[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 882 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 882

 To amend the Internal Revenue Code of 1986 to provide improvements in 
  tax administration and taxpayer safeguards, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 10, 2003

  Mr. Baucus (for himself and Mr. Grassley) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide improvements in 
  tax administration and taxpayer safeguards, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Tax Administration 
Good Government Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

Sec. 101. Waiver of user fee for installment agreements using automated 
                            withdrawals.
Sec. 102. Partial payment of tax liability in installment agreements.
Sec. 103. Termination of installment agreements.
Sec. 104. Office of Chief Counsel review of offers in compromise.
Sec. 105. Seven-day threshold on tolling of statute of limitations 
                            during National Taxpayer Advocate review.
Sec. 106. Increase in penalty for bad checks or money orders.
Sec. 107. Financial management service fees.
Sec. 108. Elimination of restriction on offsetting refunds from former 
                            residents.
                  Subtitle B--Processing and Personnel

Sec. 111. Explanation of statute of limitations and consequences of 
                            failure to file.
Sec. 112. Disclosure of tax information to facilitate combined 
                            employment tax reporting.
Sec. 113. Expansion of declaratory judgment remedy to tax-exempt 
                            organizations.
Sec. 114. Amendment to Treasury auction reforms.
Sec. 115. Revisions relating to termination of employment of Internal 
                            Revenue Service employees for misconduct.
Sec. 116. IRS Oversight Board approval of use of critical pay 
                            authority.
Sec. 117. Low-income taxpayer clinics.
Sec. 118. Enrolled agents.
Sec. 119. Establishment of disaster response team.
Sec. 120. Accelerated tax refunds.
Sec. 121. Study on clarifying record-keeping responsibilities.
Sec. 122. Streamline reporting process for National Taxpayer Advocate.
                      Subtitle C--Other Provisions

Sec. 131. Penalty on failure to report interests in foreign financial 
                            accounts.
Sec. 132. Repeal of personal holding company tax.
                TITLE II--REFORM OF PENALTY AND INTEREST

Sec. 201. Individual estimated tax.
Sec. 202. Corporate estimated tax.
Sec. 203. Increase in large corporation threshold for estimated tax 
                            payments.
Sec. 204. Abatement of interest.
Sec. 205. Deposits made to suspend running of interest on potential 
                            underpayments.
Sec. 206. Freeze of provision regarding suspension of interest where 
                            Secretary fails to contact taxpayer.
Sec. 207. Expansion of interest netting.
Sec. 208. Clarification of application of Federal tax deposit penalty.
Sec. 209. Frivolous tax submissions.
            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

Sec. 301. Jurisdiction of Tax Court over collection due process cases.
Sec. 302. Authority for special trial judges to hear and decide certain 
                            employment status cases.
Sec. 303. Confirmation of authority of Tax Court to apply doctrine of 
                            equitable recoupment.
Sec. 304. Tax Court filing fee in all cases commenced by filing 
                            petition.
Sec. 305. Amendments to appoint employees.
Sec. 306. Expanded use of Tax Court practice fee for pro se taxpayers.
             Subtitle B--Tax Court Pension and Compensation

Sec. 311. Annuities for survivors of Tax Court judges who are 
                            assassinated.
Sec. 312. Cost-of-living adjustments for Tax Court judicial survivor 
                            annuities.
Sec. 313. Life insurance coverage for Tax Court judges.
Sec. 314. Cost of life insurance coverage for Tax Court judges age 65 
                            or over.
Sec. 315. Modification of timing of lump-sum payment of judges' accrued 
                            annual leave.
Sec. 316. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 317. Exemption of teaching compensation of retired judges from 
                            limitation on outside earned income.
Sec. 318. General provisions relating to magistrate judges of the Tax 
                            Court.
Sec. 319. Annuities to surviving spouses and dependent children of 
                            magistrate judges of the Tax Court.
Sec. 320. Retirement and annuity program.
Sec. 321. Incumbent magistrate judges of the Tax Court.
Sec. 322. Provisions for recall.
Sec. 323. Effective date.
                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

Sec. 401. Clarification of definition of church tax inquiry.
Sec. 402. Collection activities with respect to joint return 
                            disclosable to either spouse based on oral 
                            request.
Sec. 403. Taxpayer representatives not subject to examination on sole 
                            basis of representation of taxpayers.
Sec. 404. Prohibition of disclosure of taxpayer identifying number with 
                            respect to disclosure of accepted offers-
                            in-compromise.
Sec. 405. Compliance by contractors and other agents with 
                            confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Civil damages for unauthorized inspection or disclosure.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to 
                            section 501(c) organizations.
Sec. 411. Treatment of public records.
Sec. 412. Investigative disclosures.
Sec. 413. TIN matching.
Sec. 414. Form 8300 disclosures.
Sec. 415. Technical amendment.
 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

Sec. 501. Simplification through elimination of inoperative provisions.

  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

SEC. 101. WAIVER OF USER FEE FOR INSTALLMENT AGREEMENTS USING AUTOMATED 
              WITHDRAWALS.

    (a) In General.--Section 6159 (relating to agreements for payment 
of tax liability in installments) is amended by redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following:
    ``(e) Waiver of User Fees for Installment Agreements Using 
Automated Withdrawals.--In the case of a taxpayer who enters into an 
installment agreement in which automated installment payments are 
agreed to, the Secretary shall waive the fee (if any) for entering into 
the installment agreement.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to agreements entered into on or after the date of the enactment 
of this Act.

SEC. 102. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT AGREEMENTS.

    (a) In General.--
            (1) Section 6159(a) (relating to authorization of 
        agreements) is amended--
                    (A) by striking ``satisfy liability for payment 
                of'' and inserting ``make payment on'', and
                    (B) by inserting ``full or partial'' after 
                ``facilitate''.
            (2) Section 6159(c) (relating to Secretary required to 
        enter into installment agreements in certain cases) is amended 
        in the matter preceding paragraph (1) by inserting ``full'' 
        before ``payment''.
    (b) Requirement To Review Partial Payment Agreements Every Two 
Years.--Section 6159, as amended by this Act, is amended by 
redesignating subsections (d), (e), and (f) as subsections (e), (f), 
and (g), respectively, and inserting after subsection (c) the following 
new subsection:
    ``(d) Secretary Required To Review Installment Agreements for 
Partial Collection Every Two Years.--In the case of an agreement 
entered into by the Secretary under subsection (a) for partial 
collection of a tax liability, the Secretary shall review the agreement 
at least once every 2 years.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to agreements entered into on or after the date of the enactment 
of this Act.

SEC. 103. TERMINATION OF INSTALLMENT AGREEMENTS.

    (a) In General.--Section 6159(b)(4) (relating to failure to pay an 
installment or any other tax liability when due or to provide requested 
financial information) is amended by striking ``or'' at the end of 
subparagraph (B), by redesignating subparagraph (C) as subparagraph 
(E), and by inserting after subparagraph (B) the following:
                    ``(C) to make a Federal tax deposit under section 
                6302 at the time such deposit is required to be made,
                    ``(D) to file a return of tax imposed under this 
                title by its due date (including extensions), or''.
    (b) Conforming Amendment.--Section 6159(b)(4) is amended by 
striking ``Failure to pay an installment or any other tax liability 
when due or to provide requested financial information'' and inserting 
``Failure to make payments or deposits or file returns when due or to 
provide requested financial information''.
    (c) Effective Date.--The amendments made by this section shall 
apply to failures occurring on or after the date of the enactment of 
this Act.

SEC. 104. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN COMPROMISE.

    (a) In General.--Section 7122(b) (relating to record) is amended by 
striking ``Whenever a compromise'' and all that follows through ``his 
delegate'' and inserting ``If the Secretary determines that an opinion 
of the General Counsel for the Department of the Treasury, or the 
Counsel's delegate, is required with respect to a compromise, there 
shall be placed on file in the office of the Secretary such opinion''.
    (b) Conforming Amendments.--Section 7122(b) is amended by striking 
the second and third sentences.
    (c) Effective Date.--The amendments made by this section shall 
apply to offers-in-compromise submitted or pending on or after the date 
of the enactment of this Act.

SEC. 105. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF LIMITATIONS 
              DURING NATIONAL TAXPAYER ADVOCATE REVIEW.

    (a) In General.--Section 7811(d)(1) (relating to suspension of 
running of period of limitation) is amended by inserting after 
``application,'' the following: ``but only if the date of such decision 
is at least 7 days after the date of the taxpayer's application''.
    (b) Effective Date.--The amendment made by this section shall apply 
to applications filed after the date of the enactment of this Act.

SEC. 106. INCREASE IN PENALTY FOR BAD CHECKS OR MONEY ORDERS.

    (a) In General.--Section 6657 (relating to bad checks) is amended--
            (1) by striking ``$750'' and inserting ``$1,250'', and
            (2) by striking ``$15'' and inserting ``$25''.
    (b) Effective Date.--The amendments made by this section apply to 
checks or money orders received after December 31, 2003.

SEC. 107. FINANCIAL MANAGEMENT SERVICE FEES.

    Notwithstanding any other provision of law, the Financial 
Management Service may charge the Internal Revenue Service, and the 
Internal Revenue Service may pay the Financial Management Service, a 
fee sufficient to cover the full cost of implementing a continuous levy 
program under subsection (h) of section 6331 of the Internal Revenue 
Code of 1986. Any such fee shall be based on actual levies made and 
shall be collected by the Financial Management Service by the retention 
of a portion of amounts collected by levy pursuant to that subsection. 
Amounts received by the Financial Management Service as fees under that 
subsection shall be deposited into the account of the Department of the 
Treasury under section 3711(g)(7) of title 31, United States Code, and 
shall be collected and accounted for in accordance with the provisions 
of that section. The amount credited against the taxpayer's liability 
on account of the continuous levy shall be the amount levied, without 
reduction for the amount paid to the Financial Management Service as a 
fee.

SEC. 108. ELIMINATION OF RESTRICTION ON OFFSETTING REFUNDS FROM FORMER 
              RESIDENTS.

    Section 6402(e) (relating to collection of past-due, legally 
enforceable State income tax obligations) is amended by striking 
paragraph (2) and by redesignating paragraphs (3), (4), (5), (6), and 
(7) as paragraphs (2), (3), (4), (5), and (6), respectively.

                  Subtitle B--Processing and Personnel

SEC. 111. EXPLANATION OF STATUTE OF LIMITATIONS AND CONSEQUENCES OF 
              FAILURE TO FILE.

    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), and any instructions booklet accompanying a general 
income tax return form for taxable years beginning after 2001 
(including forms 1040, 1040A, 1040EZ, and any similar or successor 
forms relating thereto), to provide for an explanation of--
            (1) the limitations imposed by section 6511 of the Internal 
        Revenue Code of 1986 on credits and refunds; and
            (2) the consequences under such section 6511 of the failure 
        to file a return of tax.

SEC. 112. DISCLOSURE OF TAX INFORMATION TO FACILITATE COMBINED 
              EMPLOYMENT TAX REPORTING.

    Section 6103(d)(5) is amended to read as follows:
            ``(5) Disclosure for combined employment tax reporting.--
        The Secretary may disclose taxpayer identity information and 
        signatures to any agency, body, or commission of any State for 
        the purpose of carrying out with such agency, body, or 
        commission a combined Federal and State employment tax 
        reporting program approved by the Secretary. 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. 113. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Paragraph (1) of section 7428(a) (relating to 
creation of remedy) is amended--
            (1) in subparagraph (B) by inserting after ``509(a))'' the 
        following: ``or as a private operating foundation (as defined 
        in section 4942(j)(3))''; and
            (2) by amending subparagraph (C) to read as follows:
                    ``(C) with respect to the initial qualification or 
                continuing qualification of an organization as an 
                organization described in section 501(c) (other than 
                paragraph (3)) or 501(d) which is exempt from tax under 
                section 501(a), or''.
    (b) Court Jurisdiction.--Subsection (a) of section 7428 is amended 
in the material following paragraph (2) by striking ``United States Tax 
Court, the United States Claims Court, or the district court of the 
United States for the District of Columbia'' and inserting the 
following: ``United States Tax Court (in the case of any such 
determination or failure) or the United States Claims Court or the 
district court of the United States for the District of Columbia (in 
the case of a determination or failure with respect to an issue 
referred to in subparagraph (A) or (B) of paragraph (1)),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to pleadings filed with respect to determinations (or requests 
for determinations) made after December 31, 2003.

SEC. 114. AMENDMENT TO TREASURY AUCTION REFORMS.

    (a) In General.--Clause (i) of section 202(c)(4)(B) of the 
Government Securities Act Amendments of 1993 (31 U.S.C. 3121 note) is 
amended by inserting before the semicolon ``(or, if earlier, at the 
time the Secretary releases the minutes of the meeting in accordance 
with paragraph (2))''.
    (b) Effective Date.--The amendment made by this section shall apply 
to meetings held after the date of the enactment of this Act.

SEC. 115. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF INTERNAL 
              REVENUE SERVICE EMPLOYEES FOR MISCONDUCT.

    (a) In General.--Subchapter A of chapter 80 (relating to 
application of internal revenue laws) is amended by inserting after 
section 7804 the following new section:

``SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

    ``(a) In General.--Subject to subsection (c), the Commissioner 
shall terminate the employment of any employee of the Internal Revenue 
Service if there is a final administrative or judicial determination 
that such employee committed any act or omission described under 
subsection (b) in the performance of the employee's official duties. 
Such termination shall be a removal for cause on charges of misconduct.
    ``(b) Acts or Omissions.--The acts or omissions described under 
this subsection are--
            ``(1) willful failure to obtain the required approval 
        signatures on documents authorizing the seizure of a taxpayer's 
        home, personal belongings, or business assets,
            ``(2) providing a false statement under oath with respect 
        to a material matter involving a taxpayer or taxpayer 
        representative,
            ``(3) with respect to a taxpayer or taxpayer 
        representative, the violation of--
                    ``(A) any right under the Constitution of the 
                United States, or
                    ``(B) any civil right established under--
                            ``(i) title VI or VII of the Civil Rights 
                        Act of 1964,
                            ``(ii) title IX of the Education Amendments 
                        of 1972,
                            ``(iii) the Age Discrimination in 
                        Employment Act of 1967,
                            ``(iv) the Age Discrimination Act of 1975,
                            ``(v) section 501 or 504 of the 
                        Rehabilitation Act of 1973, or
                            ``(vi) title I of the Americans with 
                        Disabilities Act of 1990,
            ``(4) falsifying or destroying documents to conceal 
        mistakes made by any employee with respect to a matter 
        involving a taxpayer or taxpayer representative,
            ``(5) assault or battery on a taxpayer or taxpayer 
        representative, but only if there is a criminal conviction, or 
        a final judgment by a court in a civil case, with respect to 
        the assault or battery,
            ``(6) violations of this title, Department of the Treasury 
        regulations, or policies of the Internal Revenue Service 
        (including the Internal Revenue Manual) for the purpose of 
        retaliating against, or harassing, a taxpayer or taxpayer 
        representative,
            ``(7) willful misuse of the provisions of section 6103 for 
        the purpose of concealing information from a congressional 
        inquiry,
            ``(8) willful failure to file any return of tax required 
        under this title on or before the date prescribed therefor 
        (including any extensions) when a tax is due and owing, unless 
        such failure is due to reasonable cause and not due to willful 
        neglect,
            ``(9) willful understatement of Federal tax liability, 
        unless such understatement is due to reasonable cause and not 
        due to willful neglect, and
            ``(10) threatening to audit a taxpayer for the purpose of 
        extracting personal gain or benefit.
    ``(c) Determinations of Commissioner.--
            ``(1) In general.--The Commissioner may take a personnel 
        action other than termination for an act or omission described 
        under subsection (b).
            ``(2) Discretion.--The exercise of authority under 
        paragraph (1) shall be at the sole discretion of the 
        Commissioner and may not be delegated to any other officer. The 
        Commissioner, in the Commissioner's sole discretion, may 
        establish a procedure which will be used to determine whether 
        an individual should be referred to the Commissioner for a 
        determination by the Commissioner under paragraph (1).
            ``(3) No appeal.--Any determination of the Commissioner 
        under this subsection may not be appealed in any administrative 
        or judicial proceeding.
    ``(d) Definition.--For the purposes of the provisions described in 
clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a 
program or activity regarding Federal financial assistance or an 
education program or activity receiving Federal financial assistance 
shall include any program or activity conducted by the Internal Revenue 
Service for a taxpayer.''.
    (b) Clerical Amendment.--The table of sections for chapter 80 is 
amended by inserting after the item relating to section 7804 the 
following new item:

                              ``Sec. 7804A. Termination of employment 
                                        for misconduct.''.
    (c) Repeal of Superseded Section.--Section 1203 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-
206; 112 Stat. 720) is repealed.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 116. IRS OVERSIGHT BOARD APPROVAL OF USE OF CRITICAL PAY 
              AUTHORITY.

    (a) In General.--Section 7802(d)(3) (relating to management) is 
amended by striking ``and'' at the end of subparagraph (B), by striking 
the period at the end of subparagraph (C) and inserting ``; and'', and 
by adding at the end the following new subparagraph:
                    ``(D) review and approve the Commissioner's use of 
                critical pay authority under section 9502 of title 5, 
                United States Code, and streamlined critical pay 
                authority under section 9503 of such title.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to personnel hired after the date of the enactment of this Act.

SEC. 117. LOW-INCOME TAXPAYER CLINICS.

    (a) Grants for Return Preparation Clinics.--
            (1) In general.--Chapter 77 (relating to miscellaneous 
        provisions) is amended by inserting after section 7526 the 
        following new section:

``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME TAXPAYERS.

    ``(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 return preparation 
clinics.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified return preparation clinic.--
                    ``(A) In general.--The term `qualified return 
                preparation clinic' means a clinic which--
                            ``(i) does not charge more than a nominal 
                        fee for its services (except for reimbursement 
                        of actual costs incurred), and
                            ``(ii) operates programs which assist low-
                        income taxpayers in preparing and filing their 
                        Federal income tax returns, including schedules 
                        reporting sole proprietorship or farm income.
                    ``(B) Assistance to low-income taxpayers.--A clinic 
                is treated as assisting low-income taxpayers under 
                subparagraph (A)(ii) if at least 90 percent of the 
                taxpayers assisted 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.
            ``(2) Clinic.--The term `clinic' includes--
                    ``(A) a clinical program at an eligible educational 
                institution (as defined in section 529(e)(5)) which 
                satisfies the requirements of paragraph (1) through 
                student assistance of taxpayers in return preparation 
                and filing, and
                    ``(B) an organization described in section 501(c) 
                and exempt from tax under section 501(a) which 
                satisfies the requirements of paragraph (1).
    ``(c) Special Rules and Limitations.--
            ``(1) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $10,000,000 per year (exclusive of costs of administering 
        the program) to grants under this section.
            ``(2) Other applicable rules.--Rules similar to the rules 
        under paragraphs (2) through (7) of section 7526(c) shall apply 
        with respect to the awarding of grants to qualified return 
        preparation clinics.''.
            (2) Clerical amendment.--The table of sections for chapter 
        77 is amended by inserting after the item relating to section 
        7526 the following new item:

                              ``Sec. 7526A. Return preparation clinics 
                                        for low-income taxpayers.''.
    (b) Grants for Taxpayer Representation and Assistance Clinics.--
            (1) Increase in authorized grants.--Section 7526(c)(1) 
        (relating to aggregate limitation) is amended by striking 
        ``$6,000,000'' and inserting ``$10,000,000''.
            (2) Use of grants for overhead expenses prohibited.--
                    (A) In general.--Section 7526(c) (relating to 
                special rules and limitations) is amended by adding at 
                the end the following new paragraph:
            ``(6) Use of grants for overhead expenses prohibited.--No 
        grant made under this section may be used for the overhead 
        expenses of any clinic or of any institution sponsoring such 
        clinic.''.
                    (B) Conforming amendments.--Section 7526(c)(5) is 
                amended--
                            (i) by inserting ``qualified'' before 
                        ``low-income'', and
                            (ii) by striking the last sentence.
            (3) Promotion of Clinics.--Section 7526(c), as amended by 
        paragraph (2), is amended by adding at the end the following 
        new paragraph:
            ``(7) Promotion of clinics.--The Secretary is authorized to 
        promote the benefits of and encourage the use of low-income 
        taxpayer clinics through the use of mass communications, 
        referrals, and other means.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to grants made after the date of the enactment of this Act.

SEC. 118. ENROLLED AGENTS.

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

``SEC. 7527. ENROLLED AGENTS.

    ``(a) In General.--The Secretary may prescribe such regulations as 
may be necessary to regulate the conduct of enrolled agents in regards 
to their practice before the Internal Revenue Service.
    ``(b) Use of Credentials.--Any enrolled agents properly licensed to 
practice as required under rules promulgated under section (a) herein 
shall be allowed to use the credentials or designation as `enrolled 
agent', `EA', or `E.A.'.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

                              ``Sec. 7527. Enrolled agents.''.
    (c) Prior Regulations.--Nothing in the amendments made by this 
section shall be construed to have any effect on part 10 of title 31, 
Code of Federal Regulations, or any other Federal rule or regulation 
issued before the date of the enactment of this Act.

SEC. 119. ESTABLISHMENT OF DISASTER RESPONSE TEAM.

    (a) In General.--Section 7508A (relating to authority to postpone 
certain tax-related deadlines by reason of presidentially declared 
disaster) is amended by adding at the end the following new subsection:
    ``(c) Duties of Disaster Response Team.--
            ``(1) Response to disasters.--The Secretary shall--
                    ``(A) establish as a permanent office in the 
                national office of the Internal Revenue Service a 
                disaster response team composed of members, who in 
                addition to their regular responsibilities, shall 
                assist taxpayers in clarifying and resolving Federal 
                tax matters associated with or resulting from any 
                Presidentially declared disaster (as so defined), and
                    ``(B) respond to requests by such taxpayers for 
                filing extensions and technical guidance expeditiously.
            ``(2) Personnel of disaster response team.--The disaster 
        response team shall be composed of--
                    ``(A) personnel from the Office of the Taxpayer 
                Advocate, and
                    ``(B) personnel from the national office of the 
                Internal Revenue Service with expertise in individual, 
                corporate, and small business tax matters.
            ``(3) Coordination with fema.--The disaster response team 
        shall operate in coordination with the Director of the Federal 
        Emergency Management Agency.
            ``(4) Toll-free telephone number.--The Commissioner of 
        Internal Revenue shall establish and maintain a toll-free 
        telephone number for taxpayers to use to receive assistance 
        from the disaster response team.
            ``(5) Internet webpage site.--The Commissioner of Internal 
        Revenue shall establish and maintain a site on the Internet 
        webpage of the Internal Revenue Service for information for 
        taxpayers described in paragraph (1)(A).''.
    (b) FEMA.--The Director of the Federal Emergency Management Agency 
shall work in coordination with the disaster response team established 
under section 7804(c)(1)(A) of the Internal Revenue Code of 1986 to 
provide timely assistance to disaster victims described in such 
section, including--
            (1) informing the disaster response team regarding any tax-
        related problems or issues arising in connection with the 
        disaster,
            (2) providing the toll-free telephone number established 
        and maintained by the Internal Revenue Service for the disaster 
        victims in all materials provided to such victims, and
            (3) providing the information described in section 
        7804(c)(5) of such Code on the Internet webpage of the Federal 
        Emergency Management Agency or through a link on such webpage 
        to the Internet webpage site of the Internal Revenue Service 
        described in such section.
    (c) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 120. ACCELERATED TAX REFUNDS.

    (a) Study.--The Secretary of the Treasury shall study the 
implementation of an accelerated refund program for taxpayers who--
            (1) maintain the same filing characteristics from year to 
        year, and
            (2) elect the direct deposit option for any refund under 
        the program.
    (b) Report.--Not later than the date which is 1 year after the date 
of the enactment of this Act, the Secretary of the Treasury shall 
transmit a report of the study described in subsection (a), including 
recommendations, to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.

SEC. 121. STUDY ON CLARIFYING RECORD-KEEPING RESPONSIBILITIES.

    (a) Study.--The Secretary of the Treasury shall study--
            (1) the scope of the records required to be maintained by 
        taxpayers under section 6001 of the Internal Revenue Code of 
        1986,
            (2) the utility of requiring taxpayers to maintain all 
        records indefinitely,
            (3) such requirement given the necessity to upgrade 
        technological storage for outdated records,
            (4) the number of negotiated records retention agreements 
        requested by taxpayers and the number entered into by the 
        Internal Revenue Service, and
            (5) proposals regarding taxpayer record-keeping.
    (b) Report.--Not later than the date which is 1 year after the date 
of the enactment of this Act, the Secretary of the Treasury shall 
transmit a report of the study described in subsection (a), including 
recommendations, to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.

SEC. 122. STREAMLINE REPORTING PROCESS FOR NATIONAL TAXPAYER ADVOCATE.

    (a) One Annual Report.--Subparagraph (B) of section 7803(c)(2) 
(relating to functions of Office) is amended--
            (1) by striking all matter preceding subclause (I) of 
        clause (ii) and inserting the following:
                    ``(B) Annual report.--
                            ``(i) In general.--Not later than December 
                        31 of each calendar year, the National Taxpayer 
                        Advocate shall report to the Committee of Ways 
                        and Means of the House of Representatives and 
                        the Committee on Finance of the Senate on the 
                        objectives of the Office of the Taxpayer of 
                        Advocate for the fiscal year beginning in such 
                        calendar year and the activities of such Office 
                        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--'',
            (2) by striking ``clause (ii)'' in clause (iv) and 
        inserting ``clause (i)'', and
            (3) by redesignating clauses (iii) and (iv) as clauses (ii) 
        and (iii), respectively.
    (b) Effective Date.--The amendments made by this section shall 
apply to reports in calendar year 2003 and thereafter.

                      Subtitle C--Other Provisions

SEC. 131. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN FINANCIAL 
              ACCOUNTS.

    (a) In General.--Section 5321(a)(5) of title 31, United States 
Code, is amended to read as follows:
            ``(5) Foreign financial agency transaction violation.--
                    ``(A) Penalty authorized.--The Secretary of the 
                Treasury may impose a civil money penalty on any person 
                who violates, or causes any violation of, any provision 
                of section 5314.
                    ``(B) Amount of penalty.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (C), the amount of any civil 
                        penalty imposed under subparagraph (A) shall 
                        not exceed $5,000.
                            ``(ii) Reasonable cause exception.--No 
                        penalty shall be imposed under subparagraph (A) 
                        with respect to any violation if--
                                    ``(I) such violation was due to 
                                reasonable cause, and
                                    ``(II) the amount of the 
                                transaction or the balance in the 
                                account at the time of the transaction 
                                was properly reported.
                    ``(C) Willful violations.--In the case of any 
                person willfully violating, or willfully causing any 
                violation of, any provision of section 5314--
                            ``(i) the maximum penalty under 
                        subparagraph (B)(i) shall be increased to the 
                        greater of--
                                    ``(I) $25,000, or
                                    ``(II) the amount (not exceeding 
                                $100,000) determined under subparagraph 
                                (D), and
                            ``(ii) subparagraph (B)(ii) shall not 
                        apply.
                    ``(D) Amount.--The amount determined under this 
                subparagraph is--
                            ``(i) in the case of a violation involving 
                        a transaction, the amount of the transaction, 
                        or
                            ``(ii) in the case of a violation involving 
                        a failure to report the existence of an account 
                        or any identifying information required to be 
                        provided with respect to an account, the 
                        balance in the account at the time of the 
                        violation.''
    (b) Effective Date.--The amendment made by this section shall apply 
to violations occurring after the date of the enactment of this Act.

SEC. 132. REPEAL OF PERSONAL HOLDING COMPANY TAX.

    (a) In General.--Part II of subchapter G of chapter 1 (relating to 
personal holding companies) is hereby repealed.
    (b) Conforming Amendments.--
            (1) Section 12(2) is amended to read as follows:
            ``(2) For accumulated earnings tax, see part I of 
        subchapter G (sec. 531 and following).''.
            (2) Section 26(b)(2) is amended by striking subparagraph 
        (G) and by redesignating the succeeding subparagraphs 
        accordingly.
            (3) Section 30A(c) is amended by striking paragraph (3) and 
        by redesignating paragraph (4) as paragraph (3).
            (4) Section 41(e)(7)(E) is amended by adding ``and'' at the 
        end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (5) Section 56(b)(2) is amended by striking subparagraph 
        (C) and by redesignating subparagraph (D) as subparagraph (C).
            (6) Section 170(e)(4)(D) is amended by adding ``and'' at 
        the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (7) Section 111(d) is amended to read as follows:
    ``(d) Special Rules for Accumulated Earnings Tax.--In applying 
subsection (a) for the purpose of determining the accumulated earnings 
tax under section 531--
            ``(1) any excluded amount under subsection (a) allowed for 
        purposes of this subtitle (other than section 531) shall be 
        allowed whether or not such amount resulted in a reduction of 
        the tax under section 531 for the prior taxable year, and
            ``(2) where any excluded amount under subsection (a) was 
        not allowed as a deduction for the prior taxable year for 
        purposes of this subtitle other than section 531 but was 
        allowable for the same taxable year under section 531, then 
        such excluded amount shall be allowable if it did not result in 
        a reduction of the tax under section 531.''.
            (8)(A) Section 316(b) is amended by striking paragraph (2) 
        and by redesignating paragraph (3) as paragraph (2).
            (B) Section 331(b) is amended by striking ``(other than a 
        distribution referred to in paragraph (2)(B) of section 
        316(b))''.
            (9) Section 341(d) is amended--
                    (A) by striking ``section 544(a)'' and inserting 
                ``section 465(f)'', and
                    (B) by inserting before the period at the end of 
                the next to the last sentence ``and such paragraph (2) 
                shall be applied by inserting `by or for his partner' 
                after `his family' ''.
            (10) Section 381(c) is amended by striking paragraphs (14) 
        and (17).
            (11) Section 443(e) is amended by striking paragraph (2) 
        and by redesignating paragraphs (3), (4), and (5) as paragraphs 
        (2), (3), and (4), respectively.
            (12) Section 447(g)(4)(A) is amended by striking ``other 
        than--'' and all that follows and inserting ``other than an S 
        corporation.''
            (13)(A) Section 465(a)(1)(B) is amended to read as follows:
                    ``(B) a C corporation which is closely held,''.
            (B) Section 465(a)(3) is amended to read as follows:
            ``(3) Closely held determination.--For purposes of 
        paragraph (1), a corporation is closely held if, at any time 
        during the last half of the taxable year, more than 50 percent 
        in value of its outstanding stock is owned, directly or 
        indirectly, by or for not more than 5 individuals. For purposes 
        of this paragraph, an organization described in section 401(a), 
        501(c)(17), or 509(a) or a portion of a trust permanently set 
        aside or to be used exclusively for the purposes described in 
        section 642(c) shall be considered an individual.''
            (C) Section 465 is amended by adding at the end the 
        following new subsection:
    ``(f) Constructive Ownership Rules.--For purposes of subsection 
(a)(3)--
            ``(1) Stock not owned by individual.--Stock owned, directly 
        or indirectly, by or for a corporation, partnership, estate, or 
        trust shall be considered as being owned proportionately by its 
        shareholders, partners, or beneficiaries.
            ``(2) Family ownership.--An individual shall be considered 
        as owning the stock owned, directly or indirectly, by or for 
        his family. For purposes of this paragraph, the family of an 
        individual includes only his brothers and sisters (whether by 
        the whole or half blood), spouse, ancestors, and lineal 
        descendants.
            ``(3) Options.--If any person has an option to acquire 
        stock, such stock shall be considered as owned by such person. 
        For purposes of this paragraph, an option to acquire such an 
        option, and each one of a series of such options, shall be 
        considered as an option to acquire such stock.
            ``(4) Application of family and option rules.--Paragraphs 
        (2) and (3) shall be applied if, but only if, the effect is to 
        make the corporation closely held under subsection (a)(3).
            ``(5) Constructive ownership as actual ownership.--Stock 
        constructively owned by a person by reason of the application 
        of paragraph (1) or (3), shall, for purposes of applying 
        paragraph (1) or (2), be treated as actually owned by such 
        person; but stock constructively owned by an individual by 
        reason of the application of paragraph (2) shall not be treated 
        as owned by him for purposes of again applying such paragraph 
        in order to make another the constructive owner of such stock.
            ``(6) Option rule in lieu of family rule.--If stock may be 
        considered as owned by an individual under either paragraph (2) 
        or (3) it shall be considered as owned by him under paragraph 
        (3).
            ``(7) Convertible securities.--Outstanding securities 
        convertible into stock (whether or not convertible during the 
        taxable year) shall be considered as outstanding stock if the 
        effect of the inclusion of all such securities is to make the 
        corporation closely held under subsection (a)(3). The 
        requirement under the preceding sentence that all convertible 
        securities must be included if any are to be included shall be 
        subject to the exception that, where some of the outstanding 
        securities are convertible only after a later date than in the 
        case of others, the class having the earlier conversion date 
        may be included although the others are not included, but no 
        convertible securities shall be included unless all outstanding 
        securities having a prior conversion date are also included.''
            (D) Section 465(c)(7)(B) is amended by striking clause (i) 
        and by redesignating clauses (ii) and (iii) as clauses (i) and 
        (ii), respectively.
            (E) Section 465(c)(7)(G) is amended to read as follows:
                    ``(G) Loss of 1 member of affiliated group may not 
                offset income of personal service corporation.--Nothing 
                in this paragraph shall permit any loss of a member of 
                an affiliated group to be used as an offset against the 
                income of any other member of such group which is a 
                personal service corporation (as defined in section 
                269A(b) but determined by substituting `5 percent' for 
                `10 percent' in section 269A(b)(2)).''
            (14) Sections 508(d), 4947, and 4948(c)(4) are each amended 
        by striking ``545(b)(2),'' each place it appears.
            (15) Section 532(b) is amended by striking paragraph (1) 
        and by redesignating paragraphs (2), (3), and (4) as paragraphs 
        (1), (2), and (3), respectively.
            (16) Sections 535(b)(1) and 556(b)(1) are each amended by 
        striking ``section 541'' and inserting ``section 541 (as in 
        effect before its repeal)''.
            (17)(A) Section 553(a)(1) is amended by striking ``section 
        543(d)'' and inserting ``subsection (c)''.
            (B) Section 553 is amended by adding at the end the 
        following new subsection:
    ``(c) Active Business Computer Software Royalties.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `active business computer software royalties' means any 
        royalties--
                    ``(A) received by any corporation during the 
                taxable year in connection with the licensing of 
                computer software, and
                    ``(B) with respect to which the requirements of 
                paragraphs (2), (3), (4), and (5) are met.
            ``(2) Royalties must be received by corporation actively 
        engaged in computer software business.--The requirements of 
        this paragraph are met if the royalties described in paragraph 
        (1)--
                    ``(A) are received by a corporation engaged in the 
                active conduct of the trade or business of developing, 
                manufacturing, or producing computer software, and
                    ``(B) are attributable to computer software which--
                            ``(i) is developed, manufactured, or 
                        produced by such corporation (or its 
                        predecessor) in connection with the trade or 
                        business described in subparagraph (A), or
                            ``(ii) is directly related to such trade or 
                        business.
            ``(3) Royalties must constitute at least 50 percent of 
        income.--The requirements of this paragraph are met if the 
        royalties described in paragraph (1) constitute at least 50 
        percent of the ordinary gross income of the corporation for the 
        taxable year.
            ``(4) Deductions under sections 162 and 174 relating to 
        royalties must equal or exceed 25 percent of ordinary gross 
        income.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if--
                            ``(i) the sum of the deductions allowable 
                        to the corporation under sections 162, 174, and 
                        195 for the taxable year which are properly 
                        allocable to the trade or business described in 
                        paragraph (2) equals or exceeds 25 percent of 
                        the ordinary gross income of such corporation 
                        for such taxable year, or
                            ``(ii) the average of such deductions for 
                        the 5-taxable year period ending with such 
                        taxable year equals or exceeds 25 percent of 
                        the average ordinary gross income of such 
                        corporation for such period.
                If a corporation has not been in existence during the 
                5-taxable year period described in clause (ii), then 
                the period of existence of such corporation shall be 
                substituted for such 5-taxable year period.
                    ``(B) Deductions allowable under section 162.--For 
                purposes of subparagraph (A), a deduction shall not be 
                treated as allowable under section 162 if it is 
                specifically allowable under another section.
                    ``(C) Limitation on allowable deductions.--For 
                purposes of subparagraph (A), no deduction shall be 
                taken into account with respect to compensation for 
                personal services rendered by the 5 individual 
                shareholders holding the largest percentage (by value) 
                of the outstanding stock of the corporation. For 
                purposes of the preceding sentence individuals holding 
                less than 5 percent (by value) of the stock of such 
                corporation shall not be taken into account.''
            (18) Section 561(a) is amended by striking paragraph (3), 
        by inserting ``and'' at the end of paragraph (1), and by 
        striking '', and'' at the end of paragraph (2) and inserting a 
        period.
            (19) Section 562(b) is amended to read as follows:
    ``(b) Distributions in Liquidation.--Except in the case of a 
foreign personal holding company described in section 552--
            ``(1) in the case of amounts distributed in liquidation, 
        the part of such distribution which is properly chargeable to 
        earnings and profits accumulated after February 28, 1913, shall 
        be treated as a dividend for purposes of computing the 
        dividends paid deduction, and
            ``(2) in the case of a complete liquidation occurring 
        within 24 months after the adoption of a plan of liquidation, 
        any distribution within such period pursuant to such plan 
        shall, to the extent of the earnings and profits (computed 
        without regard to capital losses) of the corporation for the 
        taxable year in which such distribution is made, be treated as 
        a dividend for purposes of computing the dividends paid 
        deduction.
For purposes of paragraph (1), a liquidation includes a redemption of 
stock to which section 302 applies. Except to the extent provided in 
regulations, the preceding sentence shall not apply in the case of any 
mere holding or investment company which is not a regulated investment 
company.''
            (20) Section 563 is amended by striking subsection (b).
            (21) Section 564 is hereby repealed.
            (22) Section 631(c) is amended by striking ``or section 
        545(b)(5)''.
            (23) Section 852(b)(1) is amended by striking ``which is a 
        personal holding company (as defined in section 542) or''.
            (24)(A) Section 856(h)(1) is amended to read as follows:
            ``(1) In general.--For purposes of subsection (a)(6), a 
        corporation, trust, or association is closely held if the stock 
        ownership requirement of section 465(a)(3) is met.''
            (B) Section 856(h)(3)(A)(i) is amended by striking 
        ``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
            (C) Paragraph (3) of section 856(h) is amended by striking 
        subparagraph (B) and by redesignating subparagraphs (C) and (D) 
        as subparagraphs (B) and (C), respectively.
            (D) Subparagraph (C) of section 856(h)(3), as redesignating 
        by the preceding subparagraph, is amended by striking 
        ``subparagraph (C)'' and inserting ``subparagraph (B)''.
            (25) The last sentence of section 882(c)(2) is amended to 
        read as follows:
        ``The preceding sentence shall not be construed to deny the 
        credit provided by section 33 for tax withheld at source or the 
        credit provided by section 34 for certain uses of gasoline.''.
            (26) Section 936(a)(3) is amended by striking subparagraph 
        (C), by inserting ``or'' at the end of subparagraph (B), and by 
        redesignating subparagraph (D) as subparagraph (C).
            (27) Section 992(d) is amended by striking paragraph (2) 
        and by redesignating succeeding paragraphs accordingly.
            (28) Section 992(e) is amended by striking ``and section 
        541 (relating to personal holding company tax)''.
            (29) Section 1202(e)(8) is amended by striking ``section 
        543(d)(1)'' and inserting ``section 553(c)(1)''.
            (30) Section 1362(d)(3)(C)(iii) is amended by adding at the 
        end the following new sentence: ``References to section 542 in 
        the preceding sentence shall be treated as references to such 
        section as in effect on the day before its repeal.''
            (31) Section 1504(c)(2)(B) is amended by adding ``and'' at 
        the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (32) Section 2057(e)(2)(C) is amended by adding at the end 
        the following new sentence: ``References to sections 542 and 
        543 in the preceding sentence shall be treated as references to 
        such sections as in effect on the day before their repeal.''
            (33) Sections 6422 is amended by striking paragraph (3) and 
        by redesignating paragraphs (4) through (12) and paragraphs (3) 
        through (11), respectively.
            (34) Section 6501 is amended by striking subsection (f).
            (35) Section 6503(k) is amended by striking paragraph (1) 
        and by redesignating paragraphs (2) through (5) as paragraphs 
        (1) through (4), respectively.
            (36) Section 6515 is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) through (6) as paragraphs (1) 
        through (5), respectively.
            (37) Subsections (d)(1)(B) and (e)(2) of section 6662 are 
        each amended by striking ``or a personal holding company (as 
        defined in section 542)''.
            (38) Section 6683 is hereby repealed.
    (c) Clerical Amendments.--
            (1) The table of parts for subchapter G of chapter 1 is 
        amended by striking the item relating to part II.
            (2) The table of sections for part IV of such subchapter G 
        is amended by striking the item relating to section 564.
            (3) The table of sections for part I of subchapter B of 
        chapter 68 is amended by striking the item relating to section 
        6683.
    (d) Effective Date.--The amendments made by this Act shall apply to 
taxable years beginning after December 31, 2003.

                TITLE II--REFORM OF PENALTY AND INTEREST

SEC. 201. INDIVIDUAL ESTIMATED TAX.

    (a) Increase in Exception for Individuals Owing Small Amount of 
Tax.--Section 6654(e)(1) (relating to exception where tax is small 
amount) is amended by striking ``$1,000'' and inserting ``$2,000''.
    (b) Computation of Addition to Tax.--Subsections (a) and (b) of 
section 6654 (relating to failure by individual to pay estimated taxes) 
are amended to read as follows:
    ``(a) Addition to the Tax.--
            ``(1) In general.--Except as otherwise provided in this 
        section, in the case of any underpayment of estimated tax by an 
        individual for a taxable year, there shall be added to the tax 
        under chapters 1 and 2 for the taxable year the amount 
        determined under paragraph (2) for each day of underpayment.
            ``(2) Amount.--The amount of the addition to tax for any 
        day shall be the product of the underpayment rate established 
        under subsection (b)(2) multiplied by the amount of the 
        underpayment.
    ``(b) Amount of Underpayment; Interest Rate.--For purposes of 
subsection (a)--
            ``(1) Amount.--The amount of the underpayment on any day 
        shall be the excess of--
                    ``(A) the sum of the required installments for the 
                taxable year the due dates for which are on or before 
                such day, over
                    ``(B) the sum of the amounts (if any) of estimated 
                tax payments made on or before such day on such 
                required installments.
            ``(2) Determination of interest rate.--
                    ``(A) In general.--The underpayment rate with 
                respect to any day in an installment underpayment 
                period shall be the underpayment rate established under 
                section 6621 for the first day of the calendar quarter 
                in which such installment underpayment period begins.
                    ``(B) Installment underpayment period.--For 
                purposes of subparagraph (A), the term `installment 
                underpayment period' means the period beginning on the 
day after the due date for a required installment and ending on the due 
date for the subsequent required installment (or in the case of the 4th 
required installment, the 15th day of the 4th month following the close 
of a taxable year).
                    ``(C) Daily rate.--The rate determined under 
                subparagraph (A) shall be applied on a daily basis and 
                shall be based on the assumption of 365 days in a 
                calendar year.
            ``(3) Termination of estimated tax interest.--No day after 
        the end of the installment underpayment period for the 4th 
        required installment specified in paragraph (2)(B) for a 
        taxable year shall be treated as a day of underpayment with 
        respect to such taxable year.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 202. CORPORATE ESTIMATED TAX.

    (a) Increase in Small Tax Amount Exception.--Section 6655(f) 
(relating to exception where tax is small amount) is amended by 
striking ``$500'' and inserting ``$1,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 203. INCREASE IN LARGE CORPORATION THRESHOLD FOR ESTIMATED TAX 
              PAYMENTS.

    (a) In General.--Section 6655(g)(2) (defining large corporation) is 
amended--
            (1) by striking ``$1,000,000'' in subparagraph (A) and 
        inserting ``the applicable amount'',
            (2) by redesignating subparagraph (B) as subparagraph (C), 
        and
            (3) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Applicable amount.--For purposes of 
                subparagraph (A), the applicable amount is $1,000,000 
                increased (but not above $1,500,000) by $50,000 for 
                each taxable year beginning after 2004.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 204. ABATEMENT OF INTEREST.

    (a) Abatement of Interest for Periods Attributable to Any 
Unreasonable IRS Error or Delay.--Section 6404(e)(1) is amended--
            (1) by striking ``in performing a ministerial or managerial 
        act'' in subparagraphs (A) and (B),
            (2) by striking ``deficiency'' in subparagraph (A) and 
        inserting ``underpayment of any tax, addition to tax, or 
        penalty imposed by this title'', and
            (3) by striking ``tax described in section 6212(a)'' in 
        subparagraph (B) and inserting ``tax, addition to tax, or 
        penalty imposed by this title''.
    (b) Abatement of Interest to Extent Interest Is Attributable to 
Taxpayer Reliance on Written Statements of the IRS.--Subsection (f) of 
section 6404 is amended--
            (1) in the subsection heading, by striking ``Penalty or 
        Addition'' and inserting ``Interest, Penalty, or Addition''; 
        and
            (2) in paragraph (1) and in subparagraph (B) of paragraph 
        (2), by striking ``penalty or addition'' and inserting 
        ``interest, penalty, or addition''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to interest accruing on or after the date of the 
enactment of this Act.

SEC. 205. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL 
              UNDERPAYMENTS.

    (a) In General.--Subchapter A of chapter 67 (relating to interest 
on underpayments) is amended by adding at the end the following new 
section:

``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON POTENTIAL 
              UNDERPAYMENTS, ETC.

    ``(a) Authority To Make Deposits Other Than As Payment of Tax.--A 
taxpayer may make a cash deposit with the Secretary which may be used 
by the Secretary to pay any tax imposed under subtitle A or B or 
chapter 41, 42, 43, or 44 which has not been assessed at the time of 
the deposit. Such a deposit shall be made in such manner as the 
Secretary shall prescribe.
    ``(b) No Interest Imposed.--To the extent that such deposit is used 
by the Secretary to pay tax, for purposes of section 6601 (relating to 
interest on underpayments), the tax shall be treated as paid when the 
deposit is made.
    ``(c) Return of Deposit.--Except in a case where the Secretary 
determines that collection of tax is in jeopardy, the Secretary shall 
return to the taxpayer any amount of the deposit (to the extent not 
used for a payment of tax) which the taxpayer requests in writing.
    ``(d) Payment of Interest.--
            ``(1) In general.--For purposes of section 6611 (relating 
        to interest on overpayments), a deposit which is returned to a 
        taxpayer shall be treated as a payment of tax for any period to 
        the extent (and only to the extent) attributable to a 
        disputable tax for such period. Under regulations prescribed by 
        the Secretary, rules similar to the rules of section 6611(b)(2) 
        shall apply.
            ``(2) Disputable tax.--
                    ``(A) In general.--For purposes of this section, 
                the term `disputable tax' means the amount of tax 
                specified at the time of the deposit as the taxpayer's 
                reasonable estimate of the maximum amount of any tax 
                attributable to disputable items.
                    ``(B) Safe harbor based on 30-day letter.--In the 
                case of a taxpayer who has been issued a 30-day letter, 
                the maximum amount of tax under subparagraph (A) shall 
                not be less than the amount of the proposed deficiency 
                specified in such letter.
            ``(3) Other definitions.--For purposes of paragraph (2)--
                    ``(A) Disputable item.--The term `disputable item' 
                means any item of income, gain, loss, deduction, or 
                credit if the taxpayer--
                            ``(i) has a reasonable basis for its 
                        treatment of such item, and
                            ``(ii) reasonably believes that the 
                        Secretary also has a reasonable basis for 
                        disallowing the taxpayer's treatment of such 
                        item.
                    ``(B) 30-day letter.--The term `30-day letter' 
                means the first letter of proposed deficiency which 
                allows the taxpayer an opportunity for administrative 
                review in the Internal Revenue Service Office of 
                Appeals.
            ``(4) Rate of interest.--The rate of interest allowable 
        under this subsection shall be the Federal short-term rate 
        determined under section 6621(b), compounded daily.
    ``(e) Use of Deposits.--
            ``(1) Payment of tax.--Except as otherwise provided by the 
        taxpayer, deposits shall be treated as used for the payment of 
        tax in the order deposited.
            ``(2) Returns of deposits.--Deposits shall be treated as 
        returned to the taxpayer on a last-in, first-out basis.''.
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 67 is amended by adding at the end the following new item:

                              ``Sec. 6603. Deposits made to suspend 
                                        running of interest on 
                                        potential underpayments, 
                                        etc.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to deposits made after December 31, 2003.
            (2) Coordination with deposits made under revenue procedure 
        84-58.--In the case of an amount held by the Secretary of the 
        Treasury or his delegate on the date of the enactment of this 
        Act as a deposit in the nature of a cash bond deposit pursuant 
        to Revenue Procedure 84-58, the date that the taxpayer 
        identifies such amount as a deposit made pursuant to section 
        6603 of the Internal Revenue Code (as added by this Act) shall 
        be treated as the date such amount is deposited for purposes of 
        such section 6603.

SEC. 206. FREEZE OF PROVISIONS REGARDING SUSPENSION OF INTEREST WHERE 
              SECRETARY FAILS TO CONTACT TAXPAYER.

    (a) In General.--Section 6404(G) (relating to suspension of 
interest and certain penalties where secretary fails to contact 
taxpayer) is amended by striking ``1-year period (18-month period in 
the case of taxable years beginning before January 1, 2004)'' both 
places it appears and inserting ``18-month period''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 207. EXPANSION OF INTEREST NETTING.

    (a) In General.--Subsection (d) of section 6621 (relating to 
elimination of interest on overlapping periods of tax overpayments and 
underpayments) is amended by adding at the end the following: ``Solely 
for purposes of the preceding sentence, section 6611(e) shall not 
apply.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to interest accrued after December 31, 2003.

SEC. 208. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT PENALTY.

    Nothing in section 6656 of the Internal Revenue Code of 1986 shall 
be construed to permit the percentage specified in subsection 
(b)(1)(A)(iii) thereof to apply other than in a case where the failure 
is for more than 15 days.

SEC. 209. FRIVOLOUS TAX SUBMISSIONS.

    (a) Civil Penalties.--Section 6702 is amended to read as follows:

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

    ``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay 
a penalty of $5,000 if--
            ``(1) such person files what purports to be a return of a 
        tax imposed by this title but which--
                    ``(A) does not contain information on which the 
                substantial correctness of the self-assessment may be 
                judged, or
                    ``(B) contains information that on its face 
                indicates that the self-assessment is substantially 
                incorrect; and
            ``(2) the conduct referred to in paragraph (1)--
                    ``(A) is based on a position which the Secretary 
                has identified as frivolous under subsection (c), or
                    ``(B) reflects a desire to delay or impede the 
                administration of Federal tax laws.
    ``(b) Civil Penalty for Specified Frivolous Submissions.--
            ``(1) Imposition of penalty.--Except as provided in 
        paragraph (3), any person who submits a specified frivolous 
        submission shall pay a penalty of $5,000.
            ``(2) Specified frivolous submission.--For purposes of this 
        section--
                    ``(A) Specified frivolous submission.--The term 
                `specified frivolous submission' means a specified 
                submission if any portion of such submission--
                            ``(i) is based on a position which the 
                        Secretary has identified as frivolous under 
                        subsection (c), or
                            ``(ii) reflects a desire to delay or impede 
                        the administration of Federal tax laws.
                    ``(B) Specified submission.--The term `specified 
                submission' means--
                            ``(i) a request for a hearing under--
                                    ``(I) section 6320 (relating to 
                                notice and opportunity for hearing upon 
                                filing of notice of lien), or
                                    ``(II) section 6330 (relating to 
                                notice and opportunity for hearing 
                                before levy), and
                            ``(ii) an application under--
                                    ``(I) section 7811 (relating to 
                                taxpayer assistance orders),
                                    ``(II) section 6159 (relating to 
                                agreements for payment of tax liability 
                                in installments), or
                                    ``(III) section 7122 (relating to 
                                compromises).
            ``(3) Opportunity to withdraw submission.--If the Secretary 
        provides a person with notice that a submission is a specified 
        frivolous submission and such person withdraws such submission 
        promptly after such notice, the penalty imposed under paragraph 
        (1) shall not apply with respect to such submission.
    ``(c) Listing of Frivolous Positions.--The Secretary shall 
prescribe (and periodically revise) a list of positions which the 
Secretary has identified as being frivolous for purposes of this 
subsection. The Secretary shall not include in such list any position 
that the Secretary determines meets the requirement of section 
6662(d)(2)(B)(ii)(II).
    ``(d) Reduction of Penalty.--The Secretary may reduce the amount of 
any penalty imposed under this section if the Secretary determines that 
such reduction would promote compliance with and administration of the 
Federal tax laws.
    ``(e) Penalties in Addition to Other Penalties.--The penalties 
imposed by this section shall be in addition to any other penalty 
provided by law.''
    (b) Treatment of Frivolous Requests for Hearings Before Levy.--
            (1) Frivolous requests disregarded.--Section 6330 (relating 
        to notice and opportunity for hearing before levy) is amended 
        by adding at the end the following new subsection:
    ``(g) Frivolous Requests for Hearing, etc.--Notwithstanding any 
other provision of this section, if the Secretary determines that any 
portion of a request for a hearing under this section or section 6320 
meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), 
then the Secretary may treat such portion as if it were never submitted 
and such portion shall not be subject to any further administrative or 
judicial review.''
            (2) Preclusion from raising frivolous issues at hearing.--
        Section 6330(c)(4) is amended--
                    (A) by striking ``(A)'' and inserting ``(A)(i)'';
                    (B) by striking ``(B)'' and inserting ``(ii)'';
                    (C) by striking the period at the end of the first 
                sentence and inserting ``; or''; and
                    (D) by inserting after subparagraph (A)(ii) (as so 
                redesignated) the following:
                    ``(B) the issue meets the requirement of clause (i) 
                or (ii) of section 6702(b)(2)(A).''
            (3) Statement of grounds.--Section 6330(b)(1) is amended by 
        striking ``under subsection (a)(3)(B)'' and inserting ``in 
        writing under subsection (a)(3)(B) and states the grounds for 
        the requested hearing''.
    (c) Treatment of Frivolous Requests for Hearings Upon Filing of 
Notice of Lien.--Section 6320 is amended--
            (1) in subsection (b)(1), by striking ``under subsection 
        (a)(3)(B)'' and inserting ``in writing under subsection 
        (a)(3)(B) and states the grounds for the requested hearing'', 
        and
            (2) in subsection (c), by striking ``and (e)'' and 
        inserting ``(e), and (g)''.
    (d) Treatment of Frivolous Applications for Offers-in-Compromise 
and Installment Agreements.--Section 7122 is amended by adding at the 
end the following new subsection:
    ``(e) Frivolous Submissions, etc.--Notwithstanding any other 
provision of this section, if the Secretary determines that any portion 
of an application for an offer-in-compromise or installment agreement 
submitted under this section or section 6159 meets the requirement of 
clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
treat such portion as if it were never submitted and such portion shall 
not be subject to any further administrative or judicial review.''
    (e) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by striking the item relating to 
section 6702 and inserting the following new item:

                              ``Sec. 6702. Frivolous tax submissions.''
    (f) Effective Date.--The amendments made by this section shall 
apply to submissions made and issues raised after the date on which the 
Secretary first prescribes a list under section 6702(c) of the Internal 
Revenue Code of 1986, as amended by subsection (a).

            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

SEC. 301. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.

    (a) In General.--Paragraph (1) of section 6330(d) (relating to 
proceeding after hearing) is amended to read as follows:
            ``(1) Judicial review of determination.--The person may, 
        within 30 days of a determination under this section, appeal 
        such determination to the Tax Court (and the Tax Court shall 
        have jurisdiction with respect to such matter).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to determinations made after the date of the enactment of this Act.

SEC. 302. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND DECIDE CERTAIN 
              EMPLOYMENT STATUS CASES.

    (a) In General.--Section 7443A(b) (relating to proceedings which 
may be assigned to special trial judges) is amended by striking ``and'' 
at the end of paragraph (4), by redesignating paragraph (5) as 
paragraph (6), and by inserting after paragraph (4) the following new 
paragraph:
            ``(5) any proceeding under section 7436(c), and''.
    (b) Conforming Amendment.--Section 7443A(c) is amended by striking 
``or (4)'' and inserting ``(4), or (5)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any proceeding under section 7436(c) of the Internal Revenue 
Code of 1986 with respect to which a decision has not become final (as 
determined under section 7481 of such Code) before the date of the 
enactment of this Act.

SEC. 303. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF 
              EQUITABLE RECOUPMENT.

    (a) Confirmation of Authority of Tax Court To Apply Doctrine of 
Equitable Recoupment.--Section 6214(b) (relating to jurisdiction over 
other years and quarters) is amended by adding at the end the following 
new sentence: ``Notwithstanding the preceding sentence, the Tax Court 
may apply the doctrine of equitable recoupment to the same extent that 
it is available in civil tax cases before the district courts of the 
United States and the United States Court of Federal Claims.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any action or proceeding in the United States Tax Court with respect 
to which a decision has not become final (as determined under section 
7481 of the Internal Revenue Code of 1986) as of the date of the 
enactment of this Act.

SEC. 304. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING 
              PETITION.

    (a) In General.--Section 7451 (relating to fee for filing a Tax 
Court petition) is amended by striking all that follows ``petition'' 
and inserting a period.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 305. AMENDMENTS TO APPOINT EMPLOYEES.

    (a) In General.--Subsection (a) of section 7471 (relating to Tax 
Court employees) is amended to read as follows:
    ``(a) Appointment and Compensation.--
            ``(1) Clerk.--The Tax Court may appoint a clerk without 
        regard to the provisions of title 5, United States Code, 
        governing appointments in the competitive service. The clerk 
        shall serve at the pleasure of the Tax Court.
            ``(2) Law clerks and secretaries.--
                    ``(A) In general.--The judges and special trial 
                judges of the Tax Court may appoint law clerks and 
                secretaries, in such numbers as the Tax Court may 
                approve, without regard to the provisions of title 5, 
                United States Code, governing appointments in the 
                competitive service. Any such law clerk or secretary 
                shall serve at the pleasure of the appointing judge.
                    ``(B) Exemption from federal leave provisions.--A 
                law clerk appointed under this subsection shall be 
                exempt from the provisions of subchapter I of chapter 
                63 of title 5, United States Code. Any unused sick 
                leave or annual leave standing to the employee's credit 
                as of the effective date of this subsection shall 
                remain credited to the employee and shall be available 
                to the employee upon separation from the Federal 
                Government.
            ``(3) Deputies and other employees.--The clerk may appoint 
        necessary deputies and employees without regard to the 
        provisions of title 5, United States Code, governing 
        appointments in the competitive service. Such deputies and 
        employees shall be subject to removal by the clerk.
            ``(4) Pay.--The Tax Court may fix and adjust the 
        compensation for the clerk and other employees of the Tax Court 
        without regard to the provisions of chapter 51, subchapter III 
        of chapter 53, or section 5373 of title 5, United States Code. 
        To the maximum extent feasible, the Tax Court shall compensate 
        employees at rates consistent with those for employees holding 
        comparable positions in the judicial branch.
            ``(5) Programs.--The Tax Court may establish programs for 
        employee evaluations, incentive awards, flexible work 
        schedules, premium pay, and resolution of employee grievances.
            ``(6) Discrimination prohibited.--The Tax Court shall--
                    ``(A) prohibit discrimination on the basis of race, 
                color, religion, age, sex, national origin, political 
                affiliation, marital status, or handicapping condition; 
                and
                    ``(B) promulgate regulations providing procedures 
                for resolving complaints of discrimination by employees 
                and applicants for employment.
            ``(7) Experts and consultants.--The Tax Court may procure 
        the services of experts and consultants under section 3109 of 
        title 5, United States Code.
            ``(8) Rights to certain appeals reserved.--Notwithstanding 
        any other provision of law, an individual who is an employee of 
        the Tax Court on the day before the effective date of this 
        subsection and who, as of that day, was entitled to--
                    ``(A) appeal a reduction in grade or removal to the 
                Merit Systems Protection Board under chapter 43 of 
                title 5, United States Code,
                    ``(B) appeal an adverse action to the Merit Systems 
                Protection Board under chapter 75 of title 5, United 
                States Code,
                    ``(C) appeal a prohibited personnel practice 
                described under section 2302(b) of title 5, United 
                States Code, to the Merit Systems Protection Board 
                under chapter 77 of that title,
                    ``(D) make an allegation of a prohibited personnel 
                practice described under section 2302(b) of title 5, 
                United States Code, with the Office of Special Counsel 
                under chapter 12 of that title for action in accordance 
                with that chapter, or
                    ``(E) file an appeal with the Equal Employment 
                Opportunity Commission under part 1614 of title 29 of 
                the Code of Federal Regulations,
        shall be entitled to file such appeal or make such an 
        allegation so long as the individual remains an employee of the 
        Tax Court.
            ``(9) Competitive status.--Notwithstanding any other 
        provision of law, any employee of the Tax Court who has 
        completed at least 1 year of continuous service under a non 
        temporary appointment with the Tax Court acquires a competitive 
        status for appointment to any position in the competitive 
        service for which the employee possesses the required 
        qualifications.
            ``(10) Merit system principles; prohibited personnel 
        practices; and preference eligibles.--Any personnel management 
        system of the Tax Court shall--
                    ``(A) include the principles set forth in section 
                2301(b) of title 5, United States Code;
                    ``(B) prohibit personnel practices prohibited under 
                section 2302(b) of title 5, United States Code; and
                    ``(C) in the case of any individual who would be a 
                preference eligible in the executive branch, the Tax 
                Court will provide preference for that individual in a 
                manner and to an extent consistent with preference 
                accorded to preference eligibles in the executive 
                branch.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date the United States Tax Court adopts a personnel 
management system after the date of the enactment of this Act.

SEC. 306. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE TAXPAYERS.

    (a) In General.--Section 7475(b) (relating to use of fees) is 
amended by inserting before the period at the end ``and to provide 
services to pro se taxpayers''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

             Subtitle B--Tax Court Pension and Compensation

SEC. 311. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO ARE 
              ASSASSINATED.

    (a) Eligibility in Case of Death by Assassination.--Subsection (h) 
of section 7448 (relating to annuities to surviving spouses and 
dependent children of judges) is amended to read as follows:
    ``(h) Entitlement to Annuity.--
            ``(1) In general.--
                    ``(A) Annuity to surviving spouse.--If a judge 
                described in paragraph (2) is survived by a surviving 
                spouse but not by a dependent child, there shall be 
                paid to such surviving spouse an annuity beginning with 
                the day of the death of the judge or following the 
                surviving spouse's attainment of the age of 50 years, 
                whichever is the later, in an amount computed as 
                provided in subsection (m).
                    ``(B) Annuity to child.--If such a judge is 
                survived by a surviving spouse and a dependent child or 
                children, there shall be paid to such surviving spouse 
                an immediate annuity in an amount computed as provided 
                in subsection (m), and there shall also be paid to or 
                on behalf of each such child an immediate annuity equal 
                to the lesser of--
                            ``(i) 10 percent of the average annual 
                        salary of such judge (determined in accordance 
                        with subsection (m)), or
                            ``(ii) 20 percent of such average annual 
                        salary, divided by the number of such children.
                    ``(C) Annuity to surviving dependent children.--If 
                such a judge leaves no surviving spouse but leaves a 
                surviving dependent child or children, there shall be 
                paid to or on behalf of each such child an immediate 
                annuity equal to the lesser of--
                            ``(i) 20 percent of the average annual 
                        salary of such judge (determined in accordance 
                        with subsection (m)), or
                            ``(ii) 40 percent of such average annual 
                        salary, divided by the number of such children.
            ``(2) Covered judges.--Paragraph (1) applies to any judge 
        electing under subsection (b)--
                    ``(A) who dies while a judge after having rendered 
                at least 5 years of civilian service computed as 
                prescribed in subsection (n), for the last 5 years of 
                which the salary deductions provided for by subsection 
                (c)(1) or the deposits required by subsection (d) have 
                actually been made or the salary deductions required by 
                the civil service retirement laws have actually been 
                made, or
                    ``(B) who dies by assassination after having 
                rendered less than 5 years of civilian service computed 
                as prescribed in subsection (n) if, for the period of 
                such service, the salary deductions provided for by 
                subsection (c)(1) or the deposits required by 
                subsection (d) have actually been made.
            ``(3) Termination of annuity.--
                    ``(A) In the case of a surviving spouse.--The 
                annuity payable to a surviving spouse under this 
                subsection shall be terminable upon such surviving 
                spouse's death or such surviving spouse's remarriage 
                before attaining age 55.
                    ``(B) In the case of a child.--The annuity payable 
                to a child under this subsection shall be terminable 
                upon (i) the child attaining the age of 18 years, (ii) 
                the child's marriage, or (iii) the child's death, 
                whichever first occurs, except that if such child is 
                incapable of self-support by reason of mental or 
                physical disability the child's annuity shall be 
                terminable only upon death, marriage, or recovery from 
                such disability.
                    ``(C) In the case of a dependent child after death 
                of surviving spouse.--In case of the death of a 
                surviving spouse of a judge leaving a dependent child 
                or children of the judge surviving such spouse, the 
                annuity of such child or children shall be recomputed 
                and paid as provided in paragraph (1)(C).
                    ``(D) Recomputation.--In any case in which the 
                annuity of a dependent child is terminated under this 
                subsection, the annuities of any remaining dependent 
                child or children, based upon the service of the same 
                judge, shall be recomputed and paid as though the child 
                whose annuity was so terminated had not survived such 
                judge.
            ``(4) Special rule for assassinated judges.--In the case of 
        a survivor or survivors of a judge described in paragraph 
        (2)(B), there shall be deducted from the annuities otherwise 
        payable under this section an amount equal to--
                    ``(A) the amount of salary deductions provided for 
                by subsection (c)(1) that would have been made if such 
                deductions had been made for 5 years of civilian 
                service computed as prescribed in subsection (n) before 
                the judge's death, reduced by
                    ``(B) the amount of such salary deductions that 
                were actually made before the date of the judge's 
                death.
    (b) Definition of Assassination.--Section 7448(a) (relating to 
definitions) is amended by adding at the end the following new 
paragraph:
            ``(8) The terms `assassinated' and `assassination' mean the 
        killing of a judge that is motivated by the performance by that 
        judge of his or her official duties.''.
    (c) Determination of Assassination.--Subsection (i) of section 7448 
is amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(i) Determinations by Chief Judge.--
            ``(1) Dependency and disability.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Assassination.--The chief judge shall determine 
        whether the killing of a judge was an assassination, subject to 
        review only by the Tax Court. The head of any Federal agency 
        that investigates the killing of a judge shall provide 
        information to the chief judge that would assist the chief 
        judge in making such a determination.''.
    (d) Computation of Annuities.--Subsection (m) of section 7448 is 
amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(m) Computation of Annuities.--
            ``(1) In general.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Assassinated judges.--In the case of a judge who is 
        assassinated and who has served less than 3 years, the annuity 
        of the surviving spouse of such judge shall be based upon the 
        average annual salary received by such judge for judicial 
        service.''.
    (e) Other Benefits.--Section 7448 is amended by adding at the end 
the following:
    ``(u) Other Benefits.--In the case of a judge who is assassinated, 
an annuity shall be paid under this section notwithstanding a 
survivor's eligibility for or receipt of benefits under chapter 81 of 
title 5, United States Code, except that the annuity for which a 
surviving spouse is eligible under this section shall be reduced to the 
extent that the total benefits paid under this section and chapter 81 
of that title for any year would exceed the current salary for that 
year of the office of the judge.''.

SEC. 312. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR 
              ANNUITIES.

    (a) In General.--Subsection (s) of section 7448 (relating to 
annuities to surviving spouses and dependent children of judges) is 
amended to read as follows:
    ``(s) Increases in Survivor Annuities.--Each time that an increase 
is made under section 8340(b) of title 5, United States Code, in 
annuities payable under subchapter III of chapter 83 of that title, 
each annuity payable from the survivors annuity fund under this section 
shall be increased at the same time by the same percentage by which 
annuities are increased under such section 8340(b).''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to increases made under section 8340(b) of title 5, 
United States Code, in annuities payable under subchapter III of 
chapter 83 of that title, taking effect after the date of the enactment 
of this Act.

SEC. 313. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.

    (a) In General.--Section 7447 (relating to retirement of judges) is 
amended by adding at the end the following new subsection:
            ``(j) Life insurance coverage.--For purposes of chapter 87 
        of title 5, United States Code (relating to life insurance), 
        any individual who is serving as a judge of the Tax Court or 
        who is retired under this section is deemed to be an employee 
        who is continuing in active employment.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any individual serving as a judge of the United States Tax Court or 
to any retired judge of the United States Tax Court on the date of the 
enactment of this Act.

SEC. 314. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65 
              OR OVER.

    Section 7472 (relating to expenditures) is amended by inserting 
after the first sentence the following new sentence: ``Notwithstanding 
any other provision of law, the Tax Court is authorized to pay on 
behalf of its judges, age 65 or over, any increase in the cost of 
Federal Employees' Group Life Insurance imposed after April 24, 1999, 
including any expenses generated by such payments, as authorized by the 
chief judge in a manner consistent with such payments authorized by the 
Judicial Conference of the United States pursuant to section 604(a)(5) 
of title 28, United States Code.''.

SEC. 315. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF JUDGES' ACCRUED 
              ANNUAL LEAVE.

    (a) In General.--Section 7443 (relating to membership of the Tax 
Court) is amended by adding at the end the following new subsection:
    ``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
Notwithstanding the provisions of sections 5551 and 6301 of title 5, 
United States Code, when an individual subject to the leave system 
provided in chapter 63 of that title is appointed by the President to 
be a judge of the Tax Court, the individual shall be entitled to 
receive, upon appointment to the Tax Court, a lump-sum payment from the 
Tax Court of the accumulated and accrued current annual leave standing 
to the individual's credit as certified by the agency from which the 
individual resigned.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any judge of the United States Tax Court who has an outstanding 
leave balance on the date of the enactment of this Act and to any 
individual appointed by the President to serve as a judge of the United 
States Tax Court after such date.

SEC. 316. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS PLAN.

    (a) In General.--Section 7447 (relating to retirement of judges), 
as amended by this Act, is amended by adding at the end the following 
new subsection:
    ``(k) Thrift Savings Plan.--
            ``(1) Election to contribute.--
                    ``(A) In general.--A judge of the Tax Court may 
                elect to contribute to the Thrift Savings Fund 
                established by section 8437 of title 5, United States 
                Code.
                    ``(B) Period of election.--An election may be made 
                under this paragraph only during a period provided 
                under section 8432(b) of title 5, United States Code, 
                for individuals subject to chapter 84 of such title.
            ``(2) Applicability of title 5 provisions.--Except as 
        otherwise provided in this subsection, the provisions of 
        subchapters III and VII of chapter 84 of title 5, United States 
        Code, shall apply with respect to a judge who makes an election 
        under paragraph (1).
            ``(3) Special rules.--
                    ``(A) Amount contributed.--The amount contributed 
                by a judge to the Thrift Savings Fund in any pay period 
                shall not exceed the maximum percentage of such judge's 
                basic pay for such period as allowable under section 
                8440f of title 5, United States Code. Basic pay does 
                not include any retired pay paid pursuant to this 
                section.
                    ``(B) Contributions for benefit of judge.--No 
                contributions may be made for the benefit of a judge 
                under section 8432(c) of title 5, United States Code.
                    ``(C) Applicability of section 8433(b) of title 5 
                whether or not judge retires.--Section 8433(b) of title 
                5, United States Code, applies with respect to a judge 
                who makes an election under paragraph (1) and who 
                either--
                            ``(i) retires under subsection (b), or
                            ``(ii) ceases to serve as a judge of the 
                        Tax Court but does not retire under subsection 
                        (b).
                Retirement under subsection (b) is a separation from 
                service for purposes of subchapters III and VII of 
                chapter 84 of that title.
                    ``(D) Applicability of section 8351(b)(5) of title 
                5.--The provisions of section 8351(b)(5) of title 5, 
                United States Code, shall apply with respect to a judge 
who makes an election under paragraph (1).
                    ``(E) Exception.--Notwithstanding subparagraph (C), 
                if any judge retires under this section, or resigns 
                without having met the age and service requirements set 
                forth under subsection (b)(2), and such judge's 
                nonforfeitable account balance is less than an amount 
                that the Executive Director of the Office of Personnel 
                Management prescribes by regulation, the Executive 
                Director shall pay the nonforfeitable account balance 
                to the participant in a single payment.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act, except that United 
States Tax Court judges may only begin to participate in the Thrift 
Savings Plan at the next open season beginning after such date.

SEC. 317. EXEMPTION OF TEACHING COMPENSATION OF RETIRED JUDGES FROM 
              LIMITATION ON OUTSIDE EARNED INCOME.

    (a) In General.--Section 7447 (relating to retirement of judges), 
as amended by this Act, is amended by adding at the end the following 
new subsection:
    ``(l) Teaching Compensation of Retired Judges.--For purposes of the 
limitation under section 501(a) of the Ethics in Government Act of 1978 
(5 U.S.C. App.), any compensation for teaching approved under 
subsection (a)(5) of that section shall not be treated as outside 
earned income when received by a judge of the Tax Court who has retired 
under subsection (b) for teaching performed during any calendar year 
for which such a judge has met the requirements of subsection (c), as 
certified by the chief judge of the Tax Court.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to any individual serving as a retired judge of the United States Tax 
Court on or after the date of the enactment of this Act.

SEC. 318. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES OF THE TAX 
              COURT.

    (a) Title of Special Trial Judge Changed to Magistrate Judge of the 
Tax Court.--The heading of section 7443A is amended to read as follows:

``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''.

    (b) Appointment, Tenure, and Removal.--Subsection (a) of section 
7443A is amended to read as follows:
    ``(a) Appointment, Tenure, and Removal.--
            ``(1) Appointment.--The chief judge may, from time to time, 
        appoint and reappoint magistrate judges of the Tax Court for a 
        term of 8 years. The magistrate judges of the Tax Court shall 
        proceed under such rules as may be promulgated by the Tax 
        Court.
            ``(2) Removal.--Removal of a magistrate judge of the Tax 
        Court during the term for which he or she is appointed shall be 
        only for incompetency, misconduct, neglect of duty, or physical 
        or mental disability, but the office of a magistrate judge of 
        the Tax Court shall be terminated if the judges of the Tax 
        Court determine that the services performed by the magistrate 
        judge of the Tax Court are no longer needed. Removal shall not 
        occur unless a majority of all the judges of the Tax Court 
        concur in the order of removal. Before any order of removal 
        shall be entered, a full specification of the charges shall be 
        furnished to the magistrate judge of the Tax Court, and he or 
        she shall be accorded by the judges of the Tax Court an 
        opportunity to be heard on the charges.''.
    (c) Salary.--Section 7443A(d) (relating to salary) is amended by 
striking ``90'' and inserting ``92''.
    (d) Exemption From Federal Leave Provisions.--Section 7443A is 
amended by adding at the end the following new subsection:
    ``(f) Exemption From Federal Leave Provisions.--
            ``(1) In general.--A magistrate judge of the Tax Court 
        appointed under this section shall be exempt from the 
        provisions of subchapter I of chapter 63 of title 5, United 
        States Code.
            ``(2) Treatment of unused leave.--
                    ``(A) After service as magistrate judge.--If an 
                individual who is exempted under paragraph (1) from the 
                subchapter referred to in such paragraph was previously 
                subject to such subchapter and, without a break in 
                service, again becomes subject to such subchapter on 
                completion of the individual's service as a magistrate 
                judge, the unused annual leave and sick leave standing 
                to the individual's credit when such individual was 
                exempted from this subchapter is deemed to have 
                remained to the individual's credit.
                    ``(B) Computation of annuity.--In computing an 
                annuity under section 8339 of title 5, United States 
                Code, the total service of an individual specified in 
                subparagraph (A) who retires on an immediate annuity or 
                dies leaving a survivor or survivors entitled to an 
                annuity includes, without regard to the limitations 
                imposed by subsection (f) of such section 8339, the 
                days of unused sick leave standing to the individual's 
                credit when such individual was exempted from 
                subchapter I of chapter 63 of title 5, United States 
                Code, except that these days will not be counted in 
                determining average pay or annuity eligibility.
                    ``(C) Lump sum payment.--Any accumulated and 
                current accrued annual leave or vacation balances 
                credited to a magistrate judge as of the date of the 
                enactment of this subsection shall be paid in a lump 
                sum at the time of separation from service pursuant to 
                the provisions and restrictions set forth in section 
                5551 of title 5, United States Code, and related 
                provisions referred to in such section.''.
    (e) Conforming Amendments.--
            (1) The heading of subsection (b) of section 7443A is 
        amended by striking ``Special Trial Judges'' and inserting 
        ``Magistrate Judges of the Tax Court''.
            (2) Section 7443A(b) is amended by striking ``special trial 
        judges of the court'' and inserting ``magistrate judges of the 
        Tax Court''.
            (3) Subsections (c) and (d) of section 7443A are amended by 
        striking ``special trial judge'' and inserting ``magistrate 
        judge of the Tax Court'' each place it appears.
            (4) Section 7443A(e) is amended by striking ``special trial 
        judges'' and inserting ``magistrate judges of the Tax Court''.
            (5) Section 7456(a) is amended by striking ``special trial 
        judge'' each place it appears and inserting ``magistrate 
        judge''.
            (6) Subsection (c) of section 7471 is amended--
                    (A) by striking the subsection heading and 
                inserting ``Magistrate Judges of the Tax Court.--'', 
                and
                    (B) by striking ``special trial judges'' and 
                inserting ``magistrate judges''.

SEC. 319. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF 
              MAGISTRATE JUDGES OF THE TAX COURT.

    (a) Definitions.--Section 7448(a) (relating to definitions), as 
amended by this Act, is amended by redesignating paragraphs (5), (6), 
(7), and (8) as paragraphs (7), (8), (9), and (10), respectively, and 
by inserting after paragraph (4) the following new paragraphs:
            ``(5) The term `magistrate judge' means a judicial officer 
        appointed pursuant to section 7443A, including any individual 
        receiving an annuity under section 7443B, or chapters 83 or 84, 
        as the case may be, of title 5, United States Code, whether or 
        not performing judicial duties under section 7443C.
            ``(6) The term `magistrate judge's salary' means the salary 
        of a magistrate judge received under section 7443A(d), any 
        amount received as an annuity under section 7443B, or chapters 
        83 or 84, as the case may be, of title 5, United States Code, 
        and compensation received under section 7443C.''.
    (b) Election.--Subsection (b) of section 7448 (relating to 
annuities to surviving spouses and dependent children of judges) is 
amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(b) Election.--
            ``(1) Judges.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Magistrate judges.--Any magistrate judge may by 
        written election filed with the chief judge bring himself or 
        herself within the purview of this section. Such election shall 
        be filed not later than the later of 6 months after--
                    ``(A) 6 months after the date of the enactment of 
                this paragraph,
                    ``(B) the date the judge takes office, or
                    ``(C) the date the judge marries.''.
    (c) Conforming Amendments.--
            (1) The heading of section 7448 is amended by inserting 
        ``and magistrate judges'' after ``judges''.
            (2) The item relating to section 7448 in the table of 
        sections for part I of subchapter C of chapter 76 is amended by 
        inserting ``and magistrate judges'' after ``judges''.
            (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
        and (u) of section 7448, as amended by this Act, are each 
        amended--
                    (A) by inserting ``or magistrate judge'' after 
                ``judge'' each place it appears other than in the 
                phrase ``chief judge'', and
                    (B) by inserting ``or magistrate judge's'' after 
                ``judge's'' each place it appears.
            (4) Section 7448(c) is amended--
                    (A) in paragraph (1), by striking ``Tax Court 
                judges'' and inserting ``Tax Court judicial officers'',
                    (B) in paragraph (2)--
                            (i) in subparagraph (A), by inserting ``and 
                        section 7443A(d)'' after ``(a)(4)'', and
                            (ii) in subparagraph (B), by striking 
                        ``subsection (a)(4)'' and inserting 
                        ``subsections (a)(4) and (a)(6)''.
            (5) Section 7448(g) is amended by inserting ``or section 
        7443B'' after ``section 7447'' each place it appears, and by 
        inserting ``or an annuity'' after ``retired pay''.
            (6) Section 7448(j)(1) is amended--
                    (A) in subparagraph (A), by striking ``service or 
                retired'' and inserting ``service, retired'', and by 
                inserting ``, or receiving any annuity under section 
                7443B or chapters 83 or 84 of title 5, United States 
                Code,'' after ``section 7447'', and
                    (B) in the last sentence, by striking ``subsections 
                (a)(6) and (7)'' and inserting ``paragraphs (8) and (9) 
                of subsection (a)''.
            (7) Section 7448(m)(1), as amended by this Act, is 
        amended--
                    (A) by inserting ``or any annuity under section 
                7443B or chapters 83 or 84 of title 5, United States 
                Code'' after ``7447(d)'', and
                    (B) by inserting ``or 7443B(m)(1)(B) after 
                ``7447(f)(4)''.
            (8) Section 7448(n) is amended by inserting ``his years of 
        service pursuant to any appointment under section 7443A,'' 
        after ``of the Tax Court,''.
            (9) Section 3121(b)(5)(E) is amended by inserting ``or 
        magistrate judge'' before ``of the United States Tax Court''.
            (10) Section 210(a)(5)(E) of the Social Security Act is 
        amended by inserting ``or magistrate judge'' before ``of the 
        United States Tax Court''.

SEC. 320. RETIREMENT AND ANNUITY PROGRAM.

    (a) Retirement and Annuity Program.--Part I of subchapter C of 
chapter 76 is amended by inserting after section 7443A the following 
new section:

``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX COURT.

    ``(a) Retirement Based on Years of Service.--A magistrate judge of 
the Tax Court to whom this section applies and who retires from office 
after attaining the age of 65 years and serving at least 14 years, 
whether continuously or otherwise, as such magistrate judge shall, 
subject to subsection (f), be entitled to receive, during the remainder 
of the magistrate judge's lifetime, an annuity equal to the salary 
being received at the time the magistrate judge leaves office.
    ``(b) Retirement Upon Failure of Reappointment.--A magistrate judge 
of the Tax Court to whom this section applies who is not reappointed 
following the expiration of the term of office of such magistrate 
judge, and who retires upon the completion of the term shall, subject 
to subsection (f), be entitled to receive, upon attaining the age of 65 
years and during the remainder of such magistrate judge's lifetime, an 
annuity equal to that portion of the salary being received at the time 
the magistrate judge leaves office which the aggregate number of years 
of service, not to exceed 14, bears to 14, if--
            ``(1) such magistrate judge has served at least 1 full term 
        as a magistrate judge, and
            ``(2) not earlier than 9 months before the date on which 
        the term of office of such magistrate judge expires, and not 
        later than 6 months before such date, such magistrate judge 
        notified the chief judge of the Tax Court in writing that such 
        magistrate judge was willing to accept reappointment to the 
        position in which such magistrate judge was serving.
    ``(c) Service of at Least 8 Years.--A magistrate judge of the Tax 
Court to whom this section applies and who retires after serving at 
least 8 years, whether continuously or otherwise, as such a magistrate 
judge shall, subject to subsection (f), be entitled to receive, upon 
attaining the age of 65 years and during the remainder of the 
magistrate judge's lifetime, an annuity equal to that portion of the 
salary being received at the time the magistrate judge leaves office 
which the aggregate number of years of service, not to exceed 14, bears 
to 14. Such annuity shall be reduced by \1/6\ of 1 percent for each 
full month such magistrate judge was under the age of 65 at the time 
the magistrate judge left office, except that such reduction shall not 
exceed 20 percent.
    ``(d) Retirement for Disability.--A magistrate judge of the Tax 
Court to whom this section applies, who has served at least 5 years, 
whether continuously or otherwise, as such a magistrate judge, and who 
retires or is removed from office upon the sole ground of mental or 
physical disability shall, subject to subsection (f), be entitled to 
receive, during the remainder of the magistrate judge's lifetime, an 
annuity equal to 40 percent of the salary being received at the time of 
retirement or removal or, in the case of a magistrate judge who has 
served for at least 10 years, an amount equal to that proportion of the 
salary being received at the time of retirement or removal which the 
aggregate number of years of service, not to exceed 14, bears to 14.
    ``(e) Cost-of-Living Adjustments.--A magistrate judge of the Tax 
Court who is entitled to an annuity under this section is also entitled 
to a cost-of-living adjustment in such annuity, calculated and payable 
in the same manner as adjustments under section 8340(b) of title 5, 
United States Code, except that any such annuity, as increased under 
this subsection, may not exceed the salary then payable for the 
position from which the magistrate judge retired or was removed.
    ``(f) Election; Annuity in Lieu of Other Annuities.--
            ``(1) In general.--A magistrate judge of the Tax Court 
        shall be entitled to an annuity under this section if the 
        magistrate judge elects an annuity under this section by 
        notifying the chief judge of the Tax Court not later than the 
        later of--
                    ``(A) 5 years after the magistrate judge of the Tax 
                Court begins judicial service, or
                    ``(B) 5 years after the date of the enactment of 
                this subsection.
        Such notice shall be given in accordance with procedures 
        prescribed by the Tax Court.
            ``(2) Annuity in lieu of other annuity.--A magistrate judge 
        who elects to receive an annuity under this section shall not 
        be entitled to receive--
                    ``(A) any annuity to which such magistrate judge 
                would otherwise have been entitled under subchapter III 
                of chapter 83, or under chapter 84 (except for 
                subchapters III and VII), of title 5, United States 
                Code, for service performed as a magistrate or 
                otherwise,
                    ``(B) an annuity or salary in senior status or 
                retirement under section 371 or 372 of title 28, United 
                States Code,
                    ``(C) retired pay under section 7447, or
                    ``(D) retired pay under section 7296 of title 38, 
                United States Code.
            ``(3) Coordination with title 5.--A magistrate judge of the 
        Tax Court who elects to receive an annuity under this section--
                    ``(A) shall not be subject to deductions and 
                contributions otherwise required by section 8334(a) of 
                title 5, United States Code,
                    ``(B) shall be excluded from the operation of 
                chapter 84 (other than subchapters III and VII) of such 
                title 5, and
                    ``(C) is entitled to a lump-sum credit under 
                section 8342(a) or 8424 of such title 5, as the case 
                may be.
    ``(g) Calculation of Service.--For purposes of calculating an 
annuity under this section--
            ``(1) service as a magistrate judge of the Tax Court to 
        whom this section applies may be credited, and
            ``(2) each month of service shall be credited as \1/12\ of 
        a year, and the fractional part of any month shall not be 
        credited.
    ``(h) Covered Positions and Service.--This section applies to any 
magistrate judge of the Tax Court or special trial judge of the Tax 
Court appointed under this subchapter, but only with respect to service 
as such a magistrate judge or special trial judge after a date not 
earlier than 9\1/2\ years before the date of the enactment of this 
subsection.
    ``(i) Payments Pursuant to Court Order.--
            ``(1) In general.--Payments under this section which would 
        otherwise be made to a magistrate judge of the Tax Court based 
        upon his or her service shall be paid (in whole or in part) by 
the chief judge of the Tax Court to another person if and to the extent 
expressly provided for in the terms of any court decree of divorce, 
annulment, or legal separation, or the terms of any court order or 
court-approved property settlement agreement incident to any court 
decree of divorce, annulment, or legal separation. Any payment under 
this paragraph to a person bars recovery by any other person.
            ``(2) Requirements for payment.--Paragraph (1) shall apply 
        only to payments made by the chief judge of the Tax Court after 
        the date of receipt by the chief judge of written notice of 
        such decree, order, or agreement, and such additional 
        information as the chief judge may prescribe.
            ``(3) Court defined.--For purposes of this subsection, the 
        term `court' means any court of any State, the District of 
        Columbia, the Commonwealth of Puerto Rico, Guam, the Northern 
        Mariana Islands, or the Virgin Islands, and any Indian tribal 
        court or courts of Indian offense.
    ``(j) Deductions, Contributions, and Deposits.--
            ``(1) Deductions.--Beginning with the next pay period after 
        the chief judge of the Tax Court receives a notice under 
        subsection (f) that a magistrate judge of the Tax Court has 
        elected an annuity under this section, the chief judge shall 
        deduct and withhold 1 percent of the salary of such magistrate 
        judge. Amounts shall be so deducted and withheld in a manner 
        determined by the chief judge. Amounts deducted and withheld 
        under this subsection shall be deposited in the Treasury of the 
        United States to the credit of the Tax Court Judicial Officers' 
        Retirement Fund. Deductions under this subsection from the 
        salary of a magistrate judge shall terminate upon the 
        retirement of the magistrate judge or upon completion of 14 
        years of service for which contributions under this section 
        have been made, whether continuously or otherwise, as 
        calculated under subsection (g), whichever occurs first.
            ``(2) Consent to deductions; discharge of claims.--Each 
        magistrate judge of the Tax Court who makes an election under 
        subsection (f) shall be deemed to consent and agree to the 
        deductions from salary which are made under paragraph (1). 
        Payment of such salary less such deductions (and any deductions 
        made under section 7448) is a full and complete discharge and 
        acquittance of all claims and demands for all services rendered 
        by such magistrate judge during the period covered by such 
        payment, except the right to those benefits to which the 
        magistrate judge is entitled under this section (and section 
        7448).
    ``(k) Deposits for Prior Service.--Each magistrate judge of the Tax 
Court who makes an election under subsection (f) may deposit, for 
service performed before such election for which contributions may be 
made under this section, an amount equal to 1 percent of the salary 
received for that service. Credit for any period covered by that 
service may not be allowed for purposes of an annuity under this 
section until a deposit under this subsection has been made for that 
period.
    ``(l) Individual Retirement Records.--The amounts deducted and 
withheld under subsection (j), and the amounts deposited under 
subsection (k), shall be credited to individual accounts in the name of 
each magistrate judge of the Tax Court from whom such amounts are 
received, for credit to the Tax Court Judicial Officers' Retirement 
Fund.
    ``(m) Annuities Affected in Certain Cases.--
            ``(1) 1-year forfeiture for failure to perform judicial 
        duties.--Subject to paragraph (3), any magistrate judge of the 
        Tax Court who retires under this section and who fails to 
        perform judicial duties required of such individual by section 
        7443C shall forfeit all rights to an annuity under this section 
        for a 1-year period which begins on the 1st day on which such 
        individual fails to perform such duties.
            ``(2) Permanent forfeiture of retired pay where certain 
        non-government services performed.--Subject to paragraph (3), 
        any magistrate judge of the Tax Court who retires under this 
        section and who thereafter performs (or supervises or directs 
        the performance of) legal or accounting services in the field 
        of Federal taxation for the individual's client, the 
        individual's employer, or any of such employer's clients, shall 
        forfeit all rights to an annuity under this section for all 
        periods beginning on or after the first day on which the 
        individual performs (or supervises or directs the performance 
        of) such services. The preceding sentence shall not apply to 
        any civil office or employment under the Government of the 
        United States.
            ``(3) Forfeitures not to apply where individual elects to 
        freeze amount of annuity.--
                    ``(A) In general.--If a magistrate judge of the Tax 
                Court makes an election under this paragraph--
                            ``(i) paragraphs (1) and (2) (and section 
                        7443C) shall not apply to such magistrate judge 
                        beginning on the date such election takes 
                        effect, and
                            ``(ii) the annuity payable under this 
                        section to such magistrate judge, for periods 
                        beginning on or after the date such election 
                        takes effect, shall be equal to the annuity to 
                        which such magistrate judge is entitled on the 
                        day before such effective date.
                    ``(B) Election requirements.--An election under 
                subparagraph (A)--
                            ``(i) may be made by a magistrate judge of 
                        the Tax Court eligible for retirement under 
                        this section, and
                            ``(ii) shall be filed with the chief judge 
                        of the Tax Court.
                Such an election, once it takes effect, shall be 
                irrevocable.
                    ``(C) Effective date of election.--Any election 
                under subparagraph (A) shall take effect on the first 
                day of the first month following the month in which the 
                election is made.
            ``(4) Accepting other employment.--Any magistrate judge of 
        the Tax Court who retires under this section and thereafter 
        accepts compensation for civil office or employment under the 
        United States Government (other than for the performance of 
        functions as a magistrate judge of the Tax Court under section 
        7443C) shall forfeit all rights to an annuity under this 
        section for the period for which such compensation is received. 
        For purposes of this paragraph, the term `compensation' 
        includes retired pay or salary received in retired status.
    ``(n) Lump-Sum Payments.--
            ``(1) Eligibility.--
                    ``(A) In general.--Subject to paragraph (2), an 
                individual who serves as a magistrate judge of the Tax 
                Court and--
                            ``(i) who leaves office and is not 
                        reappointed as a magistrate judge of the Tax 
                        Court for at least 31 consecutive days,
                            ``(ii) who files an application with the 
                        chief judge of the Tax Court for payment of a 
                        lump-sum credit,
                            ``(iii) is not serving as a magistrate 
                        judge of the Tax Court at the time of filing of 
                        the application, and
                            ``(iv) will not become eligible to receive 
                        an annuity under this section within 31 days 
                        after filing the application,
                is entitled to be paid the lump-sum credit. Payment of 
                the lump-sum credit voids all rights to an annuity 
                under this section based on the service on which the 
                lump-sum credit is based, until that individual resumes 
                office as a magistrate judge of the Tax Court.
                    ``(B) Payment to survivors.--Lump-sum benefits 
                authorized by subparagraphs (C), (D), and (E) of this 
                paragraph shall be paid to the person or persons 
                surviving the magistrate judge of the Tax Court and 
                alive on the date title to the payment arises, in the 
                order of precedence set forth in subsection (o) of 
                section 376 of title 28, United States Code, and in 
                accordance with the last 2 sentences of paragraph (1) 
                of that subsection. For purposes of the preceding 
                sentence, the term `judicial official' as used in 
                subsection (o) of such section 376 shall be deemed to 
                mean `magistrate judge of the Tax Court' and the terms 
                `Administrative Office of the United States Courts' and 
                `Director of the Administrative Office of the United 
                States Courts' shall be deemed to mean `chief judge of 
                the Tax Court'.
                    ``(C) Payment upon death of judge before receipt of 
                annuity.--If a magistrate judge of the Tax Court dies 
                before receiving an annuity under this section, the 
                lump-sum credit shall be paid.
                    ``(D) Payment of annuity remainder.--If all annuity 
                rights under this section based on the service of a 
                deceased magistrate judge of the Tax Court terminate 
                before the total annuity paid equals the lump-sum 
                credit, the difference shall be paid.
                    ``(E) Payment upon death of judge during receipt of 
                annuity.--If a magistrate judge of the Tax Court who is 
                receiving an annuity under this section dies, any 
                accrued annuity benefits remaining unpaid shall be 
                paid.
                    ``(F) Payment upon termination.--Any accrued 
                annuity benefits remaining unpaid on the termination, 
                except by death, of the annuity of a magistrate judge 
                of the Tax Court shall be paid to that individual.
                    ``(G) Payment upon accepting other employment.--
                Subject to paragraph (2), a magistrate judge of the Tax 
                Court who forfeits rights to an annuity under 
                subsection (m)(4) before the total annuity paid equals 
                the lump-sum credit shall be entitled to be paid the 
                difference if the magistrate judge of the Tax Court 
                files an application with the chief judge of the Tax 
                Court for payment of that difference. A payment under 
                this subparagraph voids all rights to an annuity on 
                which the payment is based.
            ``(2) Spouses and former spouses.--
                    ``(A) In general.--Payment of the lump-sum credit 
                under paragraph (1)(A) or a payment under paragraph 
                (1)(G)--
                            ``(i) may be made only if any current 
                        spouse and any former spouse of the magistrate 
                        judge of the Tax Court are notified of the 
                        magistrate judge's application, and
                            ``(ii) shall be subject to the terms of a 
                        court decree of divorce, annulment, or legal 
                        separation, or any court or court approved 
                        property settlement agreement incident to such 
                        decree, if--
                                    ``(I) the decree, order, or 
                                agreement expressly relates to any 
                                portion of the lump-sum credit or other 
                                payment involved, and
                                    ``(II) payment of the lump-sum 
                                credit or other payment would 
                                extinguish entitlement of the 
                                magistrate judge's spouse or former 
                                spouse to any portion of an annuity 
                                under subsection (i).
                    ``(B) Notification.--Notification of a spouse or 
                former spouse under this paragraph shall be made in 
                accordance with such procedures as the chief judge of 
                the Tax Court shall prescribe. The chief judge may 
                provide under such procedures that subparagraph (A)(i) 
                may be waived with respect to a spouse or former spouse 
                if the magistrate judge establishes to the satisfaction 
                of the chief judge that the whereabouts of such spouse 
                or former spouse cannot be determined.
                    ``(C) Resolution of 2 or more orders.--The chief 
                judge shall prescribe procedures under which this 
                paragraph shall be applied in any case in which the 
                chief judge receives 2 or more orders or decrees 
                described in subparagraph (A).
            ``(3) Definition.--For purposes of this subsection, the 
        term `lump-sum credit' means the unrefunded amount consisting 
        of--
                    ``(A) retirement deductions made under this section 
                from the salary of a magistrate judge of the Tax Court,
                    ``(B) amounts deposited under subsection (k) by a 
                magistrate judge of the Tax Court covering earlier 
                service, and
                    ``(C) interest on the deductions and deposits 
                which, for any calendar year, shall be equal to the 
                overall average yield to the Tax Court Judicial 
                Officers' Retirement Fund during the preceding fiscal 
                year from all obligations purchased by the Secretary 
                during such fiscal year under subsection (o); but does 
                not include interest--
                            ``(i) if the service covered thereby 
                        aggregates 1 year or less, or
                            ``(ii) for the fractional part of a month 
                        in the total service.
    ``(o) Tax Court Judicial Officers' Retirement Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        a fund which shall be known as the `Tax Court Judicial 
        Officers' Retirement Fund'. Amounts in the Fund are authorized 
        to be appropriated for the payment of annuities, refunds, and 
        other payments under this section.
            ``(2) Investment of Fund.--The Secretary shall invest, in 
        interest bearing securities of the United States, such 
        currently available portions of the Tax Court Judicial 
        Officers' Retirement Fund as are not immediately required for 
        payments from the Fund. The income derived from these 
        investments constitutes a part of the Fund.
            ``(3) Unfunded liability.--
                    ``(A) In general.--There are authorized to be 
                appropriated to the Tax Court Judicial Officers' 
                Retirement Fund amounts required to reduce to zero the 
                unfunded liability of the Fund.
                    ``(B) Unfunded liability.--For purposes of 
                subparagraph (A), the term `unfunded liability' means 
                the estimated excess, determined on an annual basis in 
                accordance with the provisions of section 9503 of title 
31, United States Code, of the present value of all benefits payable 
from the Tax Court Judicial Officers' Retirement Fund over the sum of--
                            ``(i) the present value of deductions to be 
                        withheld under this section from the future 
                        basic pay of magistrate judges of the Tax 
                        Court, plus
                            ``(ii) the balance in the Fund as of the 
                        date the unfunded liability is determined.
    ``(p) Participation in Thrift Savings Plan.--
            ``(1) Election to contribute.--
                    ``(A) In general.--A magistrate judge of the Tax 
                Court who elects to receive an annuity under this 
                section or under section 321 of the Tax Administration 
                Good Government Act may elect to contribute an amount 
                of such individual's basic pay to the Thrift Savings 
                Fund established by section 8437 of title 5, United 
                States Code.
                    ``(B) Period of election.--An election may be made 
                under this paragraph only during a period provided 
                under section 8432(b) of title 5, United States Code, 
                for individuals subject to chapter 84 of such title.
            ``(2) Applicability of title 5 provisions.--Except as 
        otherwise provided in this subsection, the provisions of 
        subchapters III and VII of chapter 84 of title 5, United States 
        Code, shall apply with respect to a magistrate judge who makes 
        an election under paragraph (1).
            ``(3) Special rules.--
                    ``(A) Amount contributed.--The amount contributed 
                by a magistrate judge to the Thrift Savings Fund in any 
                pay period shall not exceed the maximum percentage of 
                such judge's basic pay for such pay period as allowable 
                under section 8440f of title 5, United States Code.
                    ``(B) Contributions for benefit of judge.--No 
                contributions may be made for the benefit of a 
                magistrate judge under section 8432(c) of title 5, 
                United States Code.
                    ``(C) Applicability of section 8433(b) of title 
                5.--Section 8433(b) of title 5, United States Code, 
                applies with respect to a magistrate judge who makes an 
                election under paragraph (1) and--
                            ``(i) who retires entitled to an immediate 
                        annuity under this section (including a 
                        disability annuity under subsection (d) of this 
                        section) or section 321 of the Tax 
                        Administration Good Government Act,
                            ``(ii) who retires before attaining age 65 
                        but is entitled, upon attaining age 65, to an 
                        annuity under this section or section 321 of 
                        the Tax Administration Good Government Act, or
                            ``(iii) who retires before becoming 
                        entitled to an immediate annuity, or an annuity 
                        upon attaining age 65, under this section or 
                        section 321 of the Tax Administration Good 
                        Government Act.
                    ``(D) Separation from service.--With respect to a 
                magistrate judge to whom this subsection applies, 
                retirement under this section or section 321 of the Tax 
                Administration Good Government Act is a separation from 
                service for purposes of subchapters III and VII of 
                chapter 84 of title 5, United States Code.
            ``(4) Definitions.--For purposes of this subsection, the 
        terms `retirement' and `retire' include removal from office 
        under section 7443A(a)(2) on the sole ground of mental or 
        physical disability.
            ``(5) Offset.--In the case of a magistrate judge who 
        receives a distribution from the Thrift Savings Fund and who 
        later receives an annuity under this section, that annuity 
        shall be offset by an amount equal to the amount which 
        represents the Government's contribution to that person's 
        Thrift Savings Account, without regard to earnings attributable 
        to that amount. Where such an offset would exceed 50 percent of 
        the annuity to be received in the first year, the offset may be 
        divided equally over the first 2 years in which that person 
        receives the annuity.
            ``(6) Exception.--Notwithstanding clauses (i) and (ii) of 
        paragraph (3)(C), if any magistrate judge retires under 
        circumstances making such magistrate judge eligible to make an 
        election under subsection (b) of section 8433 of title 5, 
        United States Code, and such magistrate judge's nonforfeitable 
        account balance is less than an amount that the Executive 
        Director of the Office of Personnel Management prescribes by 
        regulation, the Executive Director shall pay the nonforfeitable 
        account balance to the participant in a single payment.''.
    (b) Conforming Amendment.--The table of section for part I of 
subchapter C of chapter 76 is amended by inserting after the item 
relating to section 7443A the following new item:

                              ``Sec. 7443B. Retirement for magistrate 
                                        judges of the Tax Court.''.

SEC. 321. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.

    (a) Retirement Annuity Under Title 5 and Section 7443B of the 
Internal Revenue Code of 1986.--A magistrate judge of the United States 
Tax Court in active service on the date of the enactment of this Act 
shall, subject to subsection (b), be entitled, in lieu of the annuity 
otherwise provided under the amendments made by this title, to--
            (1) an annuity under subchapter III of chapter 83, or under 
        chapter 84 (except for subchapters III and VII), of title 5, 
        United States Code, as the case may be, for creditable service 
        before the date on which service would begin to be credited for 
        purposes of paragraph (2), and
            (2) an annuity calculated under subsection (b) or (c) and 
        subsection (g) of section 7443B of the Internal Revenue Code of 
        1986, as added by this Act, for any service as a magistrate 
        judge of the United States Tax Court or special trial judge of 
        the United States Tax Court but only with respect to service as 
        such a magistrate judge or special trial judge after a date not 
earlier than 9\1/2\ years prior to the date of the enactment of this 
Act (as specified in the election pursuant to subsection (b)) for which 
deductions and deposits are made under subsections (j) and (k) of such 
section 7443B, as applicable, without regard to the minimum number of 
years of service as such a magistrate judge of the United States Tax 
Court, except that--
                    (A) in the case of a magistrate judge who retired 
                with less than 8 years of service, the annuity under 
                subsection (c) of such section 7443B shall be equal to 
                that proportion of the salary being received at the 
                time the magistrate judge leaves office which the years 
                of service bears to 14, subject to a reduction in 
                accordance with subsection (c) of such section 7443B if 
                the magistrate judge is under age 65 at the time he or 
                she leaves office, and
                    (B) the aggregate amount of the annuity initially 
                payable on retirement under this subsection may not 
                exceed the rate of pay for the magistrate judge which 
                is in effect on the day before the retirement becomes 
                effective.
    (b) Filing of Notice of Election.--A magistrate judge of the United 
States Tax Court shall be entitled to an annuity under this section 
only if the magistrate judge files a notice of that election with the 
chief judge of the United States Tax Court specifying the date on which 
service would begin to be credited under section 7443B of the Internal 
Revenue Code of 1986, as added by this Act, in lieu of chapter 83 or 
chapter 84 of title 5, United States Code. Such notice shall be filed 
in accordance with such procedures as the chief judge of the United 
States Tax Court shall prescribe.
    (c) Lump-Sum Credit Under Title 5.--A magistrate judge of the 
United States Tax Court who makes an election under subsection (b) 
shall be entitled to a lump-sum credit under section 8342 or 8424 of 
title 5, United States Code, as the case may be, for any service which 
is covered under section 7443B of the Internal Revenue Code of 1986, as 
added by this Act, pursuant to that election, and with respect to which 
any contributions were made by the magistrate judge under the 
applicable provisions of title 5, United States Code.
    (d) Recall.--With respect to any magistrate judge of the United 
States Tax Court receiving an annuity under this section who is 
recalled to serve under section 7443C of the Internal Revenue Code of 
1986, as added by this Act--
            (1) the amount of compensation which such recalled 
        magistrate judge receives under such section 7443C shall be 
        calculated on the basis of the annuity received under this 
        section, and
            (2) such recalled magistrate judge of the United States Tax 
        Court may serve as a reemployed annuitant to the extent 
        otherwise permitted under title 5, United States Code.
Section 7443B(m)(4) of the Internal Revenue Code of 1986, as added by 
this Act, shall not apply with respect to service as a reemployed 
annuitant described in paragraph (2).

SEC. 322. PROVISIONS FOR RECALL.

    (a) In General.--Part I of subchapter C of chapter 76, as amended 
by this Act, is amended by inserting after section 7443B the following 
new section:

``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.

    ``(a) Recalling of Retired Magistrate Judges.--Any individual who 
has retired pursuant to section 7443B or the applicable provisions of 
title 5, United States Code, upon reaching the age and service 
requirements established therein, may at or after retirement be called 
upon by the chief judge of the Tax Court to perform such judicial 
duties with the Tax Court as may be requested of such individual for 
any period or periods specified by the chief judge; except that in the 
case of any such individual--
            ``(1) the aggregate of such periods in any 1 calendar year 
        shall not (without such individual's consent) exceed 90 
        calendar days, and
            ``(2) such individual shall be relieved of performing such 
        duties during any period in which illness or disability 
        precludes the performance of such duties.
Any act, or failure to act, by an individual performing judicial duties 
pursuant to this subsection shall have the same force and effect as if 
it were the act (or failure to act) of a magistrate judge of the Tax 
Court.
    ``(b) Compensation.--For the year in which a period of recall 
occurs, the magistrate judge shall receive, in addition to the annuity 
provided under the provisions of section 7443B or under the applicable 
provisions of title 5, United States Code, an amount equal to the 
difference between that annuity and the current salary of the office to 
which the magistrate judge is recalled. The annuity of the magistrate 
judge who completes that period of service, who is not recalled in a 
subsequent year, and who retired under section 7443B, shall be equal to 
the salary in effect at the end of the year in which the period of 
recall occurred for the office from which such individual retired.
    ``(c) Rulemaking Authority.--The provisions of this section may be 
implemented under such rules as may be promulgated by the Tax Court.''.
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter C of chapter 76, as amended by this Act, is amended by 
inserting after the item relating to section 7443B the following new 
item:

                              ``Sec. 7443C. Recall of magistrate judges 
                                        of the Tax Court.''.

SEC. 323. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this subtitle 
shall take effect on the date of the enactment of this Act.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

SEC. 401. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

    Subsection (i) of section 7611 (relating to section not to apply to 
criminal investigations, etc.) is amended by striking ``or'' at the end 
of paragraph (4), by striking the period at the end of paragraph (5) 
and inserting ``, or'', and by inserting after paragraph (5) the 
following:
            ``(6) information provided by the Secretary related to the 
        standards for exemption from tax under this title and the 
requirements under this title relating to unrelated business taxable 
income.''.

SEC. 402. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN 
              DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL REQUEST.

    (a) In General.--Paragraph (8) of section 6103(e) (relating to 
disclosure of collection activities with respect to joint return) is 
amended by striking ``in writing'' the first place it appears.
    (b) Elimination of Reporting Requirement.--Section 7803(d)(1) 
(relating to annual reporting) is amended by striking subparagraph (B) 
and by redesignating subparagraphs (C), (D), (E), (F), and (G) as 
subparagraphs (B), (C), (D), (E), and (F), respectively.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to requests made after the date of the enactment of 
        this Act.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall apply to reports made after the date of the enactment of 
        this Act.

SEC. 403. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION ON SOLE 
              BASIS OF REPRESENTATION OF TAXPAYERS.

    (a) In General.--Paragraph (1) of section 6103(h) (relating to 
disclosure to certain Federal officers and employees for purposes of 
tax administration, etc.) is amended--
            (1) by striking ``treasury.--Returns and return 
        information'' and inserting ``treasury.--
                    ``(A) In general.--Returns and return 
                information'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Taxpayer representatives.--Notwithstanding 
                subparagraph (A), the return or return information of 
                the representative of a taxpayer whose return is being 
                examined by an officer or employee of the Department of 
                the Treasury shall not be open to inspection by such 
                officer or employee on the sole basis of the 
                representative's relationship to the taxpayer unless a 
                supervisor of such officer or employee has approved the 
                inspection of the return or return information of such 
                representative on a basis other than by reason of such 
                relationship.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date which is 180 days after the date of the enactment of 
this Act.

SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER IDENTIFYING NUMBER WITH 
              RESPECT TO DISCLOSURE OF ACCEPTED OFFERS-IN-COMPROMISE.

    (a) In General.--Paragraph (1) of section 6103(k) (relating to 
disclosure of certain returns and return information for tax 
administrative purposes) is amended by inserting ``(other than the 
taxpayer's identifying number)'' after ``Return information''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures made after the date of the enactment of this Act.

SEC. 405. COMPLIANCE BY CONTRACTORS AND OTHER AGENTS WITH 
              CONFIDENTIALITY SAFEGUARDS.

    (a) In General.--Section 6103(p) (relating to State law 
requirements) is amended by adding at the end the following new 
paragraph:
            ``(9) Disclosure to contractors and other agents.--
        Notwithstanding any other provision of this section, no return 
        or return information shall be disclosed to any contractor or 
        other agent of a Federal, State, or local agency unless such 
        agency, to the satisfaction of the Secretary--
                    ``(A) has requirements in effect which require each 
                such contractor or other agent which would have access 
                to returns or return information to provide safeguards 
                (within the meaning of paragraph (4)) to protect the 
                confidentiality of such returns or return information,
                    ``(B) agrees to conduct an on-site review every 3 
                years (mid-point review in the case of contracts or 
                agreements of less than 1 year in duration) of each 
                contractor or other agent to determine compliance with 
                such requirements,
                    ``(C) submits the findings of the most recent 
                review conducted under subparagraph (B) to the 
                Secretary as part of the report required by paragraph 
                (4)(E), and
                    ``(D) certifies to the Secretary for the most 
                recent annual period that such contractor or other 
                agent is in compliance with all such requirements.
        The certification required by subparagraph (D) shall include 
        the name and address of each contractor and other agent, a 
        description of the contract or agreement with such contractor 
        or other agent, and the duration of such contract or agreement. 
        The requirements of this paragraph shall not apply to 
        disclosures pursuant to subsection (n) for purposes of Federal 
        tax administration.''.
    (b) Conforming Amendment.--Subparagraph (B) of section 6103(p)(8) 
is amended by inserting ``or paragraph (9)'' after ``subparagraph 
(A)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to disclosures made after December 31, 2003.
            (2) Certifications.--The first certification under section 
        6103(p)(9)(D) of the Internal Revenue Code of 1986, as added by 
        subsection (a), shall be made with respect to calendar year 
        2004.

SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO DISCLOSURE.

    (a) In General.--Subsection (c) of section 6103 (relating to 
disclosure of returns and return information to designee of taxpayer) 
is amended--
            (1) by striking ``Taxpayer.--The Secretary'' and inserting 
        ``Taxpayer.--
            ``(1) In General.--The Secretary'', and
            (2) by adding at the end the following new paragraphs:
            ``(2) Restrictions on persons obtaining information.--The 
        return of any taxpayer, or return information with respect to 
        such taxpayer, disclosed to a person or persons under paragraph 
        (1) for a purpose specified in writing, electronically, or 
        orally may be disclosed or used by such person or persons only 
        for the purpose of, and to the extent necessary in, 
        accomplishing the purpose for disclosure specified and shall 
        not be disclosed or used for any other purpose.
            ``(3) Requirements for form prescribed by secretary.--For 
        purposes of this subsection, the Secretary shall prescribe a 
        form for written requests and consents which shall--
                    ``(A) contain a warning, prominently displayed, 
                informing the taxpayer that the form should not be 
                signed unless it is completed,
                    ``(B) state that if the taxpayer believes there is 
                an attempt to coerce him to sign an incomplete or blank 
                form, the taxpayer should report the matter to the 
                Treasury Inspector General for Tax Administration, and
                    ``(C) contain the address and telephone number of 
                the Treasury Inspector General for Tax Administration.
            ``(4) Cross Reference.--

                                ``For provision providing for civil 
damages for violation of paragraph (2), see section 7431(i).''.
    (b) Civil Damages.--Section 7431 (relating to civil damages for 
unauthorized inspection or disclosure of returns and return 
information) is amended by adding at the end the following new 
subsection:
    ``(i) Disclosure or Use of Returns and Return Information Obtained 
Under Subsection 6103(c).--Disclosure or use of returns or return 
information obtained under section 6103(c) other than for--
            ``(1) the purpose of, and to the extent necessary in, 
        accomplishing the purpose for disclosure specified in writing, 
        electronically, or orally, or
            ``(2) subject to the safeguards set forth in section 6103, 
        for purposes permitted under section 6103,
shall be treated as a violation of section 6103(a).''.
    (b) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretary of the Treasury shall submit a 
report to the Congress on compliance with the designation and 
certification requirements applicable to requests for or consent to 
disclosure of returns and return information under section 6103(c) of 
the Internal Revenue Code of 1986, as amended by subsection (a). Such 
report shall--
            (1) evaluate (on the basis of random sampling) whether--
                    (A) the amendment made by subsection (a) is 
                achieving the purposes of this section;
                    (B) requesters and submitters for such disclosure 
                are continuing to evade the purposes of this section 
                and, if so, how; and
                    (C) the sanctions for violations of such 
                requirements are adequate; and
            (2) include such recommendations that the Secretary of the 
        Treasury considers necessary or appropriate to better achieve 
        the purposes of this section.
    (d) Sunset of Existing Consents.--Notwithstanding any other 
provision of law, any request for or consent to disclose any return or 
return information under section 6103(c) of the Internal Revenue Code 
of 1986 made before the date of the enactment of this Act shall remain 
in effect until the earlier of the date such request or consent is 
otherwise terminated or the date which is 3 taxable years after such 
date of enactment.
    (e) Effective Date.--The amendments made by this section shall 
apply to requests and consents made after 3 months after the date of 
the enactment of this Act.

SEC. 407. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OR DISCLOSURE.

    (a) Notice to Taxpayer.--Subsection (e) of section 7431 (relating 
to notification of unlawful inspection and disclosure) is amended by 
adding at the end the following: ``The Secretary shall also notify such 
taxpayer if the Internal Revenue Service or, upon notice to the 
Secretary by a Federal or State agency, if such Federal or State 
agency, proposes an administrative determination as to disciplinary or 
adverse action against an employee arising from the employee's 
unauthorized inspection or disclosure of the taxpayer's return or 
return information. The notice described in this subsection shall 
include the date of the inspection or disclosure and the rights of the 
taxpayer under such administrative determination.''.
    (b) Exhaustion of Administrative Remedies Required.--Section 7431, 
as amended by this Act, is amended by adding at the end the following 
new subsection:
    ``(j) Exhaustion of Administrative Remedies Required.--A judgment 
for damages shall not be awarded under subsection (c) unless the court 
determines that the plaintiff has exhausted the administrative remedies 
available to such plaintiff within the Internal Revenue Service.''.
    (c) Payment Authority Clarified.--
            (1) In general.--Section 7431, as amended by subsection 
        (b), is amended by adding at the end the following new 
        subsection:
    ``(k) Payment Authority.--Claims pursuant to this section shall be 
payable out of funds appropriated under section 1304 of title 31, 
United States Code.''.
            (2) Annual reports of payments.--The Secretary of the 
        Treasury shall annually report to the Committee of Finance of 
        the Senate and the Committee on Ways and Means of the House of 
        Representatives regarding payments made from the United States 
        Judgment Fund under section 7431(k) of the Internal Revenue 
        Code of 1986.
    (d) Burden of Proof for Good Faith Exception Rests With 
Secretary.--Section 7431(b) (relating to exceptions) is amended by 
adding at the end the following new flush sentence:
``In any proceeding involving the issue of the existence of good faith, 
the burden of proof with respect to such issue shall be on the 
Secretary.''.
    (e) Reports.--Subsection (p) of section 6103 (relating to procedure 
and recordkeeping), as amended by this Act, is amended by adding at the 
end the following new paragraph:
            ``(10) Report on willful unauthorized disclosure and 
        inspection.--As part of the report required by paragraph (3)(C) 
        for each calendar year, the Secretary shall furnish information 
        regarding the willful unauthorized disclosure and inspection of 
        returns and return information, including the number, status, 
        and results of--
                    ``(A) administrative investigations,
                    ``(B) civil lawsuits brought under section 7431 
                (including the amounts for which such lawsuits were 
                settled and the amounts of damages awarded), and
                    ``(C) criminal prosecutions.''.
    (c) Effective Dates.--
            (1) Notice.--The amendment made by subsection (a) shall 
        apply to determinations made after the date of the enactment of 
        this Act.
            (2) Exhaustion of remedies and burden of proof.--The 
        amendments made by subsections (b) and (d) shall apply to 
        inspections and disclosures occurring on and after the date of 
        the enactment of this Act.
            (3) Payment authority.--The amendment made by subsection 
        (c)(1) shall take effect on the date of the enactment of this 
        Act.
            (4) Reports.--The amendment made by subsection (e) shall 
        apply to calendar years ending after the date of the enactment 
        of this Act.

SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.

    (a) In General.--Section 6103(i)(3)(B)(i) (relating to danger of 
death or physical injury) is amended by striking ``or State law 
enforcement agency'' and inserting ``, State, or local law enforcement 
agency''.
    (b) Conforming Amendments.--Section 6103(p)(4) is amended--
            (1) by striking ``(i)(3)(B)(i) or (7)(A)(ii)'' and 
        inserting ``(i)(7)(A)(ii)'', and
            (2) by striking ``, (i)(3)(B)(i),''.
    (c) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND PURPOSES.

    (a) In General.--Section 6103(m)(1) (relating to tax refunds) is 
amended by striking ``taxpayer identity information to the press and 
other media'' and by inserting ``a person's name and the city, State, 
and zip code of the person's mailing address to the press, other media, 
and through any other means of mass communication,''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS RELATED TO 
              SECTION 501(C) ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 6104 is amended by 
striking paragraph (2) and inserting the following new paragraphs:
            ``(2) Disclosure of proposed actions related to charitable 
        organizations.--
                    ``(A) Specific notifications.--In the case of an 
                organization to which paragraph (1) applies, the 
                Secretary may disclose to the appropriate State 
                officer--
                            ``(i) a notice of proposed refusal to 
                        recognize such organization as an organization 
                        described in section 501(c)(3) or a notice of 
                        proposed revocation of such organization's 
                        recognition as an organization exempt from 
                        taxation,
                            ``(ii) the issuance of a letter of proposed 
                        deficiency of tax imposed under section 507 or 
                        chapter 41 or 42, and
                            ``(iii) the names, addresses, and taxpayer 
                        identification numbers of organizations which 
                        have applied for recognition as organizations 
                        described in section 501(c)(3).
                    ``(B) Additional disclosures.--Returns and return 
                information of organizations with respect to which 
                information is disclosed under subparagraph (A) may be 
                made available for inspection by or disclosed to an 
                appropriate State officer.
                    ``(C) Procedures for disclosure.--Information may 
                be inspected or disclosed under subparagraph (A) or (B) 
                only--
                            ``(i) upon written request by an 
                        appropriate State officer, and
                            ``(ii) for the purpose of, and only to the 
                        extent necessary in, the administration of 
                        State laws regulating such organizations.
                Such information may only be inspected by or disclosed 
                to representatives of the appropriate State officer 
                designated as the individuals who are to inspect or to 
                receive the returns or return information under this 
                paragraph on behalf of such officer. Such 
                representatives shall not include any contractor or 
                agent.
                    ``(D) Disclosures other than by request.--The 
                Secretary may make available for inspection or disclose 
                returns and return information of an organization to 
                which paragraph (1) applies to an appropriate State 
                officer of any State if the Secretary determines that 
                such inspection or disclosure may facilitate the 
                resolution of Federal or State issues relating to the 
                tax-exempt status of such organization.
            ``(3) Disclosure with respect to certain other exempt 
        organizations.--Upon written request by an appropriate State 
        officer, the Secretary may make available for inspection or 
        disclosure returns and return information of an organization 
        described in paragraph (2), (4), (6), (7), (8), (10), or (13) 
        of section 501(c) for the purpose of, and to the extent 
        necessary in, the administration of State laws regulating the 
        solicitation or administration of the charitable funds or 
        charitable assets of such organizations. Such information may 
        be inspected only by or disclosed only to representatives of 
        the appropriate State officer designated as the individuals who 
        are to inspect or to receive the returns or return information 
        under this paragraph on behalf of such officer. Such 
        representatives shall not include any contractor or agent.
            ``(4) Use in civil judicial and administrative 
        proceedings.--Returns and return information disclosed pursuant 
        to this subsection may be disclosed in civil administrative and 
        civil judicial proceedings pertaining to the enforcement of 
        State laws regulating such organizations in a manner prescribed 
        by the Secretary similar to that for tax administration 
        proceedings under section 6103(h)(4).
            ``(5) No disclosure if impairment.--Returns and return 
        information shall not be disclosed under this subsection, or in 
        any proceeding described in paragraph (4), to the extent that 
        the Secretary determines that such disclosure would seriously 
        impair Federal tax administration.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Return and return information.--The terms 
                `return' and `return information' have the respective 
                meanings given to such terms by section 6103(b).
                    ``(B) Appropriate state officer.--The term 
                `appropriate State officer' means--
                            ``(i) the State attorney general,
                            ``(ii) in the case of an organization to 
                        which paragraph (1) applies, any other State 
                        official charged with overseeing organizations 
                        of the type described in section 501(c)(3), and
                            ``(iii) in the case of an organization to 
                        which paragraph (3) applies, the head of an 
                        agency designated by the State attorney general 
                        as having primary responsibility for overseeing 
                        the solicitation of funds for charitable 
                        purposes.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 6103 is amended--
                    (A) by inserting ``or any appropriate State officer 
                who has or had access to returns or return information 
                under section 6104(c)'' after ``this section'' in 
                paragraph (2), and
                    (B) by striking ``or subsection (n)'' in paragraph 
                (3) and inserting ``subsection (n), or section 
                6104(c)''.
            (2) Subparagraph (A) of section 6103(p)(3) is amended by 
        inserting ``and section 6104(c)'' after ``section'' in the 
        first sentence.
            (3) Paragraph (4) of section 6103(p), as amended by section 
        202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 116 
        Stat. 961), is amended by striking ``or (17)'' after ``any 
        other person described in subsection (l)(16)'' each place it 
        appears and inserting ``or (18) or any appropriate State 
        officer (as defined in section 6104(c))''.
            (4) The heading for paragraph (1) of section 6104(c) is 
        amended by inserting ``for charitable organizations''.
            (5) Paragraph (2) of section 7213(a) is amended by 
        inserting ``or under section 6104(c)'' after ``6103''.
            (6) Paragraph (2) of section 7213A(a) is amended by 
        inserting ``or 6104(c)'' after ``6103''.
            (7) Paragraph (2) of section 7431(a) is amended by 
        inserting ``(including any disclosure in violation of section 
        6104(c))'' after ``6103''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act but shall not apply to 
requests made before such date.

SEC. 411. TREATMENT OF PUBLIC RECORDS.

    (a) In General.--Section 6103(b) (relating to definitions) is 
amended by adding at the end the following new paragraph:
            ``(12) Treatment of public records.--Returns and return 
        information shall not be subject to subsection (a) if 
        disclosed--
                    ``(A) in the course of any judicial or 
                administrative proceeding or pursuant to tax 
                administration activities, and
                    ``(B) properly made part of the public record.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect before, on, and after the date of the enactment of this Act.

SEC. 412. INVESTIGATIVE DISCLOSURES.

    (a) In General.--Section 6103 (confidentiality and disclosure of 
returns and return information) is amended by redesignating subsection 
(q) as subsection (r) and by inserting after subsection (p) the 
following new subsection:
    ``(q) Investigative Disclosures.--Nothing in this section may be 
construed to prohibit investigative agents of the Internal Revenue 
Service from identifying themselves, their organizational affiliation, 
and the criminal nature of an investigation when contacting third 
parties in writing or in person.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 413. TIN MATCHING.

    (a) In General.--Section 6103(k) (relating to disclosure of certain 
returns and return information for tax administration purposes) is 
amended by adding at the end the following new paragraph:
            ``(10) TIN matching.--The Secretary may disclose to any 
        person required to provide a taxpayer identifying number (as 
        described in section 6109) to the Secretary whether such 
        information matches records maintained by the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 414. FORM 8300 DISCLOSURES.

    (a) In General.--Section 6103(p)(4) (relating to safeguards) is 
amended by striking ``(15),'' both places it appears.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 415. TECHNICAL AMENDMENT.

    (a) In General.--Section 6103(i)(7)(A) (relating to disclosure to 
law enforcement agencies) is amended by adding at the end the following 
new clause:
                            ``(v) Taxpayer identity.--For purposes of 
                        this subparagraph, a taxpayer's identity shall 
                        not be treated as taxpayer return 
                        information.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

SEC. 501. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS.

    (a) In General.--
            (1) Adjustments in tax tables so that inflation will not 
        result in tax increases.--Paragraph (7) of section 1(f) is 
        amended to read as follows:
            ``(7) Special rule for certain brackets.--In prescribing 
        tables under paragraph (1) which apply to taxable years 
        beginning in a calendar year after 1994, the cost-of-living 
        adjustment used in making adjustments to the dollar amounts at 
        which the 36 percent rate bracket begins or at which the 39.6 
percent rate bracket begins shall be determined under paragraph (3) by 
substituting `1993' for `1992'.''.
            (2) Reduced capital gain rates for qualified 5-year gain.--
        Paragraph (2) of section 1(h) is amended by striking ``In the 
        case of any taxable year beginning after December 31, 2000, 
        the'' and inserting ``The''.
            (3) Credit for producing fuel from nonconventional 
        source.--Section 29 is amended by striking subsection (e) and 
        by redesignating subsections (f) and (g) as subsections (e) and 
        (f), respectively.
            (4) Earned income credit.--Paragraph (1) of section 32(b) 
        is amended--
                    (A) by striking subparagraphs (B) and (C), and
                    (B) in subparagraph (A) by striking ``(A) In 
                general.--In the case of taxable years beginning after 
                1995'' and moving the table 2 ems to the left.
            (5) General business credits.--Subsection (d) of section 38 
        is amended by striking paragraph (3).
            (6) Carryback and carryforward of unused credits.--
        Subsection (d) of section 39 is amended by striking paragraphs 
        (1) through (8) and by redesignating paragraphs (9) and (10) as 
        paragraphs (1) and (2), respectively.
            (7) Adjustments based on adjusted current earnings.--Clause 
        (ii) of section 56(g)(4)(F) is amended by striking ``In the 
        case of any taxable year beginning after December 31, 1992, 
        clause'' and inserting ``Clause''.
            (8) Items of tax preference; depletion.--Paragraph (1) of 
        section 57(a) is amended by striking ``Effective with respect 
        to taxable years beginning after December 31, 1992, this'' and 
        inserting ``This''.
            (9) Intangible drilling costs.--
                    (A) Clause (i) of section 57(a)(2)(E) is amended by 
                striking ``In the case of any taxable year beginning 
                after December 31, 1992, this'' and inserting ``This''.
                    (B) Clause (ii) of section 57(a)(2)(E) is amended 
                by striking ``(30 percent in the case of taxable years 
                beginning in 1993)''.
            (10) Annuities; certain proceeds of endowment and life 
        insurance contracts.--Section 72 is amended--
                    (A) in subsection (c)(4) by striking ``; except 
                that if such date was before January 1, 1954, then the 
                annuity starting date is January 1, 1954'', and
                    (B) in subsection (g)(3) by striking ``January 1, 
                1954, or'' and ``, whichever is later''.
            (11) Accident and health plans.--Section 105(f) is amended 
        by striking ``or (d)''.
            (12) Flexible spending arrangements.--Section 106(c)(1) is 
        amended by striking ``Effective on and after January 1, 1997, 
        gross'' and inserting ``Gross''.
            (13) Certain combat zone compensation of members of the 
        armed forces.--Subsection (c) of section 112 is amended--
                    (A) by striking ``(after June 24, 1950)'' in 
                paragraph (2), and
                    (B) striking ``such zone;'' and all that follows in 
                paragraph (3) and inserting ``such zone.''.
            (14) Principal residence.--Section 121(b)(3) is amended--
                    (A) by striking subparagraph (B); and
                    (B) in subparagraph (A) by striking ``(A) In 
                general.--'' and moving the text 2 ems to the left.
            (15) Certain reduced uniformed services retirement pay.--
        Section 122(b)(1) is amended by striking ``after December 31, 
        1965,''.
            (16) Great plains conservation program.--Section 126(a) is 
        amended by striking paragraph (6) and by redesignating 
        paragraphs (7), (8), (9), and (10) as paragraphs (6), (7), (8), 
        and (9), respectively.
            (17) Mortgage revenue bonds for residences in federal 
        disaster areas.--Section 143(k) is amended by striking 
        paragraph (11).
            (18) Interim authority for governor.--
                    (A) Section 146(e) is amended by striking paragraph 
                (2) and by redesignating paragraph (3) as paragraph 
                (2).
                    (B) Section 42(h)(3)(F) is amended by striking 
                ``(other than paragraph (2)(B) thereof)''.
            (19) Treble damage payments under the antitrust law.--
        Section 162(g) is amended by striking the last sentence.
            (20) State legislators' travel expenses away from home.--
        Paragraph (4) of section 162(h) is amended by striking ``For 
        taxable years beginning after December 31, 1980, this'' and 
        inserting ``This''.
            (21) Interest.--
                    (A) Section 163 is amended by striking paragraph 
                (6) of subsection (d) and paragraph (5) (relating to 
                phase-in of limitation) of subsection (h).
                    (B) Section 56(b)(1)(C) is amended by striking 
                clause (ii) and by redesignating clauses (iii), (iv), 
                and (v) as clauses (ii), (iii), and (iv), respectively.
            (22) Charitable, etc., contributions and gifts.--Section 
        170 is amended by striking subsection (k).
            (23) Amortizable bond premium.--Subparagraph (B) of section 
        171(b)(1) is amended to read as follows:
                    ``(B)(i) in the case of a bond described in 
                subsection (a)(2), with reference to the amount payable 
                on maturity or earlier call date, and
                    ``(ii) in the case of a bond described in 
                subsection (a)(1), with reference to the amount payable 
on maturity (or if it results in a smaller amortizable bond premium 
attributable to the period of earlier call date, with reference to the 
amount payable on earlier call date), and''.
            (24) Net operating loss carrybacks and carryovers.--
                    (A) Section 172 is amended--
                            (i) by striking subparagraph (D) of 
                        subsection (b)(1) and by redesignating 
                        subparagraphs (E), (F), and (G) as 
                        subparagraphs (D), (E), and (F), respectively,
                            (ii) by striking subsection (g), and
                            (iii) by striking subparagraph (F) of 
                        subsection (h)(2).
                    (B) Section 172(h)(4) is amended by striking 
                ``subsection (b)(1)(E)'' each place it appears and 
                inserting ``subsection (b)(1)(D)''.
                    (C) Section 172(i)(3) is amended by striking 
                ``subsection (b)(1)(G)'' each place it appears and 
                inserting ``subsection (b)(1)(F)''.
                    (D) Section 172(j) is amended by striking 
                ``subsection (b)(1)(H)'' each place it appears and 
                inserting ``subsection (b)(1)(G)''.
                    (E) Section 172, as amended by subparagraphs (A) 
                through (D) of this paragraph, is amended--
                            (i) by redesignating subsections (h), (i), 
                        and (j) as subsections (g), (h), and (i), 
                        respectively,
                            (ii) by striking ``subsection (h)'' each 
                        place it appears and inserting ``subsection 
                        (g)'', and
                            (iii) by striking ``subsection (i)'' each 
                        place it appears and inserting ``subsection 
                        (h)''.
            (25) Research and experimental expenditures.--Subparagraph 
        (A) of section 174(a)(2) is amended to read as follows:
                    ``(A) Without consent.--A taxpayer may, without the 
                consent of the Secretary, adopt the method provided in 
                this subsection for his first taxable year for which 
                expenditures described in paragraph (1) are paid or 
                incurred.''.
            (26) Amortization of certain research and experimental 
        expenditures.--Paragraph (2) of section 174(b)(2) is amended by 
        striking ``beginning after December 31, 1953''.
            (27) Soil and water conservation expenditures.--Paragraph 
        (1) of section 175(d) is amended to read as follows:
            ``(1) Without consent.--A taxpayer may, without the consent 
        of the Secretary, adopt the method provided in this section for 
        his first taxable year for which expenditures described in 
        subsection (a) are paid or incurred.''.
            (28) Activities not engaged in for profit.--Section 
        183(e)(1) is amended by striking the last sentence.
            (29) Dividends received on certain preferred stock; and 
        dividends paid on certain preferred stock of public 
        utilities.--
                    (A) Sections 244 and 247 are hereby repealed and 
                the table of sections for part VIII of subchapter B of 
                chapter 1 is amended by striking the items relating to 
                sections 244 and 247.
                    (B) Paragraph (5) of section 172(d) is amended to 
                read as follows:
            ``(5) Computation of deduction for dividends received.--The 
        deductions allowed by section 243 (relating to dividends 
        received by corporations) and 245 (relating to dividends 
        received from certain foreign corporations) shall be computed 
        without regard to section 246(b) (relating to limitation on 
        aggregate amount of deductions).''.
                    (C) Paragraph (1) of section 243(c) is amended to 
                read as follows:
            ``(1) In general.--In the case of any dividend received 
        from a 20-percent owned corporation, subsection (a)(1) shall be 
        applied by substituting `80 percent' for `70 percent'.''.
                    (D) Section 243(d) is amended by striking paragraph 
                (4).
                    (E) Section 246 is amended--
                            (i) by striking ``, 244,'' in subsection 
                        (a)(1),
                            (ii) in subsection (b)(1)--
                                    (I) by striking ``sections 
                                243(a)(1), and 244(a),'' the first 
                                place it appears and inserting 
                                ``section 243(a)(1),'',
                                    (II) by striking ``244(a),'' the 
                                second place it appears therein, and
                                    (III) by striking ``subsection (a) 
                                or (b) of section 245, and 247,'' and 
                                inserting ``and subsection (a) or (b) 
                                of section 245,'', and
                            (iii) by striking ``, 244,'' in subsection 
                        (c)(1).
                    (F) Section 246A is amended by striking ``, 244,'' 
                both places it appears in subsections (a) and (e).
                    (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
                469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and 
                (D) of section 805(a)(4), 805(b)(5), 812(e)(2)(A), 
                815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), 
                1059(b)(2)(B), and 1244(c)(2)(C) are each amended by 
                striking ``, 244,'' each place it appears.
                    (H) Section 805(a)(4)(B) is amended by striking ``, 
                244(a),'' each place it appears.
                    (I) Section 810(c)(2)(B) is amended by striking 
                ``244 (relating to dividends on certain preferred stock 
                of public utilities),''.
            (30) Organization expenses.--Section 248(c) is amended by 
        striking ``beginning after December 31, 1953,'' and by striking 
        the last sentence.
            (31) Bond repurchase premium.--Section 249(b)(1) is amended 
        by striking ``, in the case of bonds or other evidences of 
        indebtedness issued after February 28, 1913,''.
            (32) Amount of gain where loss previously disallowed.--
        Section 267(d) is amended by striking ``(or by reason of 
        section 24(b) of the Internal Revenue Code of 1939)'' in 
        paragraph (1), by striking ``after December 31, 1953,'' in 
        paragraph (2), by striking the second sentence, and by striking 
        ``or by reason of section 118 of the Internal Revenue Code of 
        1939'' in the last sentence.
            (33) Acquisitions made to evade or avoid income tax.--
        Paragraphs (1) and (2) of section 269(a) are each amended by 
        striking ``or acquired on or after October 8, 1940,''.
            (34) Interest on indebtedness incurred by corporations to 
        acquire stock or assets of another corporation.--Section 279 is 
        amended--
                    (A) by striking ``after December 31, 1967,'' in 
                subsection (a)(2),
                    (B) by striking ``after October 9, 1969,'' in 
                subsection (b),
                    (C) by striking ``after October 9, 1969, and'' in 
                subsection (d)(5), and
                    (D) by striking subsection (i) and by redesignating 
                subsection (j) as subsection (i).
            (35) Special rules relating to corporate preference 
        items.--Paragraph (4) of section 291(a) is amended by striking 
        ``In the case of taxable years beginning after December 31, 
        1984, section'' and inserting ``Section''.
            (36) Qualifications for tax credit employee stock ownership 
        plan.--Section 409 is amended by striking subsections (a), (g), 
        and (q).
            (37) Funding standards.--Section 412(m)(4) is amended--
                    (A) by striking ``the applicable percentage'' in 
                subparagraph (A) and inserting ``25 percent'', and
                    (B) by striking subparagraph (C) and by 
                redesignating subparagraph (D) as subparagraph (C).
            (38) Retiree health accounts.--Section 420 is amended--
                    (A) by striking paragraph (4) in subsection (b) and 
                by redesignating paragraph (5) as paragraph (4), and
                    (B) by amending paragraph (2) of subsection (c) to 
                read as follows:
            ``(2) Requirements relating to pension benefits accruing 
        before transfer.--The requirements of this paragraph are met if 
        the plan provides that the accrued pension benefits of any 
        participant or beneficiary under the plan become nonforfeitable 
        in the same manner which would be required if the plan had 
        terminated immediately before the qualified transfer (or in the 
        case of a participant who separated during the 1-year period 
        ending on the date of the transfer, immediately before such 
        separation).''.
            (39) Employee stock purchase plans.--Section 423(a) is 
        amended by striking ``after December 31, 1963,''.
            (40) Limitation on deductions for certain farming.--Section 
        464 is amended--
                    (A) by striking ``any farming syndicate (as defined 
                in subsection (c))'' both places it appears in 
                subsections (a) and (b) and inserting ``any taxpayer to 
                whom subsection (f) applies'', and
                    (B) by striking subsection (g).
            (41) Deductions limited to amount at risk.--
                    (A) Paragraph (3) of section 465(c) is amended by 
                striking ``In the case of taxable years beginning after 
                December 31, 1978, this'' and inserting ``This''.
                    (B) Paragraph (2) of section 465(e)(2)(A) is 
                amended by striking ``beginning after December 31, 
                1978''.
            (42) Nuclear decommissioning costs.--Section 468A(e)(2) is 
        amended--
                    (A) by striking ``at the rate set forth in 
                subparagraph (B)'' in subparagraph (A) and inserting 
                ``at a rate of 20 percent'', and
                    (B) by striking subparagraph (B) and by 
                redesignating subparagraphs (C) and (D) as 
                subparagraphs (B) and (C), respectively.
            (43) Passive activity losses and credits limited.--
                    (A) Section 469 is amended by striking subsection 
                (m).
                    (B) Subsection (b) of section 58 is amended by 
                adding ``and'' at the end of paragraph (1), by striking 
                paragraph (2), and by redesignating paragraph (3) as 
                paragraph (2).
            (44) Adjustments required by changes in method of 
        accounting.--Section 481(b)(3) is amended by striking 
        subparagraph (C).
            (45) Exemption from tax on corporations, certain trusts, 
        etc.--Section 501 is amended by striking subsection (p).
            (46) Requirements for exemption.--
                    (A) Section 503(a)(1) is amended to read as 
                follows:
            ``(1) General rule.--An organization described in paragraph 
        (17) or (18) of section 501(a) or described in section 401(a) 
        and referred to in section 4975(g)(2) or (3) shall not be 
        exempt from taxation under section 501(a) if it has engaged in 
        a prohibited transaction.''.
                    (B) Paragraph (2) of section 503(a) is amended by 
                striking ``described in section 501(c)(17) or (18) or 
                paragraph (a)(1)(B)'' and inserting ``described in 
                paragraph (1)''.
                    (C) Subsection (c) of section 503 is amended by 
                striking ``described in section 501(c)(17) or (18) or 
                subsection (a)(1)(B)'' and inserting ``described in 
                subsection (a)(1)''.
            (47) Amounts received by surviving annuitant under joint 
        and survivor annuity contract.--Subparagraph (A) of section 
        691(d)(1) is amended by striking ``after December 31, 1953, 
        and''.
            (48) Income taxes of members of armed forces on death.--
        Section 692(a)(1) is amended by striking ``after June 24, 
        1950''.
            (49) Insurance company taxable income.--
                    (A) Section 832(e) is amended by striking ``of 
                taxable years beginning after December 31, 1966,''.
                    (B) Section 832(e)(6) is amended by striking ``In 
                the case of any taxable year beginning after December 
                31, 1970, the'' and by inserting ``The''.
            (50) Tax on nonresident alien individuals.--Subparagraph 
        (B) of section 871(a)(1) is amended to read as follows:
                    ``(B) gains described in subsection (b) or (c) of 
                section 631,''.
            (51) Property on which lessee has made improvements.--
        Section 1019 is amended by striking the last sentence.
            (52) Involuntary conversion.--Section 1033 is amended by 
        striking subsection (j) and by redesignating subsection (k) as 
        subsection (j).
            (53) Property acquired during affiliation.--Section 1051 is 
        repealed and the table of sections for part IV of subchapter O 
        of chapter 1 is amended by striking the item relating to 
section 1051.
            (54) Holding period of property.--
                    (A) Paragraph (5) of section 1223 is amended by 
                striking ``(or under so much of section 1052(c) as 
                refers to section 113(a)(23) of the Internal Revenue 
                Code of 1939)''.
                    (B) Paragraph (7) of section 1223 is amended by 
                striking the last sentence.
                    (C) Paragraph (9) of section 1223 is repealed.
            (55) Property used in the trade or business and involuntary 
        conversions.--Subparagraph (A) of section 1231(c)(2) is amended 
        by striking ``beginning after December 31, 1981''.
            (56) Sale or exchange of patents.--Section 1235 is 
        amended--
                    (A) by striking subsection (c) and by redesignating 
                subsections (d) and (e) as (c) and (d), respectively, 
                and
                    (B) by striking ``(d)'' in subsection (b) and 
                inserting ``(c)''.
            (57) Dealers in securities.--Subsection (b) of section 1236 
        is amended by striking ``after November 19, 1951,''.
            (58) Sale of patents.--Subsection (a) of section 1249 is 
        amended by striking ``after December 31, 1962,''.
            (59) Gain from disposition of farm land.--Paragraph (1) of 
        section 1252(a) is amended by striking ``after December 31, 
        1969,'' both places it appears.
            (60) Treatment of amounts received on retirement or sale or 
        exchange of debt instruments.--Subsection (c) of section 1271 
        is amended to read as follows:
    ``(c) Special Rule for Certain Obligations with Respect to Which 
Original Issue Discount not Currently Includible.--
            ``(1) In general.--On the sale or exchange of debt 
        instruments issued by a government or political subdivision 
        thereof after December 31, 1954, and before July 2, 1982, or by 
        a corporation after December 31, 1954, and on or before May 27, 
        1969, any gain realized which does not exceed--
                    ``(A) an amount equal to the original issue 
                discount, or
                    ``(B) if at the time of original issue there was no 
                intention to call the debt instrument before maturity, 
                an amount which bears the same ratio to the original 
                issue discount as the number of complete months that 
                the debt instrument was held by the taxpayer bears to 
                the number of complete months from the date of original 
                issue to the date of maturity,
        shall be considered as ordinary income.
            ``(2) Subsection (a)(2)(A) not to apply.--Subsection 
        (a)(2)(A) shall not apply to any debt instrument referred to in 
        subparagraph (A) of this paragraph.
            ``(3) Cross reference.--

                                ``For current inclusion of original 
issue discount, see section 1272.''.
            (61) Amount and method of adjustment.--Section 1314 is 
        amended by striking subsection (d) and by redesignating 
        subsection (e) as subsection (d).
            (62) Election; revocation; termination.--Clause (iii) of 
        section 1362(d)(3) is amended by striking ``unless'' and all 
        that follows and inserting ``unless the corporation was an S 
        corporation for such taxable year.''.
            (63) Old-age, survivors, and disability insurance.--
        Subsection (a) of section 1401 is amended by striking ``the 
        following percent'' and all that follows and inserting ``12.4 
        percent of the amount of the self-employment income for such 
        taxable year.''.
            (64) Hospital insurance.--Subsection (b) of section 1401 is 
        amended by striking ``the following percent'' and all that 
        follows and inserting ``2.9 percent of the amount of the self-
        employment income for such taxable year.''.
            (65) Ministers, members of religious orders, and christian 
        science practitioners.--Paragraph (3) of section 1402(e) is 
        amended by striking ``whichever of the following dates is 
        later: (A)'' and by striking ``; or (B)'' and all that follows 
        and by inserting a period.
            (66) Withholding of tax on nonresident aliens.--The first 
        sentence of subsection (b) of section 1441 and the first 
        sentence of paragraph (5) of section 1441(c) are each amended 
        by striking ``gains subject to tax'' and all that follows 
        through ``October 4, 1966'' and inserting ``and gains subject 
        to tax under section 871(a)(1)(D)''.
            (67) Affiliated group defined.--Subparagraph (A) of section 
        1504(a)(3) is amended by striking ``for a taxable year which 
        includes any period after December 31, 1984'' in clause (i) and 
        by striking ``in a taxable year beginning after December 31, 
        1984'' in clause (ii).
            (68) Disallowance of the benefits of the graduated 
        corporate rates and accumulated earnings credit.--
                    (A) Subsection (a) of section 1551 is amended by 
                striking paragraph (1) and by redesignating paragraphs 
                (2) and (3) as paragraphs (1) and (2), respectively.
                    (B) Section 1551(b) is amended--
                            (i) by striking ``or (2)'' in paragraph 
                        (1), and
                            (ii) by striking ``(a)(3)'' in paragraph 
                        (2) and inserting ``(a)(2)''.
            (69) Definition of wages.--Section 3121(b) is amended by 
        striking paragraph (17).
            (70) Credits against tax.--
                    (A) Paragraph (4) of section 3302(f) is amended by 
                striking ``subsection--'' and all that follows through 
                ``(A) In general.--'', by striking subparagraph (B), by 
                redesignating clauses (i) and (ii) as subparagraphs (A) 
                and (B), respectively, and by moving the text of such 
                subparagraphs (as so redesignated) 2 ems to the left.
                    (B) Paragraph (5) of section 3302(f) is amended by 
                striking subparagraphs (D) and by redesignating 
                subparagraph (E) as subparagraph (D).
            (71) Domestic service employment taxes.--Section 3510(b) is 
        amended by striking paragraph (4).
            (72) Tax on fuel used in commercial transportation on 
        inland waterways.--Section 4042(b)(2)(A) is amended to read as 
        follows:
                    ``(A) The Inland Waterways Trust Fund financing 
                rate is 20 cents per gallon.''.
            (73) Transportation by air.--Section 4261(e) is amended--
                    (A) in paragraph (1) by striking subparagraph (C), 
                and
                    (B) by striking paragraph (5).
            (74) Taxes on failure to distribute income.--Section 4942 
        is amended--
                    (A) by striking subsection (f)(2)(D),
                    (B) in subsection (g)(2)(A) by striking ``For all 
                taxable years beginning on or after January 1, 1975, 
                subject'' and inserting ``Subject'',
                    (C) in subsection (g) by striking paragraph (4), 
                and
                    (D) in subsection (i)(2) by striking ``beginning 
                after December 31, 1969, and''.
            (75) Taxes on taxable expenditures.--Section 4945(f) is 
        amended by striking ``(excluding therefrom any preceding 
        taxable year which begins before January 1, 1970)''.
            (76) Returns.--Subsection (a) of section 6039D is amended 
        by striking ``beginning after December 31, 1984,''.
            (77) Information returns.--Subsection (c) of section 6060 
        is amended by striking ``year'' and all that follows and 
        inserting ``year.''.
            (78) Abatements.--Section 6404(f) is amended by striking 
        paragraph (3).
            (79) Failure by corporation to pay estimated income tax.--
        Clause (i) of section 6655(g)(4)(A) is amended by striking 
        ``(or the corresponding provisions of prior law)''.
            (80) Retirement.--Section 7447(i)(3)(B)(ii) is amended by 
        striking ``at 4 percent per annum to December 31, 1947, and at 
        3 percent per annum thereafter'', and inserting ``at 3 percent 
        per annum''.
            (81) Annuities to surviving spouses and dependent children 
        of judges.--
                    (A) Paragraph (2) of section 7448(a) is amended by 
                striking ``or under section 1106 of the Internal 
                Revenue Code of 1939'' and by striking ``or pursuant to 
                section 1106(d) of the Internal Revenue Code of 1939''.
                    (B) Subsection (g) of section 7448 is amended by 
                striking ``or other than pursuant to section 1106 of 
                the Internal Revenue Code of 1939''.
                    (C) Subsection (j)(1) and (j)(2) of section 7448 
                are each amended by striking ``at 4 percent per annum 
                to December 31, 1947, and at 3 percent per annum 
                thereafter'' and inserting ``at 3 percent per annum''.
            (82) Merchant marine capital construction funds.--Paragraph 
        (4) of section 7518(g) is amended by striking ``any 
        nonqualified withdrawal'' and all that follows through ``shall 
        be determined'' and inserting ``any nonqualified withdrawal 
        shall be determined''.
            (83) Valuation tables.--Paragraph (3) of section 7520(c) is 
        amended--
                    (A) by striking ``Not later than December 31, 1989, 
                the'' and inserting ``The'', and
                    (B) by striking ``thereafter'' in the last sentence 
                thereof.
            (84) Administration and collection of taxes in 
        possessions.--Section 7651 is amended by striking paragraph (4) 
        and by redesignating paragraph (5) as paragraph (4).
            (85) Definition of employee.--(A) Section 7701(a)(20) is 
        amended by striking ``chapter 21'' and all that follows and 
        inserting ``chapter 21.''.
    (b) Effective Date.--
            (1) General rule.--Except as otherwise provided in 
        paragraph (2), the amendments made by subsection (a) shall take 
        effect on the date of enactment of this Act.
            (2) Savings provision.--If--
                    (A) any provision amended or repealed by subsection 
                (a) applied to--
                            (i) any transaction occurring before the 
                        date of the enactment of this Act,
                            (ii) any property acquired before such date 
                        of enactment, or
                            (iii) any item of income, loss, deduction, 
                        or credit taken into account before such date 
                        of enactment, and
                    (B) the treatment of such transaction, property, or 
                item under such provision would (without regard to the 
                amendments made by subsection (a)) affect the liability 
                for tax for periods ending after such date of 
                enactment,
        nothing in the amendments made by subsection (a) shall be 
        construed to affect the treatment of such transaction, 
        property, or item for purposes of determining liability for tax 
        for periods ending after such date of enactment.
                                 <all>