1.
(a)This Act may be cited
as the Stop Tax Haven Abuse
Act
.
(b)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)The table of contents of this Act is as follows:
Sec. 1. Short title;
etc.
TITLE I—Deterring the use of tax havens for tax
evasion
Sec. 101. Establishing presumptions for entities and
transactions involving offshore secrecy jurisdictions.
Sec. 102. Authorizing special measures against foreign
jurisdictions, financial institutions, and others that impede United States tax
enforcement.
Sec. 103. Treatment of foreign corporations managed and
controlled in the United States as domestic corporations.
Sec. 104. Allowing more time for investigations involving
offshore secrecy jurisdictions.
Sec. 105. Reporting United States beneficial owners of foreign
owned financial accounts.
Sec. 106. Preventing misuse of foreign trusts for tax
evasion.
Sec. 107. Limitation on legal opinion protection from penalties
with respect to transactions involving offshore secrecy
jurisdictions.
Sec. 108. Closing the offshore dividend tax
loophole.
Sec. 109. Reporting of activities with respect to passive
foreign investment companies.
TITLE II—Other measures to combat tax haven and tax shelter
abuses
Sec. 201. Penalty for failing to disclose offshore
holdings.
Sec. 202. Deadline for anti-money laundering rule for hedge
funds and private equity funds.
Sec. 203. Anti-money laundering requirements for formation
agents.
Sec. 204. Strengthening summons in cases involving offshore
secrecy jurisdictions.
Sec. 205. Improving enforcement of foreign financial account
reporting.
TITLE III—Combating tax shelter promoters
Sec. 301. Penalty for promoting abusive tax
shelters.
Sec. 302. Penalty for aiding and abetting the understatement of
tax liability.
Sec. 303. Tax planning inventions not patentable.
Sec. 304. Prohibited fee arrangement.
Sec. 305. Preventing tax shelter activities by financial
institutions.
Sec. 306. Information sharing for enforcement
purposes.
Sec. 307. Disclosure of information to Congress.
Sec. 308. Tax opinion standards for tax
practitioners.
Sec. 309. Denial of deduction for certain fines, penalties, and
other amounts.
TITLE IV—Requiring economic substance
Sec. 401. Clarification of economic substance
doctrine.
Sec. 402. Penalty for understatements attributable to
transactions lacking economic substance, etc.
Sec. 403. Denial of deduction for interest on underpayments
attributable to noneconomic substance transactions.
<enum>I</enum><header>Deterring the use of tax havens for tax
evasion</header>
<section id="id8771332DF03846C7BEF1838E959DBFB7"><enum>101.</enum><header>Establishing
presumptions for entities and transactions involving offshore secrecy
jurisdictions</header>
<subsection id="idA2F109A12D8B4B8DB24F105AA940825C"><enum>(a)</enum><header>Presumptions
for Internal Revenue Code of 1986</header>
<paragraph id="id73F2EB45BC054C25B4C281814B5DC18F"><enum>(1)</enum><header>In
general</header><text>Chapter 76 is amended by inserting after section 7491 the
following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="id9D74A738B7314E73B56A79ADDF379DDF" style="OLC">
<subchapter id="id21D7AB6E7E8144BEA7B0989927307B75"><enum>F</enum><header>Presumptions for
certain legal proceedings</header>
<toc>
<toc-entry idref="idE5D652CDDEB148FAA5E5F736D1A7FF7F" level="section">Sec. 7492. Presumptions pertaining to entities and transactions
involving offshore secrecy jurisdictions.</toc-entry>
</toc>
<section id="idE5D652CDDEB148FAA5E5F736D1A7FF7F"><enum>7492.</enum><header>Presumptions
pertaining to entities and transactions involving offshore secrecy
jurisdictions</header>
<subsection id="ID2398562b6c294b65890f023b0c9879e2"><enum>(a)</enum><header>Control</header><text>For
purposes of any United States civil judicial or administrative proceeding to
determine or collect tax, there shall be a rebuttable presumption that a United
States person (other than an entity with shares regularly traded on an
established securities market) who directly or indirectly formed, transferred
assets to, was a beneficiary of, had a beneficial interest in, or received
money or property or the use thereof from an entity, including a trust,
corporation, limited liability company, partnership, or foundation (other than
an entity with shares regularly traded on an established securities market),
formed, domiciled, or operating in an offshore secrecy jurisdiction, exercised
control over such entity. The presumption of control created by this subsection
shall not be applied to prevent the Secretary from determining or arguing the
absence of control.</text>
</subsection><subsection id="ID44f40aa924db435181ebddbb96c54f3b"><enum>(b)</enum><header>Transfers of
income</header><text>For purposes of any United States civil judicial or
administrative proceeding to determine or collect tax, there shall be a
rebuttable presumption that any amount or thing of value received by a United
States person (other than an entity with shares regularly traded on an
established securities market) directly or indirectly from an account or entity
(other than an entity with shares regularly traded on an established securities
market) in an offshore secrecy jurisdiction, constitutes income of such person
taxable in the year of receipt, and any amount or thing of value paid or
transferred by or on behalf of a United States person (other than an entity
with shares regularly traded on an established securities market) directly or
indirectly to an account or entity (other than an entity with shares regularly
traded on an established securities market) in any such jurisdiction represents
previously unreported income of such person taxable in the year of the
transfer.</text>
</subsection><subsection id="IDbd6705cc730d44a7824b6792ca62de0d"><enum>(c)</enum><header>Rebutting the
presumptions</header><text>The presumptions established in this section may be
rebutted only by clear and convincing evidence, including detailed documentary,
testimonial, and transactional evidence, establishing that—</text>
<paragraph id="IDd7f61653873e4f9fa1acba24416aaf63"><enum>(1)</enum><text>in subsection
(a), such taxpayer exercised no control, directly or indirectly, over such
entity at the time in question, and</text>
</paragraph><paragraph id="IDe5bc506d3e03422998be0699d010ce19"><enum>(2)</enum><text>in subsection
(b), such amounts or things of value did not represent income related to such
United States person.</text>
</paragraph><continuation-text continuation-text-level="subsection">Any court
having jurisdiction of a civil proceeding in which control of such an offshore
entity or the income character of such receipts or amounts transferred is an
issue shall prohibit the introduction by the taxpayer of any foreign based
document that is not authenticated in open court by a person with knowledge of
such document, or any other evidence supplied by a person outside the
jurisdiction of a United States court, unless such person appears before the
court.</continuation-text></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID7cdd13162ffb43e997f752cd00beb842"><enum>(2)</enum><text>The table of
subchapters for chapter 76 is amended by inserting after the item relating to
subchapter E the following new item:</text>
<quoted-block id="iddb7fc65e-879d-4243-9229-a27040e0b3ad" style="OLC">
<toc>
<toc-entry idref="id21D7AB6E7E8144BEA7B0989927307B75" level="subchapter">SUBCHAPTER F—Presumptions for certain legal
proceedings</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID7084d99cff2446d3b809c2d7b603fe81"><enum>(b)</enum><header>Definition of
offshore secrecy jurisdiction</header><text>Section 7701(a) is amended by
adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id6E35D8ED3AFB4D659EF18467A0933DB4" style="OLC">
<paragraph id="ID1ceb08bd6d3541b191297f7499751a06"><enum>(50)</enum><header>Offshore
Secrecy Jurisdiction</header>
<subparagraph id="id0A3B41CA29CA439CAEA91D545F779925"><enum>(A)</enum><header>In
general</header><text>The term <term>offshore secrecy jurisdiction</term> means
any foreign jurisdiction which is listed by the Secretary as an offshore
secrecy jurisdiction for purposes of this title.</text>
</subparagraph><subparagraph id="ID65a8b07c63a64e4da98fe47310d114ad"><enum>(B)</enum><header>Determination
of jurisdictions on list</header><text>A jurisdiction shall be listed under
paragraph (A) if the Secretary determines that such jurisdiction has corporate,
business, bank, or tax secrecy rules and practices which, in the judgment of
the Secretary, unreasonably restrict the ability of the United States to obtain
information relevant to the enforcement of this title, unless the Secretary
also determines that such country has effective information exchange
practices.</text>
</subparagraph><subparagraph id="ID9b6e8ed7a92e43fb9c9b209f03f5b3a8"><enum>(C)</enum><header>Secrecy or
confidentiality rules and practices</header><text>For purposes of subparagraph
(B), corporate, business, bank, or tax secrecy or confidentiality rules and
practices include both formal laws and regulations and informal government or
business practices having the effect of inhibiting access of law enforcement
and tax administration authorities to beneficial ownership and other financial
information.</text>
</subparagraph><subparagraph id="IDf51e9e5d29e64ab28a36934d53e64bf4"><enum>(D)</enum><header>Ineffective
information exchange practices</header><text>For purposes of subparagraph (B),
a jurisdiction shall be deemed to have ineffective information exchange
practices unless the Secretary determines, on an annual basis, that—</text>
<clause id="ID4191ee0899544749bef06f9689726525"><enum>(i)</enum><text>such jurisdiction
has in effect a treaty or other information exchange agreement with the United
States that provides for the prompt, obligatory, and automatic exchange of such
information as is forseeably relevant for carrying out the provisions of the
treaty or agreement or the administration or enforcement of this title,</text>
</clause><clause id="ID09c8db6d6e2c402eab3650057e332dfb"><enum>(ii)</enum><text>during the
12-month period preceding the annual determination, the exchange of information
between the United States and such jurisdiction was in practice adequate to
prevent evasion or avoidance of United States income tax by United States
persons and to enable the United States effectively to enforce this title,
and</text>
</clause><clause id="ID2bb0000c43db41438a51a20793e3dc84"><enum>(iii)</enum><text>during the
12-month period preceding the annual determination, such jurisdiction was not
identified by an intergovernmental group or organization of which the United
States is a member as uncooperative with international tax enforcement or
information exchange and the United States concurs in such
identification.</text>
</clause></subparagraph><subparagraph id="ID7ca69046375d40b687262cbd2706103b"><enum>(E)</enum><header>Initial list of
offshore secrecy jurisdictions</header><text>For purposes of this paragraph,
each of the following foreign jurisdictions, which have been previously and
publicly identified by the Internal Revenue Service as secrecy jurisdictions in
Federal court proceedings, shall be deemed listed by the Secretary as an
offshore secrecy jurisdiction unless delisted by the Secretary under
subparagraph (F)(ii):</text>
<clause id="IDab38c6b089da46348e63d53558e1055d"><enum>(i)</enum><text>Anguilla.</text>
</clause><clause id="ID0ba3cbc01ba1463caadebfb4898fdffd"><enum>(ii)</enum><text>Antigua and
Barbuda.</text>
</clause><clause id="ID4d1b4c82d6ce4c4fb0808ccd101301cf"><enum>(iii)</enum><text>Aruba.</text>
</clause><clause id="ID006e80839d514e7f97cc38d3a1bffd4d"><enum>(iv)</enum><text>Bahamas.</text>
</clause><clause id="ID75d02994c7e047feab467668f88783c0"><enum>(v)</enum><text>Barbados.</text>
</clause><clause id="ID7dbacdeb0a354ad2b3e8290acd88481f"><enum>(vi)</enum><text>Belize.</text>
</clause><clause id="IDd7fe7399160e4ad08aaf77c5f23ebd91"><enum>(vii)</enum><text>Bermuda.</text>
</clause><clause id="IDd5c5b9a4b8f94676a54d15994f0582d7"><enum>(viii)</enum><text>British Virgin
Islands.</text>
</clause><clause id="ID391d71a8aa8a4ebb9267b311bfce0cf3"><enum>(ix)</enum><text>Cayman
Islands.</text>
</clause><clause id="IDd96ba5200a814fceb0741fe0fb00ce72"><enum>(x)</enum><text>Cook
Islands.</text>
</clause><clause id="IDcf389ddcd8ba47ecba78c85cdeae4213"><enum>(xi)</enum><text>Costa
Rica.</text>
</clause><clause id="ID20442a6697da47ce84bf91420cee3269"><enum>(xii)</enum><text>Cyprus.</text>
</clause><clause id="ID734230f5ff0c43dab65e97ba76bac61b"><enum>(xiii)</enum><text>Dominica.</text>
</clause><clause id="ID107e01d6ae8f4e13883c6ff4eb7a984c"><enum>(xiv)</enum><text>Gibraltar.</text>
</clause><clause id="ID1dfab177af3e43f69e6904d25886edb8"><enum>(xv)</enum><text>Grenada.</text>
</clause><clause id="ID798d305ddb8945599b4a18bd220d85d3"><enum>(xvi)</enum><text>Guernsey/Sark/Alderney.</text>
</clause><clause id="IDf7fc7aac73c245799cb8a352f2726aff"><enum>(xvii)</enum><text>Hong
Kong.</text>
</clause><clause id="ID3005d34bb2aa4e16ba45afec8f7edbca"><enum>(xviii)</enum><text>Isle of
Man.</text>
</clause><clause id="IDdd5dd7213ad8414eb7b90d6fd6e9192e"><enum>(xix)</enum><text>Jersey.</text>
</clause><clause id="IDc811f5133dac49a9b193a560e68367ae"><enum>(xx)</enum><text>Latvia.</text>
</clause><clause id="IDd68be3a899cc486f805c0829380f0f87"><enum>(xxi)</enum><text>Liechtenstein.</text>
</clause><clause id="ID58eec223717d4c70957868af1629fbb6"><enum>(xxii)</enum><text>Luxembourg.</text>
</clause><clause id="IDe7b66f17eaad4c7bbdf405a559f737bf"><enum>(xxiii)</enum><text>Malta.</text>
</clause><clause id="ID2418907dc9d84ca692491a74b7a79168"><enum>(xxiv)</enum><text>Nauru.</text>
</clause><clause id="ID7b636e21075642e4816b88270531c29f"><enum>(xxv)</enum><text>Netherlands
Antilles.</text>
</clause><clause id="ID79d87e383093482f93a0bd376ad78bb9"><enum>(xxvi)</enum><text>Panama.</text>
</clause><clause id="ID73c66a7050df4d9783a0ee9e2afaf906"><enum>(xxvii)</enum><text>Samoa.</text>
</clause><clause id="ID009eaa8a6cae43cc90767575450bd023"><enum>(xxviii)</enum><text>St. Kitts
and Nevis.</text>
</clause><clause id="IDb95fcae3ac154a3b98e3c733f078f9ab"><enum>(xxix)</enum><text>St.
Lucia.</text>
</clause><clause id="IDc87c825f031a46fba6d54151db2e1351"><enum>(xxx)</enum><text>St. Vincent and
the Grenadines.</text>
</clause><clause id="ID7618be0002794635bf6596c6551d5dc5"><enum>(xxxi)</enum><text>Singapore.</text>
</clause><clause id="ID658af60895c4487e8b9cbe8323fd8e30"><enum>(xxxii)</enum><text>Switzerland.</text>
</clause><clause id="ID7779e889dda84c8ebc84c5515ef5cbdf"><enum>(xxxiii)</enum><text>Turks and
Caicos.</text>
</clause><clause id="IDe3490150d4ce45afbd83a57f72c4fb64"><enum>(xxxiv)</enum><text>Vanuatu.</text>
</clause></subparagraph><subparagraph id="IDb7e705421e0a4f208434e71ea09e751c"><enum>(F)</enum><header>Modifications
to list</header><text>The Secretary—</text>
<clause id="id561CA07C7BD44C7AA7BF414ECC5E435C"><enum>(i)</enum><text>shall add to the
list under paragraph (A) jurisdictions which meet the requirements of paragraph
(B), and</text>
</clause><clause id="id4767BF53581B452CBDF3166D66AC5538"><enum>(ii)</enum><text>may remove from
such list only those jurisdictions which do not meet the requirements of
paragraph
(B).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="id897FDF4672644FB7A4B42816E2AC6EC3"><enum>(c)</enum><header>Presumptions
for securities law purposes</header><text>Section 21 of the Securities Exchange
Act of 1934 (15 U.S.C. 78u) is amended by adding at the end the following the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id2D1944838B02446F9CD02119D414D6D5" style="OLC">
<subsection id="IDf4d8616139c04203a110e43c74c393cd"><enum>(j)</enum><header>Presumptions
pertaining to control and beneficial ownership</header>
<paragraph id="IDb212199fe90a4987811361ed869684ec"><enum>(1)</enum><header>Control</header><text>For
purposes of any civil judicial or administrative proceeding under this title,
there shall be a rebuttable presumption that a United States person (other than
an entity with shares regularly traded on an established securities market) who
directly or indirectly formed, transferred assets to, was a beneficiary of, had
a beneficial interest in, or received money or property or the use thereof from
an entity, including a trust, corporation, limited liability company,
partnership, or foundation (other than an entity with shares regularly traded
on an established securities market), formed, domiciled, or operating in an
offshore secrecy jurisdiction (as defined in section 7701(a)(50) of the
Internal Revenue Code of 1986), exercised control over such entity. The
presumption of control created by this paragraph shall not be applied to
prevent the Commission from determining or arguing the absence of
control.</text>
</paragraph><paragraph id="ID74c02bf6b5214a3db7b94a8bd24e8a97"><enum>(2)</enum><header>Beneficial
ownership</header><text>For purposes of any civil judicial or administrative
proceeding under this title, there shall be a rebuttable presumption that
securities that are nominally owned by an entity, including a trust,
corporation, limited liability company, partnership, or foundation (other than
an entity with shares regularly traded on an established securities market),
formed, domiciled, or operating in an offshore secrecy jurisdiction (as so
defined), are beneficially owned by any United States person (other than an
entity with shares regularly traded on an established securities market) who
directly or indirectly exercised control over such entity. The presumption of
beneficial ownership created by this paragraph shall not be applied to prevent
the Commission from determining or arguing the absence of beneficial
ownership.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID12c4d95c47b7432eb379aac9638c60cf"><enum>(d)</enum><header>Presumption for
reporting purposes relating to foreign financial accounts</header><text>Section
5314 of title 31, United States Code, is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="id861C1067AAAB4A4D99F4205B88D2F095" style="OLC">
<subsection id="IDb13c354e8f824c5d812fd37e5da8cc21"><enum>(d)</enum><header>Rebuttable
presumption</header><text>For purposes of this section, there shall be a
rebuttable presumption that any account with a financial institution formed,
domiciled, or operating in an offshore secrecy jurisdiction (as defined in
section 7701(a)(50) of the Internal Revenue Code of 1986) contains funds in an
amount that is at least sufficient to require a report prescribed by
regulations under this
section.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDd9fbd183ea7344e6a52b01e3ef694932"><enum>(e)</enum><header>Regulatory
authority and effective date</header>
<paragraph id="ID33cdfad2a77547cbbbfd9c0b4a33140c"><enum>(1)</enum><header>Regulatory
authority</header><text>Not later than 180 days after the date of the enactment
of this Act, the Secretary of the Treasury and the Chairman of the Securities
and Exchange Commission shall each adopt regulations or other guidance
necessary to implement the amendments made by this section. The Secretary and
the Chairman may by regulation or guidance provide that the presumption of
control shall not extend to particular classes of transactions, such as
corporate reorganizations or transactions below a specified dollar threshold,
if either determines that applying such amendments to such transactions is not
necessary to carry out the purposes of such amendments.</text>
</paragraph><paragraph id="ID4c414671c2d545cfaf1d1d33431bc93b"><enum>(2)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="IDdf2b3e396bee44d684191b1289a8bfc2"><enum>102.</enum><header>Authorizing
special measures against foreign jurisdictions, financial institutions, and
others that impede United States tax enforcement</header><text display-inline="no-display-inline">Section 5318A of title 31, United States
Code, is amended—</text>
<paragraph id="ID5cbe1da25ef1421c937d60cbfca80fbf"><enum>(1)</enum><text>by striking the
section heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idE368511390454F75A281CFD8FD5FFFA3" style="USC">
<section id="ID32487884cc1447cea62e77c8b64e3dd6"><enum>5318A.</enum><header>Special
measures for jurisdictions, financial institutions, or international
transactions that are of primary money laundering concern or impede United
States tax
enforcement</header>
</section><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID65ab8392c6734adc992e5a1526e8bc31"><enum>(2)</enum><text>in subsection
(a), by striking the subsection heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="id8EF3AD54E0FC4D2ABF4886CCAD6D441A" style="USC">
<subsection id="ID2c73ca8476cd4d459e429950cef1f358"><enum>(a)</enum><header>Special
measures To counter money laundering and efforts To impede United States tax
enforcement</header>
</subsection><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID076e1d61a48a4e289ffaa35cd70997bd"><enum>(3)</enum><text>in subsection
(c), by striking the subsection heading and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idFCEB75EAAEE846019BC7B064C6B71B12" style="USC">
<subsection id="ID9cc02aef71d247f9a4c3d6872f36e0dc"><enum>(c)</enum><header>Consultations
and information To be considered in finding jurisdictions, institutions, types
of accounts, or transactions To be of primary money laundering concern or To be
impeding United States tax
enforcement</header>
</subsection><after-quoted-block>;</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDdf99910e2fa34a7fa142571b7c341396"><enum>(4)</enum><text>in subsection
(a)(1), by inserting <quote>or is impeding United States tax
enforcement</quote> after <quote>primary money laundering
concern</quote>;</text>
</paragraph><paragraph id="IDe6506091cf0e49e7b04a22bb9c0526b5"><enum>(5)</enum><text>in subsection
(a)(4)—</text>
<subparagraph id="ID54c4f8874fc24541a4cf4e692007915a"><enum>(A)</enum><text>in subparagraph
(A)—</text>
<clause id="idEF033E382EFD47A5AD8F150D919CA660"><enum>(i)</enum><text>by
inserting <quote>in matters involving money laundering,</quote> before
<quote>shall consult</quote>; and</text>
</clause><clause id="id6A2489F97B0744C983CB82E938759659"><enum>(ii)</enum><text>by
striking <quote>and</quote> at the end;</text>
</clause></subparagraph><subparagraph id="ID0176cc1eb5bd4a21b9526b4ab0b82f61"><enum>(B)</enum><text>by redesignating
subparagraph (B) as subparagraph (C); and</text>
</subparagraph><subparagraph id="IDf62f7cbb461b4da3a2bfaabc8e0d080d"><enum>(C)</enum><text>by inserting
after subparagraph (A) the following:</text>
<quoted-block display-inline="no-display-inline" id="id36CFDE144671439CA3529C317B5568F3" style="OLC">
<subparagraph id="IDe47300dc9b694e84a533cd38df06af7a"><enum>(B)</enum><text>in matters
involving United States tax enforcement, shall consult with the Commissioner of
the Internal Revenue Service, the Secretary of State, the Attorney General of
the United States, and in the sole discretion of the Secretary, such other
agencies and interested parties as the Secretary may find to be appropriate;
and</text>
</subparagraph><after-quoted-block>;</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="IDb6d1d717783448b89866daa23de74744"><enum>(6)</enum><text>in each of
paragraphs (1)(A), (2), (3), and (4) of subsection (b), by inserting <quote>or
to be impeding United States tax enforcement</quote> after <quote>primary money
laundering concern</quote> each place that term appears;</text>
</paragraph><paragraph id="ID1d608ec65a974b08baf382e41b3b00ed"><enum>(7)</enum><text>in subsection
(b), by striking paragraph (5) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idB5D16C9DBFEF4C1DA40AC48C2BF92D7E" style="OLC">
<paragraph id="ID0a88186761f24679881e7d89535231b0"><enum>(5)</enum><header>Prohibitions or
conditions on opening or maintaining certain correspondent or payable-through
accounts or authorizing certain payment cards</header><text>If the Secretary
finds a jurisdiction outside of the United States, 1 or more financial
institutions operating outside of the United States, or 1 or more classes of
transactions within or involving a jurisdiction outside of the United States to
be of primary money laundering concern or to be impeding United States tax
enforcement, the Secretary, in consultation with the Secretary of State, the
Attorney General of the United States, and the Chairman of the Board of
Governors of the Federal Reserve System, may prohibit, or impose conditions
upon—</text>
<subparagraph id="id9B952E95E92A443093A4C7A3D9D149E3"><enum>(A)</enum><text>the opening or
maintaining in the United States of a correspondent account or payable-through
account; or</text>
</subparagraph><subparagraph id="idA2B67B9A2115436A9CC3750BACD1B8E8"><enum>(B)</enum><text>the
authorization, approval, or use in the United States of a credit card, charge
card, debit card, or similar credit or debit financial instrument by any
domestic financial institution, financial agency, or credit card company or
association, for or on behalf of a foreign banking institution, if such
correspondent account, payable-through account, credit card, charge card, debit
card, or similar credit or debit financial instrument, involves any such
jurisdiction or institution, or if any such transaction may be conducted
through such correspondent account, payable-through account, credit card,
charge card, debit card, or similar credit or debit financial
instrument.</text>
</subparagraph></paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID28618d2e4bdc4898bbbc78393a4a1a5a"><enum>(8)</enum><text>in subsection
(c)(1), by inserting <quote>or is impeding United States tax
enforcement</quote> after <quote>primary money laundering
concern</quote>;</text>
</paragraph><paragraph id="ID86dbdfe122b84e87a1135e0f6f62df75"><enum>(9)</enum><text>in subsection
(c)(2)(A)—</text>
<subparagraph id="ID4ef4f503ec80424eb9a2258886eb2dfb"><enum>(A)</enum><text>in clause (ii),
by striking <quote>bank secrecy or special regulatory advantages</quote> and
inserting <quote>bank, tax, corporate, trust, or financial secrecy or
regulatory advantages</quote>;</text>
</subparagraph><subparagraph id="ID35d33d81d87c458a87e4ddf0a6b4a449"><enum>(B)</enum><text>in clause (iii),
by striking <quote>supervisory and counter-money</quote> and inserting
<quote>supervisory, international tax enforcement, and
counter-money</quote>;</text>
</subparagraph><subparagraph id="IDb203e2a51a8a48b190c74d4b41aa690b"><enum>(C)</enum><text>in clause (v), by
striking <quote>banking or secrecy</quote> and inserting <quote>banking, tax,
or secrecy</quote>; and</text>
</subparagraph><subparagraph id="IDda37cd63cbb24dabbae016ef56cdaeaa"><enum>(D)</enum><text>in clause (vi),
by inserting <quote>, tax treaty, or tax information exchange agreement</quote>
after <quote>treaty</quote>;</text>
</subparagraph></paragraph><paragraph id="ID1463ef4358c5498f809990b837767ed0"><enum>(10)</enum><text>in subsection
(c)(2)(B)—</text>
<subparagraph id="IDca2e7bf466ec43899a0919ff867ec7d9"><enum>(A)</enum><text>in clause (i), by
inserting <quote>or tax evasion</quote> after <quote>money laundering</quote>;
and</text>
</subparagraph><subparagraph id="ID6c748c057b5f4f1c9b0494ece8cd8e36"><enum>(B)</enum><text>in clause (iii),
by inserting <quote>, tax evasion,</quote> after <quote>money
laundering</quote>; and</text>
</subparagraph></paragraph><paragraph id="ID335c118640d3402ea98b43021c1cb1aa"><enum>(11)</enum><text>in subsection
(d), by inserting <quote>involving money laundering, and shall notify, in
writing, the Committee on Finance of the Senate and the Committee on Ways and
Means of the House of Representatives of any such action involving United
States tax enforcement</quote> after <quote>such action</quote>.</text>
</paragraph></section><section id="id5C504F6B52CE435AA920E9EC3647BC16"><enum>103.</enum><header>Treatment of
foreign corporations managed and controlled in the United States as domestic
corporations</header>
<subsection id="idBACDB95C263B47D28873C87FCE2AC89C"><enum>(a)</enum><header>In
general</header><text>Section 7701 (relating to definitions) is amended by
redesignating subsection (o) as subsection (p) and by inserting after
subsection (n) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id79140093B2894F6FAFD9B95A790406FB" style="OLC">
<subsection id="idAA6AC941C4BA430F892CAA2B5734F0BA"><enum>(o)</enum><header>Certain
corporations managed and controlled in the United States treated as domestic
for income tax</header>
<paragraph id="idE32052565C9F40A9864D07831B89DE5C"><enum>(1)</enum><header>In
general</header><text>Notwithstanding subsection (a)(4), in the case of a
corporation described in paragraph (2) if—</text>
<subparagraph id="id3C1B3308DC3744028EAC816BA411B781"><enum>(A)</enum><text>the corporation
would not otherwise be treated as a domestic corporation for purposes of this
title, but</text>
</subparagraph><subparagraph id="id249293B7AC814BDD90EC723AC59EC693"><enum>(B)</enum><text>the management
and control of the corporation occurs, directly or indirectly, primarily within
the United States,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">then,
solely for purposes of chapter 1 (and any other provision of this title
relating to chapter 1), the corporation shall be treated as a domestic
corporation.</continuation-text></paragraph><paragraph id="id67E40F69D1794680BE8145E4753BD9D2"><enum>(2)</enum><header>Corporation
described</header>
<subparagraph id="id880B1CF2539E432099A4C5372506D8A9"><enum>(A)</enum><header>In
general</header><text>A corporation is described in this paragraph if—</text>
<clause id="id59809795AC644982BE332EFA61D921F4"><enum>(i)</enum><text>the stock of such
corporation is regularly traded on an established securities market, or</text>
</clause><clause id="id258AC5B95A27441F9BA8E888948C54B4"><enum>(ii)</enum><text>the aggregate
gross assets of such corporation (or any predecessor thereof), including assets
under management for investors, whether held directly or indirectly, at any
time during the taxable year or any preceding taxable year is $50,000,000 or
more.</text>
</clause></subparagraph><subparagraph id="idBEF400D4FDD042CAA0FB32E0D1B77267"><enum>(B)</enum><header>General
exception</header><text>A corporation shall not be treated as described in this
paragraph if—</text>
<clause id="id1C69FD700AE84B4DAAD4AAE055A3A1E1"><enum>(i)</enum><text>such corporation
was treated as a corporation described in this paragraph in a preceding taxable
year,</text>
</clause><clause id="id731D8713A31F469684AE4F564E5021DD"><enum>(ii)</enum><text>such
corporation—</text>
<subclause id="idAF91D14CA3CC4B4787B0CB2CDE197515"><enum>(I)</enum><text>is not regularly
traded on an established securities market, and</text>
</subclause><subclause id="id40C3B5E5F29D46919AB11FE1F9B6786B"><enum>(II)</enum><text>has, and is
reasonably expected to continue to have, aggregate gross assets (including
assets under management for investors, whether held directly or indirectly) of
less than $50,000,000, and</text>
</subclause></clause><clause id="idED22F8146E124D7491157702076EEC98"><enum>(iii)</enum><text>the Secretary
grants a waiver to such corporation under this subparagraph.</text>
</clause></subparagraph><subparagraph id="idDE46C579F9414083BC53A71DA14767A9"><enum>(C)</enum><header>Exception from
gross assets test</header><text>Subparagraph (A)(ii) shall not apply to a
corporation which is a controlled foreign corporation (as defined in section
957) and which is a member of an affiliated group (as defined section 1504, but
determined without regard to section 1504(b)(3)) the common parent of
which—</text>
<clause id="idCE84013606A04F84B0D1B97553210604"><enum>(i)</enum><text>is a domestic
corporation (determined without regard to this subsection), and</text>
</clause><clause id="id0453A5B413BD46138EE032118DB2C271"><enum>(ii)</enum><text>has substantial
assets (other than cash and cash equivalents and other than stock of foreign
subsidiaries) held for use in the active conduct of a trade or business in the
United States.</text>
</clause></subparagraph></paragraph><paragraph id="id8EB3CA3B928440F49B97427DF1B48450"><enum>(3)</enum><header>Management and
control</header>
<subparagraph id="idCA75CD2B5D774D38829E148821B2E797"><enum>(A)</enum><header>In
general</header><text>The Secretary shall prescribe regulations for purposes of
determining cases in which the management and control of a corporation is to be
treated as occurring primarily within the United States.</text>
</subparagraph><subparagraph id="id480C9965EC994F4E9FF497A5AD37E22E"><enum>(B)</enum><header>Executive
officers and senior management</header><text>Such regulations shall provide
that—</text>
<clause id="id19893E630CA54EABA5191DF4D94754E3"><enum>(i)</enum><text>the management
and control of a corporation shall be treated as occurring primarily within the
United States if substantially all of the executive officers and senior
management of the corporation who exercise day-to-day responsibility for making
decisions involving strategic, financial, and operational policies of the
corporation are located primarily within the United States, and</text>
</clause><clause id="id07C2B6E253FC4A4DA6907746729D294F"><enum>(ii)</enum><text>individuals who
are not executive officers and senior management of the corporation (including
individuals who are officers or employees of other corporations in the same
chain of corporations as the corporation) shall be treated as executive
officers and senior management if such individuals exercise the day-to day
responsibilities of the corporation described in clause (i).</text>
</clause></subparagraph><subparagraph id="idEA1B1D7C54FD4FC6BB9A4A0A3D1509C4"><enum>(C)</enum><header>Corporations
primarily holding investment assets</header><text>Such regulations shall also
provide that the management and control of a corporation shall be treated as
occurring primarily within the United States if—</text>
<clause id="idF57272915E084F14BB8E0D8DC99E872D"><enum>(i)</enum><text>the assets of
such corporation (directly or indirectly) consist primarily of assets being
managed on behalf of investors, and</text>
</clause><clause id="idDCF158FD6B60403297ED00C5D980DC1F"><enum>(ii)</enum><text>decisions about
how to invest the assets are made in the United
States.</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id38E8A919F7F74A39A0CD3165C6121442"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning on or after the date which is 2 years after the date of the
enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDF4BDBFCDDA4C4E2494EE4C89C68BE3CD" section-type="subsequent-section"><enum>104.</enum><header>Allowing more time
for investigations involving offshore secrecy jurisdictions</header>
<subsection commented="no" display-inline="no-display-inline" id="ID8979CFADA68341BE8E415F2CA3906B0F"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6501(c) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id9533B535F9DD4E0D9AD4FD531ACCF40C" style="OLC">
<paragraph id="IDe03fd28bafae4f06bba119309290dfa9"><enum>(11)</enum><header>Returns
involving offshore secrecy jurisdictions</header><text>In the case of a return
for a year in which the taxpayer directly or indirectly formed, owned,
transferred assets to, was a beneficiary of, had a beneficial interest in, or
received money or property or the use thereof from a financial account or an
entity (other than an entity with shares regularly traded on an established
securities market), including a trust, corporation, limited liability company,
partnership, or foundation formed, located, domiciled or operating in an
offshore secrecy jurisdiction, the tax may be assessed, or a proceeding in
court for the collection of such tax may be begun without assessment, at any
time within 6 years after the return was
filed.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID0D887DCF91ED4F1299E954BCFED3B32E"><enum>(b)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this section shall apply to—</text>
<paragraph id="IDd3b8b84cdf6c443b8a9a003e4b810873"><enum>(1)</enum><text>returns filed
after the date of the enactment of this Act, and</text>
</paragraph><paragraph id="ID45252063121846e6b8147cc944f7ae5c"><enum>(2)</enum><text>returns filed on
or before such date if the period specified in section 6501 of the Internal
Revenue Code of 1986 (determined without regard to the amendments made by
subsection (a)) for assessment of such taxes has not expired as of such
date.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="id485CA00ABAD04157892337B8B6D2C093"><enum>105.</enum><header>Reporting
United States beneficial owners of foreign owned financial accounts</header>
<subsection id="ID3f1120c8e1db4a778ffdba12d7bddad8"><enum>(a)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by inserting after section 6045B the following new sections:</text>
<quoted-block display-inline="no-display-inline" id="id892D4F7F427C4CA0A49075EEF45138C0" style="OLC">
<section id="IDc0e81a22bb5d444f8596a8476238bb4c"><enum>6045C.</enum><header>Returns
regarding United States beneficial owners of foreign owned financial
accounts</header>
<subsection id="IDd32f2629b00f48b29fd94c855961d627"><enum>(a)</enum><header>Requirement of
return</header><text>If—</text>
<paragraph id="IDdae9a5deb4524a01b7263e88ea26c2e3"><enum>(1)</enum><text>any withholding
agent under sections 1441 and 1442 has the control, receipt, custody, disposal,
or payment of any amount constituting gross income from sources within the
United States of any foreign entity, including a trust, corporation, limited
liability company, partnership, or foundation (other than an entity with shares
regularly traded on an established securities market), and</text>
</paragraph><paragraph id="ID502541325d2040d5b8e36ef0e0fdabe8"><enum>(2)</enum><text>such withholding
agent determines for purposes of titles 14, 18, or 31 of the United States Code
that a United States person has any beneficial interest in the foreign entity
or in the account in such entity's name (hereafter in this section referred to
as <quote>United States beneficial owner</quote>),</text>
</paragraph><continuation-text continuation-text-level="subsection">then the
withholding agent shall make a return according to the forms or regulations
prescribed by the Secretary.</continuation-text></subsection><subsection id="IDa9c2351499aa4574a7111117b2290c42"><enum>(b)</enum><header>Required
information</header><text>For purposes of subsection (a) the information
required to be included on the return shall include—</text>
<paragraph id="ID4690fc5e52ed44049c96072a763ca968"><enum>(1)</enum><text>the name,
address, and, if known, the taxpayer identification number of the United States
beneficial owner,</text>
</paragraph><paragraph id="IDc74980a586df4f7cbb466c21a09ff9cd"><enum>(2)</enum><text>the known facts
pertaining to the relationship of such United States beneficial owner to the
foreign entity and the account,</text>
</paragraph><paragraph id="IDa523e99dd7314c5da8063565fc0ea0bd"><enum>(3)</enum><text>the gross amount
of income from sources within the United States (including gross proceeds from
brokerage transactions), and</text>
</paragraph><paragraph id="ID0d68005591c1498e840dd509328384dc"><enum>(4)</enum><text>such other
information as the Secretary may by forms or regulations provide.</text>
</paragraph></subsection><subsection id="ID7e3b7070a02f425bb458f5cb2251690a"><enum>(c)</enum><header>Statements To
Be furnished to beneficial owners with respect to whom information is required
To Be reported</header><text>A withholding agent required to make a return
under subsection (a) shall furnish to each United States beneficial owner whose
name is required to be set forth in such return a statement showing—</text>
<paragraph id="ID5551b4b5cefe4fbdafd8a10ba983a1d5"><enum>(1)</enum><text>the name,
address, and telephone number of the information contact of the person required
to make such return, and</text>
</paragraph><paragraph id="ID11be2c700a574c0782cc67d416c111ea"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such United States
beneficial owner.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the United States beneficial owner on or before January 31 of the year
following the calendar year for which the return under subsection (a) was
required to be made. In the event the person filing such return does not have a
current address for the United States beneficial owner, such written statement
may be mailed to the address of the foreign entity.</continuation-text></subsection></section><section id="IDa8e1e6e331ae461181c9792881505afd"><enum>6045D.</enum><header>Returns by
financial institutions regarding establishment of accounts and creation of
entities in offshore secrecy jurisdictions</header>
<subsection id="ID56d55e532e0041b4b09a9282831175c0"><enum>(a)</enum><header>Requirement of
return</header><text>Any financial institution directly or indirectly—</text>
<paragraph id="ID83dea16500f14ca6a07f0bdb7efc7402"><enum>(1)</enum><text>opening a bank,
brokerage, or other financial account, or</text>
</paragraph><paragraph id="ID8cefc20b2a424f80b5c6b4e9cb50d2e8"><enum>(2)</enum><text>forming or
acquiring an entity, including a trust, corporation, limited liability company,
partnership, or foundation (other than an entity with shares regularly traded
on an established securities market),</text>
</paragraph><continuation-text continuation-text-level="subsection">in an
offshore secrecy jurisdiction at the direction of, on behalf of, or for the
benefit of a United States person shall make a return according to the forms or
regulations prescribed by the Secretary.</continuation-text></subsection><subsection id="ID3f9b21e9d2b74319a28f10f495eb807a"><enum>(b)</enum><header>Required
information</header><text>For purposes of subsection (a) the information
required to be included on the return shall include—</text>
<paragraph id="ID74ec78810b854f62bc212d30e1bbe048"><enum>(1)</enum><text>the name,
address, and taxpayer identification number of such United States
person,</text>
</paragraph><paragraph id="IDb04f08eca6f04361954a64d60af67318"><enum>(2)</enum><text>the name and
address of the financial institution at which a financial account is opened,
the type of account, the account number, the name under which the account was
opened, and the amount of the initial deposit,</text>
</paragraph><paragraph id="ID317334d632144cffb2959ac18878c0bc"><enum>(3)</enum><text>the name and
address of an entity formed or acquired, the type of entity, and the name and
address of any company formation agent or other professional employed to form
or acquire the entity, and</text>
</paragraph><paragraph id="ID71046cdaf6584a2d8cc9493618118c1e"><enum>(4)</enum><text>such other
information as the Secretary may by forms or regulations provide.</text>
</paragraph></subsection><subsection id="IDaa2447dbfe464b5fbee1d8aa72a5892e"><enum>(c)</enum><header>Statements To
Be furnished to United States persons with respect to whom information is
required To Be reported</header><text>A financial institution required to make
a return under subsection (a) shall furnish to each United States person whose
name is required to be set forth in such return a statement showing—</text>
<paragraph id="ID66ca090b90d8442faded17f92c274428"><enum>(1)</enum><text>the name,
address, and telephone number of the information contact of the person required
to make such return, and</text>
</paragraph><paragraph id="ID9116de0c722a4b38b14f5c6acf4faa55"><enum>(2)</enum><text>the information
required to be shown on such return with respect to such United States
person.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
such United States person on or before January 31 of the year following the
calendar year for which the return under subsection (a) was required to be
made.</continuation-text></subsection><subsection id="ID36c2cb173c324d219ed4090d077d77b2"><enum>(d)</enum><header>Exemption</header><text>The
Secretary may by regulations exempt any class of United States persons or any
class of accounts or entities from the requirements of this section if the
Secretary determines that applying this section to such persons, accounts, or
entities is not necessary to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idBB861C689FD94CF48CB0AAC49C93F1E1"><enum>(b)</enum><header>Penalties</header>
<paragraph id="id7024908A780F4CA6A9EBC0500A05E5C5"><enum>(1)</enum><header>Returns</header><text>Section
6724(d)(1)(B) is amended by redesignating clauses (v) through (xxiii) as
clauses (vii) through (xxv), respectively, and by inserting after clause (iv)
the following new clauses:</text>
<quoted-block display-inline="no-display-inline" id="id6996B6E7CC4044258247056E3B8B9F9B" style="OLC">
<clause id="id80D20C0B4375492795BC92C06ADEA47C"><enum>(v)</enum><text>section 6045C(a)
(relating to returns regarding United States beneficial owners of foreign owned
financial accounts),</text>
</clause><clause id="id94D14B28162A4CD8830049C8906E9BAE"><enum>(vi)</enum><text>section 6045D(a)
(relating to returns by financial institutions regarding establishment of
accounts and creation of entities in offshore secrecy
jurisdictions),</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id4BFC7F367CC643E5BD7D4D365DF6EE3A"><enum>(2)</enum><header>Payee
statements</header><text>Section 6724(d)(2) is amended by redesignating
subparagraphs (K) through (FF) as subparagraphs (M) through (HH), respectively,
and by inserting after subparagraph (J) the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="idA552A5E61E7C4624924BD3B15E3ADD92" style="OLC">
<subparagraph id="id51BA97E5DF144214892FF947E3C875EB"><enum>(K)</enum><text>section 6045C(c)
(relating to returns regarding United States beneficial owners of foreign owned
financial accounts),</text>
</subparagraph><subparagraph id="id76657412F91048218E8DBB627F4390E8"><enum>(L)</enum><text>section 6045D(c)
(relating to returns by financial institutions regarding establishment of
accounts and creation of entities in offshore secrecy
jurisdictions),</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id04E1BCF9F2594B1DACC49E22642A32B2"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for such subpart is amended by
inserting after the item relating to section 6045B the following new
items:</text>
<quoted-block display-inline="no-display-inline" id="id6E89AA517D144A0E8E77BCFB43660410" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 6045C. Returns regarding
United States beneficial owners of foreign owned financial
accounts.</toc-entry>
<toc-entry bold="off" level="section">Sec. 6045D. Returns by
financial institutions regarding establishment of accounts and creation of
entities in offshore secrecy
jurisdictions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="id9C4AA45377A1450DAA1AD425553E2890"><enum>(d)</enum><header>Additional
penalties</header>
<paragraph commented="no" id="id5444194394AC4560915BC9CCF5DD83F8"><enum>(1)</enum><header>Additional
penalties on banks</header><text>Section 5239(b)(1) of the Revised Statutes (12
U.S.C. 93(b)(1)) is amended by inserting <quote>or any of the provisions of
section 6045D of the Internal Revenue Code of 1986,</quote> after <quote>any
regulation issued pursuant to,</quote>.</text>
</paragraph><paragraph commented="no" id="id12EA4C062FF54EB3B604A36923656731"><enum>(2)</enum><header>Additional
penalties on securities firms</header><text>Section 21(d)(3)(A) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(A)) is amended by
inserting <quote>any of the provisions of section 6045D of the Internal Revenue
Code of 1986,</quote> after <quote>the rules or regulations
thereunder,</quote>.</text>
</paragraph></subsection><subsection id="ID1c879c843dd04293aaffd5e652c0d555"><enum>(e)</enum><header>Regulatory
authority and effective date</header>
<paragraph id="ID624de18b48c6403e8a1d77a54464f5ad"><enum>(1)</enum><header>Regulatory
Authority</header><text>Not later than 180 days after the date of the enactment
of this Act, the Secretary of the Treasury shall adopt regulations, forms, or
other guidance necessary to implement this section.</text>
</paragraph><paragraph id="ID6279a539b7144c9fb2409cbe417d9653"><enum>(2)</enum><header>Effective
Date</header><text>Section 6045C of the Internal Revenue Code of 1986 (as added
by this section) and the amendment made by subsection (d)(1) shall take effect
with respect to amounts paid into foreign owned accounts after December 31 of
the year of the date of the enactment of this Act. Section 6045D of such Code
(as so added) and the amendment made by subsection (d)(2) shall take effect
with respect to accounts opened or entities formed or acquired after December
31 of the year of the date of the enactment of this Act.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="idBE560B5914FB453FAD0B961534BB2B70"><enum>106.</enum><header>Preventing
misuse of foreign trusts for tax evasion</header>
<subsection id="ID1aa2238988aa4f12886d59bbcd287176"><enum>(a)</enum><header>Attribution of
trust protector powers to grantors</header><text>Section 672 is amended by
redesignating subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idDBDD74908B6140A7A04F931DF1986703" style="OLC">
<subsection id="ID3a92be7fbf194c4e9616f713564d63ea"><enum>(f)</enum><header>Grantor treated
as holding any power or interest of trust protector or
enforcer</header><text>For purposes of this subpart, a grantor shall be treated
as holding any power or interest held by any trust protector or trust enforcer
or similar person appointed to advise, influence, oversee, or veto the actions
of the
trustee.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID20962db81a8548de9a0b3216095ea8bf"><enum>(b)</enum><header>Treatment of
United States recipients of foreign trust assets as trust
beneficiaries</header><text>Section 679 is amended by redesignating subsections
(c) and (d) as subsections (d) and (e), respectively, and by inserting after
subsection (b) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id1020B62B979E44D0B4081ACBC18A927D" style="OLC">
<subsection id="ID341c60916085425b8b1d5ffa4efa8b9a"><enum>(c)</enum><header>Certain United
States persons treated as beneficiaries</header><text>Any United States person
receiving from a foreign trust cash or other property, or receiving the use
thereof, shall be treated as a beneficiary of such trust regardless of whether
such person is a named beneficiary, except to the extent that such person paid
fair market value for the benefit
received.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID64c09897ee9f4c11b5c75acc843400f8"><enum>(c)</enum><header>Treatment of
foreign trust transfers of real estate, artwork, or jewelry consistently with
transfers of securities</header><text>Section 643(i)(1) is amended by striking
<quote>or marketable securities</quote> and inserting <quote>or other property,
including real estate, marketable securities, artwork, jewelry, and other
personal property,</quote>.</text>
</subsection><subsection id="ID3d66aaaac64649039490168091acedd7"><enum>(d)</enum><header>Treatment of
trusts with future or contingent united states
beneficiaries</header><text>Section 679(a)(1) is amended—</text>
<paragraph id="id0FF3016589D2494B9484E3FF5C15AFC7"><enum>(1)</enum><text>by inserting
<quote>or for any subsequent year</quote> after <quote>such year</quote>,
and</text>
</paragraph><paragraph id="id434F1F8FFFDB427E9ED9A8477EADAEF4"><enum>(2)</enum><text>by inserting
<quote>(including a contingent beneficiary)</quote> after
<quote>beneficiary</quote>.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="idF81A9A3CEC15401EBF09E3B039F76CFC"><enum>107.</enum><header>Limitation on
legal opinion protection from penalties with respect to transactions involving
offshore secrecy jurisdictions</header>
<subsection commented="no" display-inline="no-display-inline" id="id49CCF86054F544DEA7F40B297080383C"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6664 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id7FFEAE642448416883E6E57B94675184" style="OLC">
<subsection id="ID36e03422055841b198b330b18af94f63"><enum>(e)</enum><header>Certain
opinions may not be relied upon</header><text>For purposes of this part, an
opinion of a tax advisor may not be relied upon to establish that there was
reasonable cause for any portion of an underpayment, or that the taxpayer acted
in good faith with respect to such portion, if such portion is attributable to
a transaction any part of which involves an entity or financial account in an
offshore secrecy
jurisdiction.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id300FB5E461544B8896B92FFCB68009FA"><enum>(b)</enum><header>Regulatory
authority</header><text>The Secretary of the Treasury may by regulation or
guidance provide that subsection (e) of section 6664 of the Internal Revenue
Code of 1986, as added by subsection (a), does not apply to legal opinions that
express a confidence level that substantially exceeds the <quote>more likely
than not</quote> confidence level; or that such subsection does not apply to
classes of transactions, such as corporate reorganizations, where the Secretary
determines that applying such subsection to such transactions is not necessary
to carry out the purposes of such subsection.</text>
</subsection></section><section id="ID35322faedb9d4e6eb5e221ee4a294500"><enum>108.</enum><header>Closing the
offshore dividend tax loophole</header>
<subsection id="ID2123cbd1500041ab924b17fc198fe277"><enum>(a)</enum><header>In
general</header><text>Section 871 is amended by redesignating subsection (l) as
subsection (m) and by inserting after subsection (k) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id0ABA4557A7A74B229D4F1DB0E50EAB4D" style="OLC">
<subsection id="ID12e1cbb581c043bdb090645b0c5a8b80"><enum>(l)</enum><header>Treatment of
dividend equivalents and substitute dividend payments</header>
<paragraph id="ID1aacd4eeb2e7465ea3d17a18936a83ff"><enum>(1)</enum><header>In
general</header><text>For purposes of this section and section 881—</text>
<subparagraph id="id93C5C4B003AC485BA2BA888C370D848E"><enum>(A)</enum><text>the term
<term>dividend</term> shall include dividend equivalents and substitute
dividends,</text>
</subparagraph><subparagraph id="id42E56C451DE840A198537D2A0E0FA258"><enum>(B)</enum><text>a dividend
equivalent with respect to the stock of one or more domestic corporations shall
be treated as sourced within the United States, and</text>
</subparagraph><subparagraph id="id6CAD446F56D34B56B9EADFC7307A9374"><enum>(C)</enum><text>a substitute
dividend payment shall be sourced in the same manner as a dividend distribution
with respect to the transferred security to which the substitute dividend
relates.</text>
</subparagraph></paragraph><paragraph id="ID994f8dd4c3e449b9b07b30f548cc29a2"><enum>(2)</enum><header>Dividend
equivalent</header><text>For purposes of this subsection—</text>
<subparagraph id="idD48A6187BBDA48188378C1ABAD6564A5"><enum>(A)</enum><header>In
general</header><text>The term <term>dividend equivalent</term> includes any
payment that is made pursuant to a notional principal contract and is
contingent upon, or is referenced to, the payment of a dividend on stock or the
payment of a dividend on property that is substantially similar or related to
stock (determined in a manner similar to the manner under section
246(c)(4)(C)).</text>
</subparagraph><subparagraph id="id6CC7267F24F04E16BC00A611B164902A"><enum>(B)</enum><header>Notional
principal contract</header><text>For purposes of subparagraph (A), the term
<term>notional principal contract</term> means a financial instrument that
provides for the payment of amounts by 1 party to another at specified
intervals calculated by reference to a specified index upon a notional
principal amount in exchange for specified consideration or a promise to pay
similar amounts.</text>
</subparagraph></paragraph><paragraph id="IDd76fe62b74964cb08b30436d9cd50945"><enum>(3)</enum><header>Substitute
dividend</header><text>For purposes of this subsection—</text>
<subparagraph id="id1898BD6B4BB74EFAAA2EAD287AF6E892"><enum>(A)</enum><header>In
general</header><text>The term <term>substitute dividend</term> means a
payment, made to the transferor of a security in a securities lending
transaction or a sale-repurchase transaction, of an amount equivalent to a
dividend distribution which the owner of the transferred security is entitled
to receive during the term of the transaction.</text>
</subparagraph><subparagraph id="id6DF32E7EE6234FC4A55383CE7EF7A0CD"><enum>(B)</enum><header>Securities
lending transaction</header><text>For purposes of subparagraph (A), the term
<term>securities lending transaction</term> means a transfer of 1 or more
securities that is described in section 1058(a) or a substantially similar
transaction.</text>
</subparagraph><subparagraph id="id4E3EDE32C274414C9DA86A752E86E09C"><enum>(C)</enum><header>Sale-repurchase
transaction</header><text>For purposes of subparagraph (A), the term
<term>sale-repurchase transaction</term> means an agreement under which a
person transfers a security in exchange for cash and simultaneously agrees to
receive substantially identical securities from the transferee in the future in
exchange for cash.</text>
</subparagraph></paragraph><paragraph id="ID73a138f61f8a42f6897bac95e87f5750"><enum>(4)</enum><header>Coordination
with tax treaties</header><text>The meaning of the term <term>dividend</term>
in any income tax convention shall be construed to include dividend equivalents
and substitute dividends in accordance with this section.</text>
</paragraph><paragraph id="ID642d7ad6bf284c19b8bbe6fd286f819d"><enum>(5)</enum><header>Prevention of
over-withholding</header><text>In the case of any dividend equivalent or
substitute dividend that is subject to withholding under this section or
section 881, the Secretary may by regulation reduce such withholding, but only
to the extent that the taxpayer can establish that the dividend for which the
payment to be withheld upon is a dividend equivalent or a substitute dividend
that was previously withheld upon under this section or under section
881.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id7F8BCBDC311645AD81E72A06B2B1FA03"><enum>(b)</enum><header>Regulations</header>
<paragraph id="idFD6B6A71F126412A8058449B28DE0396"><enum>(1)</enum><header>Proposed
rule</header><text>Not later than 90 days after the date of the enactment of
this Act, the Secretary of the Treasury (or the Secretary's designee) shall
issue proposed regulations relating to section 871(l) of the Internal Revenue
Code of 1986 (as added by this section).</text>
</paragraph><paragraph id="id71F81C3147294E15955105003293F28D"><enum>(2)</enum><header>Final
rule</header><text>Not later than 150 days after the date of the enactment of
this Act, the Secretary of the Treasury (or the Secretary's designee) shall
issue final regulations relating to such section.</text>
</paragraph><paragraph id="id3C3FB9CD8F374ED7A13FEAE634133E18"><enum>(3)</enum><header>Matters
included</header><text>The regulations issued pursuant to this subsection shall
require the imposition of withholding—</text>
<subparagraph id="id3581B1BCD8E34ABA9404BA80C6B485F6"><enum>(A)</enum><text>in cases where
dividend equivalent payments under notional principal contracts are netted with
other payments under the same instrument,</text>
</subparagraph><subparagraph id="idF52EDBCE54EA4308B34C4C1A8594E465"><enum>(B)</enum><text>in cases where
fees and other payments are netted to disguise the characterization of a
payment as a substitute dividend, and</text>
</subparagraph><subparagraph id="id48C6AAFFD67A4A6BA04F1EC34CD23852"><enum>(C)</enum><text>in cases where
option or forward contracts (or similar arrangements) achieve the same or
substantially similar economic results as the notional principal contracts
covered under section 871(l) of such Code.</text>
</subparagraph></paragraph></subsection><subsection id="ID5c204cee45de4e63bc2b0ef220a35b71"><enum>(c)</enum><header>Qualified
Intermediaries</header><text>The Secretary of the Treasury (or the Secretary’s
designee) shall ensure that any qualified intermediary withholding agreement
that the United States enters into or renews after the date of the enactment of
this Act with a foreign financial institution or foreign branch of a United
States financial institution conforms with the amendments made by this section
to ensure appropriate withholding related to dividend equivalents and
substitute dividends.</text>
</subsection><subsection id="ID7894a8f728a143b49a281a169ddf7a66"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to payments
made on or after the date that is 90 days after the date of the enactment of
this Act.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID66c3fef16a104576ad7b5d903b321eb5"><enum>(e)</enum><header>Rule of
construction</header><text>Nothing in this section or the amendments made by
this section shall be construed to limit the authority of the Commissioner of
the Internal Revenue Service to collect taxes, interest, and penalties on
dividend equivalent or substitute dividend payments (as defined in section
871(l) of the Internal Revenue Code of 1986) made prior to the date of the
enactment of this Act in connection with swap agreements, stock loan
transactions, or other financial transactions involving nonresident aliens or
foreign corporations.</text>
</subsection></section><section id="id29BDD60E15544F37BE16EF7B6519B269"><enum>109.</enum><header>Reporting of
activities with respect to passive foreign investment companies</header>
<subsection id="id30CB02F70BCF472D95040F3284EA492B"><enum>(a)</enum><header>In
general</header><text>Section 1298 is amended by redesignating subsection (f)
as subsection (g) and by inserting after subsection (e) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id6F07DD9411D74678824DD9EB1F23A880" style="OLC">
<subsection id="idE26AF6CF3FB94F6899C9E095CE7A2859"><enum>(f)</enum><header>Reporting
requirement</header><text>Each person who is a shareholder of, or who directly
or indirectly forms, transfers assets to, is a beneficiary of, has a beneficial
interest in, or receives money or property or the use thereof from, a passive
foreign investment company shall file a report containing such information as
the Secretary may
require.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id3233F524156541DCAC50F5BF74329B82"><enum>(b)</enum><header>Conforming
amendment</header><text>Subsection (e) of section 1291 is amended by striking
<quote>, (d), and (f)</quote> and inserting <quote>and (d)</quote>.</text>
</subsection><subsection id="idB2CDC77D5FDD43A1AE2D183819B1AC5B"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section take effect on the date
of the enactment of this Act.</text>
</subsection></section><enum>II</enum><header>Other measures
to combat tax haven and tax shelter abuses</header>
<section id="IDa70d1bf5cdd24034890c50f13a7e0e4c"><enum>201.</enum><header>Penalty for
failing to disclose offshore holdings</header>
<subsection id="id0B2D3E57525949299D788727B889A6F9"><enum>(a)</enum><header>Securities
Exchange Act of 1934</header><text display-inline="yes-display-inline">Section
21(d)(3)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is
amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id1C797DD6BD4C49858464A44FEDDF761A" style="OLC">
<clause id="ID4da52980048b423c8052628733c32b01" indent="up1"><enum>(iv)</enum><header>Fourth tier</header><text display-inline="yes-display-inline">Notwithstanding clauses (i), (ii), and
(iii), the amount of the penalty for each such violation shall not exceed
$1,000,000 for any person if the violation described in subparagraph (A)
involved a knowing failure to disclose any holding or transaction involving
equity or debt instruments of an issuer and known by such person to involve a
foreign entity, including any trust, corporation, limited liability company,
partnership, or foundation that is directly or indirectly controlled by such
person, and which would have been otherwise subject to disclosure by such
person under this
title.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idF88EF19743C947E89F23F2889CEC633C"><enum>(b)</enum><header>Securities Act
of 1933</header><text>Section 20(d)(2) of the Securities Act of 1933 (15 U.S.C.
77t(d)(2)) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id465C269883C941939CAFE92BCCE10F78" style="OLC">
<subparagraph id="id09E31FEF7C1A47A49B5EDAED72AB51B7"><enum>(D)</enum><header>Fourth
tier</header><text>Notwithstanding subparagraphs (A), (B), and (C), the amount
of penalty for each such violation shall not exceed $1,000,000 for any person,
if the violation described in paragraph (1) involved a knowing failure to
disclose any holding or transaction involving equity or debt instruments of an
issuer and known by such person to involve a foreign entity, including any
trust, corporation, limited liability company, partnership, or foundation,
directly or indirectly controlled by such person, and which would have been
otherwise subject to disclosure by such person under this
title.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id3907536DBBC74D57B9909CB8354217B3"><enum>(c)</enum><header>Investment
Company Act of 1940</header><text>Section 9(d)(2) of the Investment Company Act
of 1940 (15 U.S.C. 80a–9(d)(2)) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="idF8FF8D6D70544397A84B9F6C4FF2758E" style="OLC">
<subparagraph id="idF47304522E2B4D0C826FA87425E78970"><enum>(D)</enum><header>Fourth
tier</header><text>Notwithstanding subparagraphs (A), (B), and (C), the amount
of penalty for each such violation shall not exceed $1,000,000 for any person,
if the violation described in paragraph (1) involved a knowing failure to
disclose any holding or transaction involving equity or debt instruments of an
issuer and known by such person to involve a foreign entity, including any
trust, corporation, limited liability company, partnership, or foundation,
directly or indirectly controlled by such person, and which would have been
otherwise subject to disclosure by such person under this
title.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id41750AA7812D40199A32DD94ED6980C4"><enum>(d)</enum><header>Investment
Advisers Act of 1940</header><text>Section 203(i)(2) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b–3(i)(2)) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="id187F62C20A0C4C049A35055536200745" style="OLC">
<subparagraph id="id2EBFD12A5CC440DCB8A052EDCC252B88"><enum>(D)</enum><header>Fourth
tier</header><text>Notwithstanding subparagraphs (A), (B), and (C), the amount
of penalty for each such violation shall not exceed $1,000,000 for any person,
if the violation described in paragraph (1) involved a knowing failure to
disclose any holding or transaction involving equity or debt instruments of an
issuer and known by such person to involve a foreign entity, including any
trust, corporation, limited liability company, partnership, or foundation,
directly or indirectly controlled by such person, and which would have been
otherwise subject to disclosure by such person under this
title.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="IDe491c3d1e93542419a0f34aeec52d1ad"><enum>202.</enum><header>Deadline for
anti-money laundering rule for hedge funds and private equity funds</header>
<subsection id="id95ED2A0F39E84F6686F738DC0C5F8DF6"><enum>(a)</enum><header>In
general</header>
<paragraph id="id272720406CC442769C6A9A10524524FC"><enum>(1)</enum><header>Proposed
rule</header><text>Not later than 90 days after the date of the enactment of
this Act, the Secretary of the Treasury, in consultation with the Chairman of
the Securities and Exchange Commission and the Chairman of the Commodity
Futures Trading Commission, shall publish a proposed rule in the Federal
Register requiring unregistered investment companies, including hedge funds or
private equity funds, to establish anti-money laundering programs and submit
suspicious activity reports under subsections (g) and (h) of section 5318 of
title 31, United States Code.</text>
</paragraph><paragraph id="idCAA0BDD421E74C04AFB298CFE8324CF2"><enum>(2)</enum><header>Final
rule</header><text>Not later than 180 days after the date of the enactment of
this Act, the Secretary of the Treasury shall publish a final rule in the
Federal Register on the matter described in paragraph (1).</text>
</paragraph></subsection><subsection id="id7364BE4E5A8C494AB50E4EBFFCCBBFE3"><enum>(b)</enum><header>Contents</header><text>The
final rule published under this section—</text>
<paragraph id="id53538C10E69E41B3AA18DC8F814B1367"><enum>(1)</enum><text>shall require, at
a minimum, that to safeguard against terrorist financing and money laundering,
all unregistered investment companies shall—</text>
<subparagraph id="idE779AD5CED11404E94D08D61C79EB9E7"><enum>(A)</enum><text>use risk-based
due diligence policies, procedures, and controls that are reasonably designed
to ascertain the identity of any foreign person (including the nominal and
beneficial owner or beneficiary of a foreign corporation, partnership, trust,
or other foreign entity) planning to supply or supplying funds to be invested
with the advice or assistance of that unregistered investment company;
and</text>
</subparagraph><subparagraph id="id28B28C2B61DD4789A27D17B526E97CE9"><enum>(B)</enum><text>be subject to
section 5318(k)(2) of title 31, United States Code; and</text>
</subparagraph></paragraph><paragraph id="id496C122FE5EB47E1ADACF111F489C91E"><enum>(2)</enum><text>may incorporate
aspects of the proposed rule for unregistered investment companies published in
the Federal Register on September 26, 2002 (67 Fed. Reg. 60617) (relating to
anti-money laundering programs).</text>
</paragraph></subsection><subsection id="id709F933DC57B451B857FC096B335A458"><enum>(c)</enum><header>Definitions</header><text>In
this section—</text>
<paragraph id="idE0E60E378F1A4580BFF0C327CCD007C1"><enum>(1)</enum><text>the terms
<term>investment company</term> and <term>issuer</term> have the same meanings
as in section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a–2);
and</text>
</paragraph><paragraph id="idE7850D036D874C8DA4FF33C78929F54C"><enum>(2)</enum><text>the term
<term>unregistered investment company</term> means an issuer that would be an
investment company, but for the exclusion under paragraph (1) or (7) of section
3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a–3(c)).</text>
</paragraph></subsection></section><section id="ID2c76118851044c1698cf3f04961fee70"><enum>203.</enum><header>Anti-money
laundering requirements for formation agents</header>
<subsection id="IDe8febdfbebde45fd8118f67e29d7c131"><enum>(a)</enum><header>Anti-money
laundering obligations for formation agents</header><text>Section 5312(a)(2) of
title 31, United States Code, is amended, by—</text>
<paragraph id="IDc5b53983bee04dc5bc8b71f9128adc54"><enum>(1)</enum><text>in subparagraph
(Y), by striking <quote>or</quote> at the end;</text>
</paragraph><paragraph id="ID1746f4ef08564b9a8d1505241f51a517"><enum>(2)</enum><text>by redesignating
subparagraph (Z) as subparagraph (AA); and</text>
</paragraph><paragraph id="id5463549258054EFA8128549971BABC76"><enum>(3)</enum><text>by inserting
after subparagraph (Y) the following:</text>
<quoted-block display-inline="no-display-inline" id="idBC0A32A215144A69BCE0FFA85916F14B" style="OLC">
<subparagraph id="ID4938fab16f6d4339a998ad74c7244446"><enum>(Z)</enum><text>persons involved
in forming new corporations, limited liability companies, partnerships, trusts,
or other legal entities;
or</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDc29b6e51bee2421ea60b9f5d3edee5c0"><enum>(b)</enum><header>Deadline for
anti-money laundering rule for formation agents</header><text>Not later than 90
days after the date of the enactment of this Act, after consulting with the
Attorney General of the United States, the Commissioner of the Internal Revenue
Service, and Chairman of the Securities and Exchange Commission, the Secretary
of the Treasury shall publish a proposed rule in the Federal Register requiring
persons described in section 5312(a)(2)(Z) of title 31, United States Code, as
added by this section, to establish anti-money laundering programs under
subsection (h) of section 5318 of that title. The Secretary shall publish such
rule in final form in the Federal Register not later than 180 days after the
date of the enactment of this Act.</text>
</subsection></section><section id="id943F503126C543BE862E09A8B5B6FBDE"><enum>204.</enum><header>Strengthening
summons in cases involving offshore secrecy jurisdictions</header>
<subsection id="idAD01FC475B804C9A81D67C0E9C3133C7"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 7609 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="idD6B18C1880FD4C7E9397F5EF0E367EA1" style="OLC">
<subsection id="id5A3345F44FC547BAA3829CFDCA4CB363"><enum>(f)</enum><header>Additional
requirement in the case of a John Doe summons</header>
<paragraph id="id95EB7A5F0B0A47039BB86899A7B1D13F"><enum>(1)</enum><header>General
Rule</header><text>Any summons described in subsection (c)(1) which does not
identify the person with respect to whose liability the summons is issued may
be served only after a court proceeding in which the Secretary establishes
that—</text>
<subparagraph id="id4BD6034E54994B95BFD973CDD5E38E98"><enum>(A)</enum><text>the summons
relates to the investigation of a particular person or ascertainable group or
class of persons,</text>
</subparagraph><subparagraph id="idEA8C856213BC452ABAC27E9FD03CC522"><enum>(B)</enum><text>there is a
reasonable basis for believing that such person or group or class of persons
may fail or may have failed to comply with any provision of any internal
revenue law, and</text>
</subparagraph><subparagraph id="id0748EBD76B584BD6AB1F132FAB3BE16C"><enum>(C)</enum><text>the information
sought to be obtained from the examination of the records or testimony (and the
identity of the person or persons with respect to whose liability the summons
is issued) is not readily available from other sources.</text>
</subparagraph></paragraph><paragraph id="idD0F68BDCE9D341D19A1F1A97C334F76F"><enum>(2)</enum><header>Exception</header><text>Paragraph
(1) shall not apply to any summons which specifies that it is limited to
information regarding a United States correspondent account (as defined in
section 5318A(e)(1)(B) of title 31, United States Code) or a United States
payable-through account (as defined in section 5318A(e)(1)(C) of such title) of
a financial institution in an offshore secrecy jurisdiction.</text>
</paragraph><paragraph id="idA5CE1A60CF704C0FA2C174F78459C622"><enum>(3)</enum><header>Presumption in
cases involving offshore secrecy jurisdictions</header><text>For purposes of
this section, in any case in which the particular person or ascertainable group
or class of persons have financial accounts in or transactions related to
offshore secrecy jurisdictions, there shall be a presumption that there is a
reasonable basis for believing that such person or group or class of persons
may fail or may have failed to comply with provisions of internal revenue
law.</text>
</paragraph><paragraph id="idB8C5EF97DCAA48CDBBBE2343B891F5B8"><enum>(4)</enum><header>Project John
Doe summonses</header>
<subparagraph id="idABB97A0F4D18405E8880B22666FED739"><enum>(A)</enum><header>In
general</header><text>Notwithstanding the requirements of paragraph (1), the
Secretary may issue a summons described in paragraph (1) if the summons—</text>
<clause id="idF5C997BB699447448CD0D09DF8748C79"><enum>(i)</enum><text>relates to a
project which is approved under subparagraph (B),</text>
</clause><clause id="id7219C115FF384A93A392058D9CD60865"><enum>(ii)</enum><text>is issued to a
person who is a member of the group or class established under subparagraph
(B)(i), and</text>
</clause><clause id="id1F96D4097DAB4EF796CEDCA24C685261"><enum>(iii)</enum><text>is issued
within 3 years of the date on which such project was approved under
subparagraph (B).</text>
</clause></subparagraph><subparagraph id="idB80F5B26EE394E69A680C3285531E537"><enum>(B)</enum><header>Approval of
projects</header><text>A project may only be approved under this subparagraph
after a court proceeding in which the Secretary establishes that—</text>
<clause id="id0F6842818DB54ED88C5D849611EDBF91"><enum>(i)</enum><text>any summons
issues with respect to the project will be issued to a member of an
ascertainable group or class of persons, and</text>
</clause><clause id="id5C58AA1B37BA4ABA9C67AF1F34BBAD20"><enum>(ii)</enum><text>any summons
issued with respect to such project will meet the requirements of subparagraphs
(A), (B), and (C) of paragraph (1).</text>
</clause></subparagraph><subparagraph id="idE150F36D1FD843D0B5B42D9888FA0C17"><enum>(C)</enum><header>Extension</header><text>Upon
application of the Secretary, the court may extend the time for issuing such
summonses under subparagraph (A)(i) for additional 3-year periods, but only if
the court continues to exercise oversight of such project under subparagraph
(D).</text>
</subparagraph><subparagraph id="id9003E072C852419A8EDC541CE31DD41F"><enum>(D)</enum><header>Ongoing court
oversight</header><text>During any period in which the Secretary is authorized
to issue summonses in relation to a project approved under subparagraph (B)
(including during any extension under subparagraph (C)), the Secretary shall
report annually to the court on the use of such authority, provide copies of
all summonses with such report, and comply with the court's direction with
respect to the issuance of any John Doe summons under such
project.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id58EB5C4C2E584171BE347A73C1A9D41E"><enum>(b)</enum><header>Jurisdiction of
court</header>
<paragraph id="id8DAC8A508B134757A76FD53F4099F960"><enum>(1)</enum><header>In
general</header><text>Paragraph (1) of section 7609(h) is amended by inserting
after the first sentence the following new sentence: <quote>Any United States
district court in which a member of the group or class to which a summons may
be issued resides or is found shall have jurisdiction to hear and determine the
approval of a project under subsection (f)(4)(B).</quote>.</text>
</paragraph><paragraph id="idA334D37650164C3994AEA99EB7A45848"><enum>(2)</enum><header>Conforming
amendment</header><text>The first sentence of section 7609(h)(1) is amended by
striking <quote>(f)</quote> and inserting <quote>(f)(1)</quote>.</text>
</paragraph></subsection><subsection id="id5B7D67303EBA48AAA14C79F9E5D49642"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to summonses
issued after the date of the enactment of this Act.</text>
</subsection><subsection id="ID3d1c3e3026aa481da39e46b123f599d4"><enum>(d)</enum><header>GAO
report</header><text>Not later than the date which is 5 years after the date of
the enactment of this Act, the Comptroller General of the United States shall
issue a report on the implementation of section 7609(f)(4) of the Internal
Revenue Code of 1986, as added by this section.</text>
</subsection></section><section id="id7B679E7CCEDD42ACA24E10D18C2D1F98"><enum>205.</enum><header>Improving
enforcement of foreign financial account reporting</header>
<subsection id="id6935F711F3054F718E23410ACFD1C994"><enum>(a)</enum><header>Clarifying the
connection of foreign financial account reporting to tax
administration</header><text>Paragraph (4) of section 6103(b) (relating to tax
administration) is amended by adding at the end the following new
sentence:</text>
<quoted-block display-inline="no-display-inline" id="idE89C6F78E9814D3A9584D026A8B3768B" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">For
purposes of clause (i), section 5314 of title 31, United States Code, and
sections 5321 and 5322 of such title (as such sections pertain to such section
5314), shall be considered to be an internal revenue
law.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idF18FC55273684A88995E657C65EE0FC5"><enum>(b)</enum><header>Simplifying the
calculation of foreign financial account reporting
penalties</header><text>Section 5321(a)(5)(D)(ii) of title 31, United States
Code, is amended by striking <quote>the balance in the account at the time of
the violation</quote> and inserting <quote>the highest balance in the account
during the reporting period to which the violation relates</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idB4853AB2F1FF4EF4B5665768309C2D29"><enum>(c)</enum><header>Clarifying the
use of suspicious activity reports under the Bank Secrecy Act for civil tax law
enforcement</header><text>Section 5319 of title 31, United States Code, is
amended by inserting <quote>the civil and criminal enforcement divisions of the
Internal Revenue Service,</quote> after <quote>including</quote>.</text>
</subsection></section><enum>III</enum><header>Combating tax
shelter promoters</header>
<section commented="no" display-inline="no-display-inline" id="ID11C14050FFC443B585AB2AF466C5631A" section-type="subsequent-section"><enum>301.</enum><header>Penalty for
promoting abusive tax shelters</header>
<subsection commented="no" display-inline="no-display-inline" id="IDC191FD6ECC134BE08A4DD36EBF164BF9"><enum>(a)</enum><header>Penalty for
promoting abusive tax shelters</header><text display-inline="yes-display-inline">Section 6700 (relating to promoting abusive
tax shelters, etc.) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="ID8E6BA63D0D9E4A0AB7F9C233045611F7"><enum>(1)</enum><text display-inline="yes-display-inline">by redesignating subsections (b) and (c) as
subsections (d) and (e), respectively,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC147C205B821411D89C7B14B01155E78"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>a penalty</quote> and
all that follows through the period in the first sentence of subsection (a) and
inserting <quote>a penalty determined under subsection (b)</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID3F339C61AFEC4F9693593CBF597F3AF5"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting after subsection (a) the
following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="IDF2176A32171445B799848B1FF7D9B7EE" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDF634AD16E0654684A22ABDCA398311A8"><enum>(b)</enum><header>Amount of
penalty; calculation of penalty; liability for penalty</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID18CDF84E2BAE4AC88C5CEFCCD8F7935E"><enum>(1)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">The amount of the
penalty imposed by subsection (a) shall not exceed 150 percent of the gross
income derived (or to be derived) from such activity by the person or persons
subject to such penalty.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID8A79F2D4AE2840DC8D220BF84F0DF6C4"><enum>(2)</enum><header>Calculation of
penalty</header><text display-inline="yes-display-inline">The penalty amount
determined under paragraph (1) shall be calculated with respect to each
instance of an activity described in subsection (a), each instance in which
income was derived by the person or persons subject to such penalty, and each
person who participated in such an activity.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID151A527FFAB445F5927BAB7EF6F93981"><enum>(3)</enum><header>Liability for
penalty</header><text display-inline="yes-display-inline">If more than 1 person
is liable under subsection (a) with respect to such activity, all such persons
shall be jointly and severally liable for the penalty under such
subsection.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID04D255D7332C4450934E28ECA81C352F"><enum>(c)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">The payment of any
penalty imposed under this section or the payment of any amount to settle or
avoid the imposition of such penalty shall not be considered an ordinary and
necessary expense in carrying on a trade or business for purposes of this title
and shall not be deductible by the person who is subject to such penalty or who
makes such
payment.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id36AB05EC798F4556AD06EC0D50177956"><enum>(b)</enum><header>Conforming
amendment</header><text display-inline="yes-display-inline">Section 6700(a) is
amended by striking the last sentence.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID1F40E54953D24E9589B850A64C061561"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to activities after the date of the enactment of this
Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDC89B1464487542AE9ADD5C4140B8B0CB" section-type="subsequent-section"><enum>302.</enum><header>Penalty for aiding
and abetting the understatement of tax liability</header>
<subsection commented="no" display-inline="no-display-inline" id="ID8664EF7CD0824EE69836AE57E7DD9505"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6701(a)
(relating to imposition of penalty) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDE1ACDDFE72D24812ABA00F0B4FE94F6E"><enum>(1)</enum><text display-inline="yes-display-inline">by inserting <quote>the tax liability
or</quote> after <quote>respect to,</quote> in paragraph (1),</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID1277CF0A15D442959E3EA465691ACBD2"><enum>(2)</enum><text display-inline="yes-display-inline">by inserting <quote>aid, assistance,
procurement, or advice with respect to such</quote> before
<quote>portion</quote> both places it appears in paragraphs (2) and (3),
and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC7112943CBD04C1FBA2235EDBBD93F12"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting <quote>instance of aid,
assistance, procurement, or advice or each such</quote> before
<quote>document</quote> in the matter following paragraph (3).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDCFB74AD004D64FC9ADB428412F355615"><enum>(b)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">Subsection (b) of
section 6701 (relating to penalties for aiding and abetting understatement of
tax liability) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="IDA022C9628E48481EACAA8F1F56C029B7" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDB3061E608CB545A0B2D5ADCE3A8D8314"><enum>(b)</enum><header>Amount of
penalty; calculation of penalty; liability for penalty</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID645C297005A344E38E0E61A8AC8CAF26"><enum>(1)</enum><header>Amount of
penalty</header><text display-inline="yes-display-inline">The amount of the
penalty imposed by subsection (a) shall not exceed 150 percent of the gross
income derived (or to be derived) from such aid, assistance, procurement, or
advice provided by the person or persons subject to such penalty.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDCE2F24ED668E4A6AB273AB756A980491"><enum>(2)</enum><header>Calculation of
penalty</header><text display-inline="yes-display-inline">The penalty amount
determined under paragraph (1) shall be calculated with respect to each
instance of aid, assistance, procurement, or advice described in subsection
(a), each instance in which income was derived by the person or persons subject
to such penalty, and each person who made such an understatement of the
liability for tax.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDC84B698FF3F347FFB13EB40A9F7706DB"><enum>(3)</enum><header>Liability for
penalty</header><text display-inline="yes-display-inline">If more than 1 person
is liable under subsection (a) with respect to providing such aid, assistance,
procurement, or advice, all such persons shall be jointly and severally liable
for the penalty under such
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID91D46BB06F834E94A323488B11CAC58A"><enum>(c)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">Section 6701 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID9F73DF3C04824E8A9A3F585F0A450F73" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="IDD71A22C9C6F04E6DBB28A000D2F99E40"><enum>(g)</enum><header>Penalty not
deductible</header><text display-inline="yes-display-inline">The payment of any
penalty imposed under this section or the payment of any amount to settle or
avoid the imposition of such penalty shall not be considered an ordinary and
necessary expense in carrying on a trade or business for purposes of this title
and shall not be deductible by the person who is subject to such penalty or who
makes such
payment.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID48117D41C97044A99C4B4B445B0CC598"><enum>(d)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to activities after the date of the enactment of this
Act.</text>
</subsection></section><section id="idBE186AD1283F455E8BC93C57BB3CDEA4" section-type="subsequent-section"><enum>303.</enum><header>Tax planning
inventions not patentable</header>
<subsection id="ID59a67351b29d4b17979eb5bb3e587a4e"><enum>(a)</enum><header>In
general</header><text>Section 101 of title 35, United States Code, is
amended—</text>
<paragraph id="ID2451ccbbe595490cb759c5ba3585c8c5"><enum>(1)</enum><text>by striking
<quote>Whoever</quote> and inserting <quote><header-in-text level="subsection" style="OLC">(a) Patentable inventions</header-in-text>.—Whoever</quote>,
and</text>
</paragraph><paragraph id="IDa90e5eee0bfb45468bcc4d967529dd77"><enum>(2)</enum><text>by adding at the
end the following:</text>
<quoted-block display-inline="no-display-inline" id="id76E670CE59BD4745AD5EED5BBF866797" style="OLC">
<subsection id="ID915bb32046b644928d4fb4cad79a1c2b"><enum>(b)</enum><header>Tax planning
inventions</header>
<paragraph id="ID8f615e933a52482e857058866aa3a16f"><enum>(1)</enum><header>Unpatentable
subject matter</header><text>A patent may not be obtained for a tax planning
invention.</text>
</paragraph><paragraph id="idDD0A7604CE114D12927B430E07730017"><enum>(2)</enum><header>Definitions</header><text>For
purposes of paragraph (1)—</text>
<subparagraph id="ID8c2a4dca920e4cadb422131cf746c075"><enum>(A)</enum><text>the term
<term>tax planning invention</term> means a plan, strategy, technique, scheme,
process, or system that is designed to reduce, minimize, determine, avoid, or
defer, or has, when implemented, the effect of reducing, minimizing,
determining, avoiding, or deferring, a taxpayer’s tax liability or is designed
to facilitate compliance with tax laws, but does not include tax preparation
software and other tools or systems used solely to prepare tax or information
returns,</text>
</subparagraph><subparagraph commented="no" id="H542662E4BEF2457BA3B05876D0906D5B"><enum>(B)</enum><text display-inline="yes-display-inline">the term <term>taxpayer</term> means an
individual, entity, or other person (as defined in
<external-xref legal-doc="usc" parsable-cite="usc/26/7701">section
7701</external-xref> of the Internal Revenue Code of 1986),</text>
</subparagraph><subparagraph commented="no" id="HF61D8CC8EDA94224B07E6700768F68AC"><enum>(C)</enum><text display-inline="yes-display-inline">the terms <term>tax</term>, <term>tax
laws</term>, <term>tax liability</term>, and <term>taxation</term> refer to any
Federal, State, county, city, municipality, foreign, or other governmental
levy, assessment, or imposition, whether measured by income, value, or
otherwise, and</text>
</subparagraph><subparagraph commented="no" id="H6CEBD85741B14B1E9F40AADFD0C135D6"><enum>(D)</enum><text>the term
<term>State</term> means each of the several States, the District of Columbia,
and any commonwealth, territory, or possession of the United
States.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H5BB336030ED74B40AE2163BFF4B6EECB"><enum>(b)</enum><header>Applicability</header><text>The
amendments made by this section—</text>
<paragraph id="HB1608CCC21A74E83A8A5C184EBD5DD36"><enum>(1)</enum><text>shall take effect
on the date of the enactment of this Act,</text>
</paragraph><paragraph id="HB46903A17E6E446800A985744E19E7E4"><enum>(2)</enum><text>shall apply to any
application for patent or application for a reissue patent that is—</text>
<subparagraph id="H7080D5FB45084B5AB800C4F5EFFD128"><enum>(A)</enum><text>filed on or after
the date of the enactment of this Act, or</text>
</subparagraph><subparagraph id="HC0ADE3105B3E40D6AD3D861CACDC9D43"><enum>(B)</enum><text>filed before that
date if a patent or reissue patent has not been issued pursuant to the
application as of that date, and</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H0CC191B5A0774BFCAB7191735DDD7BF4"><enum>(3)</enum><text>shall not be
construed as validating any patent issued before the date of the enactment of
this Act for an invention described in
<external-xref legal-doc="usc" parsable-cite="usc/35/101">section
101(b)</external-xref> of title 35, United States Code, as added by this
section.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="ID9C823C7249F640DDB662DFE0173464E9" section-type="subsequent-section"><enum>304.</enum><header>Prohibited fee
arrangement</header>
<subsection commented="no" display-inline="no-display-inline" id="IDE47CA1D550664CD88E3C43479A65BFFC"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6701, as
amended by this Act, is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="IDCF901FE478844DABB9A9D359F7C3F1B0"><enum>(1)</enum><text display-inline="yes-display-inline">by redesignating subsections (f) and (g) as
subsections (g) and (h), respectively,</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID4EB5F59A2BA547C5947FEACA1DB060D2"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>subsection (a).</quote>
in paragraphs (2) and (3) of subsection (g) (as redesignated by paragraph (1))
and inserting <quote>subsection (a) or (f).</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID96021543EA1340A1B748045CE4138F8E"><enum>(3)</enum><text display-inline="yes-display-inline">by inserting after subsection (e) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID4C1E8882D3DB4407B72594ED64B9C6C3" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID128D9B91243B4B378DBF0EDE99155635"><enum>(f)</enum><header>Prohibited fee
arrangement</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID505CFEEE6A894BFC817DA2EECCB450FF"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Any person who makes
an agreement for, charges, or collects a fee which is for services provided in
connection with the internal revenue laws, and the amount of which is
calculated according to, or is dependent upon, a projected or actual amount
of—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="IDE6E232562DB64C1195FB6C856BFBD2FD"><enum>(A)</enum><text display-inline="yes-display-inline">tax savings or benefits, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDF70A196BCE0646458674F81F5BA05344"><enum>(B)</enum><text display-inline="yes-display-inline">losses which can be used to offset other
taxable income,</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">shall pay a penalty with respect to
each such fee activity in the amount determined under subsection (b).</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID7B6D4E08FEB8492994EE28D5B89F648C"><enum>(2)</enum><header>Rules</header><text display-inline="yes-display-inline">The Secretary may issue rules to carry out
the purposes of this subsection and may provide exceptions for fee arrangements
that are in the public
interest.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id2A3BFE8CBCB14288852A8587BE36AD35"><enum>(b)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to fee agreements, charges, and collections made after
the date of the enactment of this Act.</text>
</subsection></section><section id="id70FBAAAEF0614693A04BA10679270E51"><enum>305.</enum><header>Preventing tax
shelter activities by financial institutions</header>
<subsection commented="no" display-inline="no-display-inline" id="id0AC267A491144907BC202E0D909722A4"><enum>(a)</enum><header>Examinations</header>
<paragraph commented="no" display-inline="no-display-inline" id="id70EBEE58AB3D454A9B7A0A36330D3A40"><enum>(1)</enum><header>Development of
examination techniques</header><text display-inline="yes-display-inline">Each
of the Federal banking agencies and the Commission shall, in consultation with
the Internal Revenue Service, develop examination techniques to detect
potential violations of section 6700 or 6701 of the Internal Revenue Code of
1986, by depository institutions, brokers, dealers, and investment advisers, as
appropriate.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idEF3BA4E72E5E44F8AC4F4FA39D311FC4"><enum>(2)</enum><header>Implementation</header><text display-inline="yes-display-inline">Each of the Federal banking agencies and
the Commission shall implement the examination techniques developed under
paragraph (1) with respect to each of the depository institutions, brokers,
dealers, or investment advisers subject to their enforcement authority. Such
examination shall, to the extent possible, be combined with any examination by
such agency otherwise required or authorized by Federal law.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id7F800287C74C43FAB84AB44D3EA0353F"><enum>(b)</enum><header>Report to
internal revenue service</header><text display-inline="yes-display-inline">In
any case in which an examination conducted under this section with respect to a
financial institution or other entity reveals a potential violation, such
agency shall promptly notify the Internal Revenue Service of such potential
violation for investigation and enforcement by the Internal Revenue Service, in
accordance with applicable provisions of law.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id3B3B399837504EA3B968BE3B7C6DF245"><enum>(c)</enum><header>Report to
congress</header><text display-inline="yes-display-inline">The Federal banking
agencies and the Commission shall submit a joint written report to Congress in
2010 and 2013 on their progress in preventing violations of sections 6700 and
6701 of the Internal Revenue Code of 1986, by depository institutions, brokers,
dealers, and investment advisers, as appropriate.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idB0F74313E1834F239DE55503CEF95BF0"><enum>(d)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph commented="no" display-inline="no-display-inline" id="id402FA538018F491A8DF75534543DE985"><enum>(1)</enum><text display-inline="yes-display-inline">the terms <term>broker</term>,
<term>dealer</term>, and <term>investment adviser</term> have the same meanings
as in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idAA65914592DF4DA2BCA42F1B852C0D2C"><enum>(2)</enum><text display-inline="yes-display-inline">the term <term>Commission</term> means the
Securities and Exchange Commission;</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id552F8F8839324E46AF7252FE737C1A66"><enum>(3)</enum><text display-inline="yes-display-inline">the term <term>depository
institution</term> has the same meaning as in section 3(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(c));</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id8967360339094753A655BAABBD63F4E6"><enum>(4)</enum><text display-inline="yes-display-inline">the term <term>Federal banking
agencies</term> has the same meaning as in section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q)); and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idEA435AAADDE744CDA5698587B1510601"><enum>(5)</enum><text display-inline="yes-display-inline">the term <term>Secretary</term> means the
Secretary of the Treasury.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="ID97358E9C522C44789FAA6B645B958987" section-type="subsequent-section"><enum>306.</enum><header>Information sharing
for enforcement purposes</header>
<subsection commented="no" display-inline="no-display-inline" id="ID1E68AC35F4B646F1B802D46CEA447937"><enum>(a)</enum><header>Promotion of
prohibited tax shelters or tax avoidance schemes</header><text display-inline="yes-display-inline">Section 6103(h) (relating to disclosure to
certain Federal officers and employees for purposes of tax administration,
etc.) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDDFC3CB53CB4A4231992788F751F01663" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDE0D8313F64F74C7FBDA5209B0A848D6F"><enum>(7)</enum><header>Disclosure of
returns and return information related to promotion of prohibited tax shelters
or tax avoidance schemes</header>
<subparagraph commented="no" display-inline="no-display-inline" id="IDD773C0232A2A4BF888C08CB4DA6AFBFF"><enum>(A)</enum><header>Written
request</header><text display-inline="yes-display-inline">Upon receipt by the
Secretary of a written request which meets the requirements of subparagraph (B)
from the head of the United States Securities and Exchange Commission, an
appropriate Federal banking agency as defined under section 1813(q) of title
12, United States Code, or the Public Company Accounting Oversight Board, a
return or return information shall be disclosed to such requestor’s officers
and employees who are personally and directly engaged in an investigation,
examination, or proceeding by such requestor to evaluate, determine, penalize,
or deter conduct by a financial institution, issuer, or public accounting firm,
or associated person, in connection with a potential or actual violation of
section 6700 (promotion of abusive tax shelters), 6701 (aiding and abetting
understatement of tax liability), or activities related to promoting or
facilitating inappropriate tax avoidance or tax evasion. Such disclosure shall
be solely for use by such officers and employees in such investigation,
examination, or proceeding. In the discretion of the Secretary, such disclosure
may take the form of the participation of Internal Revenue Service employees in
a joint investigation, examination, or proceeding with the Securities Exchange
Commission, Federal banking agency, or Public Company Accounting Oversight
Board.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID8306056B019E444BAA44478AF9C0A4A5"><enum>(B)</enum><header>Requirements</header><text display-inline="yes-display-inline">A request meets the requirements of this
subparagraph if it sets forth—</text>
<clause commented="no" display-inline="no-display-inline" id="ID221366AE94AA4DD0A623C1B53B2A7A7F"><enum>(i)</enum><text display-inline="yes-display-inline">the nature of the investigation,
examination, or proceeding,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID58FC1602E9444B64A7E661637BE5FB27"><enum>(ii)</enum><text display-inline="yes-display-inline">the statutory authority under which such
investigation, examination, or proceeding is being conducted,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDA6688048D13347BDA7C8E4F220ECA92B"><enum>(iii)</enum><text display-inline="yes-display-inline">the name or names of the financial
institution, issuer, or public accounting firm to which such return information
relates,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDE1691FAC1FEB44E184F1E024003C5E71"><enum>(iv)</enum><text display-inline="yes-display-inline">the taxable period or periods to which such
return information relates, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID2AEDF81033774439BBA8C6CF76616F9D"><enum>(v)</enum><text display-inline="yes-display-inline">the specific reason or reasons why such
disclosure is, or may be, relevant to such investigation, examination or
proceeding.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID0711839E7EA94A47B3C7C625F3A31A39"><enum>(C)</enum><header>Financial
institution</header><text display-inline="yes-display-inline">For the purposes
of this paragraph, the term <term>financial institution</term> means a
depository institution, foreign bank, insured institution, industrial loan
company, broker, dealer, investment company, investment advisor, or other
entity subject to regulation or oversight by the United States Securities and
Exchange Commission or an appropriate Federal banking
agency.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID85B894FE336543A6A49C0182771EB3A5"><enum>(b)</enum><header>Financial and
accounting fraud investigations</header><text display-inline="yes-display-inline">Section 6103(i) (relating to disclosure to
Federal officers or employees for administration of Federal laws not relating
to tax administration) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDE55F5B28994E4EBC9A217855E91D3980" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="ID5EF2CE26F9B1454895E14ABFDB12F840"><enum>(9)</enum><header>Disclosure of
returns and return information for use in financial and accounting fraud
investigations</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID05B0AB60BC21428092CC087694FC30AE"><enum>(A)</enum><header>Written
request</header><text display-inline="yes-display-inline">Upon receipt by the
Secretary of a written request which meets the requirements of subparagraph (B)
from the head of the United States Securities and Exchange Commission or the
Public Company Accounting Oversight Board, a return or return information shall
be disclosed to such requestor’s officers and employees who are personally and
directly engaged in an investigation, examination, or proceeding by such
requester to evaluate the accuracy of a financial statement or report, or to
determine whether to require a restatement, penalize, or deter conduct by an
issuer, investment company, or public accounting firm, or associated person, in
connection with a potential or actual violation of auditing standards or
prohibitions against false or misleading statements or omissions in financial
statements or reports. Such disclosure shall be solely for use by such officers
and employees in such investigation, examination, or proceeding.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID8915873B554749EFAD9A5C44FFBA99A4"><enum>(B)</enum><header>Requirements</header><text display-inline="yes-display-inline">A request meets the requirements of this
subparagraph if it sets forth—</text>
<clause commented="no" display-inline="no-display-inline" id="ID184689123C2D4015931C32D2D024C8A5"><enum>(i)</enum><text display-inline="yes-display-inline">the nature of the investigation,
examination, or proceeding,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID0B71359B09FC4F6BB561B9E1659ED855"><enum>(ii)</enum><text display-inline="yes-display-inline">the statutory authority under which such
investigation, examination, or proceeding is being conducted,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID737544069DDF47418D656D54C26F9ABD"><enum>(iii)</enum><text display-inline="yes-display-inline">the name or names of the issuer, investment
company, or public accounting firm to which such return information
relates,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID19305441D33A475B8FA7709E4A8456A5"><enum>(iv)</enum><text display-inline="yes-display-inline">the taxable period or periods to which such
return information relates, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID553FD9AF88F74FC99C1ECD5D00379BA7"><enum>(v)</enum><text display-inline="yes-display-inline">the specific reason or reasons why such
disclosure is, or may be, relevant to such investigation, examination or
proceeding.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID5A82EBF08B74423EBA6F77AA9406DEA0"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to disclosures and to information and document
requests made after the date of the enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDB093A714B49A47868C15E5F1E219BC4C" section-type="subsequent-section"><enum>307.</enum><header>Disclosure of
information to Congress</header>
<subsection commented="no" display-inline="no-display-inline" id="ID6C37EEEC56914F438C96C7D72446DB8A"><enum>(a)</enum><header>Disclosure by
tax return preparer</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDD687479CA18441E7B24701CCB0773A65"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (B) of
section 7216(b)(1) (relating to disclosures) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="IDF738EECBF37141059860B198FAED43B3" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="ID705BFEFE21D147DB8070925892CF4119"><enum>(B)</enum><text display-inline="yes-display-inline">pursuant to any 1 of the following
documents, if clearly identified:</text>
<clause commented="no" display-inline="no-display-inline" id="IDB17CF96BA4CB4F80A78450A0063F9D9F"><enum>(i)</enum><text display-inline="yes-display-inline">The order of any Federal, State, or local
court of record.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID65BA2E8732A24FEB9F7642E2FCC3744A"><enum>(ii)</enum><text display-inline="yes-display-inline">A subpoena issued by a Federal or State
grand jury.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDB2196DF70B27460B94F07C7DDC38F6A2"><enum>(iii)</enum><text display-inline="yes-display-inline">An administrative order, summons, or
subpoena which is issued in the performance of its duties by—</text>
<subclause commented="no" display-inline="no-display-inline" id="ID2B80775056A04A228EE10F9EF33375B3"><enum>(I)</enum><text display-inline="yes-display-inline">any Federal agency, including Congress or
any committee or subcommittee thereof, or</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="IDF3E3263011544986B6BB9967A3C9D5D8"><enum>(II)</enum><text display-inline="yes-display-inline">any State agency, body, or commission
charged under the laws of the State or a political subdivision of the State
with the licensing, registration, or regulation of tax return
preparers.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID1C550F6197F841A997162D09997C7779"><enum>(2)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this subsection shall apply to disclosures made after the date of the enactment
of this Act pursuant to any document in effect on or after such date.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID8CD46D0A713848FDA405D3022CD4EC11"><enum>(b)</enum><header>Disclosure by
Secretary</header><text display-inline="yes-display-inline">Paragraph (2) of
section 6104(a) (relating to inspection of applications for tax exemption or
notice of status) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id85DF3A936C9541E2BEFC67D030832AE7" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDA580E567EBF64244A433CD4663764F5B"><enum>(2)</enum><header>Inspection by
Congress</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID006A7E12176C42A487916EE73ED38AE0"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Upon receipt of a
written request from a committee or subcommittee of Congress, copies of
documents related to a determination by the Secretary to grant, deny, revoke,
or restore an organization’s exemption from taxation under section 501 shall be
provided to such committee or subcommittee, including any application, notice
of status, or supporting information provided by such organization to the
Internal Revenue Service; any letter, analysis, or other document produced by
or for the Internal Revenue Service evaluating, determining, explaining, or
relating to the tax exempt status of such organization (other than returns,
unless such returns are available to the public under this section or section
6103 or 6110); and any communication between the Internal Revenue Service and
any other party relating to the tax exempt status of such organization.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID9DEB8125C1614753A921CE1B0C5E3DFB"><enum>(B)</enum><header>Additional
information</header><text display-inline="yes-display-inline">Section 6103(f)
shall apply with respect to—</text>
<clause commented="no" display-inline="no-display-inline" id="ID0FA263F5972B4E4FA12DCA63549575D1"><enum>(i)</enum><text display-inline="yes-display-inline">the application for exemption of any
organization described in subsection (c) or (d) of section 501 which is exempt
from taxation under section 501(a) for any taxable year and any application
referred to in subparagraph (B) of subsection (a)(1) of this section,
and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="IDB24BF907A40E47AAA188C7F97FA62442"><enum>(ii)</enum><text display-inline="yes-display-inline">any other papers which are in the
possession of the Secretary and which relate to such application,</text>
</clause><continuation-text commented="no" continuation-text-level="subparagraph">as if such papers constituted
returns.</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDE5A99CB0E23F425B9B7822AB496B5F34"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to disclosures and to information and document
requests made after the date of the enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="ID8DAC424D4AF9457C99DFA3B0B3F23FA1" section-type="subsequent-section"><enum>308.</enum><header>Tax opinion
standards for tax practitioners</header><text display-inline="no-display-inline">Section 330(d) of title 31, United States
Code, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="IDD04DE75E6EA5419899C2AF738AB0EB1D" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID24953C93B66D4EFE816FB2D052335805"><enum>(d)</enum><text display-inline="yes-display-inline">The Secretary of the Treasury shall impose
standards applicable to the rendering of written advice with respect to any
listed transaction or any entity, plan, arrangement, or other transaction which
has a potential for tax avoidance or evasion. Such standards shall address, but
not be limited to, the following issues:</text>
<paragraph commented="no" display-inline="no-display-inline" id="ID53700F31F067487F966031858E19D9F8"><enum>(1)</enum><text display-inline="yes-display-inline">Independence of the practitioner issuing
such written advice from persons promoting, marketing, or recommending the
subject of the advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID8EDB76273E174DCBA52DEBBE32D86E3F"><enum>(2)</enum><text display-inline="yes-display-inline">Collaboration among practitioners, or
between a practitioner and other party, which could result in such
collaborating parties having a joint financial interest in the subject of the
advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID2163F7E5DAD549DDBF34D1EEA3B57281"><enum>(3)</enum><text display-inline="yes-display-inline">Avoidance of conflicts of interest which
would impair auditor independence.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID57A899985DCB4FDF9CEC15796AB20927"><enum>(4)</enum><text display-inline="yes-display-inline">For written advice issued by a firm,
standards for reviewing the advice and ensuring the consensus support of the
firm for positions taken.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID6F47B43DA62940E193A1579A52DCC0B7"><enum>(5)</enum><text display-inline="yes-display-inline">Reliance on reasonable factual
representations by the taxpayer and other parties.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDA98630CF550F46FBB063AF4C037090FD"><enum>(6)</enum><text display-inline="yes-display-inline">Appropriateness of the fees charged by the
practitioner for the written advice.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id86C6175D913F433E8EF50AC7571F5A16"><enum>(7)</enum><text display-inline="yes-display-inline">Preventing practitioners and firms from
aiding or abetting the understatement of tax liability by clients.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id232351265C614736A34CB566F3103AAB"><enum>(8)</enum><text display-inline="yes-display-inline">Banning the promotion of potentially
abusive or illegal tax
shelters.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section commented="no" display-inline="no-display-inline" id="IDC2D08DC787B24825B799E52F9A668435" section-type="subsequent-section"><enum>309.</enum><header>Denial of deduction
for certain fines, penalties, and other amounts</header>
<subsection commented="no" display-inline="no-display-inline" id="ID6BF83AFB84EF447AA683947DF51EA795"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (f) of
section 162 (relating to trade or business expenses) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="ID71537781F7A0423AA285C31077991B6B" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="ID57CD0DF7AC35455D916F8CEDEB999FAB"><enum>(f)</enum><header>Fines,
penalties, and other amounts</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID7E3597A8568449FFB5AB3139E17ABD83"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
paragraph (2), no deduction otherwise allowable shall be allowed under this
chapter for any amount paid or incurred (whether by suit, agreement, or
otherwise) to, or at the direction of, a government or entity described in
paragraph (4) in relation to the violation of any law or the investigation or
inquiry by such government or entity into the potential violation of any
law.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID6861821E7E304362B3E09B2B6C2F6673"><enum>(2)</enum><header>Exception for
amounts constituting restitution</header><text display-inline="yes-display-inline">Paragraph (1) shall not apply to any amount
which—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID0FF2CA7716EB4F05B258612D8047A11E"><enum>(A)</enum><text display-inline="yes-display-inline">the taxpayer establishes constitutes
restitution (including remediation of property) for damage or harm caused by or
which may be caused by the violation of any law or the potential violation of
any law, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="IDC4354876294A4C429B821EAA3AA904FB"><enum>(B)</enum><text display-inline="yes-display-inline">is identified as restitution in the court
order or settlement agreement.</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">Identification pursuant to
subparagraph (B) alone shall not satisfy the requirement under subparagraph
(A). This paragraph shall not apply to any amount paid or incurred as
reimbursement to the government or entity for the costs of any investigation or
litigation.</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID7A4DF6141B2C49219C41BF8F79DD7AE9"><enum>(3)</enum><header>Exception for
amounts paid or incurred as the result of certain court orders</header><text display-inline="yes-display-inline">Paragraph (1) shall not apply to any amount
paid or incurred by order of a court in a suit in which no government or entity
described in paragraph (4) is a party.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDBF4CF24CBCD74CB39297778ED8E083D8"><enum>(4)</enum><header>Certain
nongovernmental regulatory entities</header><text display-inline="yes-display-inline">An entity is described in this paragraph if
it is—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="ID0CF6FC50B35548AB99E60A3A4934497B"><enum>(A)</enum><text display-inline="yes-display-inline">a nongovernmental entity which exercises
self-regulatory powers (including imposing sanctions) in connection with a
qualified board or exchange (as defined in section 1256(g)(7)), or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID8378B3D5BFE04308A124348E5C387D83"><enum>(B)</enum><text display-inline="yes-display-inline">to the extent provided in regulations, a
nongovernmental entity which exercises self-regulatory powers (including
imposing sanctions) as part of performing an essential governmental
function.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDA3E9613165B44EB399C43D29EC534656"><enum>(5)</enum><header>Exception for
taxes due</header><text display-inline="yes-display-inline">Paragraph (1) shall
not apply to any amount paid or incurred as taxes
due.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id9C95B9AB354C43C89BE5195DF6D6198B"><enum>(b)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this section shall apply to amounts paid or incurred on or after the date of
the enactment of this Act, except that such amendment shall not apply to
amounts paid or incurred under any binding order or agreement entered into
before such date. Such exception shall not apply to an order or agreement
requiring court approval unless the approval was obtained before such
date.</text>
</subsection></section><enum>IV</enum><header>Requiring economic substance</header>
<section id="IDEF100FDF855C4793B0DEFEC9157457A1"><enum>401.</enum><header>Clarification
of economic substance doctrine</header>
<subsection id="ID3E247AD74EB942D0B0101E2DF42863A1"><enum>(a)</enum><header>In
General</header><text>Section 7701, as amended by section 103, is amended by
redesignating subsection (p) as subsection (q) and by inserting after
subsection (o) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="ID4DF4553E0FE4406EA79569808CF3A923" style="OLC">
<subsection id="IDB104DB28DC804FF38066AA1B46BCEB6D"><enum>(p)</enum><header>Clarification
of Economic Substance Doctrine; Etc</header>
<paragraph id="ID4F155D6FFF2141DDADE687516B7ADA9F"><enum>(1)</enum><header>General
rules</header>
<subparagraph id="ID9860C7D9EE4E4375B5361323A09BC80C"><enum>(A)</enum><header>In
general</header><text>In any case in which a court determines that the economic
substance doctrine is relevant for purposes of this title to a transaction (or
series of transactions), such transaction (or series of transactions) shall
have economic substance only if the requirements of this paragraph are
met.</text>
</subparagraph><subparagraph id="IDECA4F0DFEF9B4823B8CC1F02D4947C59"><enum>(B)</enum><header>Definition of
economic substance</header><text>For purposes of subparagraph (A)—</text>
<clause id="IDB1BB918E5F164C529A35ACC4A013CCC9"><enum>(i)</enum><header>In
general</header><text>A transaction has economic substance only if—</text>
<subclause id="IDE9A3E850E5C746DB856994A2B4A271DF"><enum>(I)</enum><text>the transaction
changes in a meaningful way (apart from Federal tax effects) the taxpayer's
economic position, and</text>
</subclause><subclause id="ID2F7A086A72AA482A9FBC68FC1D1BBAFE"><enum>(II)</enum><text>subject to
clause (iii), the taxpayer has a substantial purpose (other than a Federal tax
purpose) for entering into such transaction.</text>
</subclause></clause><clause id="ID05E3D97A370B4016A926756B28616539"><enum>(ii)</enum><header>Special rule
where taxpayer relies on profit potential</header><text>A transaction shall not
be treated as having economic substance solely by reason of having a potential
for profit unless the present value of the reasonably expected pre-Federal tax
profit from the transaction is substantial in relation to the present value of
the expected net Federal tax benefits that would be allowed if the transaction
were respected. In determining pre-Federal tax profit, there shall be taken
into account fees and other transaction expenses and to the extent provided by
the Secretary, foreign taxes.</text>
</clause><clause id="ID67B33DEE4E55480AA8D60B3829422DB9"><enum>(iii)</enum><header>Special rules
for determining whether non-federal tax purpose</header><text>For purposes of
clause (i)(II)—</text>
<subclause id="ID8271BD5C56EC481F8B66F153A1CFD611"><enum>(I)</enum><text>a purpose of
achieving a financial accounting benefit shall not be taken into account in
determining whether a transaction has a substantial purpose (other than a
Federal tax purpose) if the origin of such financial accounting benefit is a
reduction of Federal tax, and</text>
</subclause><subclause id="ID090A8EE9958443DB8B60D408F88F93BB"><enum>(II)</enum><text>the taxpayer
shall not be treated as having a substantial purpose (other than a Federal tax
purpose) with respect to a transaction if the only such purpose is the
reduction of non-Federal taxes and the transaction will result in a reduction
of Federal taxes substantially equal to, or greater than, the reduction in
non-Federal taxes because of similarities between the laws imposing the
taxes.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="ID4B0A9D14225C4991A86468DC21A1F067"><enum>(2)</enum><header>Definitions and
special rules</header><text>For purposes of this subsection—</text>
<subparagraph id="IDA6F2CD12E6D64583A99381C1B8C99E53"><enum>(A)</enum><header>Economic
substance doctrine</header><text>The term <term>economic substance
doctrine</term> means the common law doctrine under which tax benefits under
subtitle A with respect to a transaction are not allowable if the transaction
does not have economic substance or lacks a business purpose.</text>
</subparagraph><subparagraph id="ID463598906A134579ABEE70EA0D8CCD53"><enum>(B)</enum><header>Exception for
personal transactions of individuals</header><text>In the case of an
individual, this subsection shall apply only to transactions entered into in
connection with a trade or business or an activity engaged in for the
production of income.</text>
</subparagraph></paragraph><paragraph id="IDDC14531114B54EB5AD9ED2AB254F2B43"><enum>(3)</enum><header>Other
provisions not affected</header><text>Except as specifically provided in this
subsection, the provisions of this subsection shall not be construed as
altering or supplanting any other rule of law or provision of this title, and
the requirements of this subsection shall be construed as being in addition to
any such other rule of law or provision of this title.</text>
</paragraph><paragraph id="ID20558900557B4C3689F5AFD020A94830"><enum>(4)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this subsection. Such regulations may include
exemptions from the application of this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID54F25D28B81043A9AB31FD9D6159D580"><enum>(b)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</subsection></section><section id="ID980B867A7472405DAA4787C168763C98"><enum>402.</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<subsection id="IDBE569C651CC244E1A8878BBEF955E23B"><enum>(a)</enum><header>In
General</header><text>Subchapter A of chapter 68 is amended by inserting after
section 6662A the following new section:</text>
<quoted-block display-inline="no-display-inline" id="id99DF6F1B11FD4CD1AE0156670BD55A8D" style="OLC">
<section id="ID838F2DCAA7C746F38415731FC19283C5"><enum>6662B.</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<subsection id="ID34935308AC6C488FA96D0A48DCD94B55"><enum>(a)</enum><header>Imposition of
Penalty</header><text>If a taxpayer has an noneconomic substance transaction
understatement for any taxable year, there shall be added to the tax an amount
equal to 30 percent of the amount of such understatement.</text>
</subsection><subsection id="IDD4336694EF76405A97DDD0E9537180C1"><enum>(b)</enum><header>Reduction of
Penalty for Disclosed Transactions</header><text>Subsection (a) shall be
applied by substituting <quote>20 percent</quote> for <quote>30 percent</quote>
with respect to the portion of any noneconomic substance transaction
understatement with respect to which the relevant facts affecting the tax
treatment of the item are adequately disclosed in the return or a statement
attached to the return.</text>
</subsection><subsection id="IDB98A568FB9F5436DAB28F8165BCFF933"><enum>(c)</enum><header>Noneconomic
Substance Transaction Understatement</header><text>For purposes of this
section—</text>
<paragraph id="ID0B0A70A449244FEEA35D61FF8FB03BAA"><enum>(1)</enum><header>In
general</header><text>The term <term>noneconomic substance transaction
understatement</term> means any amount which would be an understatement under
section 6662A(b)(1) if section 6662A were applied by taking into account items
attributable to noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.</text>
</paragraph><paragraph id="IDEC07CA21D95D457E920D4F68AE69E7D7"><enum>(2)</enum><header>Noneconomic
substance transaction</header><text>The term <term>noneconomic substance
transaction</term> means any transaction if there is a lack of economic
substance (within the meaning of section 7701(p)(1)(B)) for the transaction
giving rise to the claimed benefit.</text>
</paragraph></subsection><subsection id="ID0F6016D4F6DA4FF994BFF3E7B936767F"><enum>(d)</enum><header>Rules
Applicable to Assertion, Compromise, and Collection of Penalty</header>
<paragraph id="ID4041976508DD41CCA260BA71980A3BC0"><enum>(1)</enum><header>In
general</header><text>Only the Chief Counsel for the Internal Revenue Service
may assert a penalty imposed under this section or may compromise all or any
portion of such penalty. The Chief Counsel may delegate the authority under
this paragraph only to an individual holding the position of chief of a branch
within the Office of the Chief Counsel for the Internal Revenue Service.</text>
</paragraph><paragraph id="IDD35E392EC46D4E75BAF397C157A3C8A1"><enum>(2)</enum><header>Specific
requirements</header>
<subparagraph id="IDD9EDABFB557A47FD9FBACAE8C2B7C570"><enum>(A)</enum><header>Assertion of
penalty</header><text>The Chief Counsel for the Internal Revenue Service (or
the Chief Counsel's delegate under paragraph (1)) shall not assert a penalty
imposed under this section unless, before the assertion of the penalty, the
taxpayer is provided—</text>
<clause id="ID3FE66F13F1624D41B0B09BA177F70FAD"><enum>(i)</enum><text>a
notice of intent to assert the penalty, and</text>
</clause><clause id="IDE71593E06AB242988388A89B7B87783B"><enum>(ii)</enum><text>an opportunity
to provide to the Commissioner (or the Chief Counsel's delegate under paragraph
(1)) a written response to the proposed penalty within a reasonable period of
time after such notice.</text>
</clause></subparagraph><subparagraph id="IDC25371B9BC724FD5B577D624200D190C"><enum>(B)</enum><header>Compromise of
penalty</header><text>A compromise shall not result in a reduction in the
penalty imposed by this section in an amount greater than the amount which
bears the same ratio to the amount of the penalty determined without regard to
the compromise as—</text>
<clause id="ID140489D36BD246CEA720DB7F982107B3"><enum>(i)</enum><text>the reduction
under the compromise in the noneconomic substance transaction understatement to
which the penalty relates, bears to</text>
</clause><clause id="ID66A11F0125C34B2AA7A5709B31DF95C1"><enum>(ii)</enum><text>the amount of
the noneconomic substance transaction understatement determined without regard
to the compromise.</text>
</clause></subparagraph></paragraph><paragraph id="ID4D51DF0F60B143499976AA785A2B24DE"><enum>(3)</enum><header>Rules relating
to relevancy requirement</header>
<subparagraph id="ID650A08001F9E4A0DAE053853185DD46D"><enum>(A)</enum><header>Determination
of relevance by chief counsel</header><text>The Chief Counsel for the Internal
Revenue Service (or the Chief Counsel's delegate under paragraph (1)) may
assert, compromise, or collect a penalty imposed by this section with respect
to a noneconomic substance transaction even if there has not been a court
determination that the economic substance doctrine was relevant for purposes of
this title to the transaction if the Chief Counsel (or delegate) determines
that either was so relevant.</text>
</subparagraph><subparagraph id="ID29D8282EDCF544C684B51C245D42982E"><enum>(B)</enum><header>Final order of
court</header><text>If there is a final order of a court that determines that
the economic substance doctrine was not relevant for purposes of this title to
a transaction (or series of transactions), any penalty imposed under this
section with respect to the transaction (or series of transactions) shall be
rescinded.</text>
</subparagraph></paragraph><paragraph id="ID53D7156C32D54C19BBB6F8C7B8D0FC17"><enum>(4)</enum><header>Applicable
rules</header><text>The rules of paragraphs (2) and (3) of section 6707A(d)
shall apply to a compromise under paragraph (1).</text>
</paragraph></subsection><subsection id="ID5CB86F8C60C846B5BCED0056D199F481"><enum>(e)</enum><header>Coordination
With Other Penalties</header><text>Except as otherwise provided in this part,
the penalty imposed by this section shall be in addition to any other penalty
imposed by this title.</text>
</subsection><subsection id="IDF807D2915090451AAF57133318830FC0"><enum>(f)</enum><header>Cross
References</header>
<paragraph id="idCCFCCF354F6940F09758E828BBE92BBE"><enum>(1)</enum><text>For coordination
of penalty with understatements under section 6662 and other special rules, see
section 6662A(e).</text>
</paragraph><paragraph id="idAEFA804FE932414B9CCAD5F350D40CDD"><enum>(2)</enum><text>For reporting of
penalty imposed under this section to the Securities and Exchange Commission,
see section
6707A(e).</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID0BE5C4C6105E4B1899AA8FD104B37CB7"><enum>(b)</enum><header>Coordination
With Other Understatements and Penalties</header>
<paragraph id="ID7515E8FE3774421B821D4B32EEE8D73B"><enum>(1)</enum><text>The second
sentence of section 6662(d)(2)(A) is amended by inserting <quote>and without
regard to items with respect to which a penalty is imposed by section
6662B</quote> before the period at the end.</text>
</paragraph><paragraph id="ID2AF0D18FC3514253B0555C5A43D15B3B"><enum>(2)</enum><text>Subsection (e) of
section 6662A is amended—</text>
<subparagraph id="IDC6077D41F5FE4C528E76F3943CCB1D65"><enum>(A)</enum><text>in paragraph (1),
by inserting <quote>and noneconomic substance transaction
understatements</quote> after <quote>reportable transaction
understatements</quote> both places it appears,</text>
</subparagraph><subparagraph id="IDDC2D2D46CF2A448CAC1E53BD94137EC8"><enum>(B)</enum><text>in paragraph
(2)(A)—</text>
<clause id="ID6896A3CFFE9E4EE183FAEF3E8BB0F5C3"><enum>(i)</enum><text>by
inserting <quote>6662B or</quote> before <quote>6663</quote> in the text,
and</text>
</clause><clause id="ID63FE47EA1DAB413CB8B8039E9866A0DD"><enum>(ii)</enum><text>by
striking <quote><header-in-text level="section">penalty</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="section">and economic substance
penalties</header-in-text></quote>,</text>
</clause></subparagraph><subparagraph id="IDA2AD380A1107400CA76D6DA941C92743"><enum>(C)</enum><text>in paragraph
(2)(B)—</text>
<clause id="IDD2D51CAD228645949F098A0BD04CBF6A"><enum>(i)</enum><text>by
inserting <quote>and section 6662B</quote> after <quote>This section</quote>,
and</text>
</clause><clause id="IDDA5A28FDF7474C4A96F76270C36B8CC7"><enum>(ii)</enum><text>by
striking <quote><header-in-text level="section">penalty</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="section">and economic substance
penalties</header-in-text></quote>,</text>
</clause></subparagraph><subparagraph id="ID526B944B6F244D8ABF92CB438D936CA2"><enum>(D)</enum><text>in paragraph (3),
by inserting <quote>or noneconomic substance transaction understatement</quote>
after <quote>reportable transaction understatement</quote>, and</text>
</subparagraph><subparagraph id="IDA359AFC6EC0645C69D9D13E3996410B8"><enum>(E)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="IDE1888128114F46338D16660CBD0BAA0F" style="OLC">
<paragraph id="ID367A6A62EAFB4EE8BF2416963885B956"><enum>(4)</enum><header>Noneconomic
substance transaction understatement</header><text>For purposes of this
subsection, the term <term>noneconomic substance transaction
understatement</term> has the meaning given such term by section
6662B(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="IDFA375DBF87154D678ED3EDB26FB08B56"><enum>(3)</enum><text>Subsection (e) of
section 6707A is amended—</text>
<subparagraph id="ID4280719F733B400995AA2C5269E63397"><enum>(A)</enum><text>by striking
<quote>or</quote> at the end of subparagraph (B), and</text>
</subparagraph><subparagraph id="IDBFA797ED1C4E48B29641F99682DA38A1"><enum>(B)</enum><text>by striking
subparagraph (C) and inserting the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="ID2CD1167BFB9C40DE91334F22BDBD63D7" style="OLC">
<subparagraph id="ID77EDF8B2457B40E7B036052AE86786B7"><enum>(C)</enum><text>is required to
pay a penalty under section 6662B with respect to any noneconomic substance
transaction, or</text>
</subparagraph><subparagraph id="IDA12FB043E48244B187F3137E8912DD9E"><enum>(D)</enum><text>is required to
pay a penalty under section 6662(h) with respect to any transaction and would
(but for section 6662A(e)(2)(B)) have been subject to penalty under section
6662A at a rate prescribed under section 6662A(c) or to penalty under section
6662B,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="ID30C91097BC9B4FE4A49D6761ADA378CE"><enum>(c)</enum><header>Clerical
Amendment</header><text>The table of sections for part II of subchapter A of
chapter 68 is amended by inserting after the item relating to section 6662A the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="ID6714C06E270A478195DAE188CE702AD0" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6662B. Penalty for understatements
attributable to transactions lacking economic substance,
etc.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID4DC99E23015B4E5191FA2F5C4E2B3E24"><enum>(d)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</subsection></section><section id="ID3E72875B175C43CE8843EFA94DD20843"><enum>403.</enum><header>Denial of
deduction for interest on underpayments attributable to noneconomic substance
transactions</header>
<subsection id="ID30E5786B7AC245FEBBC0B69969E3A4D1"><enum>(a)</enum><header>In
General</header><text>Section 163(m) (relating to interest on unpaid taxes
attributable to nondisclosed reportable transactions) is amended—</text>
<paragraph id="ID85B61EDF4ADD4EB6A0FD8D3580A81D00"><enum>(1)</enum><text>by striking
<quote>attributable</quote> and all that follows and inserting the
following:</text>
<quoted-block display-inline="yes-display-inline" id="IDDF8DA618ED04496DA5643FC2EB69DFE8" style="OLC">
<text>attributable
to—</text><paragraph id="IDB709AF488C6246A6B122D5E012B3EA69"><enum>(1)</enum><text>the portion of
any reportable transaction understatement (as defined in section 6662A(b)) with
respect to which the requirement of section 6664(d)(2)(A) is not met, or</text>
</paragraph><paragraph id="ID387EB377154849AAA485B1119DC0D55D"><enum>(2)</enum><text>any noneconomic
substance transaction understatement (as defined in section
6662B(c)).</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID7F35302F6BAD4B02AF6CF0636A2F5FC4"><enum>(2)</enum><text>by inserting
<quote><header-in-text level="section">and Noneconomic Substance
Transactions</header-in-text></quote> in the heading thereof after
<quote><header-in-text level="section">Transactions</header-in-text></quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID221B07D03A5744C6BED503F92DCA8942"><enum>(b)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to
transactions after the date of the enactment of this Act in taxable years
ending after such date.</text>
</subsection></section>