II 111th CONGRESS 1st Session S. 765 IN THE SENATE OF THE UNITED STATES April 1, 2009 Mr. Nelson of Nebraska (for himself, Mr. Roberts, Mr. Bayh, Mr. Crapo, Mr. Johanns, and Mr. Lugar) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to allow the Secretary of the Treasury to not impose a penalty for failure to disclose reportable transactions when there is reasonable cause for such failure, to modify such penalty, and for other purposes.

1.

Nonimposition of penalty for failure to disclose reportable transactions when there is reasonable cause for such failure

(a)

In general

Subsection (a) of section 6707A of the Internal Revenue Code of 1986 is amended by inserting , unless it is shown that such failure is due to reasonable cause and not due to willful neglect before the period. (b)

Conforming amendments

(1)Subparagraph (C) of section 6664(d)(2) of the Internal Revenue Code of 1986 is amended by striking was rescinded under section 6707A(d) and inserting was not imposed under section 6707A(a). (2)Section 6707A of such Code is amended by striking subsection (d) and redesignating subsections (e) and (f) as subsections (d) and (e), respectively. (3)Subsection (c) of section 6707 of such Code is amended to read as follows: (c)

Rescission authority

(1)

In general

The Commissioner of Internal Revenue may rescind all or any portion of any penalty imposed by this section with respect to any violation if— (A)the violation is with respect to a reportable transaction other than a listed transaction, and (B)rescinding the penalty would promote compliance with the requirements of this title and effective tax administration. (2)

No judicial appeal

Notwithstanding any other provision of law, any determination under this subsection may not be reviewed in any judicial proceeding. (3)

Records

If a penalty is rescinded under paragraph (1), the Commissioner shall place in the file in the Office of the Commissioner the opinion of the Commissioner with respect to the determination, including— (A)a statement of the facts and circumstances relating to the violation, (B)the reasons for the rescission, and (C)the amount of the penalty rescinded. . (c)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to penalties assessed after January 1, 2008. (2)

Conforming amendment

The amendment made by subsection (b)(3) shall take effect on the date of the enactment of this Act.

2.

Proportionality of penalty

(a)

In general

Subsection (b) of section 6707A of the Internal Revenue Code of 1986 is amended to read as follows: (b)

Amount of penalty

(1)

In general

Except as provided in paragraph (2), the amount of the penalty under subsection (a) with respect to a reportable transaction shall be the amount that is equal to 100 percent of the penalty that would be imposed under section 6662A (without regard to subsection (c) thereof) if the taxpayer had a reportable transaction understatement (as defined in section 6662A(b)) with respect to such transaction. (2)

Listed transaction

The amount of the penalty under subsection (a) with respect to a listed transaction shall be the amount that is equal to 200 percent of the penalty that would be imposed under section 6662A (without regard to subsection (c) thereof) if the taxpayer had a reportable transaction understatement (as defined in section 6662A(b)) with respect to such transaction. . (b)

Effective date

The amendment made by this section shall apply to penalties assessed after January 1, 2008.

3.

One-time assessment of penalty

(a)

In general

Subsection (a) of section 6707A of the Internal Revenue Code of 1986, as amended by section 1, is amended by striking Any person and inserting Any taxpayer. (b)

Conforming amendments

Subsection (d) of section 6707A of the Internal Revenue Code of 1986, as redesignated by section 1, is amended by striking person each place it appears and inserting taxpayer. (c)

Effective date

The amendments made by this section shall apply to penalties assessed after January 1, 2008.