[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2676 Referred in Senate (RFS)]

  1st Session
                                H. R. 2676


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 5, 1997

     Received; read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 AN ACT


 
 To amend the Internal Revenue Code of 1986 to restructure and reform 
         the Internal Revenue Service, and for other purposes.

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

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

    (a) Short Title.--This Act may be cited as the ``Internal Revenue 
Service Restructuring and Reform Act of 1997''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.
   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

Sec. 101. Internal Revenue Service Oversight Board.
Sec. 102. Commissioner of Internal Revenue; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer 
                            audits and other investigations.
                  Subtitle B--Personnel Flexibilities

Sec. 111. Personnel flexibilities.
                      TITLE II--ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Due date for certain information returns filed 
                            electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.
               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 300. Short title.
                      Subtitle A--Burden of Proof

Sec. 301. Burden of proof.
                  Subtitle B--Proceedings by Taxpayers

Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.
  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 321. Spouse relieved in whole or in part of liability in certain 
                            cases.
Sec. 322. Suspension of statute of limitations on filing refund claims 
                            during periods of disability.
              Subtitle D--Provisions Relating to Interest

Sec. 331. Elimination of interest rate differential on overlapping 
                            periods of interest on income tax 
                            overpayments and underpayments.
Sec. 332. Increase in overpayment rate payable to taxpayers other than 
                            corporations.
 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

Sec. 341. Privilege of confidentiality extended to taxpayer's dealings 
                            with non-attorneys authorized to practice 
                            before Internal Revenue Service.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer 
                            source code.
Sec. 345. Procedures relating to extensions of statute of limitations 
                            by agreement.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax 
                            Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting 
                            Alternative Commitment Agreements.
                  Subtitle F--Disclosures to Taxpayers

Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers' rights in interviews with the 
                            Internal Revenue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Explanations of appeals and collection process.
                Subtitle G--Low Income Taxpayer Clinics

Sec. 361. Low income taxpayer clinics.
                       Subtitle H--Other Matters

Sec. 371. Actions for refund with respect to certain estates which have 
                            elected the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.
Sec. 375. Clarification of authority of Secretary relating to the 
                            making of elections.
Sec. 376. Limitation on penalty on individual's failure to pay for 
                            months during period of installment 
                            agreement.
                          Subtitle I--Studies

Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

Sec. 401. Expansion of duties of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.
                           Subtitle B--Budget

Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.
                     Subtitle C--Tax Law Complexity

Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.
     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

Sec. 501. Clarification of deduction for deferred compensation.
TITLE VI--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Amendments related to title I of 1997 Act.
Sec. 604. Amendments related to title II of 1997 Act.
Sec. 605. Amendments related to title III of 1997 Act.
Sec. 606. Amendments related to title V of 1997 Act.
Sec. 607. Amendments related to title VII of 1997 Act.
Sec. 608. Amendments related to title IX of 1997 Act.
Sec. 609. Amendments related to title X of 1997 Act.
Sec. 610. Amendments related to title XI of 1997 Act.
Sec. 611. Amendments related to title XII of 1997 Act.
Sec. 612. Amendments related to title XIII of 1997 Act.
Sec. 613. Amendments related to title XIV of 1997 Act.
Sec. 614. Amendments related to title XV of 1997 Act.
Sec. 615. Amendments related to title XVI of 1997 Act.
Sec. 616. Amendments related to Omibus Budget Reconciliation Act of 
                            1993.
Sec. 617. Amendments related to Tax Reform Act of 1984.
Sec. 618. Amendments related to Tax Reform Act of 1986.
Sec. 619. Miscellaneous clerical and deadwood changes.
Sec. 620. Effective date.

   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

SEC. 101. 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 11 members, as follows:
                    ``(A) 8 members shall be individuals who are not 
                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 
                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.
                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 
                paragraph (1)(A) or (D) shall be appointed for a term 
                of 5 years, except that of the members first appointed 
                under paragraph (1)(A)--
                            ``(i) 1 member shall be appointed for a 
                        term of 1 year,
                            ``(ii) 1 member shall be appointed for a 
                        term of 2 years,
                            ``(iii) 2 members shall be appointed for a 
                        term of 3 years, and
                            ``(iv) 2 members shall be appointed for a 
                        term of 4 years.
                Such terms shall begin on the date of appointment.
                    ``(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.
                    ``(E) Special government employees.--During the 
                entire period that an individual appointed under 
                paragraph (1)(A) is a member of the Oversight Board, 
                such individual shall be treated as--
                            ``(i) serving as a special government 
                        employee (as defined in section 202 of title 
                        18, United States Code) and as described in 
                        section 207(c)(2) of such title 18, and
                            ``(ii) 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.
            ``(3) Quorum.--6 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.
            ``(4) Removal.--
                    ``(A) In general.--Any member of the Oversight 
                Board 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 employment.
                    ``(C) Representative of internal revenue service 
                employees.--The member described in paragraph (1)(D) 
                shall be removed upon termination of employment, 
                membership, or other affiliation with the organization 
                described in such paragraph.
            ``(5) 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. The preceding sentence shall not be construed 
                to limit personal liability for criminal acts or 
                omissions, willful or malicious conduct, acts or 
                omissions for private gain, or any other act or 
                omission outside the scope of the service of such 
                member on the Oversight Board.
                    ``(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) 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.
            ``(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) law enforcement activities of the Internal 
                Revenue Service, including compliance activities such 
                as criminal investigations, examinations, and 
                collection activities, or
                    ``(C) specific procurement activities of the 
                Internal Revenue Service.
            ``(3) Restriction on disclosure of return information to 
        oversight board members.--No return, return information, or 
        taxpayer return information (as defined in section 6103(b)) may 
        be disclosed to any member of the Oversight Board described in 
        subsection (b)(1)(A) or (D). Any request for information not 
        permitted to be disclosed under the preceding sentence, and any 
        contact relating to a specific taxpayer, made by a member of 
        the Oversight Board so described to an officer or employee of 
        the Internal Revenue Service shall be reported by such officer 
        or employee to the Secretary and the Joint Committee on 
        Taxation.
    ``(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) review the Commissioner's selection, 
                evaluation, and compensation of senior managers, and
                    ``(C) review and approve the Commissioner's plans 
                for any major reorganization of the Internal Revenue 
                Service.
            ``(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.
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 not to exceed $30,000 per year. 
                All other members of the Oversight Board 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 not to exceed 
                $50,000.
            ``(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 attending meetings of the Oversight Board.
            ``(3) Staff.--At the request of the Chairperson of the 
        Oversight Board, the Commissioner shall detail to the Oversight 
        Board such personnel as may be necessary to enable the 
        Oversight Board to perform its duties. 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.--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).
            ``(2) Committees.--The Oversight Board may establish such 
        committees as the Oversight Board determines appropriate.
            ``(3) Meetings.--The Oversight Board shall meet at least 
        once each month and at such other times as the Oversight Board 
        determines appropriate.
            ``(4) Reports.--The Oversight Board shall each year report 
        to the President and the Congress with respect to the conduct 
        of its responsibilities under this title.''.
    (b) Conforming Amendments.--
            (1) Section 4946(c) (relating to definitions and special 
        rules for chapter 42) is amended--
                    (A) by striking ``or'' at the end of paragraph (5),
                    (B) by striking the period at the end of paragraph 
                (6) and inserting ``, or'', and
                    (C) 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.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Nominations to internal revenue service oversight 
        board.--The President shall submit 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.

SEC. 102. 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. The 
                appointment shall be made without regard to political 
                affiliation or activity.
                    ``(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.
            ``(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 ax conventions to 
                which the United States is a party; and
                    ``(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.
        If the Secretary determines not to delegate a power specified 
        in subparagraph (A) or (B), 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, the 
        Committees on Finance, Government Operations, and 
        Appropriations of the Senate, and the Joint Committee on 
        Taxation.
            ``(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) Assistant Commissioner for Employee Plans and Exempt 
Organizations.--There is established within the Internal Revenue 
Service an office to be known as the `Office of Employee Plans and 
Exempt Organizations' to be under the supervision and direction of an 
Assistant Commissioner of Internal Revenue. As head of the Office, the 
Assistant Commissioner shall be responsible for carrying out such 
functions as the Secretary may prescribe with respect to organizations 
exempt from tax under section 501(a) and with respect to plans to which 
part I of subchapter D of chapter 1 applies (and with respect to 
organizations designed to be exempt under such section and plans 
designed to be plans to which such part applies) and other nonqualified 
deferred compensation arrangements. The Assistant Commissioner shall 
report annually to the Commissioner with respect to the Assistant 
Commissioner's responsibilities under this section.
    ``(c) Office of Taxpayer Advocate.--
            ``(1) In general.--
                    ``(A) Establishment.--There is established in the 
                Internal Revenue Service an office to be known as the 
                `Office of the Taxpayer Advocate'. Such office shall be 
                under the supervision and direction of an official to 
                be known as the `Taxpayer Advocate' who shall be 
                appointed with the approval of the Oversight Board by 
                the Commissioner of Internal Revenue and shall report 
                directly to the Commissioner. The Taxpayer Advocate 
                shall be entitled to compensation at the same rate as 
                the highest level official reporting directly to the 
                Commissioner of Internal Revenue.
                    ``(B) Restriction on subsequent employment.--An 
                individual who is an officer or employee of the 
                Internal Revenue Service may be appointed as Taxpayer 
                Advocate only if such individual agrees not to accept 
                any employment with the Internal Revenue Service for at 
                least 5 years after ceasing to be the 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 Taxpayer Advocate 
                        shall report to the Committee on Ways and Means 
                        of the House of Representatives and the 
                        Committee on Finance of the Senate on the 
                        objectives of the Taxpayer Advocate for the 
                        fiscal year beginning in such calendar year. 
                        Any such report shall contain full and 
                        substantive analysis, in addition to 
                        statistical information.
                            ``(ii) Activities.--Not later than December 
                        31 of each calendar year, the Taxpayer Advocate 
                        shall report to the Committee on Ways and Means 
                        of the House of Representatives and the 
                        Committee on Finance of the Senate on the 
                        activities of the Taxpayer Advocate during the 
                        fiscal year ending during such calendar year. 
                        Any such report shall contain full and 
                        substantive analysis, in addition to 
                        statistical information, and shall--
                                    ``(I) identify the initiatives the 
                                Taxpayer Advocate has taken on 
                                improving taxpayer services and 
                                Internal Revenue Service 
                                responsiveness,
                                    ``(II) contain recommendations 
                                received from individuals with the 
                                authority to issue Taxpayer Assistance 
                                Orders under section 7811,
                                    ``(III) contain a summary of at 
                                least 20 of the most serious 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) in conjunction with the 
                                National Director of Appeals, 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 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 clauses (i) and (ii) without any 
                        prior review or comment from the Oversight 
                        Board, the Secretary of the Treasury, any other 
                        officer or employee of the Department of the 
                        Treasury, or the Office of Management and 
                        Budget.
                    ``(C) Other responsibilities.--The Taxpayer 
                Advocate shall--
                            ``(i) monitor the coverage and geographic 
                        allocation of problem resolution officers, and
                            ``(ii) develop guidance to be distributed 
                        to all Internal Revenue Service officers and 
                        employees outlining the criteria for referral 
                        of taxpayer inquiries to problem resolution 
                        officers.
            ``(3) Responsibilities of commissioner.--The Commissioner 
        shall establish procedures requiring a formal response to all 
        recommendations submitted to the Commissioner by the Taxpayer 
        Advocate within 3 months after submission to the 
        Commissioner.''.
    (b) Conforming Amendments.--
            (1) 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) Subsection (b) of section 5109 of title 5, United 
        States Code, is amended by striking ``7802(b)'' and inserting 
        ``7803(b)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) 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) 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. 103. 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. 104. 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 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 Chief Inspector of 
the Internal Revenue Service.
    ``(c) Exceptions.--Subsection (a) shall not apply to--
            ``(1) any request made to an applicable person by the 
        taxpayer or a representative of the taxpayer and forwarded by 
        such applicable person to the Internal Revenue Service,
            ``(2) any request 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) any request 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.

                  Subtitle B--Personnel Flexibilities

SEC. 111. 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 93--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                SERVICE

``Sec.
``9301. General requirements.
``9302. Flexibilities relating to performance management.
``9303. Staffing flexibilities.
``9304. Flexibilities relating to demonstration projects.
``Sec. 9301. General requirements
    ``(a) Conformance With Merit System Principles, Etc.--Any 
flexibilities under this chapter shall be exercised in a manner 
consistent with--
            ``(1) chapter 23, relating to merit system principles and 
        prohibited personnel practices; and
            ``(2) provisions of this title (outside of this subpart) 
        relating to preference eligibles.
    ``(b) Requirement Relating to Units Represented by Labor 
Organizations.--
            ``(1) Written agreement required.--Employees within a unit 
        with respect to which a labor organization is accorded 
        exclusive recognition under chapter 71 shall not be subject to 
        the exercise of any flexibility under section 9302, 9303, or 
        9304, unless there is a written agreement between the Internal 
        Revenue Service and the organization permitting such exercise.
            ``(2) Definition of a written agreement.--In order to 
        satisfy paragraph (1), a written agreement--
                    ``(A) need not be a collective bargaining agreement 
                within the meaning of section 7103(8); and
                    ``(B) may not be an agreement imposed by the 
                Federal Service Impasses Panel under section 7119.
            ``(3) Includible matters.--The written agreement may 
        address any flexibilities under section 9302, 9303, or 9304, 
        including any matter proposed to be included in a demonstration 
        project under section 9304.
``Sec. 9302. Flexibilities relating to performance management
    ``(a) In General.--The Commissioner of Internal Revenue shall, 
within a year after the date of the enactment of this chapter, 
establish a performance management system which--
            ``(1) subject to section 9301(b), shall cover all employees 
        of the Internal Revenue Service other than--
                    ``(A) the members of the Internal Revenue Service 
                Oversight Board;
                    ``(B) the Commissioner of Internal Revenue; and
                    ``(C) the Chief Counsel for the Internal Revenue 
                Service;
            ``(2) shall maintain individual accountability by--
                    ``(A) establishing standards of performance which--
                            ``(i) shall permit the accurate evaluation 
                        of each employee's performance on the basis of 
                        the individual and organizational performance 
                        requirements applicable with respect to the 
                        evaluation period involved, taking into account 
                        individual contributions toward the attainment 
                        of any goals or objectives under paragraph (3);
                            ``(ii) shall be communicated to an employee 
                        before the start of any period with respect to 
                        which the performance of such employee is to be 
                        evaluated using such standards; and
                            ``(iii) shall include at least 2 standards 
                        of performance, the lowest of which shall 
                        denote the retention standard and shall be 
                        equivalent to fully successful performance;
                    ``(B) providing for periodic performance 
                evaluations to determine whether employees are meeting 
                all applicable retention standards; and
                    ``(C) using the results of such employee's 
                performance evaluation as a basis for adjustments in 
                pay and other appropriate personnel actions; and
            ``(3) shall provide for (A) establishing goals or 
        objectives for individual, group, or organizational performance 
        (or any combination thereof), consistent with Internal Revenue 
        Service performance planning procedures, including those 
        established under the Government Performance and Results Act of 
        1993, the Information Technology Management Reform Act of 1996, 
        Revenue Procedure 64-22 (as in effect on July 30, 1997), and 
        taxpayer service surveys, (B) communicating such goals or 
        objectives to employees, and (C) using such goals or objectives 
        to make performance distinctions among employees or groups of 
        employees.
For purposes of this title, performance of an employee during any 
period in which such employee is subject to standards of performance 
under paragraph (2) shall be considered to be `unacceptable' if the 
performance of such employee during such period fails to meet any 
retention standard.
    ``(b) Awards.--
            ``(1) For superior accomplishments.--In the case of a 
        proposed award based on the efforts of an employee or former 
        employee of the Internal Revenue Service, any approval required 
        under the provisions of section 4502(b) shall be considered to 
        have been granted if the Office of Personnel Management does 
        not disapprove the proposed award within 60 days after 
        receiving the appropriate certification described in such 
        provisions.
            ``(2) For employees who report directly to the 
        commissioner.--
                    ``(A) In general.--In the case of an employee of 
                the Internal Revenue Service who reports directly to 
                the Commissioner of Internal Revenue, a cash award in 
                an amount up to 50 percent of such employee's annual 
                rate of basic pay may be made if the Commissioner finds 
                such an award to be warranted based on such employee's 
                performance.
                    ``(B) Nature of an award.--A cash award under this 
                paragraph shall not be considered to be part of basic 
                pay.
                    ``(C) Tax enforcement results.--A cash award under 
                this paragraph may not be based solely on tax 
                enforcement results.
                    ``(D) Eligible employees.--Whether or not an 
                employee is an employee who reports directly to the 
                Commissioner of Internal Revenue shall, for purposes of 
                this paragraph, be determined under regulations which 
                the Commissioner shall prescribe, except that in no 
                event shall more than 8 employees be eligible for a 
                cash award under this paragraph in any calendar year.
                    ``(E) Limitation on compensation.--For purposes of 
                applying section 5307 to an employee in connection with 
                any calendar year to which an award made under this 
                paragraph to such employee is attributable, subsection 
                (a)(1) of such section shall be applied by substituting 
                `to equal or exceed the annual rate of compensation for 
                the Vice President for such calendar year' for `to 
                exceed the annual rate of basic pay payable for level I 
                of the Executive Schedule, as of the end of such 
                calendar year'.
                    ``(F) Approval required.--An award under this 
                paragraph may not be made unless--
                            ``(i) the Commissioner of Internal Revenue 
                        certifies to the Office of Personnel Management 
                        that such award is warranted; and
                            ``(ii) the Office approves, or does not 
                        disapprove, the proposed award within 60 days 
                        after the date on which it is so certified.
            ``(3) Based on savings.--
                    ``(A) In general.--The Commissioner of Internal 
                Revenue may authorize the payment of cash awards to 
                employees based on documented financial savings 
                achieved by a group or organization which such 
                employees comprise, if such payments are made pursuant 
                to a plan which--
                            ``(i) specifies minimum levels of service 
                        and quality to be maintained while achieving 
                        such financial savings; and
                            ``(ii) is in conformance with criteria 
                        prescribed by the Office of Personnel 
                        Management.
                    ``(B) Funding.--A cash award under this paragraph 
                may be paid from the fund or appropriation available to 
                the activity primarily benefiting or the various 
                activities benefiting.
                    ``(C) Tax enforcement results.--A cash award under 
                this paragraph may not be based solely on tax 
                enforcement results.
    ``(c) Other Provisions.--
            ``(1) Notice provisions.--In applying sections 
        4303(b)(1)(A) and 7513(b)(1) to employees of the Internal 
        Revenue Service, `15 days' shall be substituted for `30 days'.
            ``(2) Appeals.--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. 9303. Staffing flexibilities
    ``(a) Eligibility To Compete for A Permanent Appointment in the 
Competitive Service.--
            ``(1) Eligibility of qualified veterans.--
                    ``(A) In general.--No veteran described in 
                subparagraph (B) shall be denied the opportunity to 
                compete for an announced vacant competitive service 
                position within the Internal Revenue Service by reason 
                of--
                            ``(i) not having acquired competitive 
                        status; or
                            ``(ii) not being an employee of that 
                        agency.
                    ``(B) Description.--An individual shall, for 
                purposes of a position for which such individual is 
                applying, be considered a veteran described in this 
                subparagraph if such individual--
                            ``(i) is either a preference eligible, or 
                        an individual (other than a preference 
                        eligible) who has been separated from the armed 
                        forces under honorable conditions after at 
                        least 3 years of active service; and
                            ``(ii) meets the minimum qualification 
                        requirements for the position sought.
            ``(2) Eligibility of certain temporary employees.--
                    ``(A) In general.--No temporary employee described 
                in subparagraph (B) shall be denied the opportunity to 
                compete for an announced vacant competitive service 
                position within the Internal Revenue Service by reason 
                of not having acquired competitive status.
                    ``(B) Description.--An individual shall, for 
                purposes of a position for which such individual is 
                applying, be considered a temporary employee described 
                in this subparagraph if--
                            ``(i) such individual is then currently 
                        serving as a temporary employee in the Internal 
                        Revenue Service;
                            ``(ii) such individual has completed at 
                        least 2 years of current continuous service in 
                        the competitive service under 1 or more term 
                        appointments, each of which was made under 
                        competitive procedures prescribed for permanent 
                        appointments;
                            ``(iii) such individual's performance under 
                        each term appointment referred to in clause 
                        (ii) met all applicable retention standards; 
                        and
                            ``(iv) such individual meets the minimum 
                        qualification requirements for the position 
                        sought.
    ``(b) Rating Systems.--
            ``(1) In general.--Notwithstanding subchapter I of chapter 
        33, the Commissioner of Internal Revenue may establish category 
        rating systems for evaluating job applicants for 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. 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 job to be 
        filled.
            ``(2) Treatment of preference eligibles.--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.
            ``(3) Selection process.--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. Notwithstanding 
        the preceding sentence, the appointing authority may not pass 
        over a preference eligible in the same or a higher category 
        from which selection is made, unless the requirements of 
        section 3317(b) or 3318(b), as applicable, are satisfied, 
        except that in no event may certification of a preference 
        eligible under this subsection be discontinued by the Internal 
        Revenue Service under section 3317(b) before the end of the 6-
        month period beginning on the date of such employee's first 
        certification.
    ``(c) Involuntary Reassignments and Removals of Career Appointees 
in the Senior Executive Service.--Neither section 3395(e)(1) nor 
section 3592(b)(1) shall apply with respect to the Internal Revenue 
Service.
    ``(d) Probationary Periods.--Notwithstanding any other provision of 
law or regulation, the Commissioner of Internal Revenue may establish a 
period of probation under section 3321 of up to 3 years for any 
position if, as determined by the Commissioner, a shorter period would 
be insufficient for the incumbent to demonstrate complete proficiency 
in such position.
    ``(e) Provisions That Remain Applicable.--No provision of this 
section exempts the Internal Revenue Service from--
            ``(1) any employment priorities established under direction 
        of the President for the placement of surplus or displaced 
        employees; or
            ``(2) its obligations under any court order or decree 
        relating to the employment practices of the Internal Revenue 
        Service.
``Sec. 9304. Flexibilities relating to demonstration projects
    ``(a) Authority To Conduct.--The Commissioner of Internal Revenue 
may, in accordance with this section, conduct 1 or more demonstration 
projects to improve personnel management; provide increased individual 
accountability; eliminate obstacles to the removal of or imposing any 
disciplinary action with respect to poor performers, subject to the 
requirements of due process; expedite appeals from adverse actions or 
performance-based actions; and promote pay based on performance.
    ``(b) General Requirements.--Except as provided in subsection (c), 
each demonstration project under this section shall comply with the 
provisions of section 4703.
    ``(c) Special Rules.--For purposes of any demonstration project 
under this section--
            ``(1) Authority of commissioner.--The Commissioner of 
        Internal Revenue shall exercise the authority provided to the 
        Office of Personnel Management under section 4703.
            ``(2) Provisions not applicable.--The following provisions 
        of section 4703 shall not apply:
                    ``(A) Paragraphs (3) through (6) of subsection (b).
                    ``(B) Paragraphs (1), (2)(B)(ii), and (4) of 
                subsection (c).
                    ``(C) Subsections (d) through (g).
    ``(d) Notification Required To Be Given.--
            ``(1) To employees.--The Commissioner of Internal Revenue 
        shall notify employees likely to be affected by a project 
        proposed under this section at least 90 days in advance of the 
        date such project is to take effect.
            ``(2) To congress and opm.--The Commissioner of Internal 
        Revenue shall, with respect to each demonstration project under 
        this section, provide each House of Congress and the Office of 
        Personnel Management with a report, at least 30 days in advance 
        of the date such project is to take effect, setting forth the 
        final version of the plan for such project. Such report shall, 
        with respect to the project to which it relates, include the 
        information specified in section 4703(b)(1).
    ``(e) Limitations.--No demonstration project under this section 
may--
            ``(1) provide for a waiver of any regulation prescribed 
        under any provision of law referred to in paragraph (2)(B)(i) 
        or (3) of section 4703(c);
            ``(2) provide for a waiver of subchapter V of chapter 63 or 
        subpart G of part III (or any regulations prescribed under such 
        subchapter or subpart);
            ``(3) provide for a waiver of any law or regulation 
        relating to preference eligibles as defined in section 2108 or 
        subchapter II or III of chapter 73 (or any regulations 
        prescribed thereunder);
            ``(4) permit collective bargaining over pay or benefits, or 
        require collective bargaining over any matter which would not 
        be required under section 7106; or
            ``(5) include a system for measuring performance that 
        provides for only 1 level of performance at or above the level 
        of fully successful or better.
    ``(f) Permissible Projects.--Notwithstanding any other provision of 
law, a demonstration project under this section--
            ``(1) may establish alternative means of resolving any 
        dispute within the jurisdiction of the Equal Employment 
        Opportunity Commission, the Merit Systems Protection Board, the 
        Federal Labor Relations Authority, or the Federal Service 
        Impasses Panel; and
            ``(2) may permit the Internal Revenue Service to adopt any 
        alternative dispute resolution procedure that a private entity 
        may lawfully adopt.
    ``(g) Consultation and Coordination.--The Commissioner of Internal 
Revenue shall consult with the Director of the Office of Personnel 
Management in the development and implementation of each demonstration 
project under this section and shall submit such reports to the 
Director as the Director may require. The Director or the Commissioner 
of Internal Revenue may terminate a demonstration project under this 
section if either of them determines that the project creates a 
substantial hardship on, or is not in the best interests of, the 
public, the Federal Government, employees, or qualified applicants for 
employment with the Internal Revenue Service.
    ``(h) Termination.--Each demonstration project under this section 
shall terminate before the end of the 5-year period beginning on the 
date on which the project takes effect, except that any such project 
may continue beyond the end of such period, for not to exceed 2 years, 
if the Commissioner of Internal Revenue, with the concurrence of the 
Director, determines such extension is necessary to validate the 
results of the project. Not later than 6 months before the end of the 
5-year period and any extension under the preceding sentence, the 
Commissioner of Internal Revenue shall, with respect to the 
demonstration project involved, submit a legislative proposal to the 
Congress if the Commissioner determines that such project should be 
made permanent, in whole or in part.''.
    (b) Clerical Amendment.--The analysis for part III of title 5, 
United States Code, is amended by adding at the end the following:

                       ``Subpart I--Miscellaneous

``93. Personnel Flexibilities Relating to the Internal          9301''.
Revenue Service.
    (c) Effective Date.--This section shall take effect on the date of 
enactment of this Act.

                      TITLE II--ELECTRONIC FILING

SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

    (a) In General.--It is the policy of the Congress that paperless 
filing should be the preferred and most convenient means of filing tax 
and information returns, and that by the year 2007, no more than 20 
percent of all such returns should be filed on paper.
    (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 1997, the Chairperson of the Internal Revenue Service Oversight 
Board, the Secretary, and the Chairperson of the electronic commerce 
advisory group established under subsection (b)(2) shall report to the 
Committees on Ways and Means, Appropriations, and Government Reform and 
Oversight of the House of Representatives, the Committees on Finance, 
Appropriations, and Government Affairs of the Senate, and the Joint 
Committee on Taxation, 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); and
            (3) the legislative changes necessary to assist the 
        Internal Revenue Service in meeting such goal.

SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS FILED 
              ELECTRONICALLY.

    (a) In General.--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) Effective Date.--The amendment made by this section shall apply 
to returns required to be filed after December 31, 1999.

SEC. 203. 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 waive the requirement of a signature for all 
        returns or classes of returns, or 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 without signature under the authority 
        of this subsection or 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. 
        Any such return, declaration, statement or other document shall 
        be presumed to have been actually submitted and subscribed by 
        the person on whose behalf it was submitted.
            ``(3) Published guidance.--The Secretary shall publish 
        guidance as appropriate to define and implement any waiver of 
        the signature requirements.''.
    (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) Procedures for Communications Between IRS and Preparer of 
Electronically Filed Returns.--The Secretary shall establish procedures 
for taxpayers to authorize, on electronically filed returns, the 
preparer of such returns to communicate with the Internal Revenue 
Service on matters included on such returns.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 204. 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, the Committee on Finance of the Senate, 
and the Joint Committee on Taxation 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. 205. ACCESS TO ACCOUNT INFORMATION.

    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 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.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

SEC. 300. SHORT TITLE.

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

                      Subtitle A--Burden of Proof

SEC. 301. 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) General Rule.--The Secretary shall have the burden of proof 
in any court proceeding with respect to any factual issue relevant to 
ascertaining the income tax liability of a taxpayer.
    ``(b) Limitations.--Subsection (a) shall only apply with respect to 
an issue if--
            ``(1) the taxpayer asserts a reasonable dispute with 
        respect to such issue,
            ``(2) the taxpayer has fully cooperated with the Secretary 
        with respect to such issue, including providing, within a 
        reasonable period of time, access to and inspection of all 
        witnesses, information, and documents within the control of the 
        taxpayer, as reasonably requested by the Secretary, and
            ``(3) in the case of a partnership, corporation, or trust, 
        the taxpayer is described in section 7430(c)(4)(A)(ii).
    ``(c) Substantiation.--Nothing in this section shall be construed 
to override any requirement of this title to substantiate any item.''.
    (b) Conforming Amendments.--
            (1) Section 6201 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
            (2) 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. 311. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN FEES.

    (a) Award of Higher Attorney's Fees Based on Complexity of 
Issues.--Clause (iii) of section 7430(c)(1)(B) (relating to the award 
of costs and certain fees) is amended by inserting ``the difficulty of 
the issues presented in the case, or the local availability of tax 
expertise,'' before ``justifies a higher rate''.
    (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:
        ``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) Attorney's 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.--In any case in which the 
                court could have awarded attorney's fees under 
                subsection (a) but for the fact that 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, the court 
                may also award a judgment or settlement for such 
                amounts as the court determines to be appropriate 
                (based on hours worked and costs expended) for services 
                of such individual but 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) 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. 312. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.

    (a) In General.--Section 7433 (relating to civil damages for 
certain unauthorized collection actions) is amended--
            (1) in subsection (a), by inserting ``, or by reason of 
        negligence,'' after ``recklessly or intentionally'', and
            (2) in subsection (b)--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``($100,000, in the case of negligence)'' 
                after ``$1,000,000'', and
                    (B) in paragraph (1), by inserting ``or negligent'' 
                after ``reckless or intentional''.
    (b) 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.''.
    (c) 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. 313. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE CALENDAR.

    (a) In General.--Subsection (a) of section 7463 (relating to 
disputes involving $10,000 or less) is amended by striking ``$10,000'' 
each place it appears and inserting ``$25,000''.
    (b) Conforming Amendments.--
            (1) The section heading for section 7463 is amended by 
        striking ``$10,000'' and inserting ``$25,000''.
            (2) The item relating to section 7463 in the table of 
        sections for part II of subchapter C of chapter 76 is amended 
        by striking ``$10,000'' and inserting ``$25,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to proceedings commencing after 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. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LIABILITY IN CERTAIN 
              CASES.

    (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. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.

    ``(a) Spouse Relieved of Liability in Certain Cases.--
            ``(1) In general.--Under procedures prescribed by the 
        Secretary, if--
                    ``(A) a joint return has been made under section 
                6013 for a taxable year,
                    ``(B) on such return there is an understatement of 
                tax attributable to erroneous items of 1 spouse,
                    ``(C) the other spouse establishes that in signing 
                the return he or she did not know, and had no reason to 
                know, that there was such understatement,
                    ``(D) taking into account all the facts and 
                circumstances, it is inequitable to hold the other 
                spouse liable for the deficiency in tax for such 
                taxable year attributable to such understatement, and
                    ``(E) the other spouse claims (in such form as the 
                Secretary may prescribe) the benefits of this 
                subsection not later than the date which is 2 years 
                after the date of the assessment of such deficiency,
        then the other spouse shall be relieved of liability for tax 
        (including interest, penalties, and other amounts) for such 
        taxable year to the extent such liability is attributable to 
        such understatement.
            ``(2) Apportionment of relief.--If a spouse who, but for 
        paragraph (1)(C), would be relieved of liability under 
        paragraph (1), establishes that in signing the return such 
        spouse did not know, and had no reason to know, the extent of 
        such understatement, then such spouse shall be relieved of 
        liability for tax (including interest, penalties, and other 
        amounts) for such taxable year to the extent that such 
        liability is attributable to the portion of such understatement 
        of which such spouse did not know and had no reason to know.
            ``(3) Understatement.--For purposes of this subsection, the 
        term `understatement' has the meaning given to such term by 
        section 6662(d)(2)(A).
            ``(4) Special rule for community property income.--For 
        purposes of this subsection, the determination of the spouse to 
        whom items of gross income (other than gross income from 
        property) are attributable shall be made without regard to 
        community property laws.
    ``(b) Petition for Review by Tax Court.--In the case of an 
individual who has filed a claim under subsection (a) within the period 
specified in subsection (a)(1)(E)--
            ``(1) In general.--Such individual may petition the Tax 
        Court (and the Tax Court shall have jurisdiction) to determine 
        such claim if such petition is filed during the 90-day period 
        beginning on the earlier of--
                    ``(A) the date which is 6 months after the date 
                such claim is filed with the Secretary, or
                    ``(B) the date on which the Secretary mails by 
                certified or registered mail a notice to such 
                individual denying such claim.
        Such 90-day period shall be determined by not counting 
        Saturday, Sunday, or a legal holiday in the District of 
        Columbia as the last day of such period.
            ``(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 to which such claim 
                relates shall be made, begun, or prosecuted, until the 
                expiration of the 90-day period described in paragraph 
                (1), nor, 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 such proceeding or levy 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 paragraph to enjoin any action 
                or proceeding unless a timely petition for a 
                determination of such claim has been filed and then 
                only in respect of the amount of the assessment to 
                which such claim relates.
                    ``(C) Jeopardy collection.--If the Secretary makes 
                a finding that the collection of the tax is in 
                jeopardy, nothing in this subsection shall prevent the 
                immediate collection of such tax.
    ``(c) 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 subsection (b) relates shall be 
suspended for the period during which the Secretary is prohibited by 
subsection (b) from collecting by levy or a proceeding in court and for 
60 days thereafter.
    ``(d) Applicable Rules.--
            ``(1) Allowance of application.--Except as provided in 
        paragraph (2), 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.
            ``(2) Res judicata.--In the case of any claim under 
        subsection (a), the determination of the Tax Court in any prior 
        proceeding for the same taxable periods in which the decision 
        has become final, shall be conclusive except with respect to 
        the qualification of the spouse for relief which was not an 
        issue in such proceeding. The preceding sentence shall not 
        apply if the Tax Court determines that the spouse participated 
        meaningfully in such prior proceeding.
            ``(3) Limitation on tax court jurisdiction.--If a suit for 
        refund is begun by either spouse pursuant to section 6532, the 
        Tax Court shall lose jurisdiction of the spouse'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.''.
    (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) 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''.
    (d) 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. Innocent spouse relief; 
                                        petition to Tax Court.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to understatements for taxable years beginning after the date of 
the enactment of this Act.

SEC. 322. 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 his medically determinable physical or mental 
                impairment 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

SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON OVERLAPPING 
              PERIODS OF INTEREST ON INCOME 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 Income 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 chapters 1 and 2, 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 Date.--The amendments made by this section shall 
apply to interest for calendar quarters beginning after the date of the 
enactment of this Act.

SEC. 332. 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 calendar quarters beginning after the date of the 
enactment of this Act.

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

SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S DEALINGS 
              WITH NON-ATTORNEYS AUTHORIZED TO PRACTICE BEFORE INTERNAL 
              REVENUE SERVICE.

    Section 7602 (relating to examination of books and witnesses) is 
amended by adding at the end the following new subsection:
    ``(d) Privilege of Confidentiality Extended to Taxpayer's Dealings 
With Non-Attorneys Authorized To Practice Before Internal Revenue 
Service.--
            ``(1) In general.--In any noncriminal proceeding before the 
        Internal Revenue Service, the taxpayer shall be entitled to the 
        same common law protections of confidentiality with respect to 
        tax advice furnished by any qualified individual (in a manner 
        consistent with State law for such individual's profession) as 
        the taxpayer would have if such individual were an attorney.
            ``(2) Qualified individual.--For purposes of paragraph (1), 
        the term `qualified individual' means any individual (other 
        than an attorney) who is authorized to practice before the 
        Internal Revenue Service.''.

SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE ORDERS.

    Section 7811(a) (relating to taxpayer assistance orders) is 
amended--
            (1) by striking ``Upon application'' and inserting the 
        following:
            ``(1) In general.--Upon application'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraphs:
            ``(2) Issuance of taxpayer assistance orders.--For purposes 
        of determining whether to issue a taxpayer assistance order, 
        the Taxpayer Advocate shall consider the following factors, 
        among others:
                    ``(A) Whether there is an immediate threat of 
                adverse action.
                    ``(B) Whether there has been an unreasonable delay 
                in resolving taxpayer account problems.
                    ``(C) Whether the taxpayer will have to pay 
                significant costs (including fees for professional 
                representation) if relief is not granted.
                    ``(D) Whether the taxpayer will suffer irreparable 
                injury, or a long-term adverse impact, 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 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.''.

SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

    Section 7602 is amended by adding at the end the following new 
subsection:
    ``(e) 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. 344. LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF COMPUTER 
              SOURCE CODE.

    (a) In General.--Section 7602 is amended by adding at the end the 
following new subsection:
    ``(f) Limitation on Authority To Require Production of Computer 
Source Code.--
            ``(1) In general.--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 examine any tax-
        related computer source code.
            ``(2) Exception where information not otherwise available 
        to verify correctness of item on return.--Paragraph (1) shall 
        not apply to any portion of a tax-related computer 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 program and 
                        the associated data which, when executed, 
                        produces the output to prepare the return for 
                        the period involved, and
                    ``(B) the Secretary identifies with reasonable 
                specificity such portion as to be used to verify the 
                correctness of such item.
        The Secretary shall be treated as meeting the requirements of 
        subparagraphs (A) and (B) after the 90th day after the 
        Secretary makes a formal request to the taxpayer and the owner 
        or developer of the computer software program for the material 
        described in subparagraph (A)(ii) if such material is not 
        provided before the close of such 90th day.
            ``(3) Other exceptions.--Paragraph (1) shall not apply to--
                    ``(A) any inquiry into any offense connected with 
                the administration or enforcement of the internal 
                revenue laws, and
                    ``(B) any tax-related computer source code 
                developed by (or primarily for the benefit of) the 
                taxpayer or a related person (within the meaning of 
                section 267 or 707(b)) for internal use by the taxpayer 
                or such person and not for commercial distribution.
            ``(4) Tax-related computer source code.--For purposes of 
        this subsection, the term `tax-related computer source code' 
        means--
                    ``(A) the computer source code for any computer 
                software program for accounting, tax return preparation 
                or compliance, or tax planning, or
                    ``(B) design and development materials related to 
                such a software program (including program notes and 
                memoranda).
            ``(5) Right to contest summons.--The determination of 
        whether the requirements of subparagraphs (A) and (B) of 
        paragraph (2) are met or whether any exception under paragraph 
        (3) applies may be contested in any proceeding under section 
        7604.
            ``(6) Protection of trade secrets and other confidential 
        information.--In any court proceeding to enforce a summons for 
        any portion of a tax-related computer source code, the court 
        may issue any order necessary to prevent the disclosure of 
        trade secrets or other confidential information with respect to 
        such source code, including providing that any information be 
        placed under seal to be opened only as directed by the 
        court.''.
    (b) Application of Special Procedures for Third-Party Summonses.--
Paragraph (3) of section 7609(a) (defining third-party recordkeeper) 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 tax-related 
                computer source code (as defined in section 
                7602(f)(4)).
        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 
        7602(f)(2)(A)(ii) to which such source code relates.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to summonses issued more than 90 days after the date of the 
enactment of this Act.

SEC. 345. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF LIMITATIONS 
              BY AGREEMENT.

    (a) In General.--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'',
            (2) by moving the text 2 ems to the right, and
            (3) 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, on each occasion when the 
                taxpayer is requested to provide such consent.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to requests to extend the period of limitations made after the 
date of the enactment of this Act.

SEC. 346. OFFERS-IN-COMPROMISE.

    (a) Allowances For Basic Living Expenses.--Section 7122 (relating 
to offers-in-compromise) is amended by adding at the end the following 
new subsection:
    ``(c) Allowances For Basic Living Expenses.--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) 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 
        agreement of the advantages of promptly notifying the Internal 
        Revenue Service of any change of address or marital status, and
            (2) provide notice to taxpayers that in the case of a 
        compromise agreement terminated due to the actions of 1 spouse 
        or former spouse, the Internal Revenue Service will, upon 
        application, reinstate such agreement with the spouse or former 
        spouse who remains in compliance with such agreement.

SEC. 347. 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. 348. 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. 349. 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.

                  Subtitle F--Disclosures to Taxpayers

SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

    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.

SEC. 352. 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. 353. 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, the Committee on Finance of the 
Senate, and the Joint Committee on Taxation on the same day.

SEC. 354. 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 appeals process and the collection process with respect to such 
proposed deficiency.

                Subtitle G--Low Income Taxpayer Clinics

SEC. 361. LOW INCOME TAXPAYER CLINICS.

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

``SEC. 7525. 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.
    ``(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 that--
                            ``(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, or
                            ``(II) operates programs to inform 
                        individuals for whom English is a second 
                        language about their rights and 
                        responsibilities under this title.
                    ``(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 
                school in which students represent low income taxpayers 
                in controversies arising under this title, and
                    ``(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.
            ``(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 $3,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(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.
            ``(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 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. 7525. 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. 371. 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 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) even if the full amount of 
        such liability has not been paid.
            ``(2) Estates to which subsection applies.--This subsection 
        shall apply to any estate if, as of the date the action is 
        filed--
                    ``(A) an election under section 6166 is in effect 
                with respect to such estate,
                    ``(B) no portion of the installments payable under 
                such section have been accelerated, and
                    ``(C) all installments the due date for which is on 
                or before the date the action is filed have been paid.
            ``(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. 372. 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. 373. 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. 374. 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. 375. 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. 376. LIMITATION ON 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.--No addition to the tax 
shall be imposed under paragraph (2) or (3) of subsection (a) with 
respect to the tax liability of an individual for any month during 
which an installment agreement under section 6159 is in effect for the 
payment of such tax to the extent that imposing an addition to the tax 
under such paragraph for such month would result in the aggregate 
number of percentage points of such addition to the tax exceeding 
9.5.''.
    (b) Effective Date.--The amendment made by this section shall apply 
for purposes of determining additions to the tax for months beginning 
after the date of the enactment of this Act.

                          Subtitle I--Studies

SEC. 381. PENALTY ADMINISTRATION.

    The Joint Committee on Taxation shall conduct a study--
            (1) reviewing the administration and implementation by the 
        Internal Revenue Service of the penalty reform provisions of 
        the Omnibus Budget Reconciliation Act of 1989, and
            (2) making any legislative and administrative 
        recommendations it deems appropriate to simplify penalty 
        administration and reduce taxpayer burden.
Such study 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 enactment of this Act.

SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMATION.

    The Joint Committee on Taxation shall conduct a study of the scope 
and use of provisions regarding taxpayer confidentiality, and shall 
report the findings of such study, together with such recommendations 
as it deems appropriate, to the Congress not later than one year after 
the date of the enactment of this Act. Such study shall examine the 
present protections for taxpayer privacy, the need for third parties to 
use tax return information, and the ability to achieve greater levels 
of voluntary compliance by allowing the public to know who is legally 
required to file tax returns, but does not file tax returns.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

SEC. 401. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON TAXATION.

    (a) In General.--Section 8021 (relating to the powers of the Joint 
Committee on Taxation) is amended by adding at the end the following 
new subsections:
    ``(e) Investigations.--The Joint Committee shall review all 
requests (other than requests by the chairman or ranking member of a 
Committee or Subcommittee) for investigations of the Internal Revenue 
Service by the General Accounting Office, and approve such requests 
when appropriate, with a view towards eliminating overlapping 
investigations, ensuring that the General Accounting Office has the 
capacity to handle the investigation, and ensuring that investigations 
focus on areas of primary importance to tax administration.
    ``(f) Relating to Joint Hearings.--
            ``(1) In general.--The Chief of Staff, and such other staff 
        as are appointed pursuant to section 8004, shall provide such 
        assistance as is required for joint hearings described in 
        paragraph (2).
            ``(2) Joint hearings.--On or before April 1 of each 
        calendar year after 1997, there shall be a joint hearing of two 
        members of the majority and one member of the minority from 
        each of the Committees on Finance, Appropriations, and 
        Government Affairs of the Senate, and the Committees on Ways 
        and Means, Appropriations, and Government Reform and Oversight 
        of the House of Representatives, to review the strategic plans 
        and budget for the Internal Revenue Service. After the 
        conclusion of the annual filing season, there shall be a second 
        annual joint hearing to review the other matters outlined in 
        section 8022(3)(C).''.
    (b) Effective Dates.--
            (1) Subsection (e) of section 8021 of the Internal Revenue 
        Code of 1986, as added by subsection (a) of this section, shall 
        apply to requests made after the date of enactment of this Act.
            (2) Subsection (f) of section 8021 of the Internal Revenue 
        Code of 1986, as added by subsection (a) of this section, shall 
        take effect on the date of the enactment of this Act.

SEC. 402. COORDINATED OVERSIGHT REPORTS.

    (a) In General.--Paragraph (3) of section 8022 (relating to the 
duties of the Joint Committee on Taxation) is amended to read as 
follows:
            ``(3) Reports.--
                    ``(A) To report, from time to time, to the 
                Committee on Finance and the Committee on Ways and 
                Means, and, in its discretion, to the Senate or House 
                of Representatives, or both, the results of its 
                investigations, together with such recommendations as 
                it may deem advisable.
                    ``(B) To report, annually, to the Committee on 
                Finance and the Committee on Ways and Means on the 
                overall state of the Federal tax system, together with 
                recommendations with respect to possible simplification 
                proposals and other matters relating to the 
                administration of the Federal tax system as it may deem 
                advisable.
                    ``(C) To report, annually, to the Committees on 
                Finance, Appropriations, and Government Affairs of the 
                Senate, and to the Committees on Ways and Means, 
                Appropriations, and Government Reform and Oversight of 
                the House of Representatives, with respect to--
                            ``(i) strategic and business plans for the 
                        Internal Revenue Service;
                            ``(ii) progress of the Internal Revenue 
                        Service in meeting its objectives;
                            ``(iii) the budget for the Internal Revenue 
                        Service and whether it supports its objectives;
                            ``(iv) progress of the Internal Revenue 
                        Service in improving taxpayer service and 
                        compliance;
                            ``(v) progress of the Internal Revenue 
                        Service on technology modernization; and
                            ``(vi) the annual filing season.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                           Subtitle B--Budget

SEC. 411. FUNDING FOR CENTURY DATE CHANGE.

    It is the sense of Congress that the Internal Revenue Service 
efforts to resolve the century date change computing problems should be 
funded fully to provide for certain resolution of such problems.

SEC. 412. FINANCIAL MANAGEMENT ADVISORY GROUP.

    The Commissioner shall convene a financial management advisory 
group consisting of individuals with expertise in governmental 
accounting and auditing from both the private sector and the Government 
to advise the Commissioner on financial management issues, including--
            (1) the continued partnership between the Internal Revenue 
        Service and the General Accounting Office;
            (2) the financial accounting aspects of the Internal 
        Revenue Service's system modernization;
            (3) the necessity and utility of year-round auditing; and
            (4) the Commissioner's plans for improving its financial 
        management system.

                     Subtitle C--Tax Law Complexity

SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.

    It is the sense of Congress that the Internal Revenue Service 
should provide the Congress with an independent view of tax 
administration, and that during the legislative process, the tax 
writing committees of the Congress should hear from front-line 
technical experts at the Internal Revenue Service with respect to the 
administrability of pending amendments to the Internal Revenue Code of 
1986.

SEC. 422. TAX COMPLEXITY ANALYSIS.

    (a) Requiring Analysis To Accompany Certain Legislation.--
            (1) In general.--Chapter 92 (relating to powers and duties 
        of the Joint Committee on Taxation) is amended by adding at the 
        end the following new section:

``SEC. 8024. TAX COMPLEXITY ANALYSIS.

    ``(a) In General.--If--
            ``(1) a bill or joint resolution is reported by the 
        Committee on Finance of the Senate, the Committee on Ways and 
        Means of the House of Representatives, or any committee of 
        conference, and
            ``(2) such legislation includes any provision amending the 
        Internal Revenue Code of 1986,
the report for such legislation shall contain a Tax Complexity Analysis 
unless the committee involved causes to have the Tax Complexity 
Analysis printed in the Congressional Record prior to the consideration 
of the legislation in the House of Representatives or the Senate (as 
the case may be).
    ``(b) Legislation Subject to Point of Order.--It shall not be in 
order in the Senate to consider any bill or joint resolution described 
in subsection (a) required to be accompanied by a Tax Complexity 
Analysis that does not contain a Tax Complexity Analysis.
    ``(c) Responsibilities of the Commissioner.--The Commissioner shall 
provide the Joint Committee on Taxation with such information as is 
necessary to prepare Tax Complexity Analyses.
    ``(d) Tax Complexity Analysis Defined.--For purposes of this 
section, the term `Tax Complexity Analysis' means, with respect to a 
bill or joint resolution, a report which is prepared by the Joint 
Committee on Taxation and which identifies the provisions of the 
legislation adding significant complexity or providing significant 
simplification (as determined by the Joint Committee) and includes the 
basis for such determination.''.
            (2) Clerical amendment.--The table of sections for chapter 
        92 is amended by adding at the end the following new item:

                              ``Sec. 8024. Tax complexity analysis.''.
    (b) Legislation Subject to Point of Order in House of 
Representatives.--
            (1) Legislation reported by committee on ways and means.--
        Clause 2(l) of rule XI of the Rules of the House of 
        Representatives is amended by adding at the end the following 
        new subparagraph:
    ``(8) The report of the Committee on Ways and Means on any bill or 
joint resolution containing any provision amending the Internal Revenue 
Code of 1986 shall include a Tax Complexity Analysis prepared by the 
Joint Committee on Taxation in accordance with section 8024 of the 
Internal Revenue Code of 1986 unless the Committee on Ways and Means 
causes to have such Analysis printed in the Congressional Record prior 
to the consideration of the bill or joint resolution.''.
            (2) Conference reports.--Rule XXVIII of the Rules of the 
        House of Representatives is amended by adding at the end the 
        following new clause:
    ``7. It shall not be in order to consider the report of a committee 
of conference which contains any provision amending the Internal 
Revenue Code of 1986 unless--
            ``(a) the accompanying joint explanatory statement contains 
        a Tax Complexity Analysis prepared by the Joint Committee on 
        Taxation in accordance with section 8024 of the Internal 
        Revenue Code of 1986, or
            ``(b) such Analysis is printed in the Congressional Record 
        prior to the consideration of the report.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to legislation considered on or after January 1, 1998.

     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION.

    (a) In General.--Subsection (a) of section 404 is amended by adding 
at the end the following new paragraph:
            ``(11) Determinations relating to deferred compensation.--
                    ``(A) In general.--For purposes of determining 
                under this section--
                            ``(i) whether compensation of an employee 
                        is deferred compensation, and
                            ``(ii) 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) Exception.--Subparagraph (A) shall not apply 
                to severance pay.''.
    (b) Sick Leave Pay Treated Like Vacation Pay.--Paragraph (5) of 
section 404(a) is amended by inserting ``or sick leave pay'' after 
``vacation pay''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after October 8, 1997.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by this section to change its method of 
        accounting for its first taxable year ending after October 8, 
        1997--
                    (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.

            TITLE VI--TAX TECHNICAL CORRECTIONS ACT OF 1997

SEC. 601. SHORT TITLE.

    This title may be cited as the ``Tax Technical Corrections Act of 
1997''.

SEC. 602. 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. 603. 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 for the taxable 
        year, the credit otherwise allowable under this section shall 
        be increased by the lesser of--
                    ``(A) the credit which would be allowed under 
                section 24 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 subpart A (without regard to this 
                subsection) would be reduced if the limitation imposed 
                by section 26(a) were reduced by the excess (if any) 
                of--
                            ``(i) the credit allowed by this section 
                        (without regard to this subsection) for the 
                        taxable year, over
                            ``(ii) the taxpayer's social security taxes 
                        (as defined in section 24(d)) for the taxable 
                        year.
        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.--
                    ``(A) In general.--The amount of the credit under 
                this subsection shall reduce the amount of the credit 
                otherwise allowable under section 24, but the amount of 
                the credit under this subsection (and such reduction) 
                shall not otherwise be taken into account in 
                determining the amount of any other credit allowable 
                under this part.
                    ``(B) Treatment of credit under section 24(d).--For 
                purposes of this subsection, the credit determined 
                under section 24(d) shall be treated as not allowed 
                under section 24.''.

SEC. 604. 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, any person 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) 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''.
    (c) Amendments Related to Section 213 of 1997 Act.--
            (1)(A) Section 530(b)(1)(E) of the 1986 Code (defining 
        education individual retirement account) is amended to read as 
        follows:
                    ``(E) 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 to 
                the estate of such beneficiary.''.
            (B) 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.''.
            (2)(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.''.
            (3) 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''.
            (4) 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''.
            (5) Subparagraph (A) of section 4973(e)(1) of the 1986 Code 
        is amended by inserting before the comma ``(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)''.
    (d) Amendment Related to Section 224 of 1997 Act.--Section 
170(e)(6)(F) of the 1986 Code (relating to termination) is amended by 
striking ``1999'' and inserting ``2000''.
    (e) 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))''.
    (f) 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''.

SEC. 605. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.

    (a) Amendments Related to Section 301 of 1997 Act.--Section 219(g) 
of the 1986 Code is amended--
            (1) by inserting ``or the individual's spouse'' after 
        ``individual'' in paragraph (1), and
            (2) 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.''.
    (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), and
                    (B) by striking ``and the deduction under section 
                219 shall be taken into account'' in subparagraph 
                (C)(i).
            (3) 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 before the 
                exclusion date for the Roth IRA.
                    ``(C) Exclusion date.--For purposes of this 
                section, the exclusion date for any Roth IRA is the 
                first day of the taxable year immediately following the 
                5-taxable year period beginning with--
                            ``(i) the first taxable year for which a 
                        contribution to any Roth IRA maintained for the 
                        benefit of the individual was made, or
                            ``(ii) in the case of a Roth IRA to which 1 
                        or more qualified rollover contributions were 
                        made--
                                    ``(I) from an individual retirement 
                                plan other than a Roth IRA, or
                                    ``(II) from another Roth IRA to the 
                                extent such contributions are properly 
                                allocable to contributions described in 
                                subclause (I),
                        the most recent taxable year for which any such 
                        qualified rollover contribution was made.''.
            (4) Section 408A(d)(3) of the 1986 Code (relating to 
        rollovers from IRAs other than Roth IRAs) is amended by adding 
        at the end the following:
                    ``(F) Special rule for applying section 72.--
                            ``(i) In general.--If--
                                    ``(I) any distribution from a Roth 
                                IRA is made before the exclusion date, 
                                and
                                    ``(II) any portion of such 
                                distribution is properly allocable to a 
                                qualified rollover contribution 
                                described in paragraph (2)(C)(ii),
                        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 includible in 
                        gross income under subparagraph (A)(i) by 
                        reason of the qualified rollover contribution.
                    ``(G) 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) 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 Roth IRA to which such 
                                qualified rollover contribution is 
                                properly allocable, the spouse may 
                                elect to include the remaining amounts 
                                described in subclause (I) 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.
                            ``(ii) Additional tax for early 
                        distribution.--
                                    ``(I) In general.--If any 
                                distribution from a Roth IRA is made 
                                before the exclusion date, and any 
                                portion of such distribution is 
                                properly allocable to such qualified 
                                rollover contribution, the 
                                distributee's tax under this chapter 
                                for the taxable year in which the 
                                amount is received shall be increased 
                                by 10 percent of the amount of such 
                                portion not in excess of the amount 
                                includible in gross income under 
                                subparagraph (A)(i) by reason of such 
                                qualified rollover contribution.
                                    ``(II) Treatment of tax.--For 
                                purposes of this title, any tax imposed 
                                by subclause (I) shall be treated as a 
                                tax imposed by section 72(t) and shall 
                                be in addition to any other tax imposed 
                                by such section.''.
            (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--
                            ``(i) Roth IRAs and other individual 
                        retirement plans,
                            ``(ii) Roth IRAs described in paragraph 
                        (2)(C)(ii) and Roth IRAs not so described, and
                            ``(iii) Roth IRAs described in paragraph 
                        (2)(C)(ii) with different exclusion dates.
                    ``(B) Ordering rules.--For purposes of applying 
                section 72 to any distribution from a Roth IRA which is 
                not a qualified distribution, 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) Qualified rollover 
                                contributions to the extent includible 
                                in gross income in the manner described 
                                in paragraph (3)(A)(iii).
                                    ``(II) Qualified rollover 
                                contributions not described in 
                                subclause (I) to the extent includible 
                                in gross income under paragraph (3)(A).
                                    ``(III) Contributions not described 
                                in subclause (I) or (II).
                Such rules shall also apply in determining the 
                character of qualified rollover contributions from one 
                Roth IRA to another Roth IRA.''.
            (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.
                    ``(C) Due date.--For purposes of this paragraph, 
                the due date for any taxable year is the last date for 
                filing the return of tax for such taxable year 
                (including extensions).''.
            (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 302(b) of the 1997 Act is amended by striking 
        ``Section 4973(b)'' and inserting ``Section 4973''.
            (8) 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, 
except as provided by the Secretary, the term `individual retirement 
plan' shall not include a simplified employee pension or a simple 
retirement account.''.
    (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) of the 1986 Code is amended by adding 
        at the end the following:
            ``(11) Denial of rollover treatment for transfers of 
        hardship distributions to individual retirement plans.--This 
        subsection shall not apply to the transfer of any hardship 
        distribution described in section 401(k)(2)(B)(i)(IV) from a 
        qualified cash or deferred arrangement to an eligible 
        retirement plan described in clause (i) or (ii) of paragraph 
        (8)(B).''.
            (B) The amendment made by this paragraph shall apply to 
        distributions made after December 31, 1997.
    (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 sales and options.--Rules 
                        similar to the rules of subsections (b) and (d) 
                        of section 1233 shall apply to substantially 
                        identical property, and section 1092(f) with 
                        respect to stock, held for more than 1 year but 
                        not more than 18 months.
                            ``(ii) 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 amount 
        of long-term capital gain which would be computed for the 
        taxable year if only gains from the sale or exchange of 
        property held by the taxpayer for more than 5 years were taken 
        into account. 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) In general.--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) 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.''.
            (2) Section 312(d)(2) of the 1997 Act (relating to sales 
        before date of 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 or estates.''.

SEC. 606. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.

    (a) Amendments Related to Section 501 of 1997 Act.--
            (1) Subsection (c) of section 2631 of the 1986 Code is 
        amended by striking ``an individual who dies'' and inserting 
        ``a generation-skipping transfer''.
            (2) 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) Subsection (a) of section 2033A of the 1986 Code is 
        amended to read as follows:
    ``(a) Exclusion.--
            ``(1) In general.--In the case of an estate of a decedent 
        to which this section applies, the value of the gross estate 
        shall not include the lesser of--
                    ``(A) the adjusted value of the qualified family-
                owned business interests of the decedent otherwise 
                includible in the estate, or
                    ``(B) the exclusion limitation with respect to such 
                estate.
            ``(2) Exclusion limitation.--
                    ``(A) In general.--The exclusion limitation with 
                respect to any estate is the amount of reduction in the 
                tentative tax base with respect to such estate which 
                would be required in order to reduce the tax imposed by 
                section 2001(b) (determined without regard to this 
                section) by an amount equal to the maximum credit 
                equivalent benefit.
                    ``(B) Maximum credit equivalent benefit.--For 
                purposes of subparagraph (A), the term `maximum credit 
                equivalent benefit' means the excess of--
                            ``(i) the amount by which the tentative tax 
                        imposed by section 2001(b) (determined without 
                        regard to this section) would be reduced if the 
                        tentative tax base were reduced by $675,000, 
                        over
                            ``(ii) the amount by which the applicable 
                        credit amount under section 2010(c) with 
                        respect to such estate exceeds such applicable 
                        credit amount in effect for 1998.
                    ``(C) Tentative tax base.--For purposes of this 
                paragraph, the term `tentative tax base' means the 
                amount with respect to which the tax imposed by section 
                2001(b) would be computed without regard to this 
                section.''.
            (2) Section 2033A(b)(3) of the 1986 Code 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.''.
    (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) Subsection (c) of section 2504 of the 1986 Code is 
        amended by striking ``was assessed or paid'' and inserting 
        ``was finally determined for purposes of this chapter''.
            (2) Paragraph (1) of section 506(e) of the 1997 Act is 
        amended by striking ``and (c)'' and inserting ``, (c), and 
        (d)''.

SEC. 607. 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) Amendments Related to Section 1400B of 1986 Code.--
            (1) Section 1400B(d)(2) of the 1986 Code is amended by 
        inserting ``as determined on the basis of the 1990 census'' 
        after ``percent''.
            (2) Section 1400B(b) of the 1986 Code is amended by 
        redesignating paragraphs (6) and (7) as paragraphs (5) and (6), 
        respectively.
    (c) Amendments Related to Section 1400C of 1986 Code.--
            (1) 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.''.
            (2) 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''.
            (3) 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.''.
            (4) 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.''.
            (5) Subsection (c) of section 23 of the 1986 Code is 
        amended by inserting ``and section 1400C'' after ``other than 
        this section''.
            (6) Subparagraph (C) of section 25(e)(1) of the 1986 Code 
        is amended by striking ``section 23'' and inserting ``sections 
        23 and 1400C''.

SEC. 608. 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 otherwise 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) 1.77 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 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.''.

SEC. 609. 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 
                clauses (i) and (ii) of 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) 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.''.
    (c) 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.''.
    (d) 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''.
    (e) 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.''.
    (f) 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''.
    (g) 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)''.
    (h) 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''.
    (i) 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) 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)).''.
            (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).''.
    (j) Amendment Related to Section 1085 of 1997 Act.--Paragraph (5) 
of section 32(c) of the 1986 Code is amended--
            (1) by inserting before the period at the end of 
        subparagraph (A) ``and increased by the amounts described in 
        subparagraph (C)'',
            (2) by adding ``or'' at the end of clause (iii) of 
        subparagraph (B), and
            (3) 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 section 402(c), 
                403(a)(4), 403(b), 408(d) (3), (4), or (5), or 
                457(e)(10).''.
    (k) 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''.
    (l) 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. 610. 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) Amendment Related to Section 1121 of 1997 Act.--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) Amendment Related to Section 1122 of 1997 Act.--Section 
672(f)(3)(B) of the 1986 Code is amended by striking ``section 1296'' 
and inserting ``section 1297''.
    (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) 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. 611. 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 heading for section 7431(g) of the 1986 Code is 
        amended by striking ``(8)'' 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), 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 1226 of 1997 Act.--Section 1226 of 
the 1997 Act is amended by striking ``ending on or'' and inserting 
``beginning''.
    (d) 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. 612. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.

    (a) Section 646 of the 1986 Code is redesignated as section 645.
    (b) 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''.
    (c) Paragraph (1) of section 2652(b) of the 1986 Code is amended by 
striking ``section 646'' and inserting ``section 645''.
    (d) Paragraph (3) of section 1(g) of the 1986 Code is amended by 
striking subparagraph (C) and by redesignating subparagraph (D) as 
subparagraph (C).
    (e) Section 641 of the 1986 Code is amended by striking subsection 
(c) and by redesignating subsection (d) as subsection (c).
    (f) Paragraph (4) of section 1361(e) of the 1986 Code is amended by 
striking ``section 641(d)'' and inserting ``section 641(c)''.
    (g) 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.

SEC. 613. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.

    (a) 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''.
    (b) 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''.

SEC. 614. 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) 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. 615. AMENDMENTS RELATED TO TITLE XVI.

    (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. 616. 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. 617. AMENDMENT RELATED TO TAX REFORM ACT OF 1984.

    (a) In General.--Paragraph (3) of section 136(c) of the Tax Reform 
Act of 1984 is amended by adding at the end the following flush 
sentence:
        ``The treatment under the preceding sentence shall apply to 
        each period after June 30, 1983, during which such members are 
        stapled entities, whether or not such members are stapled 
        entities for all periods after June 30, 1983.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the Tax Reform Act of 1984 as of the date 
of the enactment of such Act.

SEC. 618. 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. 619. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.

    (a)(1) Section 6421 of the 1986 Code is amended by redesignating 
subsections (j) and (k) as subsections (i) and (j), respectively.
    (2) Subsection (b) of section 34 of the 1986 Code is amended by 
striking ``section 6421(j)'' and inserting ``section 6421(i)''.
    (3) Subsections (a) and (b) of section 6421 of the 1986 Code are 
each amended by striking ``subsection (j)'' and inserting ``subsection 
(i)''.
    (b) 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)''.
    (c) Sections 4221(c) and 4222(d) of the 1986 Code are each amended 
by striking ``4053(a)(6)'' and inserting ``4053(6)''.
    (d) 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)''.
    (e) Paragraph (3) of section 6427(f) of the 1986 Code is amended by 
striking ``, (e),''.
    (f)(1) 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.
    (2) Paragraphs (1) and (2)(A) of section 6427(i) of the 1986 Code 
are each amended by striking ``(q)'' and inserting ``(o)''.
    (g) 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).''.
    (h)(1) 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).
    (2) Clause (ii) of such section is amended by striking ``gasoline, 
special fuels, and lubricating oil'' each place it appears and 
inserting ``fuel''.
    (i) The amendments made by this section shall take effect on the 
date of the enactment of this Act.

SEC. 620. 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.

            Passed the House of Representatives November 5, 1997.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.