[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1346 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1346

To restrict the use of offshore tax havens and abusive tax shelters to 
    inappropriately avoid Federal taxation, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 12, 2011

Mr. Levin (for himself, Mr. Conrad, Mr. Nelson of Florida, Mr. Sanders, 
Mrs. Shaheen, and Mr. Whitehouse) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To restrict the use of offshore tax havens and abusive tax shelters to 
    inappropriately avoid Federal taxation, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.
        TITLE I--DETERRING THE USE OF TAX HAVENS FOR TAX EVASION

Sec. 101. Authorizing special measures against foreign jurisdictions, 
                            financial institutions, and others that 
                            impede United States tax enforcement.
Sec. 102. Strengthening the Foreign Account Tax Compliance Act (FATCA).
Sec. 103. Treatment of foreign corporations managed and controlled in 
                            the United States as domestic corporations.
Sec. 104. Reporting United States beneficial owners of foreign owned 
                            financial accounts.
Sec. 105. Credit default swap payments made from the United States to 
                            persons offshore.
Sec. 106. Tax on income of controlled foreign corporation deposited in 
                            financial account located in the United 
                            States.
  TITLE II--OTHER MEASURES TO COMBAT TAX HAVEN AND TAX SHELTER ABUSES

Sec. 201. Country-by-country reporting.
Sec. 202. Penalty for failing to disclose offshore holdings.
Sec. 203. Deadline for anti-money laundering rule for hedge funds and 
                            private equity funds.
Sec. 204. Anti-money laundering requirements for formation agents.
Sec. 205. Strengthening John Doe summons proceedings.
Sec. 206. 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. Prohibited fee arrangement.
Sec. 304. Preventing tax shelter activities by financial institutions.
Sec. 305. Information sharing for enforcement purposes.
Sec. 306. Disclosure of information to Congress.
Sec. 307. Tax opinion standards for tax practitioners.

        TITLE I--DETERRING THE USE OF TAX HAVENS FOR TAX EVASION

SEC. 101. AUTHORIZING SPECIAL MEASURES AGAINST FOREIGN JURISDICTIONS, 
              FINANCIAL INSTITUTIONS, AND OTHERS THAT IMPEDE UNITED 
              STATES TAX ENFORCEMENT.

    (a) In General.--Section 5318A of title 31, United States Code, is 
amended--
            (1) by striking the section heading and inserting the 
        following new heading:
``Sec. 5318A. Special measures for jurisdictions, financial 
              institutions, or international transactions that are of 
              primary money laundering concern or impede United States 
              tax enforcement'';
            (2) in subsection (a), by striking all before paragraph (1) 
        and inserting the following:
    ``(a) Special Measures To Counter Money Laundering and Efforts To 
Impede United States Tax Enforcement.--'';
            (3) in subsection (c), by striking all before paragraph (1) 
        and inserting the following:
    ``(c) 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.--'';
            (4) in subsection (a)(1), by inserting ``or is impeding 
        United States tax enforcement'' after ``primary money 
        laundering concern'';
            (5) in subsection (a)(4)--
                    (A) in subparagraph (A)--
                            (i) by inserting ``in matters involving 
                        money laundering,'' before ``shall consult''; 
                        and
                            (ii) by striking ``and'' at the end;
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (C) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) 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'';
            (6) in each of paragraphs (1)(A), (2), (3), and (4) of 
        subsection (b), by inserting ``or to be impeding United States 
        tax enforcement'' after ``primary money laundering concern'' 
        each place that term appears;
            (7) in subsection (b), by striking paragraph (5) and 
        inserting the following new paragraph:
            ``(5) Prohibitions or conditions on opening or maintaining 
        certain correspondent or payable-through accounts or 
        authorizing certain payment cards.--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--
                    ``(A) the opening or maintaining in the United 
                States of a correspondent account or payable-through 
                account; or
                    ``(B) 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.'';
            (8) in subsection (c)(1), by inserting ``or is impeding 
        United States tax enforcement'' after ``primary money 
        laundering concern'';
            (9) in subsection (c)(2)(A)--
                    (A) in clause (ii), by striking ``bank secrecy or 
                special regulatory advantages'' and inserting ``bank, 
                tax, corporate, trust, or financial secrecy or 
                regulatory advantages'';
                    (B) in clause (iii), by striking ``supervisory and 
                counter-money'' and inserting ``supervisory, 
                international tax enforcement, and counter-money'';
                    (C) in clause (v), by striking ``banking or 
                secrecy'' and inserting ``banking, tax, or secrecy''; 
                and
                    (D) in clause (vi), by inserting ``, tax treaty, or 
                tax information exchange agreement'' after ``treaty'';
            (10) in subsection (c)(2)(B)--
                    (A) in clause (i), by inserting ``or tax evasion'' 
                after ``money laundering''; and
                    (B) in clause (iii), by inserting ``, tax 
                evasion,'' after ``money laundering''; and
            (11) in subsection (d), by inserting ``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'' after ``such action''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 102. STRENGTHENING THE FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA).

    (a) Reporting Activities With Respect to Passive Foreign Investment 
Companies.--Section 1298(f) is amended by inserting ``, 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,'' after ``shareholder of''.
    (b) Withholdable Payments to Foreign Financial Institutions.--
Section 1471(d) is amended--
            (1) by inserting ``or transaction'' after ``any 
        depository'' in paragraph (2)(A), and
            (2) by striking ``or any interest'' and all that follows in 
        paragraph (5)(C) and inserting ``derivatives, or any interest 
        (including a futures or forward contract, swap, or option) in 
        such securities, partnership interests, commodities, or 
        derivatives.''.
    (c) Withholdable Payments to Other Foreign Financial 
Institutions.--Section 1472 is amended--
            (1) by inserting ``as a result of any customer 
        identification, anti-money laundering, anti-corruption, or 
        similar obligation to identify account holders,'' after 
        ``reason to know,'' in subsection (b)(2), and
            (2) by inserting ``as posing a low risk of tax evasion'' 
        after ``this subsection'' in subsection (c)(1)(G).
    (d) Definitions.--Clauses (i) and (ii) of section 1473(2)(A) are 
each amended by inserting ``or as a beneficial owner'' after 
``indirectly''.
    (e) Special Rules.--Section 1474(c) is amended--
            (1) by inserting ``, except that information provided under 
        sections 1471(c) or 1472(b) may be disclosed to any Federal law 
        enforcement agency, upon request or upon the initiation of the 
        Secretary, to investigate or address a possible violation of 
        United States law'' after ``shall apply'' in paragraph (1), and
            (2) by inserting ``, or has had an agreement terminated 
        under such section,'' after ``section 1471(b)'' in paragraph 
        (2).
    (f) Information With Respect to Foreign Financial Assets.--Section 
6038D(a) is amended by inserting ``ownership or beneficial ownership'' 
after ``holds any''.
    (g) Establishing Presumptions for Entities and Transactions 
Involving Non-FATCA Institutions.--
            (1) Presumptions for tax purposes.--
                    (A) In general.--Chapter 76 is amended by inserting 
                after section 7491 the following new subchapter:

       ``Subchapter F--Presumptions for Certain Legal Proceedings

``Sec. 7492. Presumptions pertaining to entities and transactions 
                            involving non-FATCA institutions.

``SEC. 7492. PRESUMPTIONS PERTAINING TO ENTITIES AND TRANSACTIONS 
              INVOLVING NON-FATCA INSTITUTIONS.

    ``(a) Control.--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), that holds an account, or in any other manner has 
assets, in a non-FATCA institution, 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.
    ``(b) Transfers of Income.--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 from an entity (other than an entity 
with shares regularly traded on an established securities market) that 
holds an account, or in any other manner has assets, in a non-FATCA 
institution, 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) that holds an 
account, or in any other manner has assets, in a non-FATCA institution, 
represents previously unreported income of such person taxable in the 
year of the transfer.
    ``(c) Rebutting the Presumptions.--The presumptions established in 
this section may be rebutted only by clear and convincing evidence, 
including detailed documentary, testimonial, and transactional 
evidence, establishing that--
            ``(1) in subsection (a), such taxpayer exercised no 
        control, directly or indirectly, over account or entity at the 
        time in question, and
            ``(2) in subsection (b), such amounts or things of value 
        did not represent income related to such United States person.
Any court having jurisdiction of a civil proceeding in which control of 
such an offshore account or 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.''.
                    (B) The table of subchapters for chapter 76 is 
                amended by inserting after the item relating to 
                subchapter E the following new item:

     ``subchapter f--presumptions for certain legal proceedings''.

            (2) Definition of non-fatca institution.--Section 7701(a) 
        is amended by adding at the end the following new paragraph:
            ``(51) Non-fatca institution.--The term `non-FATCA 
        institution' means any financial institution that does not meet 
        the reporting requirements of section 1471(b).''.
            (3) Presumptions for securities law purposes.--Section 21 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78u) is 
        amended by adding at the end the following new subsection:
    ``(j) Presumptions Pertaining to Control and Beneficial 
Ownership.--
            ``(1) Control.--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), that holds an account, or in any other 
        manner has assets, in a non-FATCA institution (as defined in 
        section 7701(a)(51) 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.
            ``(2) Beneficial ownership.--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), and that are held in a non-FATCA 
        institution (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.''.
            (4) Presumption for reporting purposes relating to foreign 
        financial accounts.--Section 5314 of title 31, United States 
        Code, is amended by adding at the end the following new 
        subsection:
    ``(d) Rebuttable Presumption.--For purposes of this section, there 
shall be a rebuttable presumption that any account with a non-FATCA 
institution (as defined in section 7701(a)(51) 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.''.
            (5) Regulatory authority.--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 subsection. 
        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.
    (h) Effective Date.--The amendments made by this section shall take 
effect on the date which is 180 days after the date of the enactment of 
this Act, whether or not regulations are issued under subsection 
(g)(5).

SEC. 103. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN 
              THE UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Certain Corporations Managed and Controlled in the United 
States Treated as Domestic for Income Tax.--
            ``(1) In general.--Notwithstanding subsection (a)(4), in 
        the case of a corporation described in paragraph (2) if--
                    ``(A) the corporation would not otherwise be 
                treated as a domestic corporation for purposes of this 
                title, but
                    ``(B) the management and control of the corporation 
                occurs, directly or indirectly, primarily within the 
                United States,
        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.
            ``(2) Corporation described.--
                    ``(A) In general.--A corporation is described in 
                this paragraph if--
                            ``(i) the stock of such corporation is 
                        regularly traded on an established securities 
                        market, or
                            ``(ii) 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.
                    ``(B) General exception.--A corporation shall not 
                be treated as described in this paragraph if--
                            ``(i) such corporation was treated as a 
                        corporation described in this paragraph in a 
                        preceding taxable year,
                            ``(ii) such corporation--
                                    ``(I) is not regularly traded on an 
                                established securities market, and
                                    ``(II) 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
                            ``(iii) the Secretary grants a waiver to 
                        such corporation under this subparagraph.
                    ``(C) Exception from gross assets test.--
                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--
                            ``(i) is a domestic corporation (determined 
                        without regard to this subsection), and
                            ``(ii) 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.
            ``(3) Management and control.--
                    ``(A) In general.--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.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that--
                            ``(i) 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
                            ``(ii) 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).
                    ``(C) Corporations primarily holding investment 
                assets.--Such regulations shall also provide that the 
                management and control of a corporation shall be 
                treated as occurring primarily within the United States 
                if--
                            ``(i) the assets of such corporation 
                        (directly or indirectly) consist primarily of 
                        assets being managed on behalf of investors, 
                        and
                            ``(ii) decisions about how to invest the 
                        assets are made in the United States.''.
    (b) Effective Date.--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, whether or not regulations 
are issued under section 7701(p)(3) of the Internal Revenue Code of 
1986, as added by this section.

SEC. 104. REPORTING UNITED STATES BENEFICIAL OWNERS OF FOREIGN OWNED 
              FINANCIAL ACCOUNTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 is amended by inserting after section 6045B the following new 
sections:

``SEC. 6045C. RETURNS REGARDING UNITED STATES BENEFICIAL OWNERS OF 
              FINANCIAL ACCOUNTS LOCATED IN THE UNITED STATES AND HELD 
              IN THE NAME OF A FOREIGN ENTITY.

    ``(a) Requirement of Return.--If--
            ``(1) 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
            ``(2) 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 `United States beneficial owner'),
then the withholding agent shall make a return according to the forms 
or regulations prescribed by the Secretary.
    ``(b) Required Information.--For purposes of subsection (a) the 
information required to be included on the return shall include--
            ``(1) the name, address, and, if known, the taxpayer 
        identification number of the United States beneficial owner,
            ``(2) the known facts pertaining to the relationship of 
        such United States beneficial owner to the foreign entity and 
        the account,
            ``(3) the gross amount of income from sources within the 
        United States (including gross proceeds from brokerage 
        transactions), and
            ``(4) such other information as the Secretary may by forms 
        or regulations provide.
    ``(c) Statements To Be Furnished to Beneficial Owners With Respect 
to Whom Information Is Required To Be Reported.--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--
            ``(1) the name, address, and telephone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the information required to be shown on such return 
        with respect to such United States beneficial owner.
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.

``SEC. 6045D. RETURNS BY FINANCIAL INSTITUTIONS REGARDING ESTABLISHMENT 
              OF ACCOUNTS IN NON-FATCA INSTITUTIONS.

    ``(a) Requirement of Return.--Any financial institution directly or 
indirectly opening a bank, brokerage, or other financial account for or 
on behalf of an offshore entity, including a trust, corporation, 
limited liability company, partnership, or foundation (other than an 
entity with shares regularly traded on an established securities 
market), in a non-FATCA institution (as defined in section 7701(a)(51)) 
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.
    ``(b) Required Information.--For purposes of subsection (a) the 
information required to be included on the return shall include--
            ``(1) the name, address, and taxpayer identification number 
        of such United States person,
            ``(2) 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,
            ``(3) if the account is held in the name of an entity, the 
        name and address of such entity, 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
            ``(4) such other information as the Secretary may by forms 
        or regulations provide.
    ``(c) Statements To Be Furnished to United States Persons With 
Respect to Whom Information Is Required To Be Reported.--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--
            ``(1) the name, address, and telephone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the information required to be shown on such return 
        with respect to such United States person.
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.
    ``(d) Exemption.--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.''.
    (b) Penalties.--
            (1) Returns.--Section 6724(d)(1)(B) is amended by striking 
        ``or'' at the end of clause (xxiv), by striking ``and'' at the 
        end of clause (xxv), and by adding after clause (xxv) the 
        following new clauses:
                            ``(xxvi) section 6045C(a) (relating to 
                        returns regarding United States beneficial 
                        owners of financial accounts located in the 
                        United States and held in the name of a foreign 
                        entity), or
                            ``(xxvii) section 6045D(a) (relating to 
                        returns by financial institutions regarding 
                        establishment of accounts at non-FATCA 
                        institutions), and''.
            (2) Payee statements.--Section 6724(d)(2) is amended by 
        striking ``or'' at the end of subparagraph (GG), by striking 
        the period at the end of subparagraph (HH), and by inserting 
        after subparagraph (HH) the following new subparagraphs:
                    ``(II) section 6045C(c) (relating to returns 
                regarding United States beneficial owners of financial 
                accounts located in the United States and held in the 
                name of a foreign entity),
                    ``(JJ) section 6045D(c) (relating to returns by 
                financial institutions regarding establishment of 
                accounts at non-FATCA institutions).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 is amended by inserting after 
the item relating to section 6045B the following new items:

``Sec. 6045C. Returns regarding United States beneficial owners of 
                            financial accounts located in the United 
                            States and held in the name of a foreign 
                            entity.
``Sec. 6045D. Returns by financial institutions regarding establishment 
                            of accounts at non-FATCA institutions.''.
    (d) Additional Penalties.--
            (1) Additional penalties on banks.--Section 5239(b)(1) of 
        the Revised Statutes (12 U.S.C. 93(b)(1)) is amended by 
        inserting ``or any of the provisions of section 6045D of the 
        Internal Revenue Code of 1986,'' after ``any regulation issued 
        pursuant to,''.
            (2) Additional penalties on securities firms.--Section 
        21(d)(3)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78u(d)(3)(A)) is amended by inserting ``any of the provisions 
        of section 6045D of the Internal Revenue Code of 1986,'' after 
        ``the rules or regulations thereunder,''.
    (e) Regulatory Authority and Effective Date.--
            (1) Regulatory authority.--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.
            (2) Effective date.--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 located in the United States 
        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 after December 31 of the year of the 
        date of the enactment of this Act.

SEC. 105. CREDIT DEFAULT SWAP PAYMENTS MADE FROM THE UNITED STATES TO 
              PERSONS OFFSHORE.

    (a) Tax on Credit Default Swap Payments Received by Foreign 
Persons.--Section 871(a)(1) is amended--
            (1) by inserting ``credit default swap payments,'' after 
        ``annuities,'' in subparagraph (A), and
            (2) by adding at the end the following new sentence: ``In 
        the case of credit default swap payments, the source of a 
        credit default swap payment is determined by reference to the 
        location of the payor.''.
    (b) Tax on Credit Default Swap Payments Received by Foreign 
Corporations.--Section 881(a) is amended--
            (1) by inserting ``credit default swap payments,'' after 
        ``annuities,'' in paragraph (1), and
            (2) by adding at the end the following new sentence: ``In 
        the case of credit default swap payments, the source of a 
        credit default swap payment is determined by reference to the 
        location of the payor.''.

SEC. 106. TAX ON INCOME OF CONTROLLED FOREIGN CORPORATION DEPOSITED IN 
              FINANCIAL ACCOUNT LOCATED IN THE UNITED STATES.

    Section 952(a) is amended by adding at the end the following new 
sentence: ``Notwithstanding section 956(c)(2)(A), any property (as 
defined in section 317(a)) of such controlled foreign corporation that 
is deposited and maintained, directly or indirectly, for or on behalf 
of such corporation in a financial account located in the United 
States, including in a correspondent account of a financial 
institution, is a constructive distribution with respect to the stock 
which such United States shareholder owns.''.

  TITLE II--OTHER MEASURES TO COMBAT TAX HAVEN AND TAX SHELTER ABUSES

SEC. 201. COUNTRY-BY-COUNTRY REPORTING.

    (a) In General.--Section 13 of the Securities Exchange Act of 1934 
(15 U.S.C. 78m) is amended by adding at the end the following new 
subsection:
    ``(r) Disclosure of Financial Performance on a Country-by-Country 
Basis.--
            ``(1) Definitions.--In this subsection--
                    ``(A) the term `issuer group' shall mean the 
                issuer, each subsidiary of the issuer, and each entity 
                under the control of the issuer;
                    ``(B) the term `country of operation' shall mean 
                each country in which a member of the issuer group is 
                incorporated or organized, or maintains employees or 
                conducts business activities; and
                    ``(C) the term `world-wide allocation of group 
                members' shall mean each member of the issuer group 
                listed according to their country of operation.
            ``(2) Country-by-country reporting.--The Commission shall 
        issue rules that require each issuer to include in an annual 
        report filed by the issuer with the Commission information 
        indicative of financial performance on a country-by-country 
        basis during the covered period, including--
                    ``(A) a list of each country of operation;
                    ``(B) the world-wide allocation of group members;
                    ``(C) the financial performance of each member of 
                the issuer group in each country of operation, without 
                exception, including, and set forth according to--
                            ``(i) total number of employees physically 
                        working in the country of operation;
                            ``(ii) total sales by the member of the 
                        issuer group to third parties;
                            ``(iii) total sales by the member of the 
                        issuer group to other members of the issuer 
                        group and total sales to each such member;
                            ``(iv) total purchases by the member of the 
                        issuer group from third parties;
                            ``(v) total purchases by the member of the 
                        issuer group from other members of the issuer 
                        group and total purchases from each such 
                        member;
                            ``(vi) total financing payments made by the 
                        member of the issuer group to third parties;
                            ``(vii) total financing payments made by 
                        the member of the issuer group to other members 
                        of the issuer group and total financing 
                        payments made to each such member;
                            ``(viii) pre-tax gross revenues of the 
                        member of the issuer group;
                            ``(ix) pre-tax net revenues of the member 
                        of the issuer group; and
                            ``(x) such other financial information as 
                        the Commission may determine is indicative of 
                        the financial performance of the issuer;
                    ``(D) the tax paid by each member of the issuer 
                group in each country of operation, without exception, 
                including, and set forth according to--
                            ``(i) total Federal, regional, local, and 
                        other tax assessed against each member of the 
                        issuer group with respect to each country of 
                        operation during the covered period;
                            ``(ii) after taking into account any tax 
                        deductions, tax credits, tax forgiveness, or 
                        other tax benefits or waivers, total amount of 
                        tax paid from the treasury of the member of the 
                        issuer group to the government of each country 
                        of operation during the covered period; and
                            ``(iii) such other financial information as 
                        the Commission may determine is necessary or 
                        appropriate to inform the public of the tax 
                        obligations of and payments by each member of 
                        the issuer group; and
                    ``(E) such other financial information as the 
                Commission may determine is necessary or appropriate in 
                the public interest or for the protection of 
                investors.''.
    (b) Rulemaking.--
            (1) Deadlines.--Not later than 180 days after the date of 
        the enactment of this Act, the Commission shall issue a 
        proposed rule to carry out this section and, not later than 270 
        days after the date of the enactment of this Act, shall issue a 
        final rule to carry out this section.
            (2) Consultation.--In issuing the rules under this section, 
        the Commission shall consult with the Secretary of the Treasury 
        and the Commissioner of Internal Revenue and, to the extent 
        practicable and in furtherance of its obligation to protect 
        investors, shall issue rules that support Federal efforts to 
        reduce offshore tax evasion and abuses.
            (3) Interactive data format.--The rules issued under this 
        section shall require that the information provided by issuers 
        in their annual reports be submitted in an interactive data 
        format as provided in section 13(q)(2)(D) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78m(q)(2)(D)), and to the 
        extent practicable, the Commission shall make available online, 
        to the public, a compilation of such information.
            (4) Aggregate data.--The rules may allow issuers to provide 
        the financial information required under section 13(r) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m(r)), as added by 
        this section, aggregated at the level of each country of 
        operation instead of with respect to each member of the issuer 
        group individually, provided that the Commission retains the 
        authority, at its discretion, to require further 
        disaggregation.
            (5) Effective date.--Each issuer shall be required to 
        comply with the requirements of section 13(r) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78m(r)), as added by this 
        section, not later than the date on which the issuer must file 
        with the Commission its first annual report that is due not 
        later than 1 year after the date on which the Commission issues 
        a final rule under this section.

SEC. 202. PENALTY FOR FAILING TO DISCLOSE OFFSHORE HOLDINGS.

    (a) Securities Exchange Act of 1934.--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:
                    ``(iv) Fourth tier.--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.''.
    (b) Securities Act of 1933.--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:
                    ``(D) Fourth tier.--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.''.
    (c) Investment Company Act of 1940.--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:
                    ``(D) Fourth tier.--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.''.
    (d) Investment Advisers Act of 1940.--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:
                    ``(D) Fourth tier.--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.''.

SEC. 203. DEADLINE FOR ANTI-MONEY LAUNDERING RULE FOR HEDGE FUNDS AND 
              PRIVATE EQUITY FUNDS.

    (a) In General.--
            (1) Proposed rule.--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.
            (2) Final rule.--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).
    (b) Contents.--The final rule published under this section--
            (1) shall require, at a minimum, that to safeguard against 
        terrorist financing and money laundering, all unregistered 
        investment companies shall--
                    (A) 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
                    (B) be subject to section 5318(k)(2) of title 31, 
                United States Code; and
            (2) 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).
    (c) Definitions.--In this section--
            (1) the terms ``investment company'' and ``issuer'' have 
        the same meanings as in section 2 of the Investment Company Act 
        of 1940 (15 U.S.C. 80a-2); and
            (2) the term ``unregistered investment company'' 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)).

SEC. 204. ANTI-MONEY LAUNDERING REQUIREMENTS FOR FORMATION AGENTS.

    (a) Anti-Money Laundering Obligations for Formation Agents.--
Section 5312(a)(2) of title 31, United States Code, is amended, by--
            (1) in subparagraph (Y), by striking ``or'' at the end;
            (2) by redesignating subparagraph (Z) as subparagraph (AA); 
        and
            (3) by inserting after subparagraph (Y) the following:
                    ``(Z) persons engaged in the business of forming 
                new corporations, limited liability companies, 
                partnerships, trusts, or other legal entities; or''.
    (b) Deadline for Anti-Money Laundering Rule for Formation Agents.--
            (1) Proposed rule.--Not later than 120 days after the date 
        of the enactment of this Act, the Secretary of the Treasury, in 
        consultation with the Attorney General of the United States, 
        the Secretary of Homeland Security, and the Commissioner of 
        Internal Revenue, 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 subsections (g) 
        and (h) of section 5318 of that title.
            (2) Final rule.--Not later than 270 days after such date of 
        enactment, the Secretary of the Treasury shall publish a final 
        rule in the Federal Register on the matter described in 
        paragraph (1).
            (3) Exclusions.--Any rule promulgated under this subsection 
        shall exclude from the category of persons engaged in the 
        business of forming new corporations or other entities--
                    (A) any government agency; and
                    (B) any attorney or law firm that uses a paid 
                formation agent operating within the United States to 
                form such corporations or other entities.

SEC. 205. STRENGTHENING JOHN DOE SUMMONS PROCEEDINGS.

    (a) In General.--Subsection (f) of section 7609 is amended to read 
as follows:
    ``(f) Additional Requirement in the Case of a John Doe Summons.--
            ``(1) General rule.--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--
                    ``(A) the summons relates to the investigation of a 
                particular person or ascertainable group or class of 
                persons,
                    ``(B) 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
                    ``(C) 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.
            ``(2) Exception.--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 that 
        is held at a non-FATCA institution (as defined in section 
        7701(a)(51)).
            ``(3) Presumption in cases involving non-fatca 
        institutions.--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 a 
        non-FATCA institution (as defined in section 7701(a)(51)), 
        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.
            ``(4) Project john doe summonses.--
                    ``(A) In general.--Notwithstanding the requirements 
                of paragraph (1), the Secretary may issue a summons 
                described in paragraph (1) if the summons--
                            ``(i) relates to a project which is 
                        approved under subparagraph (B),
                            ``(ii) is issued to a person who is a 
                        member of the group or class established under 
                        subparagraph (B)(i), and
                            ``(iii) is issued within 3 years of the 
                        date on which such project was approved under 
                        subparagraph (B).
                    ``(B) Approval of projects.--A project may only be 
                approved under this subparagraph after a court 
                proceeding in which the Secretary establishes that--
                            ``(i) any summons issues with respect to 
                        the project will be issued to a member of an 
                        ascertainable group or class of persons, and
                            ``(ii) any summons issued with respect to 
                        such project will meet the requirements of 
                        paragraph (1).
                    ``(C) Extension.--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).
                    ``(D) Ongoing court oversight.--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.''.
    (b) Jurisdiction of Court.--
            (1) In general.--Paragraph (1) of section 7609(h) is 
        amended by inserting after the first sentence the following new 
        sentence: ``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)(2)(B).''.
            (2) Conforming amendment.--The first sentence of section 
        7609(h)(1) is amended by striking ``(f)'' and inserting 
        ``(f)(1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to summonses issued after the date of the enactment of this Act.
    (d) GAO Report.--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)(2) of the Internal Revenue Code of 1986, as added by this 
section.

SEC. 206. IMPROVING ENFORCEMENT OF FOREIGN FINANCIAL ACCOUNT REPORTING.

    (a) Clarifying the Connection of Foreign Financial Account 
Reporting to Tax Administration.--Paragraph (4) of section 6103(b) is 
amended by adding at the end the following new sentence:
        ``For purposes of subparagraph (A)(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 related statutes.''.
    (b) Simplifying the Calculation of Foreign Financial Account 
Reporting Penalties.--Section 5321(a)(5)(D)(ii) of title 31, United 
States Code, is amended by striking ``the balance in the account at the 
time of the violation'' and inserting ``the highest balance in the 
account during the reporting period to which the violation relates''.
    (c) Clarifying the Use of Suspicious Activity Reports Under the 
Bank Secrecy Act for Civil Tax Law Enforcement.--Section 5319 of title 
31, United States Code, is amended by inserting ``the civil and 
criminal enforcement divisions of the Internal Revenue Service,'' after 
``including''.

               TITLE III--COMBATING TAX SHELTER PROMOTERS

SEC. 301. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

    (a) Penalty for Promoting Abusive Tax Shelters.--Section 6700 is 
amended--
            (1) by redesignating subsections (b) and (c) as subsections 
        (d) and (e), respectively,
            (2) by striking ``a penalty'' and all that follows through 
        the period in the first sentence of subsection (a) and 
        inserting ``a penalty determined under subsection (b)'', and
            (3) by inserting after subsection (a) the following new 
        subsections:
    ``(b) Amount of Penalty; Calculation of Penalty; Liability for 
Penalty.--
            ``(1) Amount of penalty.--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.
            ``(2) Calculation of penalty.--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.
            ``(3) Liability for penalty.--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.
    ``(c) Penalty Not Deductible.--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.''.
    (b) Conforming Amendment.--Section 6700(a) is amended by striking 
the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply to activities after the date of the enactment of this Act.

SEC. 302. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT OF TAX 
              LIABILITY.

    (a) In General.--Section 6701(a) is amended--
            (1) by inserting ``the tax liability or'' after ``respect 
        to,'' in paragraph (1),
            (2) by inserting ``aid, assistance, procurement, or advice 
        with respect to such'' before ``portion'' both places it 
        appears in paragraphs (2) and (3), and
            (3) by inserting ``instance of aid, assistance, 
        procurement, or advice or each such'' before ``document'' in 
        the matter following paragraph (3).
    (b) Amount of Penalty.--Subsection (b) of section 6701 is amended 
to read as follows:
    ``(b) Amount of Penalty; Calculation of Penalty; Liability for 
Penalty.--
            ``(1) Amount of penalty.--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.
            ``(2) Calculation of penalty.--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.
            ``(3) Liability for penalty.--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.''.
    (c) Penalty Not Deductible.--Section 6701 is amended by adding at 
the end the following new subsection:
    ``(g) Penalty Not Deductible.--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.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to activities after the date of the enactment of this Act.

SEC. 303. PROHIBITED FEE ARRANGEMENT.

    (a) In General.--Section 6701, as amended by this Act, is amended--
            (1) by redesignating subsections (f) and (g) as subsections 
        (g) and (h), respectively,
            (2) by striking ``subsection (a).'' in paragraphs (2) and 
        (3) of subsection (g) (as redesignated by paragraph (1)) and 
        inserting ``subsection (a) or (f).'', and
            (3) by inserting after subsection (e) the following new 
        subsection:
    ``(f) Prohibited Fee Arrangement.--
            ``(1) In general.--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--
                    ``(A) tax savings or benefits, or
                    ``(B) losses which can be used to offset other 
                taxable income,
        shall pay a penalty with respect to each such fee activity in 
        the amount determined under subsection (b).
            ``(2) Rules.--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.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to fee agreements, charges, and collections made after the date 
of the enactment of this Act.

SEC. 304. PREVENTING TAX SHELTER ACTIVITIES BY FINANCIAL INSTITUTIONS.

    (a) Examinations.--
            (1) Development of examination techniques.--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.
            (2) Implementation.--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.
    (b) Report to Internal Revenue Service.--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.
    (c) Report to Congress.--The Federal banking agencies and the 
Commission shall submit a joint written report to Congress in 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.
    (d) Definitions.--For purposes of this section--
            (1) the terms ``broker'', ``dealer'', and ``investment 
        adviser'' have the same meanings as in section 3 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c);
            (2) the term ``Commission'' means the Securities and 
        Exchange Commission;
            (3) the term ``depository institution'' has the same 
        meaning as in section 3(c) of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813(c));
            (4) the term ``Federal banking agencies'' has the same 
        meaning as in section 3(q) of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813(q)); and
            (5) the term ``Secretary'' means the Secretary of the 
        Treasury.

SEC. 305. INFORMATION SHARING FOR ENFORCEMENT PURPOSES.

    (a) Promotion of Prohibited Tax Shelters or Tax Avoidance 
Schemes.--Section 6103(h) is amended by adding at the end the following 
new paragraph:
            ``(7) Disclosure of returns and return information related 
        to promotion of prohibited tax shelters or tax avoidance 
        schemes.--
                    ``(A) Written request.--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.
                    ``(B) Requirements.--A request meets the 
                requirements of this subparagraph if it sets forth--
                            ``(i) the nature of the investigation, 
                        examination, or proceeding,
                            ``(ii) the statutory authority under which 
                        such investigation, examination, or proceeding 
                        is being conducted,
                            ``(iii) the name or names of the financial 
                        institution, issuer, or public accounting firm 
                        to which such return information relates,
                            ``(iv) the taxable period or periods to 
                        which such return information relates, and
                            ``(v) the specific reason or reasons why 
                        such disclosure is, or may be, relevant to such 
                        investigation, examination or proceeding.
                    ``(C) Financial institution.--For the purposes of 
                this paragraph, the term `financial institution' 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.''.
    (b) Financial and Accounting Fraud Investigations.--Section 6103(i) 
is amended by adding at the end the following new paragraph:
            ``(9) Disclosure of returns and return information for use 
        in financial and accounting fraud investigations.--
                    ``(A) Written request.--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.
                    ``(B) Requirements.--A request meets the 
                requirements of this subparagraph if it sets forth--
                            ``(i) the nature of the investigation, 
                        examination, or proceeding,
                            ``(ii) the statutory authority under which 
                        such investigation, examination, or proceeding 
                        is being conducted,
                            ``(iii) the name or names of the issuer, 
                        investment company, or public accounting firm 
                        to which such return information relates,
                            ``(iv) the taxable period or periods to 
                        which such return information relates, and
                            ``(v) the specific reason or reasons why 
                        such disclosure is, or may be, relevant to such 
                        investigation, examination or proceeding.''.
    (c) Effective Date.--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.

SEC. 306. DISCLOSURE OF INFORMATION TO CONGRESS.

    (a) Disclosure by Tax Return Preparer.--
            (1) In general.--Subparagraph (B) of section 7216(b)(1) is 
        amended to read as follows:
                    ``(B) pursuant to any 1 of the following documents, 
                if clearly identified:
                            ``(i) The order of any Federal, State, or 
                        local court of record.
                            ``(ii) A subpoena issued by a Federal or 
                        State grand jury.
                            ``(iii) An administrative order, summons, 
                        or subpoena which is issued in the performance 
                        of its duties by--
                                    ``(I) any Federal agency, including 
                                Congress or any committee or 
                                subcommittee thereof, or
                                    ``(II) 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.''.
            (2) Effective date.--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.
    (b) Disclosure by Secretary.--Paragraph (2) of section 6104(a) is 
amended to read as follows:
            ``(2) Inspection by congress.--
                    ``(A) In general.--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.
                    ``(B) Additional information.--Section 6103(f) 
                shall apply with respect to--
                            ``(i) 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
                            ``(ii) any other papers which are in the 
                        possession of the Secretary and which relate to 
                        such application,
                as if such papers constituted returns.''.
    (c) Effective Date.--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.

SEC. 307. TAX OPINION STANDARDS FOR TAX PRACTITIONERS.

    Section 330(d) of title 31, United States Code, is amended to read 
as follows:
    ``(d) 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:
            ``(1) Independence of the practitioner issuing such written 
        advice from persons promoting, marketing, or recommending the 
        subject of the advice.
            ``(2) 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.
            ``(3) Avoidance of conflicts of interest which would impair 
        auditor independence.
            ``(4) For written advice issued by a firm, standards for 
        reviewing the advice and ensuring the consensus support of the 
        firm for positions taken.
            ``(5) Reliance on reasonable factual representations by the 
        taxpayer and other parties.
            ``(6) Appropriateness of the fees charged by the 
        practitioner for the written advice.
            ``(7) Preventing practitioners and firms from aiding or 
        abetting the understatement of tax liability by clients.
            ``(8) Banning the promotion of potentially abusive or 
        illegal tax shelters.''.
                                 <all>