II 109th CONGRESS 1st Session S. 1591 IN THE SENATE OF THE UNITED STATES July 29, 2005 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 modify the rules relating to the suspension of interest and certain penalties where the taxpayer is not contacted by the Internal Revenue Service within 18 months.

1.

Modifications of suspension of interest and penalties where Internal Revenue Service fails to contact taxpayer

(a)

Effective date of exception from suspension rules for certain listed and reportable transactions

(1)

In general

Paragraph (2) of section 903(d) of the American Jobs Creation Act of 2004 is amended to read as follows: (2)

Exception for reportable or listed transactions

(A)

In general

The amendments made by subsection (c) shall apply with respect to interest accruing after October 3, 2004. (B)

Special rule for certain listed and reportable transactions

(i)

In general

Except as provided in clause (ii) or (iii), the amendments made by subsection (c) shall also apply with respect to interest accruing on or before October 3, 2004. (ii)

Participants in settlement initiatives

Clause (i) shall not apply to any transaction if, pursuant to a published settlement initiative which is offered by the Secretary of the Treasury to a group of similarly situated taxpayers claiming benefits from the transaction, the taxpayer has entered into a settlement agreement with respect to the tax liability arising in connection with the transaction. (iii)

Closed transactions

Clause (i) shall not apply to a transaction if, as of July 29, 2005 (May 9, 2005 in the case of a listed transaction)— (I)the assessment of all Federal income taxes for the taxable year in which the tax liability to which the interest relates arose is prevented by the operation of any law or rule of law, or (II)a closing agreement under section 7121 has been entered into with respect to the tax liability arising in connection with the transaction. . (2)

Effective date

The amendment made by this subsection shall take effect as if included in the provisions of the American Jobs Creation Act of 2004 to which it relates. (b)

Treatment of amended returns and other similar notices of additional tax owed

(1)

In general

Section 6404(g)(1) of the Internal Revenue Code of 1986 (relating to suspension) is amended by adding at the end the following new sentence: If, after the return for a taxable year is filed, the taxpayer provides to the Secretary 1 or more signed written documents showing that the taxpayer owes an additional amount of tax for the taxable year, clause (i) shall be applied by substituting the date the last of the documents was provided for the date on which the return is filed. (2)

Effective date

The amendment made by this subsection shall apply to documents provided on or after July 29, 2005.