109 HR 2625 IH: Abusive Tax Shelter Shutdown and Taxpayer Accountability Act of 2005 U.S. House of Representatives 2005-05-25 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 2625 IN THE HOUSE OF REPRESENTATIVES May 25, 2005 Mr. Doggett (for himself, Mr. Levin, Mr. Stark, Mr. McDermott, Mr. Neal of Massachusetts, Mr. McNulty, Mr. Lewis of Georgia, Mr. Jefferson, Mr. Becerra, Mr. Emanuel, Mr. Allen, Ms. Baldwin, Mr. Berman, Mr. Brown of Ohio, Mrs. Capps, Mr. Case, Mr. Conyers, Mr. Costello, Mr. Crowley, Mr. Davis of Illinois, Mr. DeFazio, Ms. DeGette, Ms. DeLauro, Mr. Farr, Mr. Fattah, Mr. Filner, Mr. Gene Green of Texas, Mr. Grijalva, Ms. Jackson-Lee of Texas, Mr. Kucinich, Ms. Lee, Mr. Markey, Mr. McGovern, Mrs. Maloney, Mr. George Miller of California, Mr. Nadler, Mrs. Napolitano, Mr. Oberstar, Mr. Ryan of Ohio, Mr. Sabo, Ms. Loretta Sanchez of California, Mr. Sanders, Ms. Schakowsky, Mr. Sherman, Ms. Slaughter, Mr. Strickland, Ms. Solis, Mr. Taylor of Mississippi, Mr. Tierney, Mrs. Jones of Ohio, Ms. Waters, and Mr. Waxman) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to curb tax abuses by disallowing tax benefits claimed to arise from transactions without substantial economic substance, and for other purposes.

1.

Short title; etc

(a)

Short title

This Act may be cited as the Abusive Tax Shelter Shutdown and Taxpayer Accountability Act of 2005. (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 Sec. 2. Findings and purpose Title I—Provisions designed to curtail tax shelters Sec. 101. Clarification of economic substance doctrine Sec. 102. Modification of penalty for failing to disclose reportable transaction Sec. 103. Penalty for understatements attributable to transactions lacking economic substance, etc Sec. 104. Required disclosure by material advisors not subject to claim of confidentiality Sec. 105. Understatement of taxpayer’s liability by income tax return preparer Sec. 106. Frivolous tax submissions Sec. 107. Denial of deduction for interest on Underpayments attributable to nondisclosed reportable and noneconomic substance transactions Title II—Other provisions Sec. 201. Expanded authority to disallow tax benefits under Section 269 Sec. 202. Modifications of certain rules relating to controlled foreign corporations Sec. 203. Basis for determining loss always reduced by nontaxed portion of dividends

2.

Findings and purpose

(a)

Findings

The Congress hereby finds that: (1)Many corporate tax shelter transactions are complicated ways of accomplishing nothing aside from claimed tax benefits, and the legal opinions justifying those transactions take an inappropriately narrow and restrictive view of well-developed court doctrines under which— (A)the taxation of a transaction is determined in accordance with its substance and not merely its form, (B)transactions which have no significant effect on the taxpayer’s economic or beneficial interests except for tax benefits are treated as sham transactions and disregarded, (C)transactions involving multiple steps are collapsed when those steps have no substantial economic meaning and are merely designed to create tax benefits, (D)transactions with no business purpose are not given effect, and (E)in the absence of a specific congressional authorization, it is presumed that Congress did not intend a transaction to result in a negative tax where the taxpayer’s economic position or rate of return is better after tax than before tax. (2)Permitting aggressive and abusive tax shelters not only results in large revenue losses but also undermines voluntary compliance with the Internal Revenue Code of 1986. (b)

Purpose

The purpose of this Act is to eliminate abusive tax shelters by denying tax attributes claimed to arise from transactions that do not meet a heightened economic substance requirement and by repealing the provision that permits legal opinions to be used to avoid penalties on tax underpayments resulting from transactions without significant economic substance or business purpose.