individual 
                participated meaningfully in such prior proceeding.
                    ``(C) Limitation on tax court jurisdiction.--If a 
                suit for refund is begun by either individual filing 
                the joint return pursuant to section 6532--
                            ``(i) the Tax Court shall lose jurisdiction 
                        of the individual's action under this section 
                        to whatever extent jurisdiction is acquired by 
                        the district court or the United States Court 
                        of Federal Claims over the taxable years that 
                        are the subject of the suit for refund, and
                            ``(ii) the court acquiring jurisdiction 
                        shall have jurisdiction over the petition filed 
                        under this subsection.
            ``(4) Notice to other spouse.--The Tax Court shall 
        establish rules which provide the individual filing a joint 
        return but not making the election under subsection (a) with 
        adequate notice and an opportunity to become a party to a 
        proceeding under this subsection.
    ``(e) Equitable Relief.--Under procedures prescribed by the 
Secretary, if--
            ``(1) a separate return amount determined under subsection 
        (b) or an allocation of deficiency under subsection (c) is 
        attributable to an item being allocated to an individual,
            ``(2) the individual establishes that he or she did not 
        know, and had no reason to know, of such item, and
            ``(3) taking into account all the facts and circumstances, 
        it is inequitable to hold the individual liable for any unpaid 
        tax or any deficiency (or any portion of either) attributable 
        to such item,
the Secretary may provide that, for purposes of this section, such item 
shall not be allocated to such individual but shall be allocated to the 
other individual filing the joint return.
    ``(f) Other Rules.--For purposes of this section--
            ``(1) Community property laws disregarded.--Any 
        determination under this section shall be made without regard 
        to community property laws.
            ``(2) Limitations on separate returns disregarded.--If an 
        item of deduction or credit is disallowed in its entirety 
        solely because a separate return is filed, such disallowance 
        shall be disregarded and the item shall be computed as if a 
        joint return had been filed and then allocated between the 
        spouses appropriately. A similar rule shall apply for purposes 
        of section 86.
            ``(3) Child's liability.--If the liability of a child of a 
        taxpayer is included on a joint return, such liability shall be 
        disregarded in computing the separate liability of either 
        spouse and such liability shall be allocated appropriately 
        between the spouses.
    ``(g) Liability Increased by Reason of Transfers of Property To 
Avoid Tax.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, any limitation on the tax liability of an 
        individual electing the application of this section shall be 
        increased by the value of any disqualified asset transferred to 
        the individual.
            ``(2) Disqualified asset.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `disqualified asset' 
                means any property or right to property transferred to 
                an individual making the election under this section 
                with respect to a joint return by the other individual 
                filing such joint return if the principal purpose of 
                the transfer was the avoidance of tax or payment of 
                tax.
                    ``(B) Presumption.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), except as provided in clause 
                        (ii), any transfer which is made after the date 
                        which is 1 year before--
                                    ``(I) in the case of any unpaid tax 
                                to which subsection (a)(1)(A) applies, 
                                the payment due date of such unpaid 
                                tax, and
                                    ``(II) in the case of any 
                                deficiency to which subsection 
                                (a)(1)(B) applies, the date on which 
                                the 1st letter of proposed deficiency 
                                which allows the taxpayer an 
                                opportunity for administrative review 
                                in the Internal Revenue Service Office 
                                of Appeals is sent,
                        shall be presumed to have as its principal 
                        purpose the avoidance of tax or payment of tax.
                            ``(ii) Exceptions.--Clause (i) shall not 
                        apply to any transfer--
                                    ``(I) pursuant to a decree of 
                                divorce or separate maintenance or a 
                                written instrument incident to such a 
                                decree, or
                                    ``(II) which an individual 
                                establishes did not have as its 
                                principal purpose the avoidance of tax 
                                or payment of tax.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the provisions of this section, 
including--
            ``(1) regulations providing methods for allocation of items 
        other than the methods under subsection (c)(3), and
            ``(2) regulations providing the opportunity for an 
        individual to have notice of, and an opportunity to participate 
        in, any administrative proceeding with respect to an election 
        made under subsection (a) by the other individual filing the 
        joint return.''.
    (b) Separate Form for Applying for Spousal Relief.--Not later than 
180 days after the date of the enactment of this Act, the Secretary of 
the Treasury shall develop a separate form with instructions for use by 
taxpayers in applying for relief under section 6015(a) of the Internal 
Revenue Code of 1986, as added by this section.
    (c) Separate Notice to Each Filer.--The Secretary of the Treasury 
shall, wherever practicable, send any notice relating to a joint return 
under section 6013 of the Internal Revenue Code of 1986 separately to 
each individual filing the joint return.
    (d) Conforming Amendments.--
            (1) Section 6013 is amended by striking subsection (e).
            (2) Subparagraph (A) of section 6230(c)(5) is amended by 
        striking ``section 6013(e)'' and inserting ``section 6015''.
            (3) Section 7421(a) is amended by inserting ``6015(d),'' 
        after ``sections''.
    (e) Clerical Amendment.--The table of sections for subpart B of 
part II of subchapter A of chapter 61 is amended by inserting after the 
item relating to section 6014 the following new item:

                              ``Sec. 6015. Election to limit joint and 
                                        several liability on joint 
                                        return.''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to any liability 
        for tax arising after the date of the enactment of this Act and 
        any liability for tax arising on or before such date but 
        remaining unpaid as of such date.
            (2) 2-year period.--The 2-year period under section 
        6015(a)(3)(A) of the Internal Revenue Code of 1986 shall not 
        expire before the date which is 2 years after the date of the 
        first collection activity after the date of the enactment of 
        this Act.

SEC. 3202. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING REFUND CLAIMS 
              DURING PERIODS OF DISABILITY.

    (a) In General.--Section 6511 (relating to limitations on credit or 
refund) is amended by redesignating subsection (h) as subsection (i) 
and by inserting after subsection (g) the following new subsection:
    ``(h) Running of Periods of Limitation Suspended While Taxpayer Is 
Unable To Manage Financial Affairs Due to Disability.--
            ``(1) In general.--In the case of an individual, the 
        running of the periods specified in subsections (a), (b), and 
        (c) shall be suspended during any period of such individual's 
        life that such individual is financially disabled.
            ``(2) Financially disabled.--
                    ``(A) In general.--For purposes of paragraph (1), 
                an individual is financially disabled if such 
                individual is unable to manage his financial affairs by 
                reason of a medically determinable physical or mental 
                impairment of the individual which can be expected to 
                result in death or which has lasted or can be expected 
                to last for a continuous period of not less than 12 
                months. An individual shall not be considered to have 
                such an impairment unless proof of the existence 
                thereof is furnished in such form and manner as the 
                Secretary may require.
                    ``(B) Exception where individual has guardian, 
                etc.--An individual shall not be treated as financially 
                disabled during any period that such individual's 
                spouse or any other person is authorized to act on 
                behalf of such individual in financial matters.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to periods of disability before, on, or after the date of the 
enactment of this Act but shall not apply to any claim for credit or 
refund which (without regard to such amendment) is barred by the 
operation of any law or rule of law (including res judicata) as of 
January 1, 1998.

       Subtitle D--Provisions Relating to Interest and Penalties

SEC. 3301. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON OVERLAPPING 
              PERIODS OF INTEREST ON TAX OVERPAYMENTS AND 
              UNDERPAYMENTS.

    (a) In General.--Section 6621 (relating to determination of rate of 
interest) is amended by adding at the end the following new subsection:
    ``(d) Elimination of Interest on Overlapping Periods of Tax 
Overpayments and Underpayments.--To the extent that, for any period, 
interest is payable under subchapter A and allowable under subchapter B 
on equivalent underpayments and overpayments by the same taxpayer of 
tax imposed by this title, the net rate of interest under this section 
on such amounts shall be zero for such period.''.
    (b) Conforming Amendment.--Subsection (f) of section 6601 (relating 
to satisfaction by credits) is amended by adding at the end the 
following new sentence: ``The preceding sentence shall not apply to the 
extent that section 6621(d) applies.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided under paragraph (2), 
        the amendments made by this section shall apply to interest for 
        periods beginning after the date of the enactment of this Act.
            (2) Special rule.--Subject to any applicable statute of 
        limitation not having expired with regard to either a tax 
        underpayment or a tax overpayment, the amendments made by this 
        section shall apply to interest for periods beginning before 
        the date of the enactment of this Act if the taxpayer--
                    (A) reasonably identifies and establishes periods 
                of such tax overpayments and underpayments for which 
                the zero rate applies, and
                    (B) not later than December 31, 1999, requests the 
                Secretary of the Treasury to apply section 6621(d) of 
                the Internal Revenue Code of 1986, as added by 
                subsection (a), to such periods.

SEC. 3301A. PROPERTY SUBJECT TO A LIABILITY TREATED IN SAME MANNER AS 
              ASSUMPTION OF LIABILITY.

    (a) Repeal of Property Subject to a Liability Test.--
            (1) Section 357.--Section 357(a) (relating to assumption of 
        liability) is amended by striking ``, or acquires from the 
        taxpayer property subject to a liability'' in paragraph (2).
            (2) Section 358.--Section 358(d)(1) (relating to assumption 
        of liability) is amended by striking ``or acquired from the 
        taxpayer property subject to a liability''.
            (3) Section 368.--
                    (A) Section 368(a)(1)(C) is amended by striking ``, 
                or the fact that property acquired is subject to a 
                liability,''.
                    (B) The last sentence of section 368(a)(2)(B) is 
                amended by striking ``, and the amount of any liability 
                to which any property acquired from the acquiring 
                corporation is subject,''.
    (b) Clarification of Assumption of Liability.--Section 357(c) is 
amended by adding at the end the following new paragraph:
            ``(4) Determination of amount of liability assumed.--For 
        purposes of this section, section 358(d), section 368(a)(1)(C), 
        and section 368(a)(2)(B)--
                    ``(A) a liability shall be treated as having been 
                assumed to the extent, as determined on the basis of 
                facts and circumstances, the transferor is relieved of 
                such liability or any portion thereof (including 
                through an indemnity agreement or other similar 
                arrangement), and
                    ``(B) in the case of the transfer of any property 
                subject to a nonrecourse liability, unless the facts 
                and circumstances indicate otherwise, the transferee 
                shall be treated as assuming with respect to such 
                property a ratable portion of such liability determined 
                on the basis of the relative fair market values 
                (determined without regard to section 7701(g)) of all 
                assets subject to such liability.''.
    (c) Application to Provisions Other Than Subchapter C.--
            (1) Section 584.--Section 584(h)(3) is amended--
                    (A) by striking ``, and the fact that any property 
                transferred by the common trust fund is subject to a 
                liability,'' in subparagraph (A),
                    (B) by striking clause (ii) of subparagraph (B) and 
                inserting:
                            ``(ii) Assumed liabilities.--For purposes 
                        of clause (i), the term `assumed liabilities' 
                        means any liability of the common trust fund 
                        assumed by any regulated investment company in 
                        connection with the transfer referred to in 
                        paragraph (1)(A).
                    ``(C) Assumption.--For purposes of this paragraph, 
                in determining the amount of any liability assumed, the 
                rules of section 357(c)(4) shall apply.''.
            (2) Section 1031.--The last sentence of section 1031(d) is 
        amended--
                    (A) by striking ``assumed a liability of the 
                taxpayer or acquired from the taxpayer property subject 
                to a liability'' and inserting ``assumed (as determined 
                under section 357(c)(4)) a liability of the taxpayer'', 
                and
                    (B) by striking ``or acquisition (in the amount of 
                the liability)''.
    (d) Conforming Amendments.--
            (1) Section 351(h)(1) is amended by striking ``, or 
        acquires property subject to a liability,''.
            (2) Section 357 is amended by striking ``or acquisition'' 
        each place it appears in subsection (a) or (b).
            (3) Section 357(b)(1) is amended by striking ``or 
        acquired''.
            (4) Section 357(c)(1) is amended by striking ``, plus the 
        amount of the liabilities to which the property is subject,''.
            (5) Section 357(c)(3) is amended by striking ``or to which 
        the property transferred is subject''.
            (6) Section 358(d)(1) is amended by striking ``or 
        acquisition (in the amount of the liability)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of the enactment of this Act.

SEC. 3302. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS OTHER THAN 
              CORPORATIONS.

    (a) In General.--Subparagraph (B) of section 6621(a)(1) (defining 
overpayment rate) is amended to read as follows:
                    ``(B) 3 percentage points (2 percentage points in 
                the case of a corporation).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to interest for the second and succeeding calendar quarters beginning 
after the date of the enactment of this Act.

SEC. 3303. ELIMINATION OF PENALTY ON INDIVIDUAL'S FAILURE TO PAY FOR 
              MONTHS DURING PERIOD OF INSTALLMENT AGREEMENT.

    (a) In General.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(h) Limitation on Penalty on Individual's Failure To Pay for 
Months During Period of Installment Agreement.--In the case of an 
individual who files a return of tax on or before the due date for the 
return (including extensions), no addition to the tax shall be imposed 
under paragraph (2) or (3) of subsection (a) with respect to the 
individual's liability for tax relating to the return for any month 
during which an installment agreement under section 6159 is in effect 
for the payment of such tax.''.
    (b) Effective Date.--The amendment made by this section shall apply 
for purposes of determining additions to the tax for months beginning 
after December 31, 1999.

SEC. 3304. MITIGATION OF FAILURE TO DEPOSIT PENALTY.

    (a) Taxpayer May Designate Periods to Which Deposits Apply.--
Section 6656 (relating to underpayment of deposits) is amended by 
adding at the end the following new subsection:
    ``(e) Designation of Periods to Which Deposits Apply.--
            ``(1) In general.--A person may designate the period or 
        periods to which a deposit is to be applied for purposes of 
        this section.
            ``(2) Time for making designation.--A person shall make any 
        designation under paragraph (1) on or before the later of--
                    ``(A) the date the deposit is made, or
                    ``(B) the 90th day after the earlier of the dates 
                determined under subsection (b)(1)(B) with respect to a 
                notice covering the period to which the deposit would 
                be applied but for a designation under this 
                subsection.''.
    (b) Expansion of Exemption for First-Time Deposits.--
            (1) In general.--Paragraph (2) of section 6656(c) (relating 
        to exemption for first-time depositors of employment taxes) is 
        amended to read as follows:
            ``(2) such failure--
                    ``(A) occurs during the 1st quarter that such 
                person was required to deposit any employment tax, or
                    ``(B) if such person is required to change the 
                frequency of deposits of any employment tax, relates to 
                the first deposit to which such change applies, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to deposits required to be made after the 180th day after the 
date of the enactment of this Act.

SEC. 3305. SUSPENSION OF INTEREST AND CERTAIN PENALTIES WHERE SECRETARY 
              FAILS TO CONTACT INDIVIDUAL TAXPAYER.

    (a) In General.--Section 6404 (relating to abatements) is amended 
by redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
    ``(g) Suspension of Interest and Certain Penalties Where Secretary 
Fails To Contact Taxpayer.--
            ``(1) In general.--In the case of an individual who files a 
        return of tax imposed by subtitle A for a taxable year on or 
        before the due date for the return (including extensions), if 
        the Secretary does not provide a notice of deficiency to the 
        taxpayer before the close of the 1-year period beginning on the 
        later of--
                    ``(A) the date on which the return is filed, or
                    ``(B) the due date of the return without regard to 
                extensions,
        the Secretary shall suspend the imposition of any interest, 
        penalty, addition to tax, or additional amount with respect to 
        any failure relating to the return which is computed by 
        reference to the period of time the failure continues to exist 
        and which is properly allocable to the suspension period.
            ``(2) Exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any penalty imposed by section 6651,
                    ``(B) any interest, penalty, addition to tax, or 
                additional amount in a case involving fraud, or
                    ``(C) any criminal penalty.
            ``(3) Suspension period.--For purposes of this subsection, 
        the term `suspension period' means the period--
                    ``(A) beginning on the day after the close of the 
                1-year period under paragraph (1), and
                    ``(B) ending on the date which is 21 days after the 
                date on which notice and demand for payment of tax 
                relating to such return is made by the Secretary.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 3306. PROCEDURAL REQUIREMENTS FOR IMPOSITION OF PENALTIES AND 
              ADDITIONS TO TAX.

    (a) In General.--Chapter 68 (relating to additions to the tax, 
additional amounts, and assessable penalties) is amended by adding at 
the end the following new subchapter:

                ``Subchapter C--Procedural Requirements

                              ``Sec. 6751. Procedural requirements.

``SEC. 6751. PROCEDURAL REQUIREMENTS.

    ``(a) Computation of Penalty Included in Notice.--The Secretary 
shall include with each notice of penalty under this title information 
with respect to the name of the penalty, the section of this title 
under which the penalty is imposed, and a computation of the penalty.
    ``(b) Approval of Assessment.--
            ``(1) In general.--No penalty under this title shall be 
        assessed unless the initial determination of such assessment is 
        personally approved (in writing) by the immediate supervisor of 
        the individual making such determination or such higher level 
        official as the Secretary may designate.
            ``(2) Exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any addition to tax under section 6651, 6654, 
                or 6655, or
                    ``(B) any other penalty automatically calculated 
                through electronic means.
    ``(c) Penalties.--For purposes of this section, the term `penalty' 
includes any addition to tax or any additional amount.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 68 
is amended by adding at the end the following new item:

                              ``Subchapter C. Procedural 
                                        requirements.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to notices issued, and penalties assessed, after the 180th day 
after the date of the enactment of this Act.

SEC. 3307. PERSONAL DELIVERY OF NOTICE OF PENALTY UNDER SECTION 6672.

    (a) In General.--Paragraph (1) of section 6672(b) (relating to 
failure to collect and pay over tax, or attempt to evade or defeat tax) 
is amended by inserting ``or in person'' after ``section 6212(b)''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 6672(b) is amended by 
        inserting ``(or, in the case of such a notice delivered in 
        person, such delivery)'' after ``paragraph (1)''.
            (2) Paragraph (3) of section 6672(b) is amended by 
        inserting ``or delivered in person'' after ``mailed'' each 
        place it appears.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3308. NOTICE OF INTEREST CHARGES.

    (a) In General.--Chapter 67 (relating to interest) is amended by 
adding at the end the following new subchapter:

                  ``Subchapter D--Notice requirements

                              ``Sec. 6631. Notice requirements.

``SEC. 6631. NOTICE REQUIREMENTS.

    ``The Secretary shall include with each notice to an individual 
taxpayer which includes an amount of interest required to be paid by 
such taxpayer under this title information with respect to the section 
of this title under which the interest is imposed and a computation of 
the interest.''.
    (b) Conforming Amendment.--The table of subchapters for chapter 67 
is amended by adding at the end the following new item:

                              ``Subchapter D. Notice requirements.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to notices issued after June 30, 2000.

SEC. 3309. ABATEMENT OF INTEREST ON UNDERPAYMENTS BY TAXPAYERS IN 
              PRESIDENTIALLY DECLARED DISASTER AREAS.

    (a) In General.--Section 6404 of the Internal Revenue Code of 1986 
(relating to abatements) is amended by adding at the end the following:
    ``(h) Abatement of Interest on Underpayments by Taxpayers in 
Presidentially Declared Disaster Areas.--
            ``(1) In general.--If the Secretary extends for any period 
        the time for filing income tax returns under section 6081 and 
        the time for paying income tax with respect to such returns 
        under section 6161 for any taxpayer located in a Presidentially 
        declared disaster area, the Secretary shall abate for such 
        period the assessment of any interest prescribed under section 
        6601 on such income tax.
            ``(2) Presidentially declared disaster area.--For purposes 
        of paragraph (1), the term `Presidentially declared disaster 
        area' means, with respect to any taxpayer, any area which the 
        President has determined warrants assistance by the Federal 
        Government under the Disaster Relief and Emergency Assistance 
        Act.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disasters declared after December 31, 1996, with respect to taxable 
years beginning after December 31, 1996.
    (c) Emergency Designation.--
            (1) For the purposes of section 252(e) of the Balanced 
        Budget and Emergency Deficit Control Act, Congress designates 
        the provisions of this section as an emergency requirement.
            (2) The amendments made by subsections (a) and (b) of this 
        section shall only take effect upon the transmittal by the 
        President to the Congress of a message designating the 
        provisions of subsections (a) and (b) as an emergency 
        requirement pursuant to section 252(e) of the Balanced Budget 
        and Emergency Deficit Control Act.

 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

                          PART I--DUE PROCESS

SEC. 3401. DUE PROCESS IN IRS COLLECTION ACTIONS.

    (a) Notice and Opportunity for Hearing Before Filing of Notice of 
Lien.--Subchapter C of chapter 64 (relating to lien for taxes) is 
amended by inserting before the table of sections the following:

                              ``Part I.  Due process for liens.
                              ``Part II.  Liens.

                    ``PART I--DUE PROCESS FOR LIENS

                              ``Sec. 6320. Notice and opportunity for 
                                        hearing before filing of notice 
                                        of lien.

``SEC. 6320. NOTICE AND OPPORTUNITY FOR HEARING BEFORE FILING OF NOTICE 
              OF LIEN.

    ``(a) Requirement of Notice.--
            ``(1) In general.--No notice of lien may be filed under 
        section 6323 unless the Secretary has notified in writing the 
        person described in section 6321 of the Secretary's intention 
        to file such a notice of lien.
            ``(2) Time and method for notice.--The notice required 
        under paragraph (1) shall be--
                    ``(A) given in person,
                    ``(B) left at the dwelling or usual place of 
                business of such person, or
                    ``(C) sent by certified or registered mail to such 
                person's last known address,
        not less than 30 days before the day of the filing of the 
        notice of lien.
            ``(3) Information included with notice.--The notice 
        required under paragraph (1) shall include in simple and 
        nontechnical terms--
                    ``(A) the amount of unpaid tax,
                    ``(B) the right of the person to request a hearing 
                during the 30-day period described in paragraph (2),
                    ``(C) the administrative appeals available to the 
                taxpayer with respect to such lien and the procedures 
                relating to such appeals, and
                    ``(D) the provisions of this title and procedures 
                relating to the release of liens on property.
    ``(b) Right to Fair Hearing.--
            ``(1) In general.--If the person requests a hearing under 
        subsection (a)(3)(B), such hearing shall be held by the 
        Internal Revenue Service Office of Appeals.
            ``(2) Impartial officer.--The hearing under this subsection 
        shall be conducted by an officer or employee who has had no 
        involvement with respect to the unpaid tax specified in 
        subsection (a)(3)(A) before the first hearing under this 
        section. A taxpayer may waive the requirement of this 
        paragraph.
    ``(c) Conduct of Hearing; Review; Suspensions.--For purposes of 
this section, subsections (c), (d) (other than paragraph (2)(B) 
thereof), and (e) of section 6330 shall apply.

                          ``PART II--LIENS''.

    (b) Notice and Opportunity for Hearing Before Levy.--Subchapter D 
of chapter 64 (relating to seizure of property for collection of taxes) 
is amended by inserting before the table of sections the following:

                              ``Part I.  Due process for collections.
                              ``Part II.  Levy.

                 ``PART I--DUE PROCESS FOR COLLECTIONS

                              ``Sec. 6330. Notice and opportunity for 
                                        hearing before levy.

``SEC. 6330. NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.

    ``(a) Requirement of Notice Before Levy.--
            ``(1) In general.--No levy may be made on any property or 
        right to property of any person unless the Secretary has 
        notified such person in writing of the Secretary's intention to 
        make such a levy.
            ``(2) Time and method for notice.--
                    ``(A) In general.--The notice required under 
                paragraph (1) shall be--
                            ``(i) given in person,
                            ``(ii) left at the dwelling or usual place 
                        of business of such person, or
                            ``(iii) sent by certified or registered 
                        mail to such person's last known address,
                not less than 30 days before the day of the levy.
                    ``(B) Longer period for life insurance and 
                endowment contracts.--In the case of a levy on an 
                organization with respect to a life insurance or 
                endowment contract issued by such organization, 
                subparagraph (A) shall be applied by substituting `90 
                days' for `30 days'.
            ``(3) Information included with notice.--The notice 
        required under paragraph (1) shall include in simple and 
        nontechnical terms--
                    ``(A) the amount of unpaid tax,
                    ``(B) the right of the person to request a hearing 
                during the applicable period under paragraph (2), and
                    ``(C) the proposed action by the Secretary and the 
                rights of the person with respect to such action, 
                including a brief statement which sets forth--
                            ``(i) the provisions of this title relating 
                        to levy and sale of property,
                            ``(ii) the procedures applicable to the 
                        levy and sale of property under this title,
                            ``(iii) the administrative appeals 
                        available to the taxpayer with respect to such 
                        levy and sale and the procedures relating to 
                        such appeals,
                            ``(iv) the alternatives available to 
                        taxpayers which could prevent levy on the 
                        property (including installment agreements 
                        under section 6159), and
                            ``(v) the provisions of this title and 
                        procedures relating to redemption of property 
                        and release of liens on property.
    ``(b) Right to Fair Hearing.--
            ``(1) In general.--If the person requests a hearing under 
        subsection (a)(3)(B), such hearing shall be held by the 
        Internal Revenue Service Office of Appeals.
            ``(2) Impartial officer.--The hearing under this subsection 
        shall be conducted by an officer or employee who has had no 
        prior involvement with respect to the unpaid tax specified in 
        subsection (a)(3)(A) before the first hearing under this 
        section or section 6320. A taxpayer may waive the requirement 
        of this paragraph.
    ``(c) Matters Considered at Hearing.--In the case of any hearing 
conducted under this section--
            ``(1) Requirement of investigation.--The Secretary shall 
        verify at the hearing that the requirements of any applicable 
        law or administrative procedure have been met.
            ``(2) Issues at hearing.--The person may raise at the 
        hearing any relevant issue relating to the unpaid tax or the 
        proposed levy, including--
                    ``(A) challenges to the underlying tax liability as 
                to existence or amount,
                    ``(B) appropriate spousal defenses,
                    ``(C) challenges to the appropriateness of 
                collection actions, and
                    ``(D) offers of collection alternatives, which may 
                include the posting of a bond, the substitution of 
                other assets, an installment agreement, or an offer-in-
                compromise.
            ``(3) Basis for the determination.--The determination by an 
        appeals officer under this subsection shall take into 
        consideration--
                    ``(A) the verification presented under paragraph 
                (1),
                    ``(B) the issues raised under paragraph (2), and
                    ``(C) whether the proposed collection action 
                balances the need for the efficient collection of taxes 
                with the legitimate concern of the person that the 
                collection action be no more intrusive than necessary.
            ``(4) Certain issues precluded.--An issue may not be raised 
        at the hearing if--
                    ``(A) the issue was raised at a previous hearing 
                under this section or section 6320 or in any other 
                previous administrative or judicial proceeding, and
                    ``(B) the person seeking to raise the issue 
                participated meaningfully in such hearing or 
                proceeding.
        This paragraph shall not apply to any issue with respect to 
        which subsection (d)(2)(B) applies.
    ``(d) Proceeding After Hearing.--
            ``(1) Judicial review of determination.--The person may 
        appeal a determination under this section to the Tax Court 
        within 30 days of the date of such determination.
            ``(2) Jurisdiction retained at irs office of appeals.--The 
        Internal Revenue Service Office of Appeals shall retain 
        jurisdiction with respect to any determination made under this 
        section, including subsequent hearings requested by the person 
        who requested the original hearing on issues regarding--
                    ``(A) collection actions taken or proposed with 
                respect to such determination, and
                    ``(B) after the person has exhausted all 
                administrative remedies, a change in circumstances with 
                respect to such person which affects such 
                determination.
    ``(e) Suspension of Collections and Statute of Limitations.--If a 
hearing is requested under subsection (a)(3)(B), the levy actions which 
are the subject of the requested hearing and the running of any period 
of limitations under section 6502 (relating to collection after 
assessment), section 6531 (relating to criminal prosecutions), or 
section 6532 (relating to other suits) shall be suspended for the 
period during which such hearing, and appeals therein, are pending. In 
no event shall any such period expire before the 90th day after the day 
on which there is a final determination in such hearing.
    ``(f) Jeopardy Collection.--If the Secretary has made a finding 
under the last sentence of section 6331(a) that the collection of tax 
is in jeopardy, this section shall not apply, except that the taxpayer 
shall be given the opportunity for the hearing described in this 
section within a reasonable period of time after the levy.

                           ``PART II--LEVY''.

    (c) Review by Special Trial Judges Allowed.--
            (1) In general.--Section 7443(b) (relating to proceedings 
        which may be assigned to special trial judges) is amended by 
        striking ``and'' at the end of paragraph (3), by redesignating 
        paragraph (4) as paragraph (5), and by inserting after 
        paragraph (3) the following:
            ``(4) any proceeding under section 6320 or 6330, and''.
            (2) Authority to make decisions.--Section 7443(c) (relating 
        to authority to make court decisions) is amended by striking 
        ``or (3)'' and inserting ``(3), or (4)''.
    (d) Conforming Amendment.--Section 6331 is amended by striking 
subsection (d).
    (e) Effective Date.--The amendments made by this section shall 
apply to collection actions initiated after the date which is 180 days 
after the date of the enactment of this Act.

                    PART II--EXAMINATION ACTIVITIES

SEC. 3411. UNIFORM APPLICATION OF CONFIDENTIALITY PRIVILEGE TO TAXPAYER 
              COMMUNICATIONS WITH FEDERALLY AUTHORIZED PRACTITIONERS.

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

``SEC. 7525. UNIFORM APPLICATION OF CONFIDENTIALITY PRIVILEGE TO 
              TAXPAYER COMMUNICATIONS WITH FEDERALLY AUTHORIZED 
              PRACTITIONERS.

    ``(a) General Rule.--With respect to tax advice, the same common 
law protections of confidentiality which apply to a communication 
between a taxpayer and an attorney shall also apply to a communication 
between a taxpayer and any federally authorized tax practitioner to the 
extent the communication would be considered a privileged communication 
if it were between a taxpayer and an attorney.
    ``(b) Limitations.--Subsection (a) may only be asserted in--
            ``(1) any noncriminal tax matter before the Internal 
        Revenue Service, and
            ``(2) any noncriminal tax proceeding in Federal court with 
        respect to such matter.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Federally authorized tax practitioner.--The term 
        `federally authorized tax practitioner' means any individual 
        who is authorized under Federal law to practice before the 
        Internal Revenue Service if such practice is subject to Federal 
        regulation under section 330 of title 31, United States Code.
            ``(2) Tax advice.--The term `tax advice' means advice given 
        by an individual with respect to a matter which is within the 
        scope of the individual's authority to practice described in 
        paragraph (1).''.
    (b) Conforming Amendment.--The table of sections for such chapter 
77 is amended by adding at the end the following new item:

                              ``Sec. 7525. Uniform application of 
                                        confidentiality privilege to 
                                        taxpayer communications with 
                                        federally authorized 
                                        practitioners.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to communications made on or after the date of the enactment of 
this Act.

SEC. 3412. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

    Section 7602 (relating to examination of books and witnesses) is 
amended by adding at the end the following new subsection:
    ``(d) Limitation on Examination on Unreported Income.--The 
Secretary shall not use financial status or economic reality 
examination techniques to determine the existence of unreported income 
of any taxpayer unless the Secretary has a reasonable indication that 
there is a likelihood of such unreported income.''.

SEC. 3413. SOFTWARE TRADE SECRETS PROTECTION.

    (a) In General.--Subchapter A of chapter 78 (relating to 
examination and inspection) is amended by redesignating section 7612 as 
section 7613 and by inserting after 7611 the following:

``SEC. 7612. SPECIAL PROCEDURES FOR SUMMONSES FOR COMPUTER SOFTWARE.

    ``(a) General Rule.--For purposes of this title--
            ``(1) except as provided in subsection (b), no summons may 
        be issued under this title, and the Secretary may not begin any 
        action under section 7604 to enforce any summons, to produce or 
        analyze any computer software source code, and
            ``(2) any software and related materials which are provided 
        to the Secretary under this title shall be subject to the 
        safeguards under subsection (c).
    ``(b) Circumstances Under Which Computer Software Source Code May 
Be Provided.--
            ``(1) In general.--Subsection (a)(1) shall not apply to any 
        portion, item, or component of computer software source code 
        if--
                    ``(A) the Secretary is unable to otherwise 
                reasonably ascertain the correctness of any item on a 
                return from--
                            ``(i) the taxpayer's books, papers, 
                        records, or other data, or
                            ``(ii) the computer software executable 
                        code (and any modifications thereof) to which 
                        such source code relates and any associated 
                        data which, when executed, produces the output 
                        to ascertain the correctness of the item,
                    ``(B) the Secretary identifies with reasonable 
                specificity the portion, item, or component of such 
                source code needed to verify the correctness of such 
                item on the return, and
                    ``(C) the Secretary determines that the need for 
                the portion, item, or component of such source code 
                with respect to such item outweighs the risks of 
                unauthorized disclosure of trade secrets.
            ``(2) Exceptions.--Subsection (a)(1) shall not apply to--
                    ``(A) any inquiry into any offense connected with 
                the administration or enforcement of the internal 
                revenue laws,
                    ``(B) any computer software source code developed 
                by the taxpayer or a related person for internal use by 
                the taxpayer or such person, or
                    ``(C) any communications between the owner of the 
                source code and the taxpayer or related persons.
            ``(3) Cooperation required.--For purposes of paragraph (1), 
        the Secretary shall be treated as meeting the requirements of 
        subparagraphs (A) and (B) of such paragraph if--
                    ``(A) the Secretary determines that it is not 
                feasible to determine the correctness of an item 
                without access to the computer software executable code 
                and associated data described in paragraph (1)(A)(ii),
                    ``(B) the Secretary makes a formal request to the 
                taxpayer for such code and data and to the owner of the 
                computer software source code for such executable code, 
                and
                    ``(C) such code and data is not provided within 180 
                days of such request.
            ``(4) Right to contest summons.--In any proceeding brought 
        under section 7604 to enforce a summons issued under the 
        authority of this subsection, the court shall, at the request 
        of any party, hold a hearing to determine whether the 
        applicable requirements of this subsection have been met.
    ``(c) Safeguards To Ensure Protection of Trade Secrets and Other 
Confidential Information.--
            ``(1) Entry of protective order.--In any court proceeding 
        to enforce a summons for any portion of software, the court may 
        receive evidence and issue any order necessary to prevent the 
        disclosure of trade secrets or other confidential information 
        with respect to such software, including -requiring that any 
        information be placed under seal to be opened only as directed 
        by the court.
            ``(2) Protection of software.--Notwithstanding any other 
        provision of this section, and in addition to any protections 
        ordered pursuant to paragraph (1), in the case of software that 
        comes into the possession or control of the Secretary in the 
        course of any examination with respect to any taxpayer--
                    ``(A) the software may be used only in connection 
                with the examination of such taxpayer's return, any 
                appeal by the taxpayer to the Internal Revenue Service 
                Office of Appeals, any judicial proceeding (and any 
                appeals therefrom), and any inquiry into any offense 
                connected with the administration or enforcement of the 
                internal revenue laws,
                    ``(B) the Secretary shall provide, in advance, to 
                the taxpayer and the owner of the software a written 
                list of the names of all individuals who will analyze 
                or otherwise have access to the software,
                    ``(C) the software shall be maintained in a secure 
                area or place, and, in the case of computer software 
                source code, shall not be removed from the owner's 
                place of business unless the owner permits, or a court 
                orders, such removal,
                    ``(D) the software may not be copied except as 
                necessary to perform such analysis, and the Secretary 
                shall number all copies made and certify in writing 
                that no other copies have been (or will be) made,
                    ``(E) at the end of the period during which the 
                software may be used under subparagraph (A)--
                            ``(i) the software and all copies thereof 
                        shall be returned to the person from whom they 
                        were obtained and any copies thereof made under 
                        subparagraph (D) on the hard drive of a machine 
                        or other mass storage device shall be 
                        permanently deleted, and
                            ``(ii) the Secretary shall obtain from any 
                        person who analyzes or otherwise had access to 
                        such software a written certification under 
                        penalty of perjury that all copies and related 
                        materials have been returned and that no copies 
                        were made of them,
                    ``(F) the software may not be decompiled or 
                disassembled, and
                    ``(G) the Secretary shall provide to the taxpayer 
                and the owner of any interest in such software, as the 
                case may be, a written agreement, between the Secretary 
                and any person who is not an officer or employee of the 
                United States and who will analyze or otherwise have 
                access to such software, which provides that such 
                person agrees not to--
                            ``(i) disclose such software to any person 
                        other than authorized employees or agents of 
                        the Secretary during and after employment by 
                        the Secretary, or
                            ``(ii) participate for 2 years in the 
                        development of software which is intended for a 
                        similar purpose as the software examined.
        For purposes of subparagraph (C), the owner shall make 
        available any necessary equipment or materials for analysis of 
        computer software source code required to be conducted on the 
        owner's premises. The owner of any interest in the software 
        shall be considered a party to any agreement described in 
        subparagraph (G).
    ``(d) Definitions.--For purposes of this section--
            ``(1) Software.--The term `software' includes computer 
        software source code and computer software executable code.
            ``(2) Computer software source code.--The term `computer 
        software source code' means--
                    ``(A) the code written by a programmer using a 
                programming language which is comprehensible to 
                appropriately trained persons, is not machine readable, 
                and is not capable of directly being used to give 
                instructions to a computer,
                    ``(B) related programmers' notes, design documents, 
                memoranda, and similar documentation, and
                    ``(C) related customer communications.
            ``(3) Computer software executable code.--The term 
        `computer software executable code' means--
                    ``(A) any object code, machine code, or other code 
                readable by a computer when loaded into its memory and 
                used directly by such computer to execute instructions, 
                and
                    ``(B) any related user manuals.
            ``(4) Owner.--The term `owner' shall, with respect to any 
        software, include the developer of the software.
            ``(5) Related person.--A person shall be treated as related 
        to another person if such persons are related persons under 
        section 267 or 707(b).''.
    (b) Unauthorized Disclosure of Software.--Section 7213 (relating to 
unauthorized disclosure of information) is amended by redesignating 
subsection (d) as subsection (e) and by inserting after subsection (c) 
the following:
    ``(d) Disclosure of Software.--Any person who willfully divulges or 
makes known software (as defined in section 7612(d)(1)) to any person 
in violation of section 7612 shall be guilty of a felony and, upon 
conviction thereof, shall be fined not more than $5,000, or imprisoned 
not more than 5 years, or both, together with the costs of 
prosecution.''.
    (c) Application of Special Procedures for Third-Party Summonses.--
Paragraph (2) of section 7603(b), as amended by section 3416(a), is 
amended by striking ``and'' at the end of subparagraph (H), by striking 
a period at the end of subparagraph (I) and inserting ``, and'', and by 
adding at the end the following:
                    ``(J) any owner or developer of a computer software 
                source code (as defined in section 7612(d)(2)).
        Subparagraph (J) shall apply only with respect to a summons 
        requiring the production of the source code referred to in 
        subparagraph (J) or the program and data described in section 
        7612(b)(1)(A)(ii) to which such source code relates.''.
    (d) Conforming Amendment.--The table of sections for subchapter A 
of chapter 78 is amended by striking the item relating to section 7612 
and by inserting the following:

                              ``Sec. 7612. Special procedures for 
                                        summonses for computer 
                                        software.
                              ``Sec. 7613. Cross references.''.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to summonses issued, and software acquired, after the 
        date of the enactment of this Act.
            (2) Software protection.--In the case of any software 
        acquired on or before such date of enactment, the requirements 
        of section 7612(a)(2) of the Internal Revenue Code of 1986 (as 
        added by such amendments) shall apply after the 90th day after 
        such date. The preceding sentence shall not apply to the 
        requirement under section 7612(c)(2)(G)(ii) of such Code (as so 
        added).

SEC. 3414. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING 
              ALTERNATIVE COMMITMENT AGREEMENTS.

    The Secretary of the Treasury or the Secretary's delegate shall 
instruct employees of the Internal Revenue Service that they may not 
threaten to audit any taxpayer in an attempt to coerce the taxpayer 
into entering into a Tip Reporting Alternative Commitment Agreement.

SEC. 3415. TAXPAYERS ALLOWED MOTION TO QUASH ALL THIRD-PARTY SUMMONSES.

    (a) In General.--Paragraph (1) of section 7609(a) (relating to 
summonses to which section applies) is amended by striking so much of 
such paragraph as precedes ``notice of the summons'' and inserting the 
following:
            ``(1) In general.--If any summons to which this section 
        applies requires the giving of testimony on, or the production 
        of any portion of records made or kept on, any person (other 
        than the person summoned) who is identified in the summons, 
        then''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 7609 is amended by striking 
        paragraphs (3) and (4), by redesignating paragraph (5) as 
        paragraph (3), and by striking in paragraph (3) (as so 
        redesignated) ``subsection (c)(2)(B)'' and inserting 
        ``subsection (c)(2)(D)''.
            (2) Subsection (c) of section 7609 is amended to read as 
        follows:
    ``(c) Summons to Which Section Applies.--
            ``(1) In general.--Except as provided in paragraph (2), 
        this section shall apply to any summons issued under paragraph 
        (2) of section 7602(a) or under section 6420(e)(2), 6421(g)(2), 
        or 6427(j)(2).
            ``(2) Exceptions.--This section shall not apply to any 
        summons--
                    ``(A) served on the person with respect to whose 
                liability the summons is issued, or any officer or 
                employee of such person,
                    ``(B) issued to determine whether or not records of 
                the business transactions or affairs of an identified 
                person have been made or kept,
                    ``(C) issued solely to determine the identity of 
                any person having a numbered account (or similar 
                arrangement) with a bank or other institution described 
                in section 7603(b)(2)(A),
                    ``(D) issued in aid of the collection of--
                            ``(i) an assessment made or judgment 
                        rendered against the person with respect to 
                        whose liability the summons is issued, or
                            ``(ii) the liability at law or in equity of 
                        any transferee or fiduciary of any person 
                        referred to in clause (i),
                    ``(E)(i) issued by a criminal investigator of the 
                Internal Revenue Service in connection with the 
                investigation of an offense connected with the 
                administration or enforcement of the internal revenue 
                laws, and
                    ``(ii) served on any person who is not a third-
                party recordkeeper (as defined in section 7603(b)), or
                    ``(F) described in subsection (f) or (g).
            ``(3) Records.--For purposes of this section, the term 
        `records' includes books, papers, and other data.''.
            (3) Paragraph (2) of section 7609(e) is amended by striking 
        ``third-party recordkeeper's'' and all that follows through 
        ``subsection (f)'' and inserting ``summoned party's response to 
        the summons''.
            (4) Subsection (f) of section 7609 is amended--
                    (A) by striking ``described in subsection (c)'' and 
                inserting ``described in subsection (c)(1)'', and
                    (B) by inserting ``or testimony'' after ``records'' 
                in paragraph (3).
            (5) Subsection (g) of section 7609 is amended by striking 
        ``In the case of any summons described in subsection (c), the 
        provisions of subsections (a)(1) and (b) shall not apply if'' 
        and inserting ``A summons is described in this subsection if''.
            (6)(A) Subsection (i) of section 7609 is amended by 
        striking ``Third-Party Recordkeeper and'' in the subsection 
        heading.
            (B) Paragraph (1) of section 7609(i) is amended by striking 
        ``described in subsection (c), the third-party recordkeeper'' 
        and inserting ``to which this section applies for the 
        production of records, the summoned party''.
            (C) Paragraph (2) of section 7609(i) is amended--
                    (i) by striking ``recordkeeper'' in the heading and 
                inserting ``summoned party'', and
                    (ii) by striking ``the third-party recordkeeper'' 
                and inserting ``the summoned party''.
            (D) Paragraph (3) of section 7609(i) is amended to read as 
        follows:
            ``(3) Protection for summoned party who discloses.--Any 
        summoned party, or agent or employee thereof, making a 
        disclosure of records or testimony pursuant to this section in 
        good faith reliance on the certificate of the Secretary or an 
        order of a court requiring production of records or the giving 
        of such testimony shall not be liable to any customer or other 
        person for such disclosure.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to summonses served after the date of the enactment of this Act.

SEC. 3416. SERVICE OF SUMMONSES TO THIRD-PARTY RECORDKEEPERS PERMITTED 
              BY MAIL.

    (a) In General.--Section 7603 (relating to service of summons) is 
amended by striking ``A summons issued'' and inserting ``(a) In 
General.--A summons issued'' and by adding at the end the following new 
subsection:
    ``(b) Service by Mail to Third-Party Recordkeepers.--
            ``(1) In general.--A summons referred to in subsection (a) 
        for the production of books, papers, records, or other data by 
        a third-party recordkeeper may also be served by certified or 
        registered mail to the last known address of such recordkeeper.
            ``(2) Third-party recordkeeper.--For purposes of paragraph 
        (1), the term `third-party recordkeeper' means--
                    ``(A) any mutual savings bank, cooperative bank, 
                domestic building and loan association, or other 
                savings institution chartered and supervised as a 
                savings and loan or similar association under Federal 
                or State law, any bank (as defined in section 581), or 
                any credit union (within the meaning of section 
                501(c)(14)(A));
                    ``(B) any consumer reporting agency (as defined 
                under section 603(f) of the Fair Credit Reporting Act 
                (15 U.S.C. 1681a(f)));
                    ``(C) any person extending credit through the use 
                of credit cards or similar devices;
                    ``(D) any broker (as defined in section 3(a)(4) of 
                the Securities Exchange Act of 1934 (15 U.S.C. 
                78c(a)(4)));
                    ``(E) any attorney;
                    ``(F) any accountant;
                    ``(G) any barter exchange (as defined in section 
                6045(c)(3));
                    ``(H) any regulated investment company (as defined 
                in section 851) and any agent of such regulated 
                investment company when acting as an agent thereof, and
                    ``(I) any enrolled agent.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to summonses served after the date of the enactment of this Act.

SEC. 3417. PROHIBITION ON IRS CONTACT OF THIRD PARTIES WITHOUT PRIOR 
              NOTICE.

    (a) In General.--Section 7602 (relating to examination of books and 
witnesses), as amended by section 3412, is amended by redesignating 
subsections (c) and (d) as subsections (d) and (e), respectively, and 
by inserting after subsection (b) the following new subsection:
    ``(c) Limitation of Authority To Contact Third Parties.--An officer 
or employee of the Internal Revenue Service may not contact any person 
other than the taxpayer with respect to the determination or collection 
of the tax liability of such taxpayer without providing reasonable 
notice to the taxpayer that such contact will be made. This subsection 
shall not apply--
            ``(1) to any contact which the taxpayer has authorized,
            ``(2) if the Secretary determines for good cause shown that 
        such notice would jeopardize collection of any tax, or
            ``(3) with respect to any pending criminal 
        investigation.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to contacts made after the 180th day after the date of the 
enactment of this Act.

                    PART III--COLLECTION ACTIVITIES

                      Subpart A--Approval Process

SEC. 3421. APPROVAL PROCESS FOR LIENS, LEVIES, AND SEIZURES.

    (a) In General.--The Commissioner of Internal Revenue shall develop 
and implement procedures under which--
            (1) a determination by an employee to file a notice of lien 
        or levy with respect to, or to levy or seize, any property or 
        right to property would, where appropriate, be required to be 
        reviewed by a supervisor of the employee before the action was 
        taken, and
            (2) appropriate disciplinary action would be taken against 
        the employee or supervisor where the procedures under paragraph 
        (1) were not followed.
    (b) Review Process.--The review process under subsection (a)(1) may 
include a certification that the employee has--
            (1) reviewed the taxpayer's information,
            (2) verified that a balance is due, and
            (3) affirmed that the action proposed to be taken is 
        appropriate given the taxpayer's circumstances, considering the 
        amount due and the value of the property or right to property.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, except for automated 
collection system actions initiated before January 1, 2000.

                      Subpart B--Liens and Levies

SEC. 3431. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Section 6334(a)(2) (relating to fuel, provisions, 
furniture, and personal effects) is amended by striking ``$2,500'' and 
inserting ``$10,000''.
    (b) Books, Etc.--Section 6334(a)(3) (relating to books and tools of 
a trade, business, or profession) is amended by striking ``$1,250'' and 
inserting ``$5,000''.
    (c) Conforming Amendment .--Section 6334(g)(1) (relating to 
inflation adjustment) is amended--
            (1) by striking ``1997'' and inserting ``1999'', and
            (2) by striking ``1996'' in subparagraph (B) and inserting 
        ``1998''.
    (d) Effective Date.--The amendments made by this section shall take 
effect with respect to levies issued after the date of the enactment of 
this Act.

SEC. 3432. RELEASE OF LEVY UPON AGREEMENT THAT AMOUNT IS UNCOLLECTIBLE.

    (a) In General.--Section 6343 (relating to authority to release 
levy and return property) is amended by adding at the end the following 
new subsection:
    ``(e) Immediate Release of Levy Upon Agreement That Amount is not 
Collectible.--In the case of a levy on the salary or wages payable to 
or received by the taxpayer, upon agreement with the taxpayer that the 
tax is not collectible, the Secretary shall immediately release such 
levy before any intervening salary or wage payment period.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to levies imposed after December 31, 1999.

SEC. 3433. LEVY PROHIBITED DURING PENDENCY OF REFUND PROCEEDINGS.

    (a) In General.--Section 6331 (relating to levy and distraint) is 
amended by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new subsection:
    ``(i) No Levy During Pendency of Proceedings for Refund of 
Divisible Tax.--
            ``(1) In general.--No levy may be made under subsection (a) 
        on the property or rights to property of any person with 
        respect to any unpaid divisible tax during the pendency of any 
        proceeding brought by such person in a proper court for the 
        recovery of any portion of such divisible tax which was paid by 
        such person if--
                    ``(A) the decision in such proceeding would be res 
                judicata with respect to such unpaid tax, or
                    ``(B) such person would be collaterally estopped 
                from contesting such unpaid tax by reason of such 
                proceeding.
            ``(2) Divisible tax.--For purposes of paragraph (1), the 
        term `divisible tax' means--
                    ``(A) any tax imposed by subtitle C, and
                    ``(B) the penalty imposed by section 6672 with 
                respect to any such tax.
            ``(3) Exceptions.--
                    ``(A) Certain unpaid taxes.--This subsection shall 
                not apply with respect to any unpaid tax if--
                            ``(i) the taxpayer files a written notice 
                        with the Secretary which waives the restriction 
                        imposed by this subsection on levy with respect 
                        to such tax, or
                            ``(ii) the Secretary finds that the 
                        collection of such tax is in jeopardy.
                    ``(B) Certain levies.--This subsection shall not 
                apply to--
                            ``(i) any levy to carry out an offset under 
                        section 6402, and
                            ``(ii) any levy which was first made before 
                        the date that the applicable proceeding under 
                        this subsection commenced.
            ``(4) Limitation on collection activity; authority to 
        enjoin collection.--
                    ``(A) Limitation on collection.--No proceeding in 
                court for the collection of any unpaid tax to which 
                paragraph (1) applies shall be begun by the Secretary 
                during the pendency of a proceeding under such 
                paragraph. This subparagraph shall not apply to--
                            ``(i) any counterclaim in a proceeding 
                        under such paragraph, or
                            ``(ii) any proceeding relating to a 
                        proceeding under such paragraph.
                    ``(B) Authority to enjoin.--Notwithstanding section 
                7421(a), a levy or collection proceeding prohibited by 
                this subsection may be enjoined (during the period such 
                prohibition is in force) by the court in which the 
                proceeding under paragraph (1) is brought.
            ``(5) Suspension of statute of limitations on collection.--
        The period of limitations under section 6502 shall be suspended 
        for the period during which the Secretary is prohibited under 
        this subsection from making a levy.
            ``(6) Pendency of proceeding.--For purposes of this 
        subsection, a proceeding is pending beginning on the date such 
        proceeding commences and ending on the date the decision in 
        such proceeding becomes final.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to unpaid tax attributable to taxable periods beginning after December 
31, 1998.

SEC. 3434. APPROVAL REQUIRED FOR JEOPARDY AND TERMINATION ASSESSMENTS 
              AND JEOPARDY LEVIES.

    (a) In General.--Paragraph (1) of section 7429(a) (relating to 
review of jeopardy levy or assessment procedures) is amended to read as 
follows:
            ``(1) Administrative review.--
                    ``(A) Prior approval required.--No assessment may 
                be made under section 6851(a), 6852(a), 6861(a), or 
                6862, and no levy may be made under section 6331(a) 
                less than 30 days after notice and demand for payment 
                is made, unless the Chief Counsel for the Internal 
                Revenue Service (or such Counsel's delegate) personally 
                approves (in writing) such assessment or levy.
                    ``(B) Information to taxpayer.--Within 5 days after 
                the day on which such an assessment or levy is made, 
                the Secretary shall provide the taxpayer with a written 
                statement of the information upon which the Secretary 
                relied in making such assessment or levy.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxes assessed and levies made after the date of the enactment of 
this Act.

SEC. 3435. INCREASE IN AMOUNT OF CERTAIN PROPERTY ON WHICH LIEN NOT 
              VALID.

    (a) Certain Property.--
            (1) In general.--Subsection (b) of section 6323 (relating 
        to validity and priority against certain persons) is amended--
                    (A) by striking ``$250'' in paragraph (4) (relating 
                to personal property purchased in casual sale) and 
                inserting ``$1,000'', and
                    (B) by striking ``$1,000'' in paragraph (7) 
                (relating to residential property subject to a 
                mechanic's lien for certain repairs and improvements) 
                and inserting ``$5,000''.
            (2) Inflation adjustment.--Subsection (i) of section 6323 
        (relating to special rules) is amended by adding at the end the 
        following new paragraph:
            ``(4) Cost-of-living adjustment.--In the case of notices of 
        liens imposed by section 6321 which are filed in any calendar 
        year after 1998, each of the dollar amounts under paragraph (4) 
        or (7) of subsection (b) 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 the calendar year, determined 
                by substituting `calendar year 1996' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.''.
    (b) Expansion of Treatment of Passbook Loans.--Paragraph (10) of 
section 6323(b) is amended--
            (1) by striking ``Passbook loans'' in the heading and 
        inserting ``Deposit-secured loans'',
            (2) by striking ``, evidenced by a passbook,'', and
            (3) by striking all that follows ``secured by such 
        account'' and inserting a period.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3436. WAIVER OF EARLY WITHDRAWAL TAX FOR IRS LEVIES ON EMPLOYER-
              SPONSORED RETIREMENT PLANS OR IRAS.

    (a) In General.--Section 72(t)(2)(A) (relating to subsection not to 
apply to certain distributions) is amended by striking ``or'' at the 
end of clauses (iv) and (v), by striking the period at the end of 
clause (vi) and inserting ``, or'', and by adding at the end the 
following new clause:
                            ``(vii) made on account of a levy under 
                        section 6331 on the qualified retirement 
                        plan.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to levies made after December 31, 1999.

                          Subpart C--Seizures

SEC. 3441. PROHIBITION OF SALES OF SEIZED PROPERTY AT LESS THAN MINIMUM 
              BID.

    (a) In General.--Section 6335(e)(1)(A)(i) (relating to 
determinations relating to minimum price) is amended by striking ``a 
minimum price for which such property shall be sold'' and inserting ``a 
minimum price below which such property shall not be sold''.
    (b) Reference to Penalty for Violation.--Section 6335(e) is amended 
by adding at the end the following new paragraph:
            ``(4) Cross reference.--

                                ``For provision providing for civil 
damages for violation of paragraph (1)(A)(i), see section 7433.''.

SEC. 3442. ACCOUNTING OF SALES OF SEIZED PROPERTY.

    (a) In General.--Section 6340 (relating to records of sale) is 
amended--
            (1) in subsection (a)--
                    (A) by striking ``real'', and
                    (B) by inserting ``or certificate of sale of 
                personal property'' after ``deed'', and
            (2) by adding at the end the following new subsection:
    ``(c) Accounting to Taxpayer.--The taxpayer with respect to whose 
liability the sale was conducted or who redeemed the property shall be 
furnished--
            ``(1) the record under subsection (a) (other than the names 
        of the purchasers),
            ``(2) the amount from such sale applied to the taxpayer's 
        liability, and
            ``(3) the remaining balance of such liability.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to seizures occurring after the date of the enactment of this 
Act.

SEC. 3443. UNIFORM ASSET DISPOSAL MECHANISM.

    Not later than the date which is 2 years after the date of the 
enactment of this Act, the Secretary of the Treasury or the Secretary's 
delegate shall implement a uniform asset disposal mechanism for sales 
under section 6335 of the Internal Revenue Code of 1986. The mechanism 
should be designed to remove any participation in such sales by revenue 
officers of the Internal Revenue Service and should consider the use of 
outsourcing.

SEC. 3444. CODIFICATION OF IRS ADMINISTRATIVE PROCEDURES FOR SEIZURE OF 
              TAXPAYER'S PROPERTY.

    (a) In General.--Section 6331 (relating to levy and distraint), as 
amended by section 3401(c), is amended by inserting after subsection 
(c) the following new subsection:
    ``(d) No Levy Before Investigation of Status of Property.--
            ``(1) In general.--For purposes of applying the provisions 
        of this subchapter, no levy may be made on any property or 
        right to property until a thorough investigation of the status 
        of such property has been completed.
            ``(2) Elements in investigation.--For purposes of paragraph 
        (1), an investigation of the status of any property shall 
        include--
                    ``(A) a verification of the taxpayer's liability,
                    ``(B) the completion of an analysis under 
                subsection (f),
                    ``(C) the determination that the equity in such 
                property is sufficient to yield net proceeds from the 
                sale of such property to apply to such liability, and
                    ``(D) a thorough consideration of alternative 
                collection methods.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3445. PROCEDURES FOR SEIZURE OF RESIDENCES AND BUSINESSES.

    (a) In General.--Section 6334(a)(13) (relating to property exempt 
from levy) is amended to read as follows:
            ``(13) Residences exempt in small deficiency cases and 
        principal residences and certain business assets exempt in 
        absence of certain approval or jeopardy.--
                    ``(A) Residences in small deficiency cases.--If the 
                amount of the levy does not exceed $5,000, any real 
                property used as a residence by the taxpayer or any 
                other individual.
                    ``(B) Principal residences and certain business 
                assets.--Except to the extent provided in subsection 
                (e), the principal residence of the taxpayer (within 
                the meaning of section 121), and assets used in the 
                trade or business of an individual taxpayer.''.
    (b) Conforming Amendments.--Section 6334(e) is amended--
            (1) by striking ``subsection (a)(13)'' and inserting 
        ``subsection (a)(13)(B)'',
            (2) by adding at the end the following new flush sentence:
``An official may not approve a levy under paragraph (1) unless the 
official determines that the taxpayer's other assets subject to 
collection are insufficient to pay the amount due, together with 
expenses of the proceedings.'', and
            (3) by inserting ``and Certain Business Assets'' after 
        ``Principal Residence'' in the heading.
    (c) State Fish and Wildlife Permits.--(1) With respect to permits 
issued by a State and required under State law for the harvest of fish 
or wildlife in the trade or business of an individual taxpayer, ``other 
assets'' as used in section 3445 shall include future income that may 
be derived by such taxpayer from the commercial sale of fish or 
wildlife under such permit.
    (2) The preceding paragraph may not be construed to invalidate or 
in any way prejudice any assertion that the privilege embodied in such 
permits is not property or a right to property under the Internal 
Revenue Code.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

 PART IV--PROVISIONS RELATING TO EXAMINATION AND COLLECTION ACTIVITIES

SEC. 3461. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF LIMITATIONS 
              BY AGREEMENT.

    (a) Repeal of Authority To Extend 10-Year Collection Period After 
Assessment.--Section 6502(a) (relating to length of period after 
collection) is amended--
            (1) by striking paragraph (2) and inserting:
            ``(2) if there is a release of levy under section 6343 
        after such 10-year period, prior to the expiration of any 
        period for collection agreed upon in writing by the Secretary 
        and the taxpayer before such release.'', and
            (2) by striking the first sentence in the matter following 
        paragraph (2).
    (b) Notice to Taxpayer of Right To Refuse or Limit Extension.--
Paragraph (4) of section 6501(c) (relating to the period for 
limitations on assessment and collection) is amended--
            (1) by striking ``Where'' and inserting the following:
                    ``(A) In general.--Where'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Notice to taxpayer of right to refuse or 
                limit extension.--The Secretary shall notify the 
                taxpayer of the taxpayer's right to refuse to extend 
                the period of limitations, or to limit such extension 
                to particular issues or to a particular period of time, 
                on each occasion when the taxpayer is requested to 
                provide such consent.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to requests to extend the period of limitations made 
        after December 31, 1999.
            (2) Prior request.--If, in any request to extend the period 
        of limitations made on or before December 31, 1999, a taxpayer 
        agreed to extend such period beyond the 10-year period referred 
        to in section 6502(a) of the Internal Revenue Code of 1986, 
        such extension shall expire on the later of--
                    (A) the last day of such 10-year period, or
                    (B) December 31, 1999.

SEC. 3462. OFFERS-IN-COMPROMISE.

    (a) Standards for Evaluation of Offers-in-Compromise.--Section 7122 
(relating to offers-in-compromise) is amended by adding at the end the 
following new subsection:
    ``(c) Standards for Evaluation of Offers.--
            ``(1) In general.--The Secretary shall prescribe guidelines 
        for officers and employees of the Internal Revenue Service to 
        determine whether an offer-in-compromise is adequate.
            ``(2) Allowances for basic living expenses.--
                    ``(A) In general.--In prescribing guidelines under 
                paragraph (1), the Secretary shall develop and publish 
                schedules of national and local allowances designed to 
                provide that taxpayers entering into a compromise have 
                an adequate means to provide for basic living expenses.
                    ``(B) Use of schedules.--The guidelines shall 
                provide that officers and employees of the Internal 
                Revenue Service shall determine, on the basis of the 
                facts and circumstances of each taxpayer, whether the 
                use of the schedules published under subparagraph (A) 
                is appropriate and shall not use the schedules to the 
                extent such use would result in the taxpayer not having 
                adequate means to provide for basic living expenses.
            ``(3) Special rules relating to treatment of offers.--The 
        guidelines under paragraph (1) shall provide that--
                    ``(A) an officer or employee of the Internal 
                Revenue Service shall not reject an offer-in-compromise 
                from a low-income taxpayer solely on the basis of the 
                amount of the offer, and
                    ``(B) in the case of an offer-in-compromise which 
                relates only to issues of liability of the taxpayer--
                            ``(i) such offer shall not be rejected 
                        solely because the Secretary is unable to 
                        locate the taxpayer's return or return 
                        information for verification of such liability, 
                        and
                            ``(ii) the taxpayer shall not be required 
                        to provide a financial statement.''.
    (b) Levy Prohibited While Offer-in-Compromise Pending.--Section 
6331 (relating to levy and distraint), as amended by section 3433, is 
amended by redesignating subsection (j) as subsection (k) and by 
inserting after subsection (i) the following new subsection:
    ``(j) No Levy While Certain Offers Pending.--
            ``(1) Offer in compromise pending.--No levy may be made 
        under subsection (a) on the property or rights to property of 
        any person with respect to any unpaid tax--
                    ``(A) during the period that an offer by such 
                person in compromise under section 7122 of such unpaid 
                tax is pending with the Secretary, and
                    ``(B) if such offer is rejected by the Secretary, 
                during the 30 days thereafter (and, if an appeal of 
                such rejection is filed within such 30 days, during the 
                period that such appeal is pending).
        For purposes of subparagraph (A), an offer is pending beginning 
        on the date the Secretary accepts such offer for processing.
            ``(2) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (3), (4), and (5) of subsection (i) shall apply 
        for purposes of this subsection.''.
    (c) Review of Rejections of Offers-in-Compromise and Installment 
Agreements.--
            (1) In general.--Section 7122 (relating to compromises), as 
        amended by subsection (a), is amended by adding at the end the 
        following:
    ``(d) Administrative Review.--The Secretary shall establish 
procedures--
            ``(1) for an independent administrative review of any 
        rejection of a proposed offer-in-compromise or installment 
        agreement made by a taxpayer under this section or section 6159 
        before such rejection is communicated to the taxpayer, and
            ``(2) which allow a taxpayer to appeal any rejection of 
        such offer or agreement to the Internal Revenue Service Office 
        of Appeals.''.
            (2) Conforming amendment.--Section 6159 (relating to 
        installment agreements) is amended by adding at the end the 
        following new subsection:
    ``(d) Cross Reference.--

                                ``For rights to administrative review 
and appeal, see section 7122(d).''.
    (d) Preparation of Statement Relating to Offers-in-Compromise.--The 
Secretary of the Treasury shall prepare a statement which sets forth in 
simple, nontechnical terms the rights of a taxpayer and the obligations 
of the Internal Revenue Service relating to offers-in-compromise. Such 
statement shall--
            (1) advise taxpayers who have entered into a compromise of 
        the advantages of promptly notifying the Internal Revenue 
        Service of any change of address or marital status,
            (2) provide notice to taxpayers that in the case of a 
        compromise terminated due to the actions of 1 spouse or former 
        spouse, the Internal Revenue Service will, upon application, 
        reinstate such compromise with the spouse or former spouse who 
        remains in compliance with such compromise, and
            (3) provide notice to the taxpayer that the taxpayer may 
        appeal the rejection of an offer-in-compromise to the Internal 
        Revenue Service Office of Appeals.
    (e) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to proposed offers-in-compromise and installment 
        agreements submitted after the date of the enactment of this 
        Act.
            (2) Suspension of collection by levy.--The amendment made 
        by subsection (b) shall apply to offers-in-compromise pending 
        on or made after December 31, 1999.

SEC. 3463. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR FILING TAX 
              COURT PETITION.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall include on each notice of deficiency under section 6212 
of the Internal Revenue Code of 1986 the date determined by such 
Secretary (or delegate) as the last day on which the taxpayer may file 
a petition with the Tax Court.
    (b) Later Filing Deadlines Specified on Notice of Deficiency To Be 
Binding.--Subsection (a) of section 6213 (relating to restrictions 
applicable to deficiencies; petition to Tax Court) is amended by adding 
at the end the following new sentence: ``Any petition filed with the 
Tax Court on or before the last date specified for filing such petition 
by the Secretary in the notice of deficiency shall be treated as timely 
filed.''.
    (c) Effective Date.--Subsection (a) and the amendment made by 
subsection (b) shall apply to notices mailed after December 31, 1998.

SEC. 3464. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL DETERMINATION.

    (a) Tax Court Proceedings.--Subsection (a) of section 6213 is 
amended--
            (1) by striking ``, including the Tax Court.'' and 
        inserting ``, including the Tax Court, and a refund may be 
        ordered by such court of any amount collected within the period 
        during which the Secretary is prohibited from collecting by 
        levy or through a proceeding in court under the provisions of 
        this subsection.'', and
            (2) by striking ``to enjoin any action or proceeding'' and 
        inserting ``to enjoin any action or proceeding or order any 
        refund''.
    (b) Other Proceedings.--Subsection (a) of section 6512 is amended 
by striking the period at the end of paragraph (4) and inserting ``, 
and'', and by inserting after paragraph (4) the following new 
paragraphs:
            ``(5) As to any amount collected within the period during 
        which the Secretary is prohibited from making the assessment or 
        from collecting by levy or through a proceeding in court under 
        the provisions of section 6213(a), and
            ``(6) As to overpayments the Secretary is authorized to 
        refund or credit pending appeal as provided in subsection 
        (b).''.
    (c) Refund or Credit Pending Appeal.--Paragraph (1) of section 
6512(b) is amended by adding at the end the following new sentence: 
``If a notice of appeal in respect of the decision of the Tax Court is 
filed under section 7483, the Secretary is authorized to refund or 
credit the overpayment determined by the Tax Court to the extent the 
overpayment is not contested on appeal.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3465. IRS PROCEDURES RELATING TO APPEALS OF EXAMINATIONS AND 
              COLLECTIONS.

    (a) Dispute Resolution Procedures.--
            (1) In general.--Chapter 74 (relating to closing agreements 
        and compromises) is amended by redesignating section 7123 as 
        section 7124 and by inserting after section 7122 the following 
        new section:

``SEC. 7123. APPEALS DISPUTE RESOLUTION PROCEDURES.

    ``(a) Early Referral to Appeals Procedures.--The Secretary shall 
prescribe procedures by which any taxpayer may request early referral 
of 1 or more unresolved issues from the examination or collection 
division to the Internal Revenue Service Office of Appeals.
    ``(b) Alternative Dispute Resolution Procedures.--
            ``(1) Mediation.--The Secretary shall prescribe procedures 
        under which a taxpayer or the Internal Revenue Service Office 
        of Appeals may request non-binding mediation on any issue 
        unresolved at the conclusion of--
                    ``(A) appeals procedures, or
                    ``(B) unsuccessful attempts to enter into a closing 
                agreement under section 7121 or a compromise under 
                section 7122.
            ``(2) Arbitration.--The Secretary shall establish a pilot 
        program under which a taxpayer and the Internal Revenue Service 
        Office of Appeals may jointly request binding arbitration on 
        any issue unresolved at the conclusion of--
                    ``(A) appeals procedures, or
                    ``(B) unsuccessful attempts to enter into a closing 
                agreement under section 7121 or a compromise under 
                section 7122.''.
            (2) Conforming amendment.--The table of sections for 
        chapter 74 is amended by striking the item relating to section 
        7123 and inserting the following new items:

                              ``Sec. 7123. Appeals dispute resolution 
                                        procedures.
                              ``Sec. 7124. Cross references.''.
    (b) Appeals Officers in Each State.--The Commissioner of Internal 
Revenue shall ensure that an appeals officer is regularly available 
within each State.
    (c) Appeals Videoconferencing Alternative for Rural Areas.--The 
Commissioner of Internal Revenue shall consider the use of the 
videoconferencing of appeals conferences between appeals officers and 
taxpayers seeking appeals in rural or remote areas.

SEC. 3466. APPLICATION OF CERTAIN FAIR DEBT COLLECTION PROCEDURES.

    (a) In General.--Subchapter A of chapter 64 (relating to 
collection) is amended by inserting after section 6303 the following 
new section:

``SEC. 6304. FAIR TAX COLLECTION PRACTICES.

    ``(a) Communication With the Taxpayer.--Without the prior consent 
of the taxpayer given directly to the Secretary or the express 
permission of a court of competent jurisdiction, the Secretary may not 
communicate with a taxpayer in connection with the collection of any 
unpaid tax--
            ``(1) at any unusual time or place or a time or place known 
        or which should be known to be inconvenient to the taxpayer;
            ``(2) if the Secretary knows the taxpayer is represented by 
        any person authorized to practice before the Internal Revenue 
        Service with respect to such unpaid tax and has knowledge of, 
        or can readily ascertain, such person's name and address, 
        unless such person fails to respond within a reasonable period 
        of time to a communication from the Secretary or unless such 
        person consents to direct communication with the taxpayer; or
            ``(3) at the taxpayer's place of employment if the 
        Secretary knows or has reason to know that the taxpayer's 
        employer prohibits the taxpayer from receiving such 
        communication.
In the absence of knowledge of circumstances to the contrary, the 
Secretary shall assume that the convenient time for communicating with 
a taxpayer is after 8 a.m. and before 9 p.m., local time at the 
taxpayer's location.
    ``(b) Prohibition of Harassment and Abuse.--The Secretary may not 
engage in any conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of any 
unpaid tax. Without limiting the general application of the foregoing, 
the following conduct is a violation of this subsection:
            ``(1) The use or threat of use of violence or other 
        criminal means to harm the physical person, reputation, or 
        property of any person.
            ``(2) The use of obscene or profane language or language 
        the natural consequence of which is to abuse the hearer or 
        reader.
            ``(3) Causing a telephone to ring or engaging any person in 
        telephone conversation repeatedly or continuously with intent 
        to annoy, abuse, or harass any person at the called number.
            ``(4) Except as provided under rules similar to the rules 
        in section 804 of the Fair Debt Collection Practices Act (15 
        U.S.C. 1692b), the placement of telephone calls without 
        meaningful disclosure of the caller's identity.
    ``(c) Civil Action for Violations of Section.--

                                ``For civil action for violations of 
this section, see section 7433.''.
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 64 is amended by inserting after the item relating to section 
6303 the following new item:

                              ``Sec. 6304. Fair tax collection 
                                        practices.''.
    (c) Annual report.--The Inspector General for Tax Administration 
shall report annually to Congress on any administrative or civil 
actions with respect to violations of the fair debt collection 
provisions of section 6304 of the Internal Revenue Code of 1986, as 
added by this section, including--
            (1) a summary of such actions initiated since the date of 
        the last report, and
            (2) a summary of any judgments or awards granted as a 
        result of such actions.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3467. GUARANTEED AVAILABILITY OF INSTALLMENT AGREEMENTS.

    (a) In General.--Section 6159 (relating to agreements for payment 
of tax liability in installments) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Secretary Required To Enter Into Installment Agreements in 
Certain Cases.--In the case of a liability for tax of an individual 
under subtitle A, the Secretary shall enter into an agreement to accept 
the payment of such tax in installments if, as of the date the 
individual offers to enter into the agreement--
            ``(1) the aggregate amount of such liability (determined 
        without regard to interest, penalties, additions to the tax, 
        and additional amounts) does not exceed $10,000,
            ``(2) the taxpayer (and, if such liability relates to a 
        joint return, the taxpayer's spouse) has not, during any of the 
        preceding 5 taxable years--
                    ``(A) failed to file any return of tax imposed by 
                subtitle A,
                    ``(B) failed to pay any tax required to be shown on 
                any such return, or
                    ``(C) entered into an installment agreement under 
                this section for payment of any tax imposed by subtitle 
                A,
            ``(3) the Secretary determines that the taxpayer is 
        financially unable to pay such liability in full when due (and 
        the taxpayer submits such information as the Secretary may 
        require to make such determination),
            ``(4) the agreement requires full payment of such liability 
        within 3 years, and
            ``(5) the taxpayer agrees to comply with the provisions of 
        this title for the period such agreement is in effect.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3468. PROHIBITION ON REQUESTS TO TAXPAYERS TO GIVE UP RIGHTS TO 
              BRING ACTIONS.

    (a) Prohibition.--No officer or employee of the United States may 
request a taxpayer to waive the taxpayer's right to bring a civil 
action against the United States or any officer or employee of the 
United States for any action taken in connection with the internal 
revenue laws.
    (b) Exceptions.--Subsection (a) shall not apply in any case where--
            (1) a taxpayer waives the right described in subsection (a) 
        knowingly and voluntarily, or
            (2) the request by the officer or employee is made in 
        person and the taxpayer's attorney or other federally 
        authorized tax practitioner (within the meaning of section 
        7525(c)(1)) is present, or the request is made in writing to 
        the taxpayer's attorney or other representative.

                  Subtitle F--Disclosures to Taxpayers

SEC. 3501. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall, as soon as practicable, but not later than 180 days 
after the date of the enactment of this Act, establish procedures to 
clearly alert married taxpayers of their joint and several liabilities 
on all appropriate publications and instructions.
    (b) Right To Limit Liability.--The procedures under subsection (a) 
shall include requirements that notice of an individual's right to 
limit joint and several liability under section 6015 of the Internal 
Revenue Code of 1986 shall be included in the statement required by 
section 6227 of the Omnibus Taxpayer Bill of Rights (Internal Revenue 
Service Publication No. 1) and in any collection-related notices.

SEC. 3502. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH THE 
              INTERNAL REVENUE SERVICE.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable, but not later than 180 days after the date of the 
enactment of this Act, revise the statement required by section 6227 of 
the Omnibus Taxpayer Bill of Rights (Internal Revenue Service 
Publication No. 1) to more clearly inform taxpayers of their rights--
            (1) to be represented at interviews with the Internal 
        Revenue Service by any person authorized to practice before the 
        Internal Revenue Service, and
            (2) to suspend an interview pursuant to section 7521(b)(2) 
        of the Internal Revenue Code of 1986.

SEC. 3503. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.

    (a) In General.--The Secretary of the Treasury or the Secretary's 
delegate shall, as soon as practicable, but not later than 180 days 
after the date of the enactment of this Act, incorporate into the 
statement required by section 6227 of the Omnibus Taxpayer Bill of 
Rights (Internal Revenue Service Publication No. 1) a statement which 
sets forth in simple and nontechnical terms the criteria and procedures 
for selecting taxpayers for examination. Such statement shall not 
include any information the disclosure of which would be detrimental to 
law enforcement, but shall specify the general procedures used by the 
Internal Revenue Service, including whether taxpayers are selected for 
examination on the basis of information available in the media or on 
the basis of information provided to the Internal Revenue Service by 
informants.
    (b) Transmission to Committees of Congress.--The Secretary shall 
transmit drafts of the statement required under subsection (a) (or 
proposed revisions to any such statement) to the Committee on Ways and 
Means of the House of Representatives and the Committee on Finance of 
the Senate on the same day.

SEC. 3504. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable but not later than 180 days after the date of the 
enactment of this Act, include with any 1st letter of proposed 
deficiency which allows the taxpayer an opportunity for administrative 
review in the Internal Revenue Service Office of Appeals an explanation 
of the entire process from examination through collection with respect 
to such proposed deficiency, including the assistance available to the 
taxpayer from the National Taxpayer Advocate at various points in the 
process.

SEC. 3505. EXPLANATION OF REASON FOR REFUND DENIAL.

    (a) In General.--Section 6402 (relating to authority to make 
credits or refunds) is amended by adding at the end the following new 
subsection:
    ``(j) Explanation of Reason for Refund Denial.--In the case of a 
denial of a claim for refund, the Secretary shall provide the taxpayer 
with an explanation for such denial.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to denials issued after the 180th day after the date of the enactment 
of this Act.

SEC. 3506. STATEMENTS REGARDING INSTALLMENT AGREEMENTS.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable but not later than 180 days after the date of the 
enactment of this Act, provide each taxpayer who has an installment 
agreement in effect under section 6159 of the Internal Revenue Code of 
1986 an annual statement setting forth the initial balance at the 
beginning of the year, the payments made during the year, and the 
remaining balance as of the end of the year.

SEC. 3507. NOTIFICATION OF CHANGE IN TAX MATTERS PARTNER.

    (a) In General.--Section 6231(a)(7) (defining tax matters partner) 
is amended by adding at the end the following new sentence: ``The 
Secretary shall, within 30 days of selecting a tax matters partner 
under the preceding sentence, notify all partners required to receive 
notice under section 6223(a) of the name and address of the individual 
selected.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to selections of tax matters partners made by the Secretary of the 
Treasury after the date of the enactment of this Act.

SEC. 3508. DISCLOSURE TO TAXPAYERS.

    Section 6103(d) of the Internal Revenue Code of 1986 is amended by 
adding at the end thereof a new paragraph to read as follows:
            ``(6) Disclosure to taxpayers.--The Secretary shall ensure 
        that any instructions booklet accompanying a general tax return 
        form (including forms 1040, 1040A, 1040EZ, and any similar or 
        successor forms) shall include, in clear language, in 
        conspicuous print, and in a conspicuous place near the front of 
        the booklet, a concise description of the conditions under 
        which return information may be disclosed to any party outside 
        the Internal Revenue Service, including disclosure to any State 
        or agency, body, or commission (or legal representative) 
        thereof.''.

                Subtitle G--Low Income Taxpayer Clinics

SEC. 3601. LOW INCOME TAXPAYER CLINICS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions), 
as amended by section 3411, is amended by adding at the end the 
following new section:

``SEC. 7526. LOW INCOME TAXPAYER CLINICS.

    ``(a) In General.--The Secretary may, subject to the availability 
of appropriated funds, make grants to provide matching funds for the 
development, expansion, or continuation of qualified low income 
taxpayer clinics, including volunteer income tax assistance programs, 
and to provide funds for training and technical assistance to support 
such clinics and programs.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified low income taxpayer clinic.--
                    ``(A) In general.--The term `qualified low income 
                taxpayer clinic' means a clinic which--
                            ``(i) does not charge more than a nominal 
                        fee for its services (except for reimbursement 
                        of actual costs incurred), and
                            ``(ii)(I) represents low income taxpayers 
                        in controversies with the Internal Revenue 
                        Service,
                            ``(II) operates programs to inform 
                        individuals for whom English is a second 
                        language about their rights and 
                        responsibilities under this title, or
                            ``(III) provides tax preparation assistance 
                        and tax counseling assistance to low income 
                        taxpayers, such as volunteer income tax 
                        assistance programs.
                    ``(B) Representation of low income taxpayers.--A 
                clinic meets the requirements of subparagraph 
                (A)(ii)(I) if--
                            ``(i) at least 90 percent of the taxpayers 
                        represented by the clinic have incomes which do 
                        not exceed 250 percent of the poverty level, as 
                        determined in accordance with criteria 
                        established by the Director of the Office of 
                        Management and Budget, and
                            ``(ii) the amount in controversy for any 
                        taxable year generally does not exceed the 
                        amount specified in section 7463.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an accredited law, 
                business, or accounting school in which students 
                represent low income taxpayers in controversies arising 
                under this title,
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1) through 
                representation of taxpayers or referral of taxpayers to 
                qualified representatives, and
                    ``(C) a volunteer income tax assistance program 
                which is described in section 501(c) and exempt from 
                tax under section 501(a) and which provides tax 
                preparation assistance and tax counseling assistance to 
                low income taxpayers.
            ``(3) Qualified representative.--The term `qualified 
        representative' means any individual (whether or not an 
        attorney) who is authorized to practice before the Internal 
        Revenue Service or the applicable court.
    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $6,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section. Not more than 7.5 
        percent of the amount available shall be allocated to training 
        and technical assistance programs.
            ``(2) Limitation on annual grants to a clinic.--The 
        aggregate amount of grants which may be made under this section 
        to a clinic for a year shall not exceed $100,000, except that 
        larger grants may be made for training and technical assistance 
        programs.
            ``(3) Multi-year grants.--Upon application of a qualified 
        low income taxpayer clinic, the Secretary is authorized to 
        award a multi-year grant not to exceed 3 years.
            ``(4) Criteria for awards.--In determining whether to make 
        a grant under this section, the Secretary shall consider--
                    ``(A) the numbers of taxpayers who will be served 
                by the clinic, including the number of taxpayers in the 
                geographical area for whom English is a second 
                language,
                    ``(B) the existence of other low income taxpayer 
                clinics serving the same population,
                    ``(C) the quality of the program offered by the low 
                income taxpayer clinic, including the qualifications of 
                its administrators and qualified representatives, and 
                its record, if any, in providing service to low income 
                taxpayers, and
                    ``(D) alternative funding sources available to the 
                clinic, including amounts received from other grants 
                and contributions, and the endowment and resources of 
                the institution sponsoring the clinic.
            ``(5) Requirement of matching funds.--A low income taxpayer 
        clinic (other than a clinic described in paragraph (2)(C)) must 
        provide matching funds on a dollar for dollar basis for all 
        grants provided under this section. Matching funds may 
        include--
                    ``(A) the salary (including fringe benefits) of 
                individuals performing services for the clinic, and
                    ``(B) the cost of equipment used in the clinic.
        Indirect expenses, including general overhead of the 
        institution sponsoring the clinic, shall not be counted as 
        matching funds.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new section:

                              ``Sec. 7526. Low income taxpayer 
                                        clinics.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                       Subtitle H--Other Matters

SEC. 3701. CATALOGING COMPLAINTS.

    In collecting data for the report required under section 1211 of 
Taxpayer Bill of Rights 2 (Public Law 104-168), the Secretary of the 
Treasury or the Secretary's delegate shall maintain records of taxpayer 
complaints of misconduct by Internal Revenue Service employees on an 
individual employee basis.

SEC. 3702. ARCHIVE OF RECORDS OF INTERNAL REVENUE SERVICE.

    (a) In General.--Subsection (l) of section 6103 (relating to 
confidentiality and disclosure of returns and return information) is 
amended by adding at the end the following new paragraph:
            ``(17) Disclosure to national archives and records 
        administration.--The Secretary shall, upon written request from 
        the Archivist of the United States, disclose or authorize the 
        disclosure of returns and return information to officers and 
        employees of the National Archives and Records Administration 
        for purposes of, and only to the extent necessary in, the 
        appraisal of records for destruction or retention. No such 
        officer or employee shall, except to the extent authorized by 
        subsections (f), (i)(7), or (p), disclose any return or return 
        information disclosed under the preceding sentence to any 
        person other than to the Secretary, or to another officer or 
        employee of the National Archives and Records Administration 
        whose official duties require such disclosure for purposes of 
        such appraisal.''.
    (b) Conforming Amendments.--Section 6103(p) is amended--
            (1) in paragraph (3)(A), by striking ``or (16)'' and 
        inserting ``(16), or (17)'',
            (2) in paragraph (4), by striking ``or (14)'' and inserting 
        ``, (14), or (17)'' in the matter preceding subparagraph (A), 
        and
            (3) in paragraph (4)(F)(ii), by striking ``or (15)'' and 
        inserting ``, (15), or (17)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made by the Archivist of the United States after the 
date of the enactment of this Act.

SEC. 3703. PAYMENT OF TAXES.

    The Secretary of the Treasury or the Secretary's delegate shall 
establish such rules, regulations, and procedures as are necessary to 
allow payment of taxes by check or money order made payable to the 
United States Treasury.

SEC. 3704. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO THE 
              MAKING OF ELECTIONS.

    Subsection (d) of section 7805 is amended by striking ``by 
regulations or forms''.

SEC. 3705. IRS EMPLOYEE CONTACTS.

    (a) Notice.--The Secretary of the Treasury or the Secretary's 
delegate shall provide that any correspondence or notice received by a 
taxpayer from the Internal Revenue Service shall include in a prominent 
manner the name and telephone number of an Internal Revenue Service 
employee the taxpayer may contact with respect to the correspondence or 
notice.
    (b) Single Contact.--The Secretary of the Treasury or the 
Secretary's delegate shall develop a procedure under which, to the 
extent practicable and if advantageous to the taxpayer, one Internal 
Revenue Service employee shall be assigned to handle a taxpayer's 
matter until it is resolved.
    (c) Telephone Helpline Option in Spanish.--The Secretary of the 
Treasury or the Secretary's delegate shall provide on all telephone 
helplines of the Internal Revenue Service an option for any taxpayer 
questions to be answered in Spanish.
    (d) Other Telephone Helpline Options.--The Secretary of the 
Treasury or the Secretary's delegate shall provide on all telephone 
helplines of the Internal Revenue Service an option for any taxpayer to 
talk to a live person in addition to hearing a recorded message. The 
person shall direct phone questions of the taxpayer to other Internal 
Revenue Service personnel who can provide understandable information to 
the taxpayer.
    (e) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, this section shall take effect 60 days after the 
        date of the enactment of this Act.
            (2) Subsection (c).--Subsection (c) shall take effect on 
        January 1, 2000.
            (3) Subsection (d).--Subsection (d) shall take effect on 
        January 1, 2000.

SEC. 3706. USE OF PSEUDONYMS BY IRS EMPLOYEES.

    (a) In General.--Any employee of the Internal Revenue Service may 
use a pseudonym only if--
            (1) adequate justification for the use of a pseudonym is 
        provided by the employee, including protection of personal 
        safety, and
            (2) such use is approved by the employee's supervisor 
        before the pseudonym is used.
    (b) Effective Date.--Subsection (a) shall apply to requests made 
after the date of the enactment of this Act.

SEC. 3707. CONFERENCES OF RIGHT IN THE NATIONAL OFFICE OF IRS.

    (a) In General.--In any conference of right in the National Office 
of the Internal Revenue Service, participation in such conference 
shall, upon request of the taxpayer, be limited to personnel of the 
National Office.
    (b) Effective Date.--Subsection (a) shall apply to requests made 
after the date of the enactment of this Act.

SEC. 3708. ILLEGAL TAX PROTESTER DESIGNATION.

    (a) Prohibition.--The officers and employees of the Internal 
Revenue Service--
            (1) shall not designate taxpayers as illegal tax protesters 
        (or any similar designation), and
            (2) in the case of any such designation made on or before 
        the date of the enactment of this Act--
                    (A) shall remove such designation from the 
                individual master file, and
                    (B) shall disregard any such designation not 
                located in the individual master file.
    (b) Designation of Nonfilers Allowed.--An officer or employee of 
the Internal Revenue Service may designate any appropriate taxpayer as 
a nonfiler, but shall remove such designation once the taxpayer has 
filed income tax returns for 2 consecutive taxable years and paid all 
taxes shown on such returns.
    (c) Effective Date.--The provisions of this section shall take 
effect on the date of the enactment of this Act, except that the 
removal of any designation under subsection (a)(2)(A) shall not be 
required to begin before January 1, 1999.

SEC. 3709. PROVISION OF CONFIDENTIAL INFORMATION TO CONGRESS BY 
              WHISTLEBLOWERS.

    (a) In General.--Paragraph (1) of section 6103(f) (relating to 
disclosure of confidential information to committees of Congress) is 
amended--
            (1) by striking ``Upon written'' and inserting the 
        following:
            ``(A) Written request by chairman.--Upon written''; and
            (2) by adding at the end the following new subparagraph:
            ``(B) Whistleblower information.--Any person who otherwise 
        has or had access to any return or return information under 
        this section may disclose such return or return information to 
        a chairman of a committee referred to in subparagraph (A) or 
        the chief of staff of the Joint Committee of Taxation only if--
                    ``(i) the disclosure is for the purpose of alleging 
                an incident of employee misconduct or taxpayer abuse, 
                and
                    ``(ii) the chairman of the committee to which the 
                disclosure is made (or either chairman in the case of 
                disclosure to the chief of staff) gives prior written 
                approval for the disclosure.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3710. LISTING OF LOCAL IRS TELEPHONE NUMBERS AND ADDRESSES.

    The Secretary of the Treasury or the Secretary's delegate shall, as 
soon as practicable, but not later than 180 days after the date of the 
enactment of this Act, provide that the local telephone numbers and 
addresses of Internal Revenue Service offices located in any particular 
area be listed in the telephone book for that area.

SEC. 3711. IDENTIFICATION OF RETURN PREPARERS.

    (a) In General.--The last sentence of section 6109(a) (relating to 
identifying numbers) is amended by striking ``For purposes of this 
subsection'' and inserting ``For purposes of paragraphs (1), (2), and 
(3)''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3712. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE INCOME TAX 
              OBLIGATIONS AGAINST OVERPAYMENTS.

    (a) In General.--Section 6402 (relating to authority to make 
credits or refunds) is amended by redesignating subsections (e) through 
(i) as subsections (f) through (j), respectively, and by inserting 
after subsection (d) the following new subsection:
    ``(e) Collection of Past-Due, Legally Enforceable State Income Tax 
Obligations.--
            ``(1) In general.--Upon receiving notice from any State 
        that a named person owes a past-due, legally enforceable State 
        income tax obligation to such State, the Secretary shall, under 
        such conditions as may be prescribed by the Secretary--
                    ``(A) reduce the amount of any overpayment payable 
                to such person by the amount of such State income tax 
                obligation;
                    ``(B) pay the amount by which such overpayment is 
                reduced under subparagraph (A) to such State and notify 
                such State of such person's name, taxpayer 
                identification number, address, and the amount 
                collected; and
                    ``(C) notify the person making such overpayment 
                that the overpayment has been reduced by an amount 
                necessary to satisfy a past-due, legally enforceable 
                State income tax obligation.
        If an offset is made pursuant to a joint return, the notice 
        under subparagraph (B) shall include the names, taxpayer 
        identification numbers, and addresses of each person filing 
        such return.
            ``(2) Offset permitted only against residents of state 
        seeking offset.--Paragraph (1) shall apply to an overpayment by 
        any person for a taxable year only if the address shown on the 
        Federal return for such taxable year of the overpayment is an 
        address within the State seeking the offset.
            ``(3) Priorities for offset.--Any overpayment by a person 
        shall be reduced pursuant to this subsection--
                    ``(A) after such overpayment is reduced pursuant 
                to--
                            ``(i) subsection (a) with respect to any 
                        liability for any internal revenue tax on the 
                        part of the person who made the overpayment,
                            ``(ii) subsection (c) with respect to past-
                        due support, and
                            ``(iii) subsection (d) with respect to any 
                        past-due, legally enforceable debt owed to a 
                        Federal agency, and
                    ``(B) before such overpayment is credited to the 
                future liability for any Federal internal revenue tax 
                of such person pursuant to subsection (b).
        If the Secretary receives notice from 1 or more agencies of the 
        State of more than 1 debt subject to paragraph (1) that is owed 
        by such person to such an agency, any overpayment by such 
        person shall be applied against such debts in the order in 
        which such debts accrued.
            ``(4) Notice; consideration of evidence.--No State may take 
        action under this subsection until such State--
                    ``(A) notifies by certified mail with return 
                receipt the person owing the past-due State income tax 
                liability that the State proposes to take action 
                pursuant to this section,
                    ``(B) gives such person at least 60 days to present 
                evidence that all or part of such liability is not 
                past-due or not legally enforceable,
                    ``(C) considers any evidence presented by such 
                person and determines that an amount of such debt is 
                past-due and legally enforceable, and
                    ``(D) satisfies such other conditions as the 
                Secretary may prescribe to ensure that the 
                determination made under subparagraph (C) is valid and 
                that the State has made reasonable efforts to obtain 
                payment of such State income tax obligation.
            ``(5) Past-due, legally enforceable state income tax 
        obligation.--For purposes of this subsection, the term `past-
        due, legally enforceable State income tax obligation' means a 
        debt--
                    ``(A)(i) which resulted from--
                            ``(I) a judgment rendered by a court of 
                        competent jurisdiction which has determined an 
                        amount of State income tax to be due, or
                            ``(II) a determination after an 
                        administrative hearing which has determined an 
                        amount of State tax to be due, and
                    ``(ii) which is no longer subject to judicial 
                review, or
                    ``(B) which resulted from a State income tax which 
                has been assessed but not collected, the time for 
                redetermination of which has expired, and which has not 
                been delinquent for more than 10 years.
        For purposes of this paragraph, the term `State income tax' 
        includes any local tax administered by the chief tax 
        administration agency of the State.
            ``(6) Regulations.--The Secretary shall issue regulations 
        prescribing the time and manner in which States must submit 
        notices of past-due, legally enforceable State income tax 
        obligations and the necessary information that must be 
        contained in or accompany such notices. The regulations shall 
        specify the types of State income taxes and the minimum amount 
        of debt to which the reduction procedure established by 
        paragraph (1) may be applied. The regulations may require 
        States to pay a fee to reimburse the Secretary for the cost of 
        applying such procedure. Any fee paid to the Secretary pursuant 
        to the preceding sentence shall be used to reimburse 
        appropriations which bore all or part of the cost of applying 
        such procedure.
            ``(7) Erroneous payment to state.--Any State receiving 
        notice from the Secretary that an erroneous payment has been 
        made to such State under paragraph (1) shall pay promptly to 
        the Secretary, in accordance with such regulations as the 
        Secretary may prescribe, an amount equal to the amount of such 
        erroneous payment (without regard to whether any other amounts 
        payable to such State under such paragraph have been paid to 
        such State).''.
    (b) Disclosure of Certain Information to States Requesting Refund 
Offsets for Past-Due, Legally Enforceable State Income Tax 
Obligations.--
            (1) Paragraph (10) of section 6103(l) is amended by 
        striking ``(c) or (d)'' each place it appears and inserting 
        ``(c), (d), or (e)''.
            (2) The paragraph heading for such paragraph (10) is 
        amended by striking ``section 6402(c) or 6402(d)'' and 
        inserting ``subsection (c), (d), or (e) of section 6402''.
    (c) Conforming Amendments.--
            (1) Subsection (a) of section 6402 is amended by striking 
        ``(c) and (d)'' and inserting ``(c), (d), and (e)''.
            (2) Paragraph (2) of section 6402(d) is amended by striking 
        ``and before such overpayment'' and inserting ``and before such 
        overpayment is reduced pursuant to subsection (e) and before 
        such overpayment''.
            (3) Subsection (f) of section 6402, as redesignated by 
        subsection (a), is amended--
                    (A) by striking ``(c) or (d)'' and inserting ``(c), 
                (d), or (e)'', and
                    (B) by striking ``Federal agency'' and inserting 
                ``Federal agency or State''.
            (4) Subsection (h) of section 6402, as redesignated by 
        subsection (a), is amended by striking ``subsection (c)'' and 
        inserting ``subsection (c) or (e)''.
    (d) Effective Date.--The amendments made by this section (other 
than subsection (d)) shall apply to refunds payable under section 6402 
of the Internal Revenue Code of 1986 after December 31, 1998.

SEC. 3713. TREATMENT OF IRS NOTICES ON FOREIGN TAX PROVISIONS.

    (a) Notice 98-11.--
            (1) Moratorium.--The Secretary of the Treasury or his 
        delegate shall not implement final or temporary regulations 
        with respect to Internal Revenue Service Notice 98-11 during 
        the period--
                    (A) beginning on January 16, 1998, and
                    (B) ending on the date which is 6 months after the 
                date of the enactment of this Act.
            (2) Sense of senate regarding notice.--It is the sense of 
        the Senate that--
                    (A) the Secretary of the Treasury or his delegate 
                should withdraw Internal Revenue Service Notice 98-11 
                and the regulations issued with respect to such notice, 
                and
                    (B) Congress, not the Department of the Treasury or 
                the Internal Revenue Service, should determine the 
                policy issues with respect to the treatment of hybrid 
                transactions under subpart F of part III of subchapter 
                N of chapter 1 of the Internal Revenue Code of 1986.
    (b) Notice 98-5.--It is the sense of the Senate that--
            (1) the Secretary of the Treasury or his delegate should 
        limit any regulations issued with respect to Internal Revenue 
        Service Notice 98-5 to the specific transactions contained in 
        such notice, and
            (2) such regulations should--
                    (A) not affect transactions undertaken in the 
                ordinary course of business,
                    (B) not have an effective date before the earlier 
                of the dates described in subparagraph (A) or (B) of 
                section 7805(b)(1) of the Internal Revenue Code of 
                1986, and
                    (C) be issued in accordance with normal regulatory 
                procedures which include an opportunity for comment.
Nothing in the preceding sentence shall be construed as expressing any 
intent by the Senate to limit the Secretary's ability to address 
abusive transactions.

SEC. 3714. STUDY OF PAYMENTS MADE FOR DETECTION OF UNDERPAYMENTS AND 
              FRAUD.

    Not later than 1 year after the date of enactment of this Act, the 
Secretary of the Treasury shall conduct a study and report to Congress 
on the use of section 7623 of the Internal Revenue Code of 1986 
including--
            (1) an analysis of the present use of such section and the 
        results of such use, and
            (2) any legislative or administrative recommendations 
        regarding the provisions of such section and its application.

SEC. 3715. COMBINED EMPLOYMENT TAX REPORTING DEMONSTRATION PROJECT.

    (a) In General.--The Secretary of the Treasury shall provide for a 
demonstration project to assess the feasibility and desirability of 
expanding combined Federal and State tax reporting.
    (b) Description of Demonstration Project.--The demonstration 
project under subsection (a) shall be--
            (1) carried out between the Internal Revenue Service and 
        the State of Iowa for a period ending with the date which is 5 
        years after the date of the enactment of this Act,
            (2) limited to the reporting of employment taxes, and
            (3) limited to the disclosure of the taxpayer identity (as 
        defined in section 6103(b)(6) of such Code) and the signature 
        of the taxpayer.
    (c) Conforming Amendment.--Section 6103(d)(5), as amended by 
section 6009(f), is amended by striking ``project described in section 
976 of the Taxpayer Relief Act of 1997.'' and inserting ``projects 
described in section 976 of the Taxpayer Relief Act of 1997 and section 
3715 of the Internal Revenue Service Restructuring and Reform Act of 
1998.''.

SEC. 3716. REPORTING REQUIREMENTS IN CONNECTION WITH EDUCATION TAX 
              CREDIT.

    (a) Amounts to be Reported.--Subparagraph (C) of section 
6050S(b)(2) is amended--
            (1) in clause (i), by inserting ``and any grant amount 
        received by such individual and processed through the 
        institution during such calendar year'' after ``calendar 
        year'',
            (2) in clause (ii), by inserting ``by the person making 
        such return'' after ``year'', and
            (3) in clause (iii), by inserting ``and'' at the end.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed with respect to taxable years 
beginning after December 31, 1998.

                          Subtitle I--Studies

SEC. 3801. ADMINISTRATION OF PENALTIES AND INTEREST.

    The Joint Committee on Taxation and the Secretary of the Treasury 
shall each conduct a separate study--
            (1) reviewing the administration and implementation by the 
        Internal Revenue Service of the interest and penalty provisions 
        of the Internal Revenue Code of 1986 (including the penalty 
        reform provisions of the Omnibus Budget Reconciliation Act of 
        1989), and
            (2) making any legislative and administrative 
        recommendations the Committee or the Secretary deems 
        appropriate to simplify penalty or interest administration and 
        reduce taxpayer burden.
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 
not later than 9 months after the date of the enactment of this Act.

SEC. 3802. CONFIDENTIALITY OF TAX RETURN INFORMATION.

    The Joint Committee on Taxation and the Secretary of the Treasury 
shall each conduct a separate study of the scope and use of provisions 
regarding taxpayer confidentiality, and shall report the findings of 
such study, together with such recommendations as the Committee or the 
Secretary deems appropriate, to the Congress not later than one year 
after the date of the enactment of this Act. Such study shall examine--
            (1) the present protections for taxpayer privacy,
            (2) any need for third parties to use tax return 
        information,
            (3) whether greater levels of voluntary compliance may be 
        achieved by allowing the public to know who is legally required 
        to file tax returns, but does not file tax returns,
            (4) the interrelationship of the taxpayer confidentiality 
        provisions in the Internal Revenue Code of 1986 with such 
        provisions in other Federal law, including section 552a of 
        title 5, United States Code (commonly known as the ``Freedom of 
        Information Act''),
            (5) Whether return information should be disclosed under 
        section 6103(d) of the Internal Revenue Code of 1986 to any 
        agency, body, or commission of any State (or legal 
        representative thereof) unless the Secretary determines that 
        such agency, body, or commission (or legal representative) has 
        first notified each person for whom such return or return 
        information was filed or provided by, on behalf of, or with 
        respect to, personally in writing that the request described in 
        section 6103(d) of the Internal Revenue Code of 1986 has been 
        made by such agency, body, or commission (or legal 
        representative) and the specific reasons for making such 
        request, and
            (6) the impact on taxpayer privacy of the sharing of income 
        tax return information for purposes of enforcement of State and 
        local tax laws other than income tax laws, and including the 
        impact on the taxpayer privacy intended to be protected at the 
        Federal, State, and local levels under Public Law 105-35, the 
        Taxpayer Browsing Protection Act of 1997.

SEC. 3803. STUDY OF TRANSFER PRICING ENFORCEMENT.

    (a) In General.--The Internal Revenue Service Oversight Board shall 
study whether the Internal Revenue Service has the resources needed to 
prevent tax avoidance by companies using unlawful transfer pricing 
methods.
    (b) Assistance.--The Internal Revenue Service shall assist the 
Board in its study by analyzing and reporting to the Board on its 
enforcement of transfer pricing abuses, including a review of the 
effectiveness of the current enforcement tools used by the Internal 
Revenue Service to ensure compliance under section 482 of the Internal 
Revenue Code of 1986 and to determine the scope of nonpayment of United 
States taxes by reason of such abuses.
    (c) Report.--The Board shall report to Congress, not later than 12 
months after the date of enactment of this Act, on the results of the 
study conducted under this subsection, including recommendations for 
improving the Internal Revenue Service's enforcement tools to ensure 
that multinational companies doing business in the United States pay 
their fair share of United States taxes.

SEC. 3804. WILLFUL NONCOMPLIANCE WITH INTERNAL REVENUE LAWS BY 
              TAXPAYERS.

    Not later than 1 year after the date of enactment of this Act, the 
Joint Committee on Taxation, the Secretary of the Treasury, and the 
Commissioner of Internal Revenue shall conduct jointly a study of the 
willful noncompliance with internal revenue laws by taxpayers and 
report the findings of such study to Congress.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

SEC. 4001. CENTURY DATE CHANGE.

    (a) Sense of Congress.--It is the sense of Congress that the 
Internal Revenue Service should place a high priority on resolving the 
century date change computing problems.
    (b) Report on Effect of Legislation on Century Date Change.--The 
Commissioner of Internal Revenue shall expeditiously submit a report to 
Congress on--
            (1) the overall impact of this Act on the ability of the 
        Internal Revenue Service to resolve the century date change 
        computing problems, and
            (2) provisions of this Act that will require significant 
        amounts of computer programming prior to December 31, 1999, in 
        order to carry out such provisions.

SEC. 4002. TAX LAW COMPLEXITY ANALYSIS.

    (a) Commissioner Study.--
            (1) In general.--The Commissioner of Internal Revenue shall 
        conduct each year an analysis of the sources of the complexity 
        of the administration of the Federal tax laws. Such analysis 
        may include an analysis of--
                    (A) questions frequently asked by taxpayers with 
                respect to return filing,
                    (B) common errors made by taxpayers in filling out 
                their returns,
                    (C) areas of law which frequently result in 
                disagreements between taxpayers and the Internal 
                Revenue Service,
                    (D) major areas of law in which there is no (or 
                incomplete) published guidance or in which the law is 
                uncertain,
                    (E) areas in which revenue officers make frequent 
                errors interpreting or applying the law,
                    (F) the impact of recent legislation on complexity, 
                and
                    (G) forms supplied by the Internal Revenue Service, 
                including the time it takes for taxpayers to complete 
                and review forms, the number of taxpayers who use each 
                form, and how recent legislation has affected the time 
                it takes to complete and review forms.
            (2) Report.--The Commissioner shall each year report the 
        results of the analysis conducted under paragraph (1) to the 
        Committee on Ways and Means of the House of Representatives and 
        the Committee on Finance of the Senate. The report shall 
        include any recommendations--
                    (A) for reducing the complexity of the 
                administration of Federal tax laws, and
                    (B) for repeal or modification of any provision the 
                Commissioner believes adds undue and unnecessary 
                complexity to the administration of the Federal tax 
                laws.
    (b) Analysis to Accompany Certain Legislation.--
            (1) In general.--The Joint Committee on Taxation, in 
        consultation with the Internal Revenue Service and the 
        Department of the Treasury, shall include a tax complexity 
        analysis in each report for legislation, or provide such 
        analysis to members of the committee reporting the legislation 
        as soon as practicable after the report is filed, if--
                    (A) such legislation is reported by the Committee 
                on Finance in the Senate, the Committee on Ways and 
                Means of the House of Representatives, or any committee 
                of conference, and
                    (B) such legislation includes a provision which 
                would directly or indirectly amend the Internal Revenue 
                Code of 1986 and which has widespread applicability to 
                individuals or small businesses.
            (2) Tax complexity analysis.--For purposes of this 
        subsection, the term ``tax complexity analysis'' means, with 
        respect to any legislation, a report on the complexity and 
        administrative difficulties of each provision described in 
        paragraph (1)(B) which--
                    (A) includes--
                            (i) an estimate of the number of taxpayers 
                        affected by the provision, and
                            (ii) if applicable, the income level of 
                        taxpayers affected by the provision, and
                    (B) should include (if determinable)--
                            (i) the extent to which tax forms supplied 
                        by the Internal Revenue Service would require 
                        revision and whether any new forms would be 
                        required,
                            (ii) the extent to which taxpayers would be 
                        required to keep additional records,
                            (iii) the estimated cost to taxpayers to 
                        comply with the provision,
                            (iv) the extent to which enactment of the 
                        provision would require the Internal Revenue 
                        Service to develop or modify regulatory 
                        guidance,
                            (v) the extent to which the provision may 
                        result in disagreements between taxpayers and 
                        the Internal Revenue Service, and
                            (vi) any expected impact on the Internal 
                        Revenue Service from the provision (including 
                        the impact on internal training, revision of 
                        the Internal Revenue Manual, reprogramming of 
                        computers, and the extent to which the Internal 
                        Revenue Service would be required to divert or 
                        redirect resources in response to the 
                        provision).
            (3) Effective date.--This subsection shall apply to 
        legislation considered on or after January 1, 1999.

                      TITLE V--REVENUE PROVISIONS

SEC. 5001. CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION.

    (a) In General.--Section 404(a) (relating to deduction for 
contributions of an employer to an employee's trust or annuity plan and 
compensation under a deferred-payment plan) is amended by adding at the 
end the following new paragraph:
            ``(11) Determinations relating to deferred compensation.--
        For purposes of determining under this section--
                    ``(A) whether compensation of an employee is 
                deferred compensation, and
                    ``(B) when deferred compensation is paid,
        no amount shall be treated as received by the employee, or 
        paid, until it is actually received by the employee.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendment made by subsection (a) to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account in such first taxable year.

SEC. 5002. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND CARRYOVER 
              PERIODS.

    (a) In General.--Section 904(c) (relating to limitation on credit) 
is amended--
            (1) by striking ``in the second preceding taxable year,'', 
        and
            (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
        or seventh''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to credits arising in taxable years beginning after December 31, 
1998.

SEC. 5003. CLARIFICATION AND EXPANSION OF MATHEMATICAL ERROR ASSESSMENT 
              PROCEDURES.

    (a) TIN Deemed Incorrect if Information on Return Differs With 
Agency Records.--Section 6213(g)(2) (defining mathematical or clerical 
error) is amended by adding at the end the following flush sentence:
        ``A taxpayer shall be treated as having omitted a correct TIN 
        for purposes of the preceding sentence if information provided 
        by the taxpayer on the return with respect to the individual 
        whose TIN was provided differs from the information the 
        Secretary obtains from the person issuing the TIN.''.
    (b) Expansion of Mathematical Error Procedures to Cases Where TIN 
Establishes Individual Not Eligible for Tax Credit.--Section 
6213(g)(2), as amended by title VI of this Act, is amended by striking 
``and'' at the end of subparagraph (J), by striking the period at the 
end of the subparagraph (K) and inserting ``, and'', and by adding at 
the end the following new subparagraph:
                    ``(L) the inclusion on a return of a TIN required 
                to be included on the return under section 21, 24, or 
                32 if--
                            ``(i) such TIN is of an individual whose 
                        age affects the amount of the credit under such 
                        section, and
                            ``(ii) the computation of the credit on the 
                        return reflects the treatment of such 
                        individual as being of an age different from 
                        the individual's age based on such TIN.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 5004. TERMINATION OF EXCEPTION FOR CERTAIN REAL ESTATE INVESTMENT 
              TRUSTS FROM THE TREATMENT OF STAPLED ENTITIES.

    (a) In General.--Notwithstanding paragraph (3) of section 136(c) of 
the Tax Reform Act of 1984 (relating to stapled stock; stapled 
entities), the REIT gross income provisions shall be applied by 
treating the activities and gross income of members of the stapled REIT 
group properly allocable to any nonqualified real property interest 
held by the exempt REIT or any stapled entity which is a member of such 
group (or treated under subsection (c) as held by such REIT or stapled 
entity) as the activities and gross income of the exempt REIT in the 
same manner as if the exempt REIT and such group were 1 entity.
    (b) Nonqualified Real Property Interest.--For purposes of this 
section--
            (1) In general.--The term ``nonqualified real property 
        interest'' means, with respect to any exempt REIT, any interest 
        in real property acquired after March 26, 1998, by the exempt 
        REIT or any stapled entity.
            (2) Exception for binding contracts, etc.--Such term shall 
        not include any interest in real property acquired after March 
        26, 1998, by the exempt REIT or any stapled entity if--
                    (A) the acquisition is pursuant to a written 
                agreement which was binding on such date and at all 
                times thereafter on such REIT or stapled entity, or
                    (B) the acquisition is described on or before such 
                date in a public announcement or in a filing with the 
                Securities and Exchange Commission.
            (3) Improvements and leases.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the term ``nonqualified real property 
                interest'' shall not include--
                            (i) any improvement to land owned or leased 
                        by the exempt REIT or any member of the stapled 
                        REIT group, and
                            (ii) any repair to, or improvement of, any 
                        improvement owned or leased by the exempt REIT 
                        or any member of the stapled REIT group,
                if such ownership or leasehold interest is a qualified 
                real property interest.
                    (B) Leases.--Such term shall not include any lease 
                of a qualified real property interest.
                    (C) Termination where change in use.--
                            (i) In general.--Subparagraph (A) shall not 
                        apply to any improvement placed in service 
                        after December 31, 1999, which is part of a 
                        change in the use of the property to which such 
                        improvement relates unless the cost of such 
                        improvement does not exceed 200 percent of--
                                    (I) the cost of such property, or
                                    (II) if such property is 
                                substituted basis property (as defined 
                                in section 7701(a)(42) of the Internal 
                                Revenue Code of 1986), the fair market 
                                value of the property at the time of 
                                acquisition.
                            (ii) Binding contracts.--For purposes of 
                        clause (i), an improvement shall be treated as 
                        placed in service before January 1, 2000, if 
                        such improvement is placed in service before 
                        January 1, 2004, pursuant to a binding contract 
                        in effect on December 31, 1999, and at all 
                        times thereafter.
            (4) Treatment of entities which are not stapled, etc. on 
        march 26, 1998.--Notwithstanding any other provision of this 
        section, all interests in real property held by an exempt REIT 
        or any stapled entity with respect to such REIT (or treated 
        under subsection (c) as held by such REIT or stapled entity) 
        shall be treated as nonqualified real property interests 
        unless--
                    (A) such stapled entity was a stapled entity with 
                respect to such REIT as of March 26, 1998, and at all 
                times thereafter, and
                    (B) as of March 26, 1998, and at all times 
                thereafter, such REIT was a real estate investment 
                trust.
            (5) Qualified real property interest.--The term ``qualified 
        real property interest'' means any interest in real property 
        other than a nonqualified real property interest.
    (c) Treatment of Property Held by 10-Percent Subsidiaries.--For 
purposes of this section--
            (1) In general.--Any exempt REIT and any stapled entity 
        shall be treated as holding their proportionate shares of each 
        interest in real property held by any 10-percent subsidiary 
        entity of the exempt REIT or stapled entity, as the case may 
        be.
            (2) Property held by 10-percent subsidiaries treated as 
        nonqualified.--
                    (A) In general.--Except as provided in subparagraph 
                (B), any interest in real property held by a 10-percent 
                subsidiary entity of an exempt REIT or stapled entity 
                shall be treated as a nonqualified real property 
                interest.
                    (B) Exception for interests in real property held 
                on march 26, 1998, etc.--In the case of an entity which 
                was a 10-percent subsidiary entity of an exempt REIT or 
                stapled entity on March 26, 1998, and at all times 
                thereafter, an interest in real property held by such 
                subsidiary entity shall be treated as a qualified real 
                property interest if such interest would be so treated 
                if held directly by the exempt REIT or the stapled 
                entity.
            (3) Reduction in qualified real property interests if 
        increase in ownership of subsidiary.--If, after March 26, 1998, 
        an exempt REIT or stapled entity increases its ownership 
        interest in a subsidiary entity to which paragraph (2)(B) 
        applies above its ownership interest in such subsidiary entity 
        as of such date, the additional portion of each interest in 
        real property which is treated as held by the exempt REIT or 
        stapled entity by reason of such increased ownership shall be 
        treated as a nonqualified real property interest.
            (4) Special rules for determining ownership.--For purposes 
        of this subsection--
                    (A) percentage ownership of an entity shall be 
                determined in accordance with subsection (e)(4),
                    (B) interests in the entity which are acquired by 
                the exempt REIT or stapled entity in any acquisition 
                described in an agreement, announcement, or filing 
                described in subsection (b)(2) shall be treated as 
                acquired on March 26, 1998, and
                    (C) except as provided in guidance prescribed by 
                the Secretary, any change in proportionate ownership 
                which is attributable solely to fluctuations in the 
                relative fair market values of different classes of 
                stock shall not be taken into account.
    (d) Treatment of Property Secured by Mortgage Held by Exempt REIT 
or Member of Stapled REIT Group.--
            (1) In general.--In the case of any nonqualified obligation 
        held by an exempt REIT or any member of the stapled REIT group, 
        the REIT gross income provisions shall be applied by treating 
        the exempt REIT as having impermissible tenant service income 
        equal to--
                    (A) the interest income from such obligation which 
                is properly allocable to the property described in 
                paragraph (2), and
                    (B) the income of any member of the stapled REIT 
                group from services described in paragraph (2) with 
                respect to such property.
        If the income referred to in subparagraph (A) or (B) is of a 
        10-percent subsidiary entity, only the portion of such income 
        which is properly allocable to the exempt REIT's or the stapled 
        entity's interest in the subsidiary entity shall be taken into 
        account.
            (2) Nonqualified obligation.--Except as otherwise provided 
        in this subsection, the term ``nonqualified obligation'' means 
        any obligation secured by a mortgage on an interest in real 
        property if the income of any member of the stapled REIT group 
        for services furnished with respect to such property would be 
        impermissible tenant service income were such property held by 
        the exempt REIT and such services furnished by the exempt REIT.
            (3) Exception for certain market rate obligations.--Such 
        term shall not include any obligation--
                    (A) payments under which would be treated as 
                interest if received by a REIT, and
                    (B) the rate of interest on which does not exceed 
                an arm's length rate.
            (4) Exception for existing obligations.--Such term shall 
        not include any obligation--
                    (A) which is secured on March 26, 1998, by an 
                interest in real property, and
                    (B) which is held on such date by the exempt REIT 
                or any entity which is a member of the stapled REIT 
                group on such date and at all times thereafter,
        but only so long as such obligation is secured by such 
        interest. The preceding sentence shall not cease to apply by 
        reason of the refinancing of the obligation if (immediately 
        after the refinancing) the principal amount of the obligation 
        resulting from the refinancing does not exceed the principal 
        amount of the refinanced obligation (immediately before the 
        refinancing).
            (5) Treatment of entities which are not stapled, etc. on 
        march 26, 1998.--A rule similar to the rule of subsection 
        (b)(4) shall apply for purposes of this subsection.
            (6) Increase in amount of nonqualified obligations if 
        increase in ownership of subsidiary.--A rule similar to the 
        rule of subsection (c)(3) shall apply for purposes of this 
        subsection.
            (7) Coordination with subsection (a).--This subsection 
        shall not apply to the portion of any interest in real property 
        that the exempt REIT or stapled entity holds or is treated as 
        holding under this section without regard to this subsection.
    (e) Definitions.--For purposes of this section--
            (1) REIT gross income provisions.--The term ``REIT gross 
        income provisions'' means--
                    (A) paragraphs (2), (3), and (6) of section 856(c) 
                of the Internal Revenue Code of 1986, and
                    (B) section 857(b)(5) of such Code.
            (2) Exempt reit.--The term ``exempt REIT'' means a real 
        estate investment trust to which section 269B of the Internal 
        Revenue Code of 1986 does not apply by reason of paragraph (3) 
        of section 136(c) of the Tax Reform Act of 1984.
            (3) Stapled reit group.--The term ``stapled REIT group'' 
        means, with respect to an exempt REIT, the group consisting 
        of--
                    (A) all entities which are stapled entities with 
                respect to the exempt REIT, and
                    (B) all entities which are 10-percent subsidiary 
                entities of the exempt REIT or any such stapled entity.
            (4) 10-percent subsidiary entity.--
                    (A) In general.--The term ``10-percent subsidiary 
                entity'' means, with respect to any exempt REIT or 
                stapled entity, any entity in which the exempt REIT or 
                stapled entity (as the case may be) directly or 
                indirectly holds at least a 10-percent interest.
                    (B) Exception for certain c corporation 
                subsidiaries of reits.--A corporation which would, but 
                for this subparagraph, be treated as a 10-percent 
                subsidiary of an exempt REIT shall not be so treated if 
                such corporation is taxable under section 11 of the 
                Internal Revenue Code of 1986.
                    (C) 10-percent interest.--The term ``10-percent 
                interest'' means--
                            (i) in the case of an interest in a 
                        corporation, ownership of 10 percent (by vote 
                        or value) of the stock in such corporation,
                            (ii) in the case of an interest in a 
                        partnership, ownership of 10 percent of the 
                        assets or net profits interest in the 
                        partnership, and
                            (iii) in any other case, ownership of 10 
                        percent of the beneficial interests in the 
                        entity.
            (5) Other definitions.--Terms used in this section which 
        are used in section 269B or section 856 of such Code shall have 
        the respective meanings given such terms by such section.
    (f) Guidance.--The Secretary may prescribe such guidance as may be 
necessary or appropriate to carry out the purposes of this section, 
including guidance to prevent the avoidance of such purposes and to 
prevent the double counting of income.
    (g) Effective Date.--This section shall apply to taxable years 
ending after March 26, 1998.

SEC. 5005. CERTAIN CUSTOMER RECEIVABLES INELIGIBLE FOR MARK-TO-MARKET 
              TREATMENT.

    (a) Certain Receivables Not Eligible for Mark to Market.--Section 
475(c) (relating to definitions) is amended by adding at the end the 
following new paragraph:
            ``(4) Special rules for certain receivables.--
                    ``(A) In general.--Paragraph (2)(C) shall not 
                include any note, bond, debenture, or other evidence of 
                indebtedness which is nonfinancial customer paper.
                    ``(B) Nonfinancial customer paper.--For purposes of 
                subparagraph (A), the term `nonfinancial customer 
                paper' means any receivable--
                            ``(i) arising out of the sale of goods or 
                        services by a person the principal activity of 
                        which is the selling or providing of 
                        nonfinancial goods and services, and
                            ``(ii) held by such person (or a person who 
                        bears a relationship to such person described 
                        in section 267(b) or 707(b)) at all times since 
                        issue.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account ratably over the 4-taxable year period 
                beginning with such first taxable year.

SEC. 5006. INCLUSION OF ROTAVIRUS GASTROENTERITIS TO LIST OF TAXABLE 
              VACCINES.

    (a) In General.--Section 4132(1) (defining taxable vaccine) is 
amended by adding at the end the following new subparagraph:
                    ``(K) Any vaccine against rotavirus 
                gastroenteritis.''.
    (b) Effective Date.--
            (1) Sales.--The amendment made by this section shall apply 
        to sales after the date of the enactment of this Act.
            (2) Deliveries.--For purposes of paragraph (1), in the case 
        of sales on or before the date of the enactment of this Act for 
        which delivery is made after such date, the delivery date shall 
        be considered the sale date.

SEC. 5007. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY LOSS.

    (a) In General.--Subparagraph (B) of section 172(f)(1) (defining 
specified liability loss) is amended to read as follows:
                    ``(B) Any amount (not described in subparagraph 
                (A)) allowable as a deduction under this chapter which 
                is attributable to a liability--
                            ``(i) under a Federal or State law 
                        requiring the reclamation of land, 
                        decommissioning of a nuclear power plant (or 
                        any unit thereof), dismantlement of an offshore 
                        drilling platform, remediation of environmental 
                        contamination, or payment of workmen's 
                        compensation, and
                            ``(ii) with respect to which the act (or 
                        failure to act) giving rise to such liability 
                        occurs at least 3 years before the beginning of 
                        the taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to net operating losses arising in taxable years beginning after the 
date of the enactment of this Act.

SEC. 5008. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS.

    (a) In General.--Section 408A(c)(3)(C)(i) (relating to limits based 
on modified adjusted gross income) is amended to read as follows:
                            ``(i) adjusted gross income shall be 
                        determined in the same manner as under section 
                        219(g)(3), except that--
                                    ``(I) any amount included in gross 
                                income under subsection (d)(3) shall 
                                not be taken into account, and
                                    ``(II) any amount included in gross 
                                income by reason of a required 
                                distribution under a provision 
                                described in paragraph (5) shall not be 
                                taken into account for purposes of 
                                subparagraph (B)(i).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2004.

SEC. 5009. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

    Subsection (c) of section 10511 of the Revenue Act of 1987 is 
amended by striking ``October 1, 2003'' and inserting ``October 1, 
2007''.

                    TITLE VI--TECHNICAL CORRECTIONS

SEC. 6001. SHORT TITLE.

    This title may be cited as the ``Tax Technical Corrections Act of 
1998''.

SEC. 6002. DEFINITIONS.

    For purposes of this title--
            (1) 1986 code.--The term ``1986 Code'' means the Internal 
        Revenue Code of 1986.
            (2) 1997 act.--The term ``1997 Act'' means the Taxpayer 
        Relief Act of 1997.

SEC. 6003. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.

    (a) Amendments Related to Section 101(a) of 1997 Act.--
            (1) Subsection (d) of section 24 of the 1986 Code is 
        amended--
                    (A) by striking paragraphs (3) and (4),
                    (B) by redesignating paragraph (5) as paragraph 
                (3), and
                    (C) by striking paragraphs (1) and (2) and 
                inserting the following new paragraphs:
            ``(1) In general.--In the case of a taxpayer with 3 or more 
        qualifying children for any taxable year, the aggregate credits 
        allowed under subpart C shall be increased by the lesser of--
                    ``(A) the credit which would be allowed under this 
                section without regard to this subsection and the 
                limitation under section 26(a), or
                    ``(B) the amount by which the aggregate amount of 
                credits allowed by this subpart (without regard to this 
                subsection) would increase if the limitation imposed by 
                section 26(a) were increased by the excess (if any) 
                of--
                            ``(i) the taxpayer's social security taxes 
                        for the taxable year, over
                            ``(ii) the credit allowed under section 32 
                        (determined without regard to subsection (n)) 
                        for the taxable year.
        The amount of the credit allowed under this subsection shall 
        not be treated as a credit allowed under this subpart and shall 
        reduce the amount of credit otherwise allowable under 
        subsection (a) without regard to section 26(a).
            ``(2) Reduction of credit to taxpayer subject to 
        alternative minimum tax.--The credit determined under this 
        subsection for the taxable year shall be reduced by the excess 
        (if any) of--
                    ``(A) the amount of tax imposed by section 55 
                (relating to alternative minimum tax) with respect to 
                such taxpayer for such taxable year, over
                    ``(B) the amount of the reduction under section 
                32(h) with respect to such taxpayer for such taxable 
                year.''.
            (2) Paragraph (3) of section 24(d) of the 1986 Code (as 
        redesignated by paragraph (1)) is amended by striking 
        ``paragraph (3)'' and inserting ``paragraph (1)''.
    (b) Amendments Related to Section 101(b) of 1997 Act.--
            (1) The subsection (m) of section 32 of the 1986 Code added 
        by section 101(b) of the 1997 Act is amended to read as 
        follows:
    ``(n) Supplemental Child Credit.--
            ``(1) In general.--In the case of a taxpayer with respect 
        to whom a credit is allowed under section 24(a) for the taxable 
        year, the credit otherwise allowable under this section shall 
        be increased by the lesser of--
                    ``(A) the excess of--
                            ``(i) the credits allowed under subpart A 
                        (determined after the application of section 26 
                        and without regard to this subsection), over
                            ``(ii) the credits which would be allowed 
                        under subpart A after the application of 
                        section 26, determined without regard to 
                        section 24 and this subsection, or
                    ``(B) the excess of--
                            ``(i) the sum of the credits allowed under 
                        this part (determined without regard to 
                        sections 31, 33, and 34 and this subsection), 
                        over
                            ``(ii) the sum of the regular tax and the 
                        social security taxes (as defined in section 
                        24(d)).
        The credit determined under this subsection shall be allowed 
        without regard to any other provision of this section, 
        including subsection (d).
            ``(2) Coordination with other credits.--The amount of the 
        credit under this subsection shall reduce the amount of the 
        credits otherwise allowable under subpart A for the taxable 
        year (determined after the application of section 26), but the 
        amount of the credit under this subsection (and such reduction) 
        shall not be taken into account in determining the amount of 
        any other credit allowable under this part.''.

SEC. 6004. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.

    (a) Amendments Related to Section 201 of 1997 Act.--
            (1) The item relating to section 25A in the table of 
        sections for subpart A of part IV of subchapter A of chapter 1 
        of the 1986 Code is amended to read as follows:

                              ``Sec. 25A. Hope and Lifetime Learning 
                                        credits.''.
            (2) Subsection (a) of section 6050S of the 1986 Code is 
        amended to read as follows:
    ``(a) In General.--Any person--
            ``(1) which is an eligible educational institution--
                    ``(A) which receives payments for qualified tuition 
                and related expenses with respect to any individual for 
                any calendar year, or
                    ``(B) which makes reimbursements or refunds (or 
                similar amounts) to any individual of qualified tuition 
                and related expenses,
            ``(2) which is engaged in a trade or business of making 
        payments to any individual under an insurance arrangement as 
        reimbursements or refunds (or similar amounts) of qualified 
        tuition and related expenses, or
            ``(3) except as provided in regulations, which is engaged 
        in a trade or business and, in the course of which, receives 
        from any individual interest aggregating $600 or more for any 
        calendar year on 1 or more qualified education loans,
shall make the return described in subsection (b) with respect to the 
individual at such time as the Secretary may by regulations 
prescribe.''.
            (3) Subparagraph (A) of section 201(c)(2) of the 1997 Act 
        is amended to read as follows:
                    ``(A) Subparagraph (B) of section 6724(d)(1) 
                (relating to definitions) is amended by redesignating 
                clauses (x) through (xv) as clauses (xi) through (xvi), 
                respectively, and by inserting after clause (ix) the 
                following new clause:
                            ```(x) section 6050S (relating to returns 
                        relating to payments for qualified tuition and 
                        related expenses),'''.
    (b) Amendment Related to Section 202 of 1997 Act.--Paragraph (1) of 
section 221(e) of the 1986 Code is amended by inserting ``by the 
taxpayer'' after ``incurred'' the first place it appears.
    (c) Amendments Related to Section 211 of 1997 Act.--
            (1) Paragraph (3) of section 135(c) of the 1986 Code is 
        amended to read as follows:
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' has the meaning given such term by 
        section 529(e)(5).''.
            (2) Subparagraph (A) of section 529(c)(3) of the 1986 Code 
        is amended by striking ``section 72(b)'' and inserting 
        ``section 72''.
            (3) Paragraph (2) of section 529(e) of the 1986 Code is 
        amended to read as follows:
            ``(2) Member of family.--The term `member of the family' 
        means, with respect to any designated beneficiary--
                    ``(A) the spouse of such beneficiary,
                    ``(B) an individual who bears a relationship to 
                such beneficiary which is described in paragraphs (1) 
                through (8) of section 152(a), and
                    ``(C) the spouse of any individual described in 
                subparagraph (B).''.
    (d) Amendments Related to Section 213 of 1997 Act.--
            (1) Section 530(b)(1) of the 1986 Code (defining education 
        individual retirement account) is amended by inserting ``an 
        individual who is'' before ``the designated beneficiary'' in 
        the material preceding subparagraph (A).
            (2)(A) Section 530(b)(1)(E) of the 1986 Code (defining 
        education individual retirement account) is amended to read as 
        follows:
                    ``(E) Except as provided in subsection (d)(7), any 
                balance to the credit of the designated beneficiary on 
                the date on which the beneficiary attains age 30 shall 
                be distributed within 30 days after such date to the 
                beneficiary or, if the beneficiary dies before 
                attaining age 30, shall be distributed within 30 days 
                after the date of death of such beneficiary.''.
            (B) Paragraph (7) of section 530(d) of the 1986 Code is 
        amended by inserting at the end the following new sentence: 
        ``In applying the preceding sentence, members of the family of 
        the designated beneficiary shall be treated in the same manner 
        as the spouse under such paragraph (8).''.
            (C) Subsection (d) of section 530 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(8) Deemed distribution on required distribution date.--
        In any case in which a distribution is required under 
        subsection (b)(1)(E), any balance to the credit of a designated 
        beneficiary as of the close of the 30-day period referred to in 
        such subsection for making such distribution shall be deemed 
        distributed at the close of such period.''.
            (3)(A) Paragraph (1) of section 530(d) of the 1986 Code is 
        amended by striking ``section 72(b)'' and inserting ``section 
        72''.
            (B) Subsection (e) of section 72 of the 1986 Code is 
        amended by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Extension of paragraph (2)(b) to qualified state 
        tuition programs and educational individual retirement 
        accounts.--Notwithstanding any other provision of this 
        subsection, paragraph (2)(B) shall apply to amounts received 
        under a qualified State tuition program (as defined in section 
        529(b)) or under an education individual retirement account (as 
        defined in section 530(b)). The rule of paragraph (8)(B) shall 
        apply for purposes of this paragraph.''.
            (4) Paragraph (2) of section 135(d) of the 1986 Code is 
        amended to read as follows:
            ``(2) Coordination with other higher education benefits.--
        The amount of the qualified higher education expenses otherwise 
        taken into account under subsection (a) with respect to the 
        education of an individual shall be reduced (before the 
        application of subsection (b)) by--
                    ``(A) the amount of such expenses which are taken 
                into account in determining the credit allowable to the 
                taxpayer or any other person under section 25A with 
                respect to such expenses, and
                    ``(B) the amount of such expenses which are taken 
                into account in determining the exclusion under section 
                530(d)(2).''.
            (5) Section 530(d)(2) (relating to distributions for 
        qualified higher education expenses) is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Disallowance of excluded amounts as credit or 
                deduction.--No deduction or credit shall be allowed to 
                the taxpayer under any other section of this chapter 
                for any qualified education expenses to the extent 
                taken into account in determining the amount of the 
                exclusion under this paragraph.''.
            (6) Section 530(d)(4)(B) of the 1986 Code (relating to 
        exceptions) is amended by striking ``or'' at the end of clause 
        (ii), by striking the period at the end of clause (iii) and 
        inserting ``, or'', and by adding at the end the following new 
        clause:
                            ``(iv) an amount which is includible in 
                        gross income solely because the taxpayer 
                        elected under paragraph (2)(C) to waive the 
                        application of paragraph (2) for the taxable 
                        year.''.
            (7) So much of section 530(d)(4)(C) of the 1986 Code as 
        precedes clause (ii) thereof is amended to read as follows:
                    ``(C) Contributions returned before due date of 
                return.--Subparagraph (A) shall not apply to the 
                distribution of any contribution made during a taxable 
                year on behalf of the designated beneficiary if--
                            ``(i) such distribution is made on or 
                        before the day prescribed by law (including 
                        extensions of time) for filing the 
                        beneficiary's return of tax for the taxable 
                        year or, if the beneficiary is not required to 
                        file such a return, the 15th day of the 4th 
                        month of the taxable year following the taxable 
                        year, and''.
            (8) Subparagraph (C) of section 135(c)(2) of the 1986 Code 
        is amended--
                    (A) by inserting ``and education individual 
                retirement accounts'' in the heading after ``program'', 
                and
                    (B) by striking ``section 529(c)(3)(A)'' and 
                inserting ``section 72''.
            (9) Paragraph (1) of section 4973(e) of the 1986 Code is 
        amended to read as follows:
            ``(1) In general.--In the case of education individual 
        retirement accounts maintained for the benefit of any 1 
        beneficiary, the term `excess contributions' means the sum of--
                    ``(A) the amount by which the amount contributed 
                for the taxable year to such accounts exceeds $500 (or, 
                if less, the sum of the maximum amounts permitted to be 
                contributed under section 530(c) by the contributors to 
                such accounts for such year),
                    ``(B) if any amount is contributed during such year 
                to a qualified State tuition program for the benefit of 
                such beneficiary, any amount contributed to such 
                accounts for any taxable year, and
                    ``(C) the amount determined under this subsection 
                for the preceding taxable year, reduced by the sum of--
                            ``(i) the distributions out of the accounts 
                        for the taxable year which are included in 
                        gross income, and
                            ``(ii) the excess (if any) of the maximum 
                        amount which may be contributed to the accounts 
                        for the taxable year (other than excess 
                        contributions within the meaning of 
                        subparagraphs (A) and (B)) over the amount 
                        contributed to the accounts for the taxable 
                        year.''.
    (e) Amendments Related to Section 224 of 1997 Act.--
            (1) Clauses (vi) and (vii) of section 170(e)(6)(B) of the 
        1986 Code are each amended by striking ``entity's'' and 
        inserting ``donee's''.
            (2) Clause (iv) of section 170(e)(6)(B) of the 1986 Code is 
        amended by striking ``organization or entity'' and inserting 
        ``donee''.
            (3) Subclause (I) of section 170(e)(6)(C)(ii) of the 1986 
        Code is amended by striking ``an entity'' and inserting ``a 
        donee''.
            (4) Section 170(e)(6)(F) of the 1986 Code (relating to 
        termination) is amended by striking ``1999'' and inserting 
        ``2000''.
    (f) Amendments Related to Section 225 of 1997 Act.--
            (1) The last sentence of section 108(f)(2) of the 1986 Code 
        is amended to read as follows:
        ``The term `student loan' includes any loan made by an 
        educational organization described in section 170(b)(1)(A)(ii) 
        or by an organization exempt from tax under section 501(a) to 
        refinance a loan to an individual to assist the individual in 
        attending any such educational organization but only if the 
        refinancing loan is pursuant to a program of the refinancing 
        organization which is designed as described in subparagraph 
        (D)(ii).''.
            (2) Section 108(f)(3) of the 1986 Code is amended by 
        striking ``(or by an organization described in paragraph (2)(E) 
        from funds provided by an organization described in paragraph 
        (2)(D))''.
    (g) Amendments Related to Section 226 of 1997 Act.--
            (1) Section 226(a) of the 1997 Act is amended by striking 
        ``section 1397E'' and inserting ``section 1397D''.
            (2) Section 1397E(d)(4)(B) of the 1986 Code is amended by 
        striking ``local education agency as defined'' and inserting 
        ``local educational agency as defined''.
            (3) Section 1397E is amended by adding at the end the 
        following new subsection:
    ``(h) Credit Treated as Allowed Under Part IV of Subchapter A.--For 
purposes of subtitle F, the credit allowed by this section shall be 
treated as a credit allowable under part IV of subchapter A of this 
chapter.''.

SEC. 6005. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.

    (a) Amendments Related to Section 301 of 1997 Act.--
            (1) Section 219(g) of the 1986 Code is amended--
                    (A) by inserting ``or the individual's spouse'' 
                after ``individual'' in paragraph (1), and
                    (B) by striking paragraph (7) and inserting:
            ``(7) Special rule for spouses who are not active 
        participants.--If this subsection applies to an individual for 
        any taxable year solely because their spouse is an active 
        participant, then, in applying this subsection to the 
        individual (but not their spouse)--
                    ``(A) the applicable dollar amount under paragraph 
                (3)(B)(i) shall be $150,000, and
                    ``(B) the amount applicable under paragraph 
                (2)(A)(ii) shall be $10,000.''.
            (2) Paragraph (2) of section 301(a) of the 1997 Act is 
        amended by inserting ``after `$10,000''' before the period.
    (b) Amendments Related to Section 302 of 1997 Act.--
            (1) Section 408A(c)(3)(A) of the 1986 Code is amended by 
        striking ``shall be reduced'' and inserting ``shall not exceed 
        an amount equal to the amount determined under paragraph (2)(A) 
        for such taxable year, reduced''.
            (2) Section 408A(c)(3) of the 1986 Code (relating to limits 
        based on modified adjusted gross income) is amended--
                    (A) by inserting ``or a married individual filing a 
                separate return'' after ``joint return'' in 
                subparagraph (A)(ii),
                    (B) in subparagraph (B)--
                            (i) by inserting ``, for the taxable year 
                        of the distribution to which such contribution 
                        relates'' after ``if'', and
                            (ii) by striking ``for such taxable year'' 
                        in clause (i), and
                    (C) by striking ``and the deduction under section 
                219 shall be taken into account'' in subparagraph 
                (C)(i).
            (3)(A) Section 408A(d)(2) of the 1986 Code (defining 
        qualified distribution) is amended by striking subparagraph (B) 
        and inserting the following:
                    ``(B) Distributions within nonexclusion period.--A 
                payment or distribution from a Roth IRA shall not be 
                treated as a qualified distribution under subparagraph 
                (A) if such payment or distribution is made within the 
                5-taxable year period beginning with the 1st taxable 
                year for which the individual made a contribution to a 
                Roth IRA (or such individual's spouse made a 
                contribution to a Roth IRA) established for such 
                individual.''.
            (B) Section 408A(d)(2) of the 1986 Code is amended by 
        adding at the end the following new subparagraph:
                    ``(C) Distributions of excess contributions and 
                earnings.--The term `qualified distribution' shall not 
                include any distribution of any contribution described 
                in section 408(d)(4) and any net income allocable to 
                the contribution.''.
            (4) Section 408A(d)(3) of the 1986 Code (relating to 
        rollovers from IRAs other than Roth IRAs) is amended--
                    (A) by striking clause (iii) of subparagraph (A) 
                and inserting:
                            ``(iii) unless the taxpayer elects not to 
                        have this clause apply for any taxable year, 
                        any amount required to be included in gross 
                        income for such taxable year by reason of this 
                        paragraph for any distribution before January 
                        1, 1999, shall be so included ratably over the 
                        4-taxable year period beginning with such 
                        taxable year.
                Any election under clause (iii) for any distributions 
                during a taxable year may not be changed after the due 
                date for such taxable year.''; and
                    (B) by adding at the end the following:
                    ``(F) Special rules for contributions to which 4-
                year averaging applies.--In the case of a qualified 
                rollover contribution to a Roth IRA of a distribution 
                to which subparagraph (A)(iii) applied, the following 
                rules shall apply:
                            ``(i) Acceleration of inclusion.--
                                    ``(I) In general.--The amount 
                                required to be included in gross income 
                                for each of the first 3 taxable years 
                                in the 4-year period under subparagraph 
                                (A)(iii) shall be increased by the 
                                aggregate distributions from Roth IRAs 
                                for such taxable year which are 
                                allocable under paragraph (4) to the 
                                portion of such qualified rollover 
                                contribution required to be included in 
                                gross income under subparagraph (A)(i).
                                    ``(II) Limitation on aggregate 
                                amount included.--The amount required 
                                to be included in gross income for any 
                                taxable year under subparagraph 
                                (A)(iii) shall not exceed the aggregate 
                                amount required to be included in gross 
                                income under subparagraph (A)(iii) for 
                                all taxable years in the 4-year period 
                                (without regard to subclause (I)) 
                                reduced by amounts included for all 
                                preceding taxable years.
                            ``(ii) Death of distributee.--
                                    ``(I) In general.--If the 
                                individual required to include amounts 
                                in gross income under such subparagraph 
                                dies before all of such amounts are 
                                included, all remaining amounts shall 
                                be included in gross income for the 
                                taxable year which includes the date of 
                                death.
                                    ``(II) Special rule for surviving 
                                spouse.--If the spouse of the 
                                individual described in subclause (I) 
                                acquires the individual's entire 
                                interest in any Roth IRA to which such 
                                qualified rollover contribution is 
                                properly allocable, the spouse may 
                                elect to treat the remaining amounts 
                                described in subclause (I) as 
                                includible in the spouse's gross income 
                                in the taxable years of the spouse 
                                ending with or within the taxable years 
                                of such individual in which such 
                                amounts would otherwise have been 
                                includible. Any such election may not 
                                be made or changed after the due date 
                                for the spouse's taxable year which 
                                includes the date of death.
                    ``(G) Special rule for applying section 72.--
                            ``(i) In general.--If--
                                    ``(I) any portion of a distribution 
                                from a Roth IRA is properly allocable 
                                to a qualified rollover contribution 
                                described in this paragraph, and
                                    ``(II) such distribution is made 
                                within the 5-taxable year period 
                                beginning with the taxable year in 
                                which such contribution was made,
                        then section 72(t) shall be applied as if such 
                        portion were includible in gross income.
                            ``(ii) Limitation.--Clause (i) shall apply 
                        only to the extent of the amount of the 
                        qualified rollover contribution includible in 
                        gross income under subparagraph (A)(i).''.
            (5)(A) Section 408A(d)(4) of the 1986 Code is amended to 
        read as follows:
            ``(4) Aggregation and ordering rules.--
                    ``(A) Aggregation rules.--Section 408(d)(2) shall 
                be applied separately with respect to Roth IRAs and 
                other individual retirement plans.
                    ``(B) Ordering rules.--For purposes of applying 
                this section and section 72 to any distribution from a 
                Roth IRA, such distribution shall be treated as made--
                            ``(i) from contributions to the extent that 
                        the amount of such distribution, when added to 
                        all previous distributions from the Roth IRA, 
                        does not exceed the aggregate contributions to 
                        the Roth IRA, and
                            ``(ii) from such contributions in the 
                        following order:
                                    ``(I) Contributions other than 
                                qualified rollover contributions to 
                                which paragraph (3) applies.
                                    ``(II) Qualified rollover 
                                contributions to which paragraph (3) 
                                applies on a first-in, first-out basis.
                Any distribution allocated to a qualified rollover 
                contribution under clause (ii)(II) shall be allocated 
                first to the portion of such contribution required to 
                be included in gross income.''.
            (B) Section 408A(d)(1) of the 1986 Code is amended to read 
        as follows:
            ``(1) Exclusion.--Any qualified distribution from a Roth 
        IRA shall not be includible in gross income.''.
            (6)(A) Section 408A(d) of the 1986 Code (relating to 
        distribution rules) is amended by adding at the end the 
        following:
            ``(6) Taxpayer may make adjustments before due date.--
                    ``(A) In general.--Except as provided by the 
                Secretary, if, on or before the due date for any 
                taxable year, a taxpayer transfers in a trustee-to-
                trustee transfer any contribution to an individual 
                retirement plan made during such taxable year from such 
                plan to any other individual retirement plan, then, for 
                purposes of this chapter, such contribution shall be 
                treated as having been made to the transferee plan (and 
                not the transferor plan).
                    ``(B) Special rules.--
                            ``(i) Transfer of earnings.--Subparagraph 
                        (A) shall not apply to the transfer of any 
                        contribution unless such transfer is 
                        accompanied by any net income allocable to such 
                        contribution.
                            ``(ii) No deduction.--Subparagraph (A) 
                        shall apply to the transfer of any contribution 
                        only to the extent no deduction was allowed 
                        with respect to the contribution to the 
                        transferor plan.''.
            (B) Section 408A(d)(3) of the 1986 Code, as amended by this 
        subsection, is amended by striking subparagraph (D) and by 
        redesignating subparagraphs (E), (F), and (G) as subparagraphs 
        (D), (E), and (F), respectively.
            (7) Section 408A(d) of the 1986 Code, as amended by 
        paragraph (6), is amended by adding at the end the following 
        new paragraph:
            ``(7) Due date.--For purposes of this subsection, the due 
        date for any taxable year is the date prescribed by law 
        (including extensions of time) for filing the taxpayer's return 
        for such taxable year.''.
            (8)(A) Section 4973(f) of the 1986 Code is amended--
                    (i) by striking ``such accounts'' in paragraph 
                (1)(A) and inserting ``Roth IRAs'', and
                    (ii) by striking ``to the accounts'' in paragraph 
                (2)(B) and inserting ``by the individual to all 
                individual retirement plans''.
            (B) Section 4973(b) of the 1986 Code is amended--
                    (i) by inserting ``a contribution to a Roth IRA 
                or'' after ``other than'' in paragraph (1)(A), and
                    (ii) by inserting ``(including the amount 
                contributed to a Roth IRA)'' after ``annuities'' in 
                paragraph (2)(C).
            (C) Section 302(b) of the 1997 Act is amended by striking 
        ``Section 4973(b)'' and inserting ``Section 4973''.
            (9) Section 408A of the 1986 Code is amended by adding at 
        the end the following new subsection:
    ``(f) Individual Retirement Plan.--For purposes of this section--
            ``(1) a simplified employee pension or a simple retirement 
        account may not be designated as a Roth IRA, and
            ``(2) contributions to any such pension or account shall 
        not be taken into account for purposes of subsection 
        (c)(2)(B).''.
    (c) Amendments Related to Section 303 of 1997 Act.--
            (1) Section 72(t)(8)(E) of the 1986 Code is amended--
                    (A) by striking ``120 days'' and inserting ``120th 
                day'', and
                    (B) by striking ``60 days'' and inserting ``60th 
                day''.
            (2)(A) Section 402(c)(4) of the 1986 Code is amended by 
        striking ``and'' at the end of subparagraph (A), by striking 
        the period at the end of subparagraph (B) and inserting ``, 
        and'', by inserting at the end the following new subparagraph:
                    ``(C) any hardship distribution described in 
                section 401(k)(2)(B)(i)(IV).''.
            (B) Section 403(b)(8)(B) of the 1986 Code is amended by 
        inserting ``(including paragraph (4)(C) thereof)'' after 
        ``section 402(c)''.
            (C) The amendments made by this paragraph shall apply to 
        distributions after December 31, 1998.
    (d) Amendments Related to Section 311 of 1997 Act.--
            (1) Subsection (h) of section 1 of the 1986 Code (relating 
        to maximum capital gains rate) is amended to read as follows:
    ``(h) Maximum Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a net capital gain for 
        any taxable year, the tax imposed by this section for such 
        taxable year shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by the net 
                        capital gain, or
                            ``(ii) the lesser of--
                                    ``(I) the amount of taxable income 
                                taxed at a rate below 28 percent, or
                                    ``(II) taxable income reduced by 
                                the adjusted net capital gain,
                    ``(B) 10 percent of so much of the adjusted net 
                capital gain (or, if less, taxable income) as does not 
                exceed the excess (if any) of--
                            ``(i) the amount of taxable income which 
                        would (without regard to this paragraph) be 
                        taxed at a rate below 28 percent, over
                            ``(ii) the taxable income reduced by the 
                        adjusted net capital gain,
                    ``(C) 20 percent of the adjusted net capital gain 
                (or, if less, taxable income) in excess of the amount 
                on which a tax is determined under subparagraph (B),
                    ``(D) 25 percent of the excess (if any) of--
                            ``(i) the unrecaptured section 1250 gain 
                        (or, if less, the net capital gain), over
                            ``(ii) the excess (if any) of--
                                    ``(I) the sum of the amount on 
                                which tax is determined under 
                                subparagraph (A) plus the net capital 
                                gain, over
                                    ``(II) taxable income, and
                    ``(E) 28 percent of the amount of taxable income in 
                excess of the sum of the amounts on which tax is 
                determined under the preceding subparagraphs of this 
                paragraph.
            ``(2) Reduced capital gain rates for qualified 5-year 
        gain.--
                    ``(A) Reduction in 10-percent rate.--In the case of 
                any taxable year beginning after December 31, 2000, the 
                rate under paragraph (1)(B) shall be 8 percent with 
                respect to so much of the amount to which the 10-
                percent rate would otherwise apply as does not exceed 
                qualified 5-year gain, and 10 percent with respect to 
                the remainder of such amount.
                    ``(B) Reduction in 20-percent rate.--The rate under 
                paragraph (1)(C) shall be 18 percent with respect to so 
                much of the amount to which the 20-percent rate would 
                otherwise apply as does not exceed the lesser of--
                            ``(i) the excess of qualified 5-year gain 
                        over the amount of such gain taken into account 
                        under subparagraph (A) of this paragraph, or
                            ``(ii) the amount of qualified 5-year gain 
                        (determined by taking into account only 
                        property the holding period for which begins 
                        after December 31, 2000),
                and 20 percent with respect to the remainder of such 
                amount. For purposes of determining under the preceding 
                sentence whether the holding period of property begins 
                after December 31, 2000, the holding period of property 
                acquired pursuant to the exercise of an option (or 
                other right or obligation to acquire property) shall 
                include the period such option (or other right or 
                obligation) was held.
            ``(3) Net capital gain taken into account as investment 
        income.--For purposes of this subsection, the net capital gain 
        for any taxable year shall be reduced (but not below zero) by 
        the amount which the taxpayer takes into account as investment 
        income under section 163(d)(4)(B)(iii).
            ``(4) Adjusted net capital gain.--For purposes of this 
        subsection, the term `adjusted net capital gain' means net 
        capital gain reduced (but not below zero) by the sum of--
                    ``(A) unrecaptured section 1250 gain, and
                    ``(B) 28 percent rate gain.
            ``(5) 28 percent rate gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `28 percent rate gain' 
                means the excess (if any) of--
                            ``(i) the sum of--
                                    ``(I) the aggregate long-term 
                                capital gain from property held for 
                                more than 1 year but not more than 18 
                                months,
                                    ``(II) collectibles gain, and
                                    ``(III) section 1202 gain, over
                            ``(ii) the sum of--
                                    ``(I) the aggregate long-term 
                                capital loss (not described in 
                                subclause (IV)) from property referred 
                                to in clause (i)(I),
                                    ``(II) collectibles loss,
                                    ``(III) the net short-term capital 
                                loss, and
                                    ``(IV) the amount of long-term 
                                capital loss carried under section 
                                1212(b)(1)(B) to the taxable year.
                    ``(B) Special rules.--
                            ``(i) Short sale gains and holding 
                        periods.--Rules similar to the rules of section 
                        1233(b) shall apply where the substantially 
                        identical property has been held more than 1 
                        year but not more than 18 months; except that, 
                        for purposes of such rules--
                                    ``(I) section 1233(b)(1) shall be 
                                applied by substituting `18 months' for 
                                `1 year' each place it appears, and
                                    ``(II) the holding period of such 
                                property shall be treated as being 1 
                                year on the day before the earlier of 
                                the date of the closing of the short 
                                sale or the date such property is 
                                disposed of.
                            ``(ii) Long-term losses.--Section 1233(d) 
                        shall be applied separately by substituting `18 
                        months' for `1 year' each place it appears.
                            ``(iii) Options.--A rule similar to the 
                        rule of section 1092(f) shall apply where the 
                        stock was held for more than 18 months.
                            ``(iv) Section 1256 contracts.--Amounts 
                        treated as long-term capital gain or loss under 
                        section 1256(a)(3) shall be treated as 
                        attributable to property held for more than 18 
                        months.
            ``(6) Collectibles gain and loss.--For purposes of this 
        subsection--
                    ``(A) In general.--The terms `collectibles gain' 
                and `collectibles loss' mean gain or loss 
                (respectively) from the sale or exchange of a 
                collectible (as defined in section 408(m) without 
                regard to paragraph (3) thereof) which is a capital 
                asset held for more than 18 months but only to the 
                extent such gain is taken into account in computing 
                gross income and such loss is taken into account in 
                computing taxable income.
                    ``(B) Partnerships, etc.--For purposes of 
                subparagraph (A), any gain from the sale of an interest 
                in a partnership, S corporation, or trust which is 
                attributable to unrealized appreciation in the value of 
                collectibles shall be treated as gain from the sale or 
                exchange of a collectible. Rules similar to the rules 
                of section 751 shall apply for purposes of the 
                preceding sentence.
            ``(7) Unrecaptured section 1250 gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `unrecaptured section 
                1250 gain' means the excess (if any) of--
                            ``(i) the amount of long-term capital gain 
                        (not otherwise treated as ordinary income) 
                        which would be treated as ordinary income if--
                                    ``(I) section 1250(b)(1) included 
                                all depreciation and the applicable 
                                percentage under section 1250(a) were 
                                100 percent, and
                                    ``(II) only gain from property held 
                                for more than 18 months were taken into 
                                account, over
                            ``(ii) the excess (if any) of--
                                    ``(I) the amount described in 
                                paragraph (5)(A)(ii), over
                                    ``(II) the amount described in 
                                paragraph (5)(A)(i).
                    ``(B) Limitation with respect to section 1231 
                property.--The amount described in subparagraph (A)(i) 
                from sales, exchanges, and conversions described in 
                section 1231(a)(3)(A) for any taxable year shall not 
                exceed the net section 1231 gain (as defined in section 
                1231(c)(3)) for such year.
            ``(8) Section 1202 gain.--For purposes of this subsection, 
        the term `section 1202 gain' means an amount equal to the gain 
        excluded from gross income under section 1202(a).
            ``(9) Qualified 5-year gain.--For purposes of this 
        subsection, the term `qualified 5-year gain' means the 
        aggregate long-term capital gain from property held for more 
        than 5 years. The determination under the preceding sentence 
        shall be made without regard to collectibles gain, gain 
        described in paragraph (7)(A)(i), and section 1202 gain.
            ``(10) Coordination with recapture of net ordinary losses 
        under section 1231.--If any amount is treated as ordinary 
        income under section 1231(c), such amount shall be allocated 
        among the separate categories of net section 1231 gain (as 
        defined in section 1231(c)(3)) in such manner as the Secretary 
        may by forms or regulations prescribe.
            ``(11) Regulations.--The Secretary may prescribe such 
        regulations as are appropriate (including regulations requiring 
        reporting) to apply this subsection in the case of sales and 
        exchanges by pass-thru entities and of interests in such 
        entities.
            ``(12) Pass-thru entity defined.--For purposes of this 
        subsection, the term `pass-thru entity' means--
                    ``(A) a regulated investment company,
                    ``(B) a real estate investment trust,
                    ``(C) an S corporation,
                    ``(D) a partnership,
                    ``(E) an estate or trust,
                    ``(F) a common trust fund,
                    ``(G) a foreign investment company which is 
                described in section 1246(b)(1) and for which an 
                election is in effect under section 1247, and
                    ``(H) a qualified electing fund (as defined in 
                section 1295).
            ``(13) Special rules for periods during 1997.--
                    ``(A) Determination of 28 percent rate gain.--In 
                applying paragraph (5)--
                            ``(i) the amount determined under subclause 
                        (I) of paragraph (5)(A)(i) shall include long-
                        term capital gain (not otherwise described in 
                        paragraph (5)(A)(i)) which is properly taken 
                        into account for the portion of the taxable 
                        year before May 7, 1997,
                            ``(ii) the amounts determined under 
                        subclause (I) of paragraph (5)(A)(ii) shall 
                        include long-term capital loss (not otherwise 
                        described in paragraph (5)(A)(ii)) which is 
                        properly taken into account for the portion of 
                        the taxable year before May 7, 1997, and
                            ``(iii) clauses (i)(I) and (ii)(I) of 
                        paragraph (5)(A) shall be applied by not taking 
                        into account any gain and loss on property held 
                        for more than 1 year but not more than 18 
                        months which is properly taken into account for 
                        the portion of the taxable year after May 6, 
                        1997, and before July 29, 1997.
                    ``(B) Other special rules.--
                            ``(i) Determination of unrecaptured section 
                        1250 gain not to include pre-may 7, 1997 
                        gain.--The amount determined under paragraph 
                        (7)(A)(i) shall not include gain properly taken 
                        into account for the portion of the taxable 
                        year before May 7, 1997.
                            ``(ii) Other transitional rules for 18-
                        month holding period.--Paragraphs (6)(A) and 
                        (7)(A)(i)(II) shall be applied by substituting 
                        `1 year' for `18 months' with respect to gain 
                        properly taken into account for the portion of 
                        the taxable year after May 6, 1997, and before 
                        July 29, 1997.
                    ``(C) Special rules for pass-thru entities.--In 
                applying this paragraph with respect to any pass-thru 
                entity, the determination of when gains and loss are 
                properly taken into account shall be made at the entity 
                level.''.
            (2) Paragraph (3) of section 55(b) of the 1986 Code is 
        amended to read as follows:
            ``(3) Maximum rate of tax on net capital gain of 
        noncorporate taxpayers.--The amount determined under the first 
        sentence of paragraph (1)(A)(i) shall not exceed the sum of--
                    ``(A) the amount determined under such first 
                sentence computed at the rates and in the same manner 
                as if this paragraph had not been enacted on the 
                taxable excess reduced by the lesser of--
                            ``(i) the net capital gain, or
                            ``(ii) the sum of--
                                    ``(I) the adjusted net capital 
                                gain, plus
                                    ``(II) the unrecaptured section 
                                1250 gain, plus
                    ``(B) 10 percent of so much of the adjusted net 
                capital gain (or, if less, taxable excess) as does not 
                exceed the amount on which a tax is determined under 
                section 1(h)(1)(B), plus
                    ``(C) 20 percent of the adjusted net capital gain 
                (or, if less, taxable excess) in excess of the amount 
                on which tax is determined under subparagraph (B), plus
                    ``(D) 25 percent of the amount of taxable excess in 
                excess of the sum of the amounts on which tax is 
                determined under the preceding subparagraphs of this 
                paragraph.
        In the case of taxable years beginning after December 31, 2000, 
        rules similar to the rules of section 1(h)(2) shall apply for 
        purposes of subparagraphs (B) and (C). Terms used in this 
        paragraph which are also used in section 1(h) shall have the 
        respective meanings given such terms by section 1(h) but 
        computed with the adjustments under this part.''.
            (3) Section 57(a)(7) of the 1986 Code is amended by adding 
        at the end the following new sentence: ``In the case of stock 
        the holding period of which begins after December 31, 2000 
        (determined with the application of the last sentence of 
        section 1(h)(2)(B)), the preceding sentence shall be applied by 
        substituting `28 percent' for `42 percent'.''.
            (4) Paragraphs (11) and (12) of section 1223, and section 
        1235(a), of the 1986 Code are each amended by striking ``1 
        year'' each place it appears and inserting ``18 months''.
    (e) Amendments Related to Section 312 of 1997 Act.--
            (1) Paragraph (2) of section 121(b) of the 1986 Code is 
        amended to read as follows:
            ``(2) Special rules for joint returns.--In the case of a 
        husband and wife who make a joint return for the taxable year 
        of the sale or exchange of the property--
                    ``(A) $500,000 Limitation for certain joint 
                returns.--Paragraph (1) shall be applied by 
                substituting `$500,000' for `$250,000' if--
                            ``(i) either spouse meets the ownership 
                        requirements of subsection (a) with respect to 
                        such property,
                            ``(ii) both spouses meet the use 
                        requirements of subsection (a) with respect to 
                        such property, and
                            ``(iii) neither spouse is ineligible for 
                        the benefits of subsection (a) with respect to 
                        such property by reason of paragraph (3).
                    ``(B) Other joint returns.--If such spouses do not 
                meet the requirements of subparagraph (A), the 
                limitation under paragraph (1) shall be the sum of the 
                limitations under paragraph (1) to which each spouse 
                would be entitled if such spouses had not been married. 
                For purposes of the preceding sentence, each spouse 
                shall be treated as owning the property during the 
                period that either spouse owned the property.''.
            (2) Section 121(c)(1) of the 1986 Code is amended to read 
        as follows:
            ``(1) In general.--In the case of a sale or exchange to 
        which this subsection applies, the ownership and use 
        requirements of subsection (a), and subsection (b)(3), shall 
        not apply; but the dollar limitation under paragraph (1) or (2) 
        of subsection (b), whichever is applicable, shall be equal to--
                    ``(A) the amount which bears the same ratio to such 
                limitation (determined without regard to this 
                paragraph) as
                    ``(B)(i) the shorter of--
                            ``(I) the aggregate periods, during the 5-
                        year period ending on the date of such sale or 
                        exchange, such property has been owned and used 
                        by the taxpayer as the taxpayer's principal 
                        residence, or
                            ``(II) the period after the date of the 
                        most recent prior sale or exchange by the 
                        taxpayer to which subsection (a) applied and 
                        before the date of such sale or exchange, bears 
                        to
                    ``(ii) 2 years.''.
            (3) Section 312(d)(2) of the 1997 Act (relating to sales 
        before date of the enactment) is amended by inserting ``on or'' 
        before ``before'' each place it appears in the text and 
        heading.
    (f) Amendment Related to Section 313 of 1997 Act.--Section 1045 of 
the 1986 Code is amended by adding at the end the following new 
subsection:
    ``(c) Limitation on Application to Partnerships and S 
Corporations.--Subsection (a) shall apply to a partnership or S 
corporation for a taxable year only if at all times during such taxable 
year all of the partners in the partnership, or all of the shareholders 
of the S corporation, are natural persons, estates, or trusts (other 
than trusts having any beneficiary which is a C corporation).''.

SEC. 6006. AMENDMENT RELATED TO TITLE IV OF 1997 ACT.

    (a) Amendment Related to Section 401 of 1997 Act.--Paragraph (1) of 
section 55(e) of the 1986 Code is amended to read as follows:
            ``(1) In general.--
                    ``(A) $7,500,000 gross receipts test.--The 
                tentative minimum tax of a corporation shall be zero 
                for any taxable year if the corporation's average 
                annual gross receipts for all 3-taxable-year periods 
                ending before such taxable year does not exceed 
                $7,500,000. For purposes of the preceding sentence, 
                only taxable years beginning after December 31, 1993, 
                shall be taken into account.
                    ``(B) $5,000,000 gross receipts test for first 3-
                year period.--Subparagraph (A) shall be applied by 
                substituting `$5,000,000' for `$7,500,000' for the 
                first 3-taxable-year period (or portion thereof) of the 
                corporation which is taken into account under 
                subparagraph (A).
                    ``(C) First taxable year corporation in 
                existence.--If such taxable year is the first taxable 
                year that such corporation is in existence, the 
                tentative minimum tax of such corporation for such year 
                shall be zero.
                    ``(D) Special rules.--For purposes of this 
                paragraph, the rules of paragraphs (2) and (3) of 
                section 448(c) shall apply.''.
    (b) Amendment Related to Section 402 of 1997 Act.--Subsection (c) 
of section 168 of the 1986 Code is amended--
            (1) by striking paragraph (2), and
            (2) by striking the portion of such subsection preceding 
        the table in paragraph (1) and inserting the following:
    ``(c) Applicable Recovery Period.--For purposes of this section, 
the applicable recovery period shall be determined in accordance with 
the following table:''.

SEC. 6007. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.

    (a) Amendments Related to Section 501 of 1997 Act.--
            (1) Paragraph (2) of section 2001(c) of the 1986 Code is 
        amended by striking ``$10,000,000'' and all that follows and 
        inserting ``$10,000,000. The amount of the increase under the 
        preceding sentence shall not exceed the sum of the applicable 
        credit amount under section 2010(c) (determined without regard 
        to section 2057(a)(3), and $359,200.''.
            (2) Subsection (c) of section 2631 of the 1986 Code is 
        amended to read as follows:
    ``(c) Inflation Adjustment.--
            ``(1) In general.--In the case of any calendar year after 
        1998, the $1,000,000 amount contained in subsection (a) shall 
        be increased by an amount equal to--
                    ``(A) $1,000,000, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 1997' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount shall be rounded to the next 
        lowest multiple of $10,000.
            ``(2) Allocation of increase.--Any increase under paragraph 
        (1) for any calendar year shall apply only to generation-
        skipping transfers made during or after such calendar year; 
        except that no such increase for calendar years after the 
        calendar year in which the transferor dies shall apply to 
        transfers by such transferor.''.
            (3) Subsection (f) of section 501 of the 1997 Act is 
        amended by inserting ``(other than the amendment made by 
        subsection (d))'' after ``this section''.
    (b) Amendments Related to Section 502 of 1997 Act.--
            (1)(A) Section 2033A of the 1986 Code is hereby moved to 
        the end of part IV of subchapter A of chapter 11 of the 1986 
        Code and redesignated as section 2057.
            (B) So much of such section 2057 (as so redesignated) as 
        precedes subsection (b) thereof is amended to read as follows:

``SEC. 2057. FAMILY-OWNED BUSINESS INTERESTS.

    ``(a) General Rule.--
            ``(1) Allowance of deduction.--For purposes of the tax 
        imposed by section 2001, in the case of an estate of a decedent 
        to which this section applies, the value of the taxable estate 
        shall be determined by deducting from the value of the gross 
        estate the adjusted value of the qualified family-owned 
        business interests of the decedent which are described in 
        subsection (b)(2).
            ``(2) Maximum deduction.--The deduction allowed by this 
        section shall not exceed $675,000.
            ``(3) Coordination with unified credit.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if this section applies to an estate, 
                the applicable exclusion amount under section 2010 
                shall be $625,000.
                    ``(B) Increase in unified credit if deduction is 
                less than $675,000.--If the deduction allowed by this 
                section is less than $675,000, the amount of the 
                applicable exclusion amount under section 2010 shall be 
                increased (but not above the amount which would apply 
                to the estate without regard to this section) by the 
                excess of $675,000 over the amount of the deduction 
                allowed.''.
            (C) Subparagraph (A) of section 2057(b)(2) of the 1986 Code 
        (as so redesignated) is amended by striking ``(without regard 
        to this section)''.
            (D) Subsection (c) of section 2057 of the 1986 Code (as so 
        redesignated) is amended by striking ``(determined without 
        regard to this section)''.
            (E) The table of sections for part III of subchapter A of 
        chapter 11 of the 1986 Code is amended by striking the item 
        relating to section 2033A.
            (F) The table of sections for part IV of such subchapter is 
        amended by adding at the end the following new item:

                              ``Sec. 2057. Family-owned business 
                                        interests.''.
            (2) Section 2057(b)(3) of the 1986 Code (as so 
        redesignated) is amended to read as follows:
            ``(3) Includible gifts of interests.--The amount of the 
        gifts of qualified family-owned business interests determined 
        under this paragraph is the sum of--
                    ``(A) the amount of such gifts from the decedent to 
                members of the decedent's family taken into account 
                under section 2001(b)(1)(B), plus
                    ``(B) the amount of such gifts otherwise excluded 
                under section 2503(b),
        to the extent such interests are continuously held by members 
        of such family (other than the decedent's spouse) between the 
        date of the gift and the date of the decedent's death.''.
            (3)(A) Section 2057(e)(2)(C) of the 1986 Code (as so 
        redesignated) is amended by striking ``(as defined in section 
        543(a))'' and inserting ``(as defined in section 543(a) without 
        regard to paragraph (2)(B) thereof) if such trade or business 
        were a corporation''.
            (B) Clause (ii) of section 2057(e)(2)(D) of the 1986 Code 
        (as so redesignated) is amended by striking ``income of which 
        is described in section 543(a) or'' and inserting ``personal 
        holding company income (as defined in subparagraph (C)) or 
        income described''.
            (4) Paragraph (2) of section 2057(f) of the 1986 Code (as 
        so redesignated) is amended--
                    (A) by striking ``(as determined under rules 
                similar to the rules of section 2032A(c)(2)(B))'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Adjusted tax difference.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The adjusted tax 
                        difference attributable to a qualified family-
                        owned business interest is the amount which 
                        bears the same ratio to the adjusted tax 
                        difference with respect to the estate 
                        (determined under clause (ii)) as the value of 
                        such interest bears to the value of all 
                        qualified family-owned business interests 
                        described in subsection (b)(2).
                            ``(ii) Adjusted tax difference with respect 
                        to the estate.--For purposes of clause (i), the 
                        term `adjusted tax difference with respect to 
                        the estate' means the excess of what would have 
                        been the estate tax liability but for the 
                        election under this section over the estate tax 
                        liability. For purposes of this clause, the 
                        term `estate tax liability' means the tax 
                        imposed by section 2001 reduced by the credits 
                        allowable against such tax.''.
            (5)(A) Paragraph (1) of section 2057(e) of the 1986 Code 
        (as so redesignated) is amended by adding at the end the 
        following:
        ``For purposes of the preceding sentence, a decedent shall be 
        treated as engaged in a trade or business if any member of the 
        decedent's family is engaged in such trade or business.''.
            (B) Subsection (f) of section 2057 of the 1986 Code (as so 
        redesignated) is amended by adding at the end the following new 
        paragraph:
            ``(3) Use in trade or business by family members.--A 
        qualified heir shall not be treated as disposing of an interest 
        described in subsection (e)(1)(A) by reason of ceasing to be 
        engaged in a trade or business so long as the property to which 
        such interest relates is used in a trade or business by any 
        member of such individual's family.''.
            (6) Paragraph (1) of section 2057(g) of the 1986 Code (as 
        so redesignated) is amended by striking ``or (M)''.
            (7) Paragraph (3) of section 2057(i) of the 1986 Code (as 
        so redesignated) is amended by redesignating subparagraphs (L), 
        (M), and (N) as subparagraphs (N), (O), and (P), respectively, 
        and by inserting after subparagraph (K) the following new 
        subparagraphs:
                    ``(L) Section 2032A(g) (relating to application to 
                interests in partnerships, corporations, and trusts).
                    ``(M) Subsections (h) and (i) of section 2032A.''.
    (c) Amendments Related to Section 503 of the 1997 Act.--
            (1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code 
        is amended to read as follows:
                            ``(iii) for purposes of applying section 
                        6601(j), the 2-percent portion (as defined in 
                        such section) shall be treated as being 
                        zero.''.
            (2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code 
        is amended to read as follows:
                            ``(iii) 2-percent interest rate not to 
                        apply.--For purposes of applying section 
                        6601(j), the 2-percent portion (as defined in 
                        such section) shall be treated as being 
                        zero.''.
    (d) Amendment Related to Section 505 of the 1997 Act.--Paragraphs 
(1) and (2) of section 7479(a) of the 1986 Code are each amended by 
striking ``an estate,'' and inserting ``an estate (or with respect to 
any property included therein),''.
    (e) Amendments Related to Section 506 of the 1997 Act.--
            (1) Paragraph (1) of section 506(e) of the 1997 Act is 
        amended by striking ``and (c)'' and inserting ``, (c), and 
        (d)''.
            (2)(A) Paragraph (9) of section 6501(c) of the 1986 Code is 
        amended by striking the last sentence.
            (B) Subsection (f) of section 2001 of the 1986 Code is 
        amended to read as follows:
    ``(f) Valuation of Gifts.--
            ``(1) In general--If the time has expired under section 
        6501 within which a tax may be assessed under chapter 12 (or 
        under corresponding provisions of prior laws) on--
                    ``(A) the transfer of property by gift made during 
                a preceding calendar period (as defined in section 
                2502(b)), or
                    ``(B) an increase in taxable gifts required under 
                section 2701(d),
        the value thereof shall, for purposes of computing the tax 
        under this chapter, be the value as finally determined for 
        purposes of chapter 12.
            ``(2) Final determination.--For purposes of paragraph (1), 
        a value shall be treated as finally determined for purposes of 
        chapter 12 if--
                    ``(A) the value is shown on a return under such 
                chapter and such value is not contested by the 
                Secretary before the expiration of the time referred to 
                in paragraph (1) with respect to such return,
                    ``(B) in a case not described in subparagraph (A), 
                the value is specified by the Secretary and such value 
                is not timely contested by the taxpayer, or
                    ``(C) the value is determined by a court or 
                pursuant to a settlement agreement with the 
                Secretary.''.
            (B) Subsection (c) of section 2504 of the 1986 Code is 
        amended to read as follows:
    ``(c) Valuation of Gifts.--If the time has expired under section 
6501 within which a tax may be assessed under this chapter 12 (or under 
corresponding provisions of prior laws) on--
            ``(1) the transfer of property by gift made during a 
        preceding calendar period (as defined in section 2502(b)), or
            ``(2) an increase in taxable gifts required under section 
        2701(d),
the value thereof shall, for purposes of computing the tax under this 
chapter, be the value as finally determined (within the meaning of 
section 2001(f)(2)) for purposes of this chapter.''.
    (f) Amendments Related to Section 507 of 1997 Act.--
            (1) Paragraph (3) of section 1(g) of the 1986 Code is 
        amended by striking subparagraph (C) and by redesignating 
        subparagraph (D) as subparagraph (C).
            (2) Section 641 of the 1986 Code is amended by striking 
        subsection (c) and by redesignating subsection (d) as 
        subsection (c).
            (3) Paragraph (4) of section 1361(e) of the 1986 Code is 
        amended by striking ``section 641(d)'' and inserting ``section 
        641(c)''.
            (4) Subparagraph (A) of section 6103(e)(1) of the 1986 Code 
        is amended by striking clause (ii) and by redesignating clauses 
        (iii) and (iv) as clauses (ii) and (iii), respectively.
    (g) Amendments Related to Section 508 of 1997 Act.--
            (1) Subsection (c) of section 2031 of the 1986 Code is 
        amended by redesignating paragraph (9) as paragraph (10) and by 
        inserting after paragraph (8) the following new paragraph:
            ``(9) Treatment of easements granted after death.--In any 
        case in which the qualified conservation easement is granted 
        after the date of the decedent's death and on or before the due 
        date (including extensions) for filing the return of tax 
        imposed by section 2001, the deduction under section 2055(f) 
        with respect to such easement shall be allowed to the estate 
        but only if no charitable deduction is allowed under chapter 1 
        to any person with respect to the grant of such easement.''.
            (2) The first sentence of paragraph (6) of section 2031(c) 
        of the 1986 Code is amended by striking all that follows 
        ``shall be made'' and inserting ``on or before the due date 
        (including extensions) for filing the return of tax imposed by 
        section 2001 and shall be made on such return.''.

SEC. 6008. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT.

    (a) Amendment Related to Section 1400 of 1986 Code.--Section 
1400(b)(2)(B) of the 1986 Code is amended by inserting ``as determined 
on the basis of the 1990 census'' after ``percent''.
    (b) Amendment Related to Section 1400A of 1986 Code.--Subsection 
(a) of section 1400A of the 1986 Code is amended by inserting before 
the period ``and section 1394(b)(3)(B)(iii) shall be applied without 
regard to the employee residency requirement''.
    (c) Amendments Related to Section 1400B of 1986 Code.--
            (1) Section 1400B(b) of the 1986 Code is amended by 
        inserting after paragraph (4) the following new paragraph:
            ``(5) Treatment of dc zone termination.--The termination of 
        the designation of the DC Zone shall be disregarded for 
        purposes of determining whether any property is a DC Zone 
        asset.''.
            (2) Paragraph (6) of section 1400B(b) of the 1986 Code is 
        amended by striking ``(4)(A)(ii)'' and inserting ``(4)(A)(i) or 
        (ii)''.
            (3) Section 1400B(c) of the 1986 Code is amended by 
        striking ``entity which is an''.
            (4) Section 1400B(d)(2) of the 1986 Code is amended by 
        inserting ``as determined on the basis of the 1990 census'' 
        after ``percent''.
    (d) Amendments Related to Section 1400C of 1986 Code.--
            (1) Paragraph (1) of section 1400C(b) of the 1986 Code is 
        amended by inserting ``and subsection (d)'' after ``this 
        subsection''.
            (2) Paragraph (1) of section 1400C(c) of the 1986 Code is 
        amended to read as follows:
            ``(1) In general.--The term `first-time homebuyer' means 
        any individual if such individual (and if married, such 
        individual's spouse) had no present ownership interest in a 
        principal residence in the District of Columbia during the 1-
        year period ending on the date of the purchase of the principal 
        residence to which this section applies.''.
            (3) Subparagraph (B) of section 1400C(e)(2) of the 1986 
        Code is amended by inserting before the period ``on the date 
        the taxpayer first occupies such residence''.
            (4) Paragraph (3) of section 1400C(e) of the 1986 Code is 
        amended by striking all that follows ``principal residence'' 
        and inserting ``on the date such residence is purchased.''.
            (5) Subsection (i) of section 1400C of the 1986 Code is 
        amended to read as follows:
    ``(i) Application of Section.--This section shall apply to property 
purchased after August 4, 1997, and before January 1, 2001.''.
            (6) Subsection (c) of section 23 of the 1986 Code is 
        amended by inserting ``and section 1400C'' after ``other than 
        this section''.
            (7) Subparagraph (C) of section 25(e)(1) of the 1986 Code 
        is amended by striking ``section 23'' and inserting ``sections 
        23 and 1400C''.

SEC. 6009. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.

    (a) Amendment Related to Section 901 of 1997 Act.--Section 
9503(c)(7) of the 1986 Code is amended--
            (1) by striking ``resulting from the amendments made by'' 
        and inserting ``(and transfers to the Mass Transit Account) 
        resulting from the amendments made by subsections (a) and (b) 
        of section 901 of'', and
            (2) by inserting before the period ``and deposits in the 
        Highway Trust Fund (and transfers to the Mass Transit Account) 
        shall be treated as made when they would have been required to 
        be made without regard to section 901(e) of the Taxpayer Relief 
        Act of 1997''.
    (b) Amendment Related to Section 907 of 1997 Act.--Paragraph (2) of 
section 9503(e) of the 1986 Code is amended by striking the last 
sentence and inserting the following new sentence: ``For purposes of 
the preceding sentence, the term `mass transit portion' means, for any 
fuel with respect to which tax was imposed under section 4041 or 4081 
and deposited into the Highway Trust Fund, the amount determined at the 
rate of--
                    ``(A) except as otherwise provided in this 
                sentence, 2.86 cents per gallon,
                    ``(B) 1.43 cents per gallon in the case of any 
                partially exempt methanol or ethanol fuel (as defined 
                in section 4041(m)) none of the alcohol in which 
                consists of ethanol,
                    ``(C) 1.86 cents per gallon in the case of 
                liquefied natural gas,
                    ``(D) 2.13 cents per gallon in the case of 
                liquefied petroleum gas, and
                    ``(E) 9.71 cents per MCF (determined at standard 
                temperature and pressure) in the case of compressed 
                natural gas.''.
    (c) Amendment Related to Section 908 of 1997 Act.--Paragraph (6) of 
section 5041(b) of the 1986 Code is amended by inserting ``which is a 
still wine'' after ``hard cider''.
    (d) Amendment Related to Section 964 of 1997 Act.--
            (1) In general.--Subparagraph (C) of section 7704(g)(3) of 
        the 1986 Code is amended by striking the period at the end and 
        inserting ``and shall be paid by the partnership. Section 6655 
        shall be applied to such partnership with respect to such tax 
        in the same manner as if the partnership were a corporation, 
        such tax were imposed by section 11, and references in such 
        section to taxable income were references to the gross income 
        referred to in subparagraph (A).''.
            (2) Effective date.--The second sentence of section 
        7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (e) Amendment Related to Section 971 of 1997 Act.--Clause (ii) of 
section 280F(a)(1)(C) is amended by striking ``subparagraph (A)'' and 
inserting ``subparagraphs (A) and (B)''.
    (f) Amendment Related to Section 976 of 1997 Act.--Section 
6103(d)(5) of the 1986 Code is amended by striking ``section 967 of the 
Taxpayer Relief Act of 1997.'' and inserting ``section 976 of the 
Taxpayer Relief Act of 1997. Subsections (a)(2) and (p)(4) and sections 
7213 and 7213A shall not apply with respect to disclosures or 
inspections made pursuant to this paragraph.''.
    (g) Amendment Related to Section 977 of 1997 Act.--Paragraph (2) of 
section 977(e) of the 1997 Act is amended to read as follows:
            ``(2) Non-amtrak state.--The term `non-Amtrak State' means 
        any State which is not receiving intercity passenger rail 
        service from the Corporation as of the date of the enactment of 
        this Act.''.

SEC. 6010. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.

    (a) Amendments Related to Section 1001 of 1997 Act.--
            (1) Paragraph (2) of section 1259(b) of the 1986 Code is 
        amended--
                    (A) by striking ``debt'' each place it appears in 
                subparagraph (A) and inserting ``position'',
                    (B) by striking ``and'' at the end of subparagraph 
                (A), and
                    (C) by redesignating subparagraph (B) as 
                subparagraph (C) and by inserting after subparagraph 
                (A) the following new subparagraph:
                    ``(B) any hedge with respect to a position 
                described in subparagraph (A), and''.
            (2) Section 1259(d)(1) of the 1986 Code is amended by 
        inserting ``(including cash)'' after ``property''.
            (3) Subparagraph (D) of section 475(f)(1) of the 1986 Code 
        is amended by adding at the end the following new sentence: 
        ``Subsection (d)(3) shall not apply under the preceding 
        sentence for purposes of applying sections 1402 and 7704.''.
            (4) Subparagraph (C) of section 1001(d)(3) of the 1997 Act 
        is amended by striking ``within the 30-day period beginning 
        on'' and inserting ``before the close of the 30th day after''.
    (b) Amendment Related to Section 1011 of 1997 Act.--Paragraph (1) 
of section 1059(g) of the 1986 Code is amended by striking ``and in the 
case of stock held by pass-thru entities'' and inserting ``, in the 
case of stock held by pass-thru entities, and in the case of 
consolidated groups''.
    (c) Amendments Related to Section 1012 of 1997 Act.--
            (1) Paragraph (1) of section 1012(d) of the 1997 Act is 
        amended by striking ``1997, pursuant'' and inserting ``1997; 
        except that the amendment made by subsection (a) shall apply to 
        such distributions only if pursuant''.
            (2) Subparagraph (A) of section 355(e)(3) of the 1986 Code 
        is amended--
                    (A) by striking ``shall not be treated as described 
                in'' and inserting ``shall not be taken into account in 
                applying'', and
                    (B) by striking clause (iv) and inserting the 
                following new clause:
                            ``(iv) The acquisition of stock in the 
                        distributing corporation or any controlled 
                        corporation to the extent that the percentage 
                        of stock owned directly or indirectly in such 
                        corporation by each person owning stock in such 
                        corporation immediately before the acquisition 
                        does not decrease.''.
            (3)(A) Subsection (c) of section 351 of the 1986 Code is 
        amended to read as follows:
    ``(c) Special Rules Where Distribution to Shareholders.--
            ``(1) In general.--In determining control for purposes of 
        this section, the fact that any corporate transferor 
        distributes part or all of the stock in the corporation which 
        it receives in the exchange to its shareholders shall not be 
        taken into account.
            ``(2) Special rule for section 355.--If the requirements of 
        section 355 (or so much of section 356 as relates to section 
        355) are met with respect to a distribution described in 
        paragraph (1), then, solely for purposes of determining the tax 
        treatment of the transfers of property to the controlled 
        corporation by the distributing corporation, the fact that the 
        shareholders of the distributing corporation dispose of part or 
        all of the distributed stock shall not be taken into account in 
        determining control for purposes of this section.''.
            (B) Clause (ii) of section 368(a)(2)(H) of the 1986 Code is 
        amended to read as follows:
                            ``(ii) in the case of a transaction with 
                        respect to which the requirements of section 
                        355 (or so much of section 356 as relates to 
                        section 355) are met, the fact that the 
                        shareholders of the distributing corporation 
                        dispose of part or all of the distributed stock 
                        shall not be taken into account.''.
    (d) Amendments Related to Section 1013 of 1997 Act.--
            (1) Paragraph (5) of section 304(b) of the 1986 Code is 
        amended by striking subparagraph (B) and by redesignating 
        subparagraph (C) as subparagraph (B).
            (2) Subsection (b) of section 304 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(6) Avoidance of multiple inclusions, etc.--In the case 
        of any acquisition to which subsection (a) applies in which the 
        acquiring corporation or the issuing corporation is a foreign 
        corporation, the Secretary shall prescribe such regulations as 
        are appropriate in order to eliminate a multiple inclusion of 
        any item in income by reason of this subpart and to provide 
        appropriate basis adjustments (including modifications to the 
        application of sections 959 and 961).''.
    (e) Amendments Related to Section 1014 of 1997 Act.--
            (1) Paragraph (1) of section 351(g) of the 1986 Code is 
        amended by adding ``and'' at the end of subparagraph (A) and by 
        striking subparagraphs (B) and (C) and inserting the following 
        new subparagraph:
                    ``(B) if (and only if) the transferor receives 
                stock other than nonqualified preferred stock--
                            ``(i) subsection (b) shall apply to such 
                        transferor, and
                            ``(ii) such nonqualified preferred stock 
                        shall be treated as other property for purposes 
                        of applying subsection (b).''.
            (2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is 
        amended by adding at the end the following new subclause:
                                    ``(III) Extension of statute of 
                                limitations.--The statutory period for 
                                the assessment of any deficiency 
                                attributable to a corporation failing 
                                to be a family-owned corporation shall 
                                not expire before the expiration of 3 
                                years after the date the Secretary is 
                                notified by the corporation (in such 
                                manner as the Secretary may prescribe) 
                                of such failure, and such deficiency 
                                may be assessed before the expiration 
                                of such 3-year period notwithstanding 
                                the provisions of any other law or rule 
                                of law which would otherwise prevent 
                                such assessment.''.
    (f) Amendment Related to Section 1024 of 1997 Act.--Section 
6331(h)(1) of the 1986 Code is amended by striking ``The effect of a 
levy'' and inserting ``If the Secretary approves a levy under this 
subsection, the effect of such levy''.
    (g) Amendments Related to Section 1031 of 1997 Act.--
            (1) Subsection (l) of section 4041 of the 1986 Code is 
        amended by striking ``subsection (e) or (f)'' and inserting 
        ``subsection (f) or (g)''.
            (2) Subsection (b) of section 9502 of the 1986 Code is 
        amended by moving the sentence added at the end of paragraph 
        (1) to the end of such subsection.
            (3) Subsection (c) of section 6421 of the 1986 Code is 
        amended--
                    (A) by striking ``(2)(A)'' and inserting ``(2)'', 
                and
                    (B) by adding at the end the following sentence: 
                ``Subsection (a) shall not apply to gasoline to which 
                this subsection applies.''.
    (h) Amendments Related to Section 1032 of 1997 Act.--
            (1) Section 1032(a) of the 1997 Act is amended by striking 
        ``Subsection (a) of section 4083'' and inserting ``Paragraph 
        (1) of section 4083(a)''.
            (2) Section 1032(e)(12)(A) of the 1997 Act shall be applied 
        as if ``gasoline, diesel fuel,'' were the material proposed to 
        be stricken.
            (3) Paragraph (1) of section 4101(e) of the 1986 Code is 
        amended by striking ``dyed diesel fuel and kerosene'' and 
        inserting ``such fuel in a dyed form''.
    (i) Amendment Related to Section 1034 of 1997 Act.--Paragraph (3) 
of section 4251(d) of the 1986 Code is amended by striking ``other 
similar arrangement'' and inserting ``any other similar arrangement''.
    (j) Amendments Related to Section 1041 of 1997 Act.--
            (1) Subparagraph (A) of section 512(b)(13) of the 1986 Code 
        is amended by inserting ``or accrues'' after ``receives''.
            (2) Subclause (I) of section 512(b)(13)(B)(i) of the 1986 
        Code is amended by striking ``(as defined in section 
        513A(a)(5)(A))''.
            (3) Paragraph (2) of section 1041(b) of the 1997 Act is 
        amended to read as follows:
            ``(2) Binding contracts.--The amendments made by this 
        section shall not apply to any amount received or accrued 
        during the first 2 taxable years beginning on or after the date 
        of the enactment of this Act if such amount is received or 
        accrued pursuant to a written binding contract in effect on 
        June 8, 1997, and at all times thereafter before such amount is 
        received or accrued. The preceding sentence shall not apply to 
        any amount which would (but for the exercise of an option to 
        accelerate payment of such amount) be received or accrued after 
        such 2 taxable years.''.
    (k) Amendments Related to Section 1053 of 1997 Act.--
            (1) Section 853 of the 1986 Code is amended by 
        redesignating subsection (e) as subsection (f) and by inserting 
        after subsection (d) the following new subsection:
    ``(e) Treatment of Taxes Not Allowed as a Credit Under Section 
901(k).--This section shall not apply to any tax with respect to which 
the regulated investment company is not allowed a credit under section 
901 by reason of section 901(k).''.
            (2) Subsection (c) of section 853 of the 1986 Code is 
        amended by striking the last sentence.
    (l) Amendment Related to Section 1055 of 1997 Act.--Section 
6611(g)(1) of the 1986 Code is amended by striking ``(e), and (h)'' and 
inserting ``and (e)''.
    (m) Amendment Related to Section 1061 of 1997 Act.--Subsection (c) 
of section 751 of the 1986 Code is amended by striking ``731'' each 
place it appears and inserting ``731, 732,''.
    (n) Amendment Related to Section 1083 of 1997 Act.--Section 
1083(a)(2) of the 1997 Act is amended--
            (1) by striking ``21'' and inserting ``20'', and
            (2) by striking ``22'' and inserting ``21''.
    (o) Amendment Related to Section 1084 of 1997 Act.--
            (1) Paragraph (3) of section 264(a) of the 1986 Code is 
        amended by striking ``subsection (c)'' and inserting 
        ``subsection (d)''.
            (2) Paragraph (4) of section 264(a) of the 1986 Code is 
        amended by striking ``subsection (d)'' and inserting 
        ``subsection (e)''.
            (3)(A) Paragraph (4) of section 264(f) of the 1986 Code is 
        amended by adding at the end the following new subparagraph:
                    ``(E) Master contracts.--If coverage for each 
                insured under a master contract is treated as a 
                separate contract for purposes of sections 817(h), 
                7702, and 7702A, coverage for each such insured shall 
                be treated as a separate contract for purposes of 
                subparagraph (A). For purposes of the preceding 
                sentence, the term `master contract' shall not include 
                any group life insurance contract (as defined in 
                section 848(e)(2)).''.
            (B) The second sentence of section 1084(d) of the 1997 Act 
        is amended by striking ``but'' and all that follows and 
        inserting ``except that, in the case of a master contract 
        (within the meaning of section 264(f)(4)(E) of the Internal 
        Revenue Code of 1986), the addition of covered lives shall be 
        treated as a new contract only with respect to such additional 
        covered lives.''.
            (4)(A) Clause (iv) of section 264(f)(5)(A) of the 1986 Code 
        is amended by striking the second sentence.
            (B) Subparagraph (B) of section 6724(d)(1) of the 1986 Code 
        is amended by striking ``or'' at the end of clause (xv), by 
        striking the period at the end of clause (xvi) and inserting 
        ``, or'', and by adding at the end the following new clause:
                            ``(xvii) section 264(f)(5)(A)(iv) (relating 
                        to reporting with respect to certain life 
                        insurance and annuity contracts).''.
            (C) Paragraph (2) of section 6724(d) of the 1986 Code is 
        amended by striking ``or'' at the end of subparagraph (Y), by 
        striking the period at the end of subparagraph (Z) and 
        inserting ``or'', and by adding at the end the following new 
        subparagraph:
                    ``(AA) section 264(f)(5)(A)(iv) (relating to 
                reporting with respect to certain life insurance and 
                annuity contracts).''.
    (p) Amendments Related to Section 1085 of 1997 Act.--
            (1) Paragraph (5) of section 32(c) of the 1986 Code is 
        amended--
                    (A) by inserting before the period at the end of 
                subparagraph (A) ``and increased by the amounts 
                described in subparagraph (C)'',
                    (B) by adding ``or'' at the end of clause (iii) of 
                subparagraph (B), and
                    (C) by striking all that follows subclause (II) of 
                subparagraph (B)(iv) and inserting the following:
                                    ``(III) other trades or businesses.
                        For purposes of clause (iv), there shall not be 
                        taken into account items which are attributable 
                        to a trade or business which consists of the 
                        performance of services by the taxpayer as an 
                        employee.
                    ``(C) Certain amounts included.--An amount is 
                described in this subparagraph if it is--
                            ``(i) interest received or accrued during 
                        the taxable year which is exempt from tax 
                        imposed by this chapter, or
                            ``(ii) amounts received as a pension or 
                        annuity, and any distributions or payments 
                        received from an individual retirement plan, by 
                        the taxpayer during the taxable year to the 
                        extent not included in gross income.
                Clause (ii) shall not include any amount which is not 
                includible in gross income by reason of a trustee-to-
                trustee transfer or a rollover distribution.''.
            (2) Clause (v) of section 32(c)(2)(B) of the 1986 Code is 
        amended by inserting ``shall be taken into account'' before ``, 
        but only''.
            (3) The text of paragraph (3) of section 1085(a) of the 
        1997 Act is amended to read as follows: ``Paragraph (2) of 
        section 6213(g) (relating to the definition of mathematical or 
        clerical errors) is amended by striking ``and'' at the end of 
        subparagraph (I), by striking the period at the end of 
        subparagraph (J) and inserting ``, and'', and by inserting 
        after subparagraph (J) the following new subparagraph:
                    ``(K) an omission of information required by 
                section 32(k)(2) (relating to taxpayers making improper 
                prior claims of earned income credit).''.
    (q) Amendment Related to Section 1088 of 1997 Act.--Section 
1088(b)(2)(C) of the 1997 Act is amended by inserting ``more than 1 
year'' before ``after''.
    (r) Amendment Related to Section 1089 of 1997 Act.--Paragraphs 
(1)(C) and (2)(C) of section 664(d) of the 1986 Code are each amended 
by adding ``, and'' at the end.

SEC. 6011. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.

    (a) Amendment Related to Section 1103 of 1997 Act.--The paragraph 
(3) of section 59(a) added by section 1103 of the 1997 Act is 
redesignated as paragraph (4).
    (b) Amendments Related to Section 1121 of 1997 Act.--
            (1) Subsection (e) of section 1297 of the 1986 Code is 
        amended by adding at the end the following new paragraph:
            ``(4) Treatment of holders of options.--Paragraph (1) shall 
        not apply to stock treated as owned by a person by reason of 
        section 1298(a)(4) (relating to the treatment of a person that 
        has an option to acquire stock as owning such stock) unless 
        such person establishes that such stock is owned (within the 
        meaning of section 958(a)) by a United States shareholder (as 
        defined in section 951(b)) who is not exempt from tax under 
        this chapter.''.
            (2) Section 1298(a)(2)(B) of the 1986 Code is amended by 
        adding at the end the following new sentence: ``Section 1297(e) 
        shall not apply in determining whether a corporation is a 
        passive foreign investment company for purposes of this 
        subparagraph.''.
    (c) Amendments Related to Section 1122 of 1997 Act.--
            (1) Section 672(f)(3)(B) of the 1986 Code is amended by 
        striking ``section 1296'' and inserting ``section 1297''.
            (2) Paragraph (1) of section 1291(d) of the 1986 Code is 
        amended by adding at the end the following new sentence: ``In 
        the case of stock which is marked to market under section 475 
        or any other provision of this chapter, this section shall not 
        apply, except that rules similar to the rules of section 
        1296(j) shall apply.''.
            (3) Subsection (d) of section 1296 of the 1986 Code is 
        amended by adding at the end the following new sentence: ``In 
        the case of a regulated investment company which elected to 
        mark to market the stock held by such company as of the last 
        day of the taxable year preceding such company's first taxable 
        year for which such company elects the application of this 
        section, the amount referred to in paragraph (1) shall include 
        amounts included in gross income under such mark to market with 
        respect to such stock for prior taxable years.''.
    (d) Amendment Related to Section 1123 of 1997 Act.--The subsection 
(e) of section 1297 of the 1986 Code added by section 1123 of the 1997 
Act is redesignated as subsection (f).
    (e) Amendments Related to Section 1131 of 1997 Act.--
            (1) Section 991 of the 1986 Code is amended by striking 
        ``except for the tax imposed by chapter 5''.
            (2) Section 6013 of the 1986 Code is amended by striking 
        ``chapters 1 and 5'' each place it appears in paragraphs (1)(A) 
        and (5) of subsection (g) and in subsection (h)(1) and 
        inserting ``chapter 1'' .
    (f) Amendment Related to Section 1144 of 1997 Act.--Paragraphs (1) 
and (2) of section 1144(c) of the 1997 Act are each amended by striking 
``6038B(b)'' and inserting ``6038B(c) (as redesignated by subsection 
(b))''.

SEC. 6012. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT.

    (a) Amendment Related to Section 1204 of 1997 Act.--The last 
sentence of section 162(a) of the 1986 Code is amended by striking 
``investigate'' and all that follows and inserting ``investigate or 
prosecute, or provide support services for the investigation or 
prosecution of, a Federal crime.''.
    (b) Amendments Related to Section 1205 of 1997 Act.--
            (1) Section 6311(e)(1) of the 1986 Code is amended by 
        striking ``section 6103(k)(8)'' and inserting ``section 
        6103(k)(9)''.
            (2) Paragraph (8) of section 6103(k) of the 1986 Code (as 
        added by section 1205(c)(1) of the 1997 Act) is redesignated as 
        paragraph (9).
            (3) The subsection (g) of section 7431 of the 1986 Code 
        added by section 1205 of the 1997 Act is redesignated as 
        subsection (h) and is amended by striking ``(8)'' in the 
        heading and inserting ``(9)''.
            (4) Section 1205(c)(3) of the 1997 Act shall be applied as 
        if it read as follows:
            ``(3) Section 6103(p)(3)(A), as amended by section 
        1026(b)(1)(A) of the 1997 Act, is amended by striking ``or 
        (8)'' and inserting ``(8), or (9)''.
            (5) Section 1213(b) of the 1997 Act is amended by striking 
        ``section 6724(d)(1)(A)'' and inserting ``section 6724(d)(1)''.
    (c) Amendment Related to Section 1221 of 1997 Act.--Paragraph (2) 
of section 774(d) of the 1986 Act is amended by inserting before the 
period ``or 857(b)(3)(D)''.
    (d) Amendment Related to Section 1226 of 1997 Act.--Section 1226 of 
the 1997 Act is amended by striking ``ending on or'' and inserting 
``beginning''.
    (e) Amendment Related to Section 1231 of 1997 Act.--Subsection (c) 
of section 6211 of the 1986 Code is amended--
            (1) by striking ``Subchapter C'' in the heading and 
        inserting ``Subchapters C and D'', and
            (2) by striking ``subchapter C'' in the text and inserting 
        ``subchapters C and D''.
    (f) Amendment Related to Section 1256 of 1997 Act.--Subparagraph 
(A) of section 857(d)(3) of the 1986 Code is amended by striking 
``earliest accumulated earnings and profits (other than earnings and 
profits to which subsection (a)(2)(A) applies)'' and inserting 
``earliest earnings and profits accumulated in any taxable year to 
which the provisions of this part did not apply''.
    (g) Amendment Related to Section 1285 of 1997 Act.--Section 7430(b) 
of the 1986 Code is amended by redesignating paragraph (5) as paragraph 
(4).

SEC. 6013. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.

    (a) Amendments Related to Section 1305 of 1997 Act.--
            (1) Section 646 of the 1986 Code is redesignated as section 
        645.
            (2) The item relating to section 646 in the table of 
        sections for subpart A of part I of subchapter J of chapter 1 
        of the 1986 Code is amended by striking ``Sec. 646'' and 
        inserting ``Sec. 645''.
            (3) Paragraph (1) of section 2652(b) of the 1986 Code is 
        amended by striking ``section 646'' and inserting ``section 
        645''.
            (4)(A) Paragraph (1) of section 2652(b) of the 1986 Code is 
        amended by striking the second sentence.
            (B) Subsection (b) of section 2654 of the 1986 Code is 
        amended by adding at the end the following new sentence: ``For 
        purposes of this subsection, a trust shall be treated as part 
        of an estate during any period that the trust is so treated 
        under section 645.''.
    (b) Amendments Related to Section 1309 of 1997 Act.--
            (1) Subsection (b) of section 685 of the 1986 Code is 
        amended by adding at the end the following flush sentence:
``A trust shall not fail to be treated as meeting the requirement of 
paragraph (6) by reason of the death of an individual but only during 
the 60-day period beginning on the date of such death.''.
            (2) Subsection (f) of section 685 of the 1986 Code is 
        amended by inserting before the period at the end ``and of 
        trusts terminated during the year''.

SEC. 6014. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.

    (a) Amendment Related to Section 1422 of 1997 Act.--Section 5364 of 
the 1986 Code is amended by striking ``Wine imported or brought into'' 
and inserting ``Natural wine (as defined in section 5381) imported or 
brought into''.
    (b) Amendment Related to Section 1434 of 1997 Act.--Paragraph (2) 
of section 4052(f) of the 1986 Code is amended by striking ``this 
section'' and inserting ``such section''.
    (c) Amendment Related to Section 1436 of 1997 Act.--Paragraph (2) 
of section 4091(a) of the 1986 Code is amended by inserting ``or on 
which tax has been credited or refunded'' after ``such paragraph''.
    (d) Amendment Related to Section 1453 of 1997 Act.--Subparagraph 
(D) of section 7430(c)(4) of the 1986 Code is amended by striking 
``subparagraph (A)(iii)'' and inserting ``subparagraph (A)(ii)''.

SEC. 6015. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT.

    (a) Amendment Related to Section 1501 of 1997 Act.--The paragraph 
(8) of section 408(p) of the 1986 Code added by section 1501(b) of the 
1997 Act is redesignated as paragraph (9).
    (b) Amendment Related to Section 1505 of 1997 Act.--Section 
1505(d)(2) of the 1997 Act is amended by striking ``(b)(12)'' and 
inserting ``(b)(12)(A)(i)''.
    (c) Amendments Related to Section 1529 of 1997 Act.--
            (1) Section 1529(a) of the 1997 Act is amended to read as 
        follows:
    ``(a) General Rule.--Amounts to which this section applies which 
are received by an individual (or the survivors of the individual) as a 
result of hypertension or heart disease of the individual shall be 
excludable from gross income under section 104(a)(1) of the Internal 
Revenue Code of 1986.''.
            (2) Section 1529(b)(1)(B) of the 1997 Act is amended to 
        read as follows:
                    ``(B) under--
                            ``(i) a State law (as amended on May 19, 
                        1992) which irrebuttably presumed that heart 
                        disease and hypertension are work-related 
                        illnesses but only for employees hired before 
                        July 1, 1992, or
                            ``(ii) any other statute, ordinance, labor 
                        agreement, or similar provision as a disability 
                        pension payment or in the nature of a 
                        disability pension payment attributable to 
                        employment as a police officer or fireman, but 
                        only if the individual is referred to in the 
                        State law described in clause (i); and''.
    (d) Amendment Related to Section 1530 of 1997 Act.--Subparagraph 
(C) of section 404(a)(9) of the 1986 Code (as added by section 1530 of 
the 1997 Act) is redesignated as subparagraph (D) and is amended by 
striking ``A qualified'' and inserting ``Qualified gratuitous 
transfers.--A qualified''.
    (e) Amendment Related to Section 1531 of 1997 Act.--Subsection (f) 
of section 9811 of the 1986 Code (as added by section 1531 of the 1997 
Act) is redesignated as subsection (e).

SEC. 6016. AMENDMENTS RELATED TO TITLE XVI OF 1997 ACT.

    (a) Amendments Related to Section 1601(d) of 1997 Act.--
            (1) Amendments related to section 1601(d)(1)--
                    (A) Section 408(p)(2)(D)(i) of the 1986 Code is 
                amended by striking ``or (B)'' in the last sentence.
                    (B) Section 408(p) of the 1986 Code is amended by 
                adding at the end the following:
            ``(10) Special rules for acquisitions, dispositions, and 
        similar transactions.--
                    ``(A) In general.--An employer which fails to meet 
                any applicable requirement by reason of an acquisition, 
                disposition, or similar transaction shall not be 
                treated as failing to meet such requirement during the 
                transition period if--
                            ``(i) the employer satisfies requirements 
                        similar to the requirements of section 
                        410(b)(6)(C)(i)(II), and
                            ``(ii) the qualified salary reduction 
                        arrangement maintained by the employer would 
                        satisfy the requirements of this subsection 
                        after the transaction if the employer which 
                        maintained the arrangement before the 
                        transaction had remained a separate employer.
                    ``(B) Applicable requirement.--For purposes of this 
                paragraph, the term `applicable requirement' means--
                            ``(i) the requirement under paragraph 
                        (2)(A)(i) that an employer be an eligible 
                        employer,
                            ``(ii) the requirement under paragraph 
                        (2)(D) that an arrangement be the only plan of 
                        an employer, and
                            ``(iii) the participation requirements 
                        under paragraph (4).
                    ``(C) Transition period.--For purposes of this 
                paragraph, the term `transition period' means the 
                period beginning on the date of any transaction 
                described in subparagraph (A) and ending on the last 
                day of the second calendar year following the calendar 
                year in which such transaction occurs.''.
                    (C) Section 408(p)(2) of the 1986 Code is amended--
                            (i) by striking ``the preceding sentence 
                        shall apply only in accordance with rules 
                        similar to the rules of section 
                        410(b)(6)(C)(i)'' in the last sentence of 
                        subparagraph (C)(i)(II) and inserting ``the 
                        preceding sentence shall not apply'', and
                            (ii) by striking clause (iii) of 
                        subparagraph (D).
            (2) Amendment to section 1601(d)(4).--Section 1601(d)(4)(A) 
        of the 1997 Act is amended--
                    (A) by striking ``Section 403(b)(11)'' and 
                inserting ``Paragraphs (7)(A)(ii) and (11) of section 
                403(b)'', and
                    (B) by striking ``403(b)(1)'' in clause (ii) and 
                inserting ``403(b)(10)''.
    (b) Amendment Related to Section 1601(f)(4) of 1997 Act.--
Subsection (d) of section 6427 of the 1986 Code is amended--
            (1) by striking ``Helicopters'' in the heading and 
        inserting ``Other Aircraft Uses'', and
            (2) by inserting ``or a fixed-wing aircraft'' after 
        ``helicopter''.

SEC. 6017. AMENDMENTS RELATED TO SMALL BUSINESS JOB PROTECTION ACT OF 
              1996.

    (a) Amendment Relating to Section 1116.--Subparagraph (C) of 
section 1116(b)(2) of the Small Business Job Protection Act of 1996 is 
amended by striking ``chapter 68'' and inserting ``chapter 61''.
    (b) Amendment Relating to Section 1421.--Section 408(d)(7) of the 
1986 Code is amended--
            (1) by inserting ``or 402(k)'' after ``section 402(h)'' in 
        subparagraph (B) thereof, and
            (2) by inserting ``or simple retirement accounts'' after 
        ``pensions'' in the heading thereof.
    (c) Amendment Relating to Section 1431.--Subparagraph (E) of 
section 1431(c)(1) of the Small Business Job Protection Act of 1996 is 
amended to read as follows:
            ``(E) Section 414(q)(5), as redesignated by subparagraph 
        (A), is amended by striking `under paragraph (4) or the number 
        of officers taken into account under paragraph (5)'''.
    (d) Amendment Relating to Section 1604.--Paragraph (3) of section 
1604(b) of such Act is amended--
            (1) by striking ``such Code'' and inserting ``the Internal 
        Revenue Code of 1986'', and
            (2) by striking ``such date of enactment'' and inserting 
        ``the date of the enactment of this Act''.
    (e) Amendment Relating to Section 1609.--Paragraph (1) of section 
1609(h) of such Act is amended by striking ``paragraph (3)(A)(i)'' and 
inserting ``paragraph (3)(A)''.
    (f) Amendments Relating to Section  1807.--
            (1) Subparagraph (A) of section 23(b)(2) of the 1986 Code 
        (relating to income limitation on credit for adoption expenses) 
        is amended by inserting ``(determined without regard to 
        subsection (c))'' after ``for any taxable year''.
            (2) Paragraph (3) of section 1807(c) of the Small Business 
        Job Protection Act of 1996 is amended by striking ``Clause 
        (i)'' and inserting ``Clause (ii)''.
    (g) Amendment Relating to Section 1903.--Subsection (b) of section 
1903 of such Act shall be applied as if ``or'' in the material proposed 
to be stricken were capitalized.
    (h) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Small Business Job 
Protection Act of 1996 to which they relate.

SEC. 6018. AMENDMENTS RELATED TO TAXPAYER BILL OF RIGHTS 2.

    (a) In General.--Subsection (b) of section 6104 of the 1986 Code is 
amended by adding at the end the following new sentence: ``In the case 
of an organization described in section 501(d), this subsection shall 
not apply to copies referred to in section 6031(b) with respect to such 
organization.''.
    (b) Public Inspection.--Subparagraph (C) of section 6104(e)(1) of 
the 1986 Code is amended by adding at the end the following new 
sentence: ``In the case of an organization described in section 501(d), 
subparagraph (A) shall not require the disclosure of the copies 
referred to in section 6031(b) with respect to such organization.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 6019. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCILIATION ACT OF 
              1993.

    (a) In General.--Section 196(c) of the 1986 Code is amended by 
striking ``and'' at the end of paragraph (6), by striking the period at 
the end of paragraph (7), and insert ``, and'', and by adding at the 
end the following new paragraph:
            ``(8) the employer social security credit determined under 
        section 45B(a).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the amendments made by section 13443 of the 
Revenue Reconciliation Act of 1993.

SEC. 6020. AMENDMENT RELATED TO REVENUE RECONCILIATION ACT OF 1990.

    (a) Identification Requirement for Individuals Eligible for Earned 
Income Credit.--Subparagraph (F) of section 32(c)(1) of the 1986 Code 
is amended by striking ``The term `eligible individual' does not 
include any individual who does not include on the return of tax for 
the taxable year--'' and inserting ``No credit shall be allowed under 
this section to an eligible individual who does not include on the 
return of tax for the taxable year--''.
    (b) Identification Requirement for Qualifying Children Under Earned 
Income Credit.--
            (1) In general.--Clause (i) of section 32(c)(3)(D) of the 
        1986 Code is amended--
                    (A) by striking ``The requirements of this 
                subparagraph are met'' and inserting ``A qualifying 
                child shall not be taken into account under subsection 
                (b)'',
                    (B) by striking ``each'' and inserting ``the'', and
                    (C) by striking ``(without regard to this 
                subparagraph)''.
            (2) Individuals who do not include tin, etc., of any 
        qualifying child.--Paragraph (1) of section 32(c) of the 1986 
        Code is amended by adding at the end the following new 
        subparagraph:
                    ``(G) Individuals who do not include tin, etc., of 
                any qualifying child.--No credit shall be allowed under 
                this section to any eligible individual who has 1 or 
                more qualifying children if no qualifying child of such 
                individual is taken into account under subsection (b) 
                by reason of paragraph (3)(D).''.
            (3) Conforming amendment.--Subparagraph (A) of section 
        32(c)(3) is amended by inserting ``and'' at the end of clause 
        (ii), by striking ``, and'' at the end of clause (iii) and 
        inserting a period, and by striking clause (iv).
    (c) Effective Dates.--
            (1) Eligible individuals.--The amendment made by subsection 
        (a) shall take effect as if included in the amendments made by 
        section 451 of the Personal Responsibility and Work Opportunity 
        Reconciliation Act of 1996.
            (2) Qualifying children.--The amendments made by subsection 
        (b) shall take effect as if included in the amendments made by 
        section 11111 of Revenue Reconciliation Act of 1990.

SEC. 6021. AMENDMENT RELATED TO TAX REFORM ACT OF 1986.

    (a) In General.--Section 6401(b)(1) of the 1986 Code is amended by 
striking ``and D'' and inserting ``D, and G''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the amendments made by section 701(b) of 
the Tax Reform Act of 1986.

SEC. 6022. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.

            (1) The heading for subparagraph (B) of section 45A(b)(1) 
        of the 1986 Code is amended by striking ``targeted jobs 
        credit'' and inserting ``work opportunity credit''.
            (2) The subsection heading for section 59(b) of the 1986 
        Code is amended by striking ``Section 936 Credit'' and 
        inserting ``Credits Under Section 30A or 936''.
            (3) Subsection (n) of section 72 of the 1986 Code is 
        amended by inserting ``(as in effect on the day before the date 
        of the enactment of the Small Business Job Protection Act of 
        1996)'' after ``section 101(b)(2)(D)''.
            (4) Subparagraph (A) of section 72(t)(3) of the 1986 Code 
        is amended by striking ``(A)(v),'' and inserting ``(A)(v)''.
            (5) Clause (ii) of section 142(f)(3)(A) of the 1986 Code is 
        amended by striking ``1997, ('' and inserting ``1997 (''.
            (6) The last sentence of paragraph (3) of section 501(n) of 
        the 1986 Code is amended by striking ``subparagraph (C)(ii)'' 
        and inserting ``subparagraph (E)(ii)''.
            (7) The heading for subclause (II) of section 
        512(b)(17)(B)(ii) of the 1986 Code is amended by striking 
        ``Rule'' and inserting ``rule''.
            (8) Clause (ii) of section 543(d)(5)(A) of the 1986 Code is 
        amended by striking ``section 563(c)'' and inserting ``section 
        563(d)''.
            (9) Subparagraph (B) of section 871(f)(2) of the 1986 Code 
        is amended by striking ``(19 U.S.C. 2462)'' and inserting ``19 
        U.S.C. 2461 et seq.)''.
            (10) Paragraph (2) of section 1017(a) of the 1986 Code is 
        amended by striking ``(b)(2)(D)'' and inserting ``(b)(2)(E)''.
            (11) Subparagraph (D) of section 1250(d)(4) of the 1986 
        Code is amended by striking ``the last sentence of section 
        1033(b)'' and inserting ``section 1033(b)(2)''.
            (12) Paragraph (5) of section 3121(a) of the 1986 Code is 
        amended--
                    (A) by striking the semicolon at the end of 
                subparagraph (F) and inserting a comma,
                    (B) by striking ``or'' at the end of subparagraph 
                (G), and
                    (C) by striking the period at the end of 
                subparagraph (I) and inserting a semicolon.
            (13) Paragraph (19) of section 3401(a) of the 1986 Code is 
        amended by inserting ``for'' before ``any benefit provided 
        to''.
            (14) Paragraph (21) of section 3401(a) of the 1986 Code is 
        amended by inserting ``for'' before ``any payment made''.
            (15) Sections 4092(b) and 6427(q)(2) of the 1986 Code are 
        each amended by striking ``section 4041(c)(4)'' and inserting 
        ``section 4041(c)(2)''.
            (16) Sections 4221(c) and 4222(d) of the 1986 Code are each 
        amended by striking ``4053(a)(6)'' and inserting ``4053(6)''.
            (17)(A) The heading of section 4973 of the 1986 Code is 
        amended to read as follows:

``SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-FAVORED 
              ACCOUNTS AND ANNUITIES.''.

            (B) The item relating to section 4973 in the table of 
        sections for chapter 43 of the 1986 Code is amended to read as 
        follows:

                              ``Sec. 4973. Tax on excess contributions 
                                        to certain tax-favored accounts 
                                        and annuities.''.
            (18) Section 4975 of the 1986 Code is amended--
                    (A) in subsection (c)(3) by striking ``exempt for 
                the tax'' and inserting ``exempt from the tax'', and
                    (B) in subsection (i) by striking ``Secretary of 
                Treasury'' and inserting ``Secretary of the Treasury''.
            (19) Paragraph (1) of section 6039(a) of the 1986 Code is 
        amended by inserting ``to any person'' after ``transfers''.
            (20) Subparagraph (A) of section 6050R(b)(2) of the 1986 
        Code is amended by striking the semicolon at the end thereof 
        and inserting a comma.
            (21) Subparagraph (A) of section 6103(h)(4) of the 1986 
        Code is amended by inserting ``if'' before ``the taxpayer is a 
        party to''.
            (22) Paragraph (5) of section 6416(b) of the 1986 Code is 
        amended by striking ``section 4216(e)(1)'' each place it 
        appears and inserting ``section 4216(d)(1)''.
            (23)(A) Section 6421 of the 1986 Code is amended by 
        redesignating subsections (j) and (k) as subsections (i) and 
        (j), respectively.
            (B) Subsection (b) of section 34 of the 1986 Code is 
        amended by striking ``section 6421(j)'' and inserting ``section 
        6421(i)''.
            (C) Subsections (a) and (b) of section 6421 of the 1986 
        Code are each amended by striking ``subsection (j)'' and 
        inserting ``subsection (i)''.
            (24) Paragraph (3) of section 6427(f) of the 1986 Code is 
        amended by striking ``, (e),''.
            (25)(A) Section 6427 of the 1986 Code, as amended by 
        paragraph (2), is amended by redesignating subsections (n), 
        (p), (q), and (r) as subsections (m), (n), (o), and (p), 
        respectively.
            (B) Paragraphs (1) and (2)(A) of section 6427(i) of the 
        1986 Code are each amended by striking ``(q)'' and inserting 
        ``(o)''.
            (26) Subsection (m) of section 6501 of the 1986 Code is 
        amended by striking ``election under'' and all that follows 
        through ``(or any'' and inserting ``election under section 
        30(d)(4), 40(f), 43, 45B, 45C(d)(4), or 51(j) (or any''.
            (27) The paragraph heading of paragraph (2) of section 
        7702B(e) of the 1986 Code is amended by inserting ``section'' 
        after ``Application of''.
            (28) Paragraph (3) of section 7435(b) of the 1986 Code is 
        amended by striking ``attorneys fees'' and inserting 
        ``attorneys' fees''.
            (29) Subparagraph (B) of section 7872(f)(2) of the 1986 
        Code is amended by striking ``foregone'' and inserting 
        ``forgone''.
            (30) Subsection (e) of section 9502 of the 1986 Code is 
        amended to read as follows:
    ``(e) Certain Taxes on Alcohol Mixtures To Remain in General 
Fund.--For purposes of this section, the amounts which would (but for 
this subsection) be required to be appropriated under subparagraphs 
(A), (C), and (D) of subsection (b)(1) shall be reduced by--
            ``(1) 0.6 cent per gallon in the case of taxes imposed on 
        any mixture at least 10 percent of which is alcohol (as defined 
        in section 4081(c)(3)) if any portion of such alcohol is 
        ethanol, and
            ``(2) 0.67 cent per gallon in the case of fuel used in 
        producing a mixture described in paragraph (1).''.
            (31)(A) Clause (i) of section 9503(c)(2)(A) of the 1986 
        Code is amended by adding ``and'' at the end of subclause (II), 
        by striking subclause (III), and by redesignating subclause 
        (IV) as subclause (III).
            (B) Clause (ii) of such section is amended by striking 
        ``gasoline, special fuels, and lubricating oil'' each place it 
        appears and inserting ``fuel''.
            (32) The amendments made by this section shall take effect 
        on the date of the enactment of this Act.

SEC. 6023. EFFECTIVE DATE.

    Except as otherwise provided in this title, the amendments made by 
this title shall take effect as if included in the provisions of the 
Taxpayer Relief Act of 1997 to which they relate.

            Attest:

                                                             Secretary.
105th CONGRESS

  2d Session

                               H. R. 2676

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                               AMENDMENT

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