[Congressional Record Volume 149, Number 58 (Thursday, April 10, 2003)]
[Senate]
[Pages S5210-S5232]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself and Mr. Grassley):
  S. 882. A bill to amend the Internal Revenue Code of 1986 to provide 
improvements in tax administration and taxpayer safeguards, and for 
other purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, today we are introducing the Tax 
Administration Good Government Act.
  The legislation contains five major components. First, it provides 
additional safeguards for taxpayers. Second, the legislation 
significantly simplifies the current interest and penalty regimes. 
Third, the Act also includes the proposals passed out of the Finance 
Committee on April 2, 2003 and included in a bill introduced by 
Senators Hatch and Breaux to modernize the United States Tax Court.
  Fourth, our legislation also includes several provisions, some of 
which were requested by the Treasury Department and the Joint Committee 
on Taxation, to strike an appropriate balance in protecting taxpayer 
confidentiality through disclosure reforms. Finally, the legislation 
takes a small, but important step toward simplification of the tax code 
through the elimination of obsolete provisions.
  We have worked closely with the Treasury Department, the Internal 
Revenue Service, the National Taxpayer Advocate and the Joint Committee 
on Taxation to develop this package of proposals to promote good 
government in the administration of our tax code.
  Congress's responsibility for the tax system does not stop after we 
pass tax law changes. We have an oversight responsibility to ensure 
that taxpayer rights are protected, that our tax laws are not 
administered counter to Congressional intent, that the judicial

[[Page S5211]]

body with primary jurisdiction over the tax laws has the tools 
necessary to provide independent review of controversies between 
taxpayers and the Internal Revenue Service, and to take steps to 
simplify the tax code whenever possible.
  It is our intention to pass a package of tax administration good 
government proposals out of the Finance Committee in the coming months. 
We urge our colleagues to support this important legislation.
  We also submit for the Record a more detailed description of the 
specific provisions included in the Tax Administration Good Government 
Act.
  I ask unanimous consent that the text of the bill and the description 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 882

       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 ``Tax 
     Administration Good Government 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 for this Act 
     is as follows:

Sec. 1. Short title; etc.

  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

Sec. 101. Waiver of user fee for installment agreements using automated 
              withdrawals.
Sec. 102. Partial payment of tax liability in installment agreements.
Sec. 103. Termination of installment agreements.
Sec. 104. Office of Chief Counsel review of offers in compromise.
Sec. 105. Seven-day threshold on tolling of statute of limitations 
              during National Taxpayer Advocate review.
Sec. 106. Increase in penalty for bad checks or money orders.
Sec. 107. Financial management service fees.
Sec. 108. Elimination of restriction on offsetting refunds from former 
              residents.

                  Subtitle B--Processing and Personnel

Sec. 111. Explanation of statute of limitations and consequences of 
              failure to file.
Sec. 112. Disclosure of tax information to facilitate combined 
              employment tax reporting.
Sec. 113. Expansion of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 114. Amendment to Treasury auction reforms.
Sec. 115. Revisions relating to termination of employment of Internal 
              Revenue Service employees for misconduct.
Sec. 116. IRS Oversight Board approval of use of critical pay 
              authority.
Sec. 117. Low-income taxpayer clinics.
Sec. 118. Enrolled agents.
Sec. 119. Establishment of disaster response team.
Sec. 120. Accelerated tax refunds.
Sec. 121. Study on clarifying record-keeping responsibilities.
Sec. 122. Streamline reporting process for National Taxpayer Advocate.

                      Subtitle C--Other Provisions

Sec. 131. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 132. Repeal of personal holding company tax.

                TITLE II--REFORM OF PENALTY AND INTEREST

Sec. 201. Individual estimated tax.
Sec. 202. Corporate estimated tax.
Sec. 203. Increase in large corporation threshold for estimated tax 
              payments.
Sec. 204. Abatement of interest.
Sec. 205. Deposits made to suspend running of interest on potential 
              underpayments.
Sec. 206. Freeze of provision regarding suspension of interest where 
              Secretary fails to contact taxpayer.
Sec. 207. Expansion of interest netting.
Sec. 208. Clarification of application of Federal tax deposit penalty.
Sec. 209. Frivolous tax submissions.

            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

Sec. 301. Jurisdiction of Tax Court over collection due process cases.
Sec. 302. Authority for special trial judges to hear and decide certain 
              employment status cases.
Sec. 303. Confirmation of authority of Tax Court to apply doctrine of 
              equitable recoupment.
Sec. 304. Tax Court filing fee in all cases commenced by filing 
              petition.
Sec. 305. Amendments to appoint employees.
Sec. 306. Expanded use of Tax Court practice fee for pro se taxpayers.

             Subtitle B--Tax Court Pension and Compensation

Sec. 311. Annuities for survivors of Tax Court judges who are 
              assassinated.
Sec. 312. Cost-of-living adjustments for Tax Court judicial survivor 
              annuities.
Sec. 313. Life insurance coverage for Tax Court judges.
Sec. 314. Cost of life insurance coverage for Tax Court judges age 65 
              or over.
Sec. 315. Modification of timing of lump-sum payment of judges' accrued 
              annual leave.
Sec. 316. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 317. Exemption of teaching compensation of retired judges from 
              limitation on outside earned income.
Sec. 318. General provisions relating to magistrate judges of the Tax 
              Court.
Sec. 319. Annuities to surviving spouses and dependent children of 
              magistrate judges of the Tax Court.
Sec. 320. Retirement and annuity program.
Sec. 321. Incumbent magistrate judges of the Tax Court.
Sec. 322. Provisions for recall.
Sec. 323. Effective date.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

Sec. 401. Clarification of definition of church tax inquiry.
Sec. 402. Collection activities with respect to joint return 
              disclosable to either spouse based on oral request.
Sec. 403. Taxpayer representatives not subject to examination on sole 
              basis of representation of taxpayers.
Sec. 404. Prohibition of disclosure of taxpayer identifying number with 
              respect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors and other agents with 
              confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Civil damages for unauthorized inspection or disclosure.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to 
              section 501(c) organizations.
Sec. 411. Treatment of public records.
Sec. 412. Investigative disclosures.
Sec. 413. TIN matching.
Sec. 414. Form 8300 disclosures.
Sec. 415. Technical amendment.

 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

Sec. 501. Simplification through elimination of inoperative provisions.

  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

     SEC. 101. WAIVER OF USER FEE FOR INSTALLMENT AGREEMENTS USING 
                   AUTOMATED WITHDRAWALS.

       (a) In General.--Section 6159 (relating to agreements for 
     payment of tax liability in installments) is amended by 
     redesignating subsection (e) as subsection (f) and by 
     inserting after subsection (d) the following:
       ``(e) Waiver of User Fees for Installment Agreements Using 
     Automated Withdrawals.--In the case of a taxpayer who enters 
     into an installment agreement in which automated installment 
     payments are agreed to, the Secretary shall waive the fee (if 
     any) for entering into the installment agreement.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into on or after the date 
     of the enactment of this Act.

     SEC. 102. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT 
                   AGREEMENTS.

       (a) In General.--
       (1) Section 6159(a) (relating to authorization of 
     agreements) is amended--
       (A) by striking ``satisfy liability for payment of'' and 
     inserting ``make payment on'', and
       (B) by inserting ``full or partial'' after ``facilitate''.
       (2) Section 6159(c) (relating to Secretary required to 
     enter into installment agreements in certain cases) is 
     amended in the matter preceding paragraph (1) by inserting 
     ``full'' before ``payment''.
       (b) Requirement To Review Partial Payment Agreements Every 
     Two Years.--Section 6159, as amended by this Act, is amended 
     by redesignating subsections (d), (e), and (f) as subsections 
     (e), (f), and (g), respectively, and inserting after 
     subsection (c) the following new subsection:
       ``(d) Secretary Required To Review Installment Agreements 
     for Partial Collection Every Two Years.--In the case of

[[Page S5212]]

     an agreement entered into by the Secretary under subsection 
     (a) for partial collection of a tax liability, the Secretary 
     shall review the agreement at least once every 2 years.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into on or after the date 
     of the enactment of this Act.

     SEC. 103. TERMINATION OF INSTALLMENT AGREEMENTS.

       (a) In General.--Section 6159(b)(4) (relating to failure to 
     pay an installment or any other tax liability when due or to 
     provide requested financial information) is amended by 
     striking ``or'' at the end of subparagraph (B), by 
     redesignating subparagraph (C) as subparagraph (E), and by 
     inserting after subparagraph (B) the following:
       ``(C) to make a Federal tax deposit under section 6302 at 
     the time such deposit is required to be made,
       ``(D) to file a return of tax imposed under this title by 
     its due date (including extensions), or''.
       (b) Conforming Amendment.--Section 6159(b)(4) is amended by 
     striking ``Failure to pay an installment or any other tax 
     liability when due or to provide requested financial 
     information'' and inserting ``Failure to make payments or 
     deposits or file returns when due or to provide requested 
     financial information''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to failures occurring on or after the date of the 
     enactment of this Act.

     SEC. 104. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN 
                   COMPROMISE.

       (a) In General.--Section 7122(b) (relating to record) is 
     amended by striking ``Whenever a compromise'' and all that 
     follows through ``his delegate'' and inserting ``If the 
     Secretary determines that an opinion of the General Counsel 
     for the Department of the Treasury, or the Counsel's 
     delegate, is required with respect to a compromise, there 
     shall be placed on file in the office of the Secretary such 
     opinion''.
       (b) Conforming Amendments.--Section 7122(b) is amended by 
     striking the second and third sentences.
       (c) Effective Date.--The amendments made by this section 
     shall apply to offers-in-compromise submitted or pending on 
     or after the date of the enactment of this Act.

     SEC. 105. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF 
                   LIMITATIONS DURING NATIONAL TAXPAYER ADVOCATE 
                   REVIEW.

       (a) In General.--Section 7811(d)(1) (relating to suspension 
     of running of period of limitation) is amended by inserting 
     after ``application,'' the following: ``but only if the date 
     of such decision is at least 7 days after the date of the 
     taxpayer's application''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to applications filed after the date of the 
     enactment of this Act.

     SEC. 106. INCREASE IN PENALTY FOR BAD CHECKS OR MONEY ORDERS.

       (a) In General.--Section 6657 (relating to bad checks) is 
     amended--
       (1) by striking ``$750'' and inserting ``$1,250'', and
       (2) by striking ``$15'' and inserting ``$25''.
       (b) Effective Date.--The amendments made by this section 
     apply to checks or money orders received after December 31, 
     2003.

     SEC. 107. FINANCIAL MANAGEMENT SERVICE FEES.

       Notwithstanding any other provision of law, the Financial 
     Management Service may charge the Internal Revenue Service, 
     and the Internal Revenue Service may pay the Financial 
     Management Service, a fee sufficient to cover the full cost 
     of implementing a continuous levy program under subsection 
     (h) of section 6331 of the Internal Revenue Code of 1986. Any 
     such fee shall be based on actual levies made and shall be 
     collected by the Financial Management Service by the 
     retention of a portion of amounts collected by levy pursuant 
     to that subsection. Amounts received by the Financial 
     Management Service as fees under that subsection shall be 
     deposited into the account of the Department of the Treasury 
     under section 3711(g)(7) of title 31, United States Code, and 
     shall be collected and accounted for in accordance with the 
     provisions of that section. The amount credited against the 
     taxpayer's liability on account of the continuous levy shall 
     be the amount levied, without reduction for the amount paid 
     to the Financial Management Service as a fee.

     SEC. 108. ELIMINATION OF RESTRICTION ON OFFSETTING REFUNDS 
                   FROM FORMER RESIDENTS.

       Section 6402(e) (relating to collection of past-due, 
     legally enforceable State income tax obligations) is amended 
     by striking paragraph (2) and by redesignating paragraphs 
     (3), (4), (5), (6), and (7) as paragraphs (2), (3), (4), (5), 
     and (6), respectively.

                  Subtitle B--Processing and Personnel

     SEC. 111. EXPLANATION OF STATUTE OF LIMITATIONS AND 
                   CONSEQUENCES OF FAILURE TO FILE.

       The Secretary of the Treasury or the Secretary's delegate 
     shall, as soon as practicable but not later than 180 days 
     after the date of the enactment of this Act, revise the 
     statement required by section 6227 of the Omnibus Taxpayer 
     Bill of Rights (Internal Revenue Service Publication No. 1), 
     and any instructions booklet accompanying a general income 
     tax return form for taxable years beginning after 2001 
     (including forms 1040, 1040A, 1040EZ, and any similar or 
     successor forms relating thereto), to provide for an 
     explanation of--
       (1) the limitations imposed by section 6511 of the Internal 
     Revenue Code of 1986 on credits and refunds; and
       (2) the consequences under such section 6511 of the failure 
     to file a return of tax.

     SEC. 112. DISCLOSURE OF TAX INFORMATION TO FACILITATE 
                   COMBINED EMPLOYMENT TAX REPORTING.

       Section 6103(d)(5) is amended to read as follows:
       ``(5) Disclosure for combined employment tax reporting.--
     The Secretary may disclose taxpayer identity information and 
     signatures to any agency, body, or commission of any State 
     for the purpose of carrying out with such agency, body, or 
     commission a combined Federal and State employment tax 
     reporting program approved by the Secretary. Subsections 
     (a)(2) and (p)(4) and sections 7213 and 7213A shall not apply 
     with respect to disclosures or inspections made pursuant to 
     this paragraph.''.

     SEC. 113. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
                   EXEMPT ORGANIZATIONS.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended--
       (1) in subparagraph (B) by inserting after ``509(a))'' the 
     following: ``or as a private operating foundation (as defined 
     in section 4942(j)(3))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) with respect to the initial qualification or 
     continuing qualification of an organization as an 
     organization described in section 501(c) (other than 
     paragraph (3)) or 501(d) which is exempt from tax under 
     section 501(a), or''.
       (b) Court Jurisdiction.--Subsection (a) of section 7428 is 
     amended in the material following paragraph (2) by striking 
     ``United States Tax Court, the United States Claims Court, or 
     the district court of the United States for the District of 
     Columbia'' and inserting the following: ``United States Tax 
     Court (in the case of any such determination or failure) or 
     the United States Claims Court or the district court of the 
     United States for the District of Columbia (in the case of a 
     determination or failure with respect to an issue referred to 
     in subparagraph (A) or (B) of paragraph (1)),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to pleadings filed with respect to determinations 
     (or requests for determinations) made after December 31, 
     2003.

     SEC. 114. AMENDMENT TO TREASURY AUCTION REFORMS.

       (a) In General.--Clause (i) of section 202(c)(4)(B) of the 
     Government Securities Act Amendments of 1993 (31 U.S.C. 3121 
     note) is amended by inserting before the semicolon ``(or, if 
     earlier, at the time the Secretary releases the minutes of 
     the meeting in accordance with paragraph (2))''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to meetings held after the date of the enactment 
     of this Act.

     SEC. 115. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF 
                   INTERNAL REVENUE SERVICE EMPLOYEES FOR 
                   MISCONDUCT.

       (a) In General.--Subchapter A of chapter 80 (relating to 
     application of internal revenue laws) is amended by inserting 
     after section 7804 the following new section:

     ``SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

       ``(a) In General.--Subject to subsection (c), the 
     Commissioner shall terminate the employment of any employee 
     of the Internal Revenue Service if there is a final 
     administrative or judicial determination that such employee 
     committed any act or omission described under subsection (b) 
     in the performance of the employee's official duties. Such 
     termination shall be a removal for cause on charges of 
     misconduct.
       ``(b) Acts or Omissions.--The acts or omissions described 
     under this subsection are--
       ``(1) willful failure to obtain the required approval 
     signatures on documents authorizing the seizure of a 
     taxpayer's home, personal belongings, or business assets,
       ``(2) providing a false statement under oath with respect 
     to a material matter involving a taxpayer or taxpayer 
     representative,
       ``(3) with respect to a taxpayer or taxpayer 
     representative, the violation of--
       ``(A) any right under the Constitution of the United 
     States, or
       ``(B) any civil right established under--
       ``(i) title VI or VII of the Civil Rights Act of 1964,
       ``(ii) title IX of the Education Amendments of 1972,
       ``(iii) the Age Discrimination in Employment Act of 1967,
       ``(iv) the Age Discrimination Act of 1975,
       ``(v) section 501 or 504 of the Rehabilitation Act of 1973, 
     or
       ``(vi) title I of the Americans with Disabilities Act of 
     1990,
       ``(4) falsifying or destroying documents to conceal 
     mistakes made by any employee with respect to a matter 
     involving a taxpayer or taxpayer representative,
       ``(5) assault or battery on a taxpayer or taxpayer 
     representative, but only if there is a criminal conviction, 
     or a final judgment by a court in a civil case, with respect 
     to the assault or battery,
       ``(6) violations of this title, Department of the Treasury 
     regulations, or policies of the Internal Revenue Service 
     (including the Internal Revenue Manual) for the purpose of

[[Page S5213]]

     retaliating against, or harassing, a taxpayer or taxpayer 
     representative,
       ``(7) willful misuse of the provisions of section 6103 for 
     the purpose of concealing information from a congressional 
     inquiry,
       ``(8) willful failure to file any return of tax required 
     under this title on or before the date prescribed therefor 
     (including any extensions) when a tax is due and owing, 
     unless such failure is due to reasonable cause and not due to 
     willful neglect,
       ``(9) willful understatement of Federal tax liability, 
     unless such understatement is due to reasonable cause and not 
     due to willful neglect, and
       ``(10) threatening to audit a taxpayer for the purpose of 
     extracting personal gain or benefit.
       ``(c) Determinations of Commissioner.--
       ``(1) In general.--The Commissioner may take a personnel 
     action other than termination for an act or omission 
     described under subsection (b).
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may not be delegated to any other officer. 
     The Commissioner, in the Commissioner's sole discretion, may 
     establish a procedure which will be used to determine whether 
     an individual should be referred to the Commissioner for a 
     determination by the Commissioner under paragraph (1).
       ``(3) No appeal.--Any determination of the Commissioner 
     under this subsection may not be appealed in any 
     administrative or judicial proceeding.
       ``(d) Definition.--For the purposes of the provisions 
     described in clauses (i), (ii), and (iv) of subsection 
     (b)(3)(B), references to a program or activity regarding 
     Federal financial assistance or an education program or 
     activity receiving Federal financial assistance shall include 
     any program or activity conducted by the Internal Revenue 
     Service for a taxpayer.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     80 is amended by inserting after the item relating to section 
     7804 the following new item:

``Sec. 7804A. Termination of employment for misconduct.''.

       (c) Repeal of Superseded Section.--Section 1203 of the 
     Internal Revenue Service Restructuring and Reform Act of 1998 
     (Public Law 105-206; 112 Stat. 720) is repealed.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 116. IRS OVERSIGHT BOARD APPROVAL OF USE OF CRITICAL PAY 
                   AUTHORITY.

       (a) In General.--Section 7802(d)(3) (relating to 
     management) is amended by striking ``and'' at the end of 
     subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``; and'', and by adding at 
     the end the following new subparagraph:
       ``(D) review and approve the Commissioner's use of critical 
     pay authority under section 9502 of title 5, United States 
     Code, and streamlined critical pay authority under section 
     9503 of such title.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to personnel hired after the date of the 
     enactment of this Act.

     SEC. 117. LOW-INCOME TAXPAYER CLINICS.

       (a) Grants for Return Preparation Clinics.--
       (1) In general.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by inserting after section 7526 the 
     following new section:

     ``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME 
                   TAXPAYERS.

       ``(a) In General.--The Secretary may, subject to the 
     availability of appropriated funds, make grants to provide 
     matching funds for the development, expansion, or 
     continuation of qualified return preparation clinics.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified return preparation clinic.--
       ``(A) In general.--The term `qualified return preparation 
     clinic' means a clinic which--
       ``(i) does not charge more than a nominal fee for its 
     services (except for reimbursement of actual costs incurred), 
     and
       ``(ii) operates programs which assist low-income taxpayers 
     in preparing and filing their Federal income tax returns, 
     including schedules reporting sole proprietorship or farm 
     income.
       ``(B) Assistance to low-income taxpayers.--A clinic is 
     treated as assisting low-income taxpayers under subparagraph 
     (A)(ii) if at least 90 percent of the taxpayers assisted by 
     the clinic have incomes which do not exceed 250 percent of 
     the poverty level, as determined in accordance with criteria 
     established by the Director of the Office of Management and 
     Budget.
       ``(2) Clinic.--The term `clinic' includes--
       ``(A) a clinical program at an eligible educational 
     institution (as defined in section 529(e)(5)) which satisfies 
     the requirements of paragraph (1) through student assistance 
     of taxpayers in return preparation and filing, and
       ``(B) an organization described in section 501(c) and 
     exempt from tax under section 501(a) which satisfies the 
     requirements of paragraph (1).
       ``(c) Special Rules and Limitations.--
       ``(1) Aggregate limitation.--Unless otherwise provided by 
     specific appropriation, the Secretary shall not allocate more 
     than $10,000,000 per year (exclusive of costs of 
     administering the program) to grants under this section.
       ``(2) Other applicable rules.--Rules similar to the rules 
     under paragraphs (2) through (7) of section 7526(c) shall 
     apply with respect to the awarding of grants to qualified 
     return preparation clinics.''.
       (2) Clerical amendment.--The table of sections for chapter 
     77 is amended by inserting after the item relating to section 
     7526 the following new item:

``Sec. 7526A. Return preparation clinics for low-income taxpayers.''.

       (b) Grants for Taxpayer Representation and Assistance 
     Clinics.--
       (1) Increase in authorized grants.--Section 7526(c)(1) 
     (relating to aggregate limitation) is amended by striking 
     ``$6,000,000'' and inserting ``$10,000,000''.
       (2) Use of grants for overhead expenses prohibited.--
       (A) In general.--Section 7526(c) (relating to special rules 
     and limitations) is amended by adding at the end the 
     following new paragraph:
       ``(6) Use of grants for overhead expenses prohibited.--No 
     grant made under this section may be used for the overhead 
     expenses of any clinic or of any institution sponsoring such 
     clinic.''.
       (B) Conforming amendments.--Section 7526(c)(5) is amended--
       (i) by inserting ``qualified'' before ``low-income'', and
       (ii) by striking the last sentence.
       (3) Promotion of Clinics.--Section 7526(c), as amended by 
     paragraph (2), is amended by adding at the end the following 
     new paragraph:
       ``(7) Promotion of clinics.--The Secretary is authorized to 
     promote the benefits of and encourage the use of low-income 
     taxpayer clinics through the use of mass communications, 
     referrals, and other means.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to grants made after the date of the enactment of 
     this Act.

     SEC. 118. ENROLLED AGENTS.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7527. ENROLLED AGENTS.

       ``(a) In General.--The Secretary may prescribe such 
     regulations as may be necessary to regulate the conduct of 
     enrolled agents in regards to their practice before the 
     Internal Revenue Service.
       ``(b) Use of Credentials.--Any enrolled agents properly 
     licensed to practice as required under rules promulgated 
     under section (a) herein shall be allowed to use the 
     credentials or designation as `enrolled agent', `EA', or 
     `E.A.'.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new item:

``Sec. 7527. Enrolled agents.''.

       (c) Prior Regulations.--Nothing in the amendments made by 
     this section shall be construed to have any effect on part 10 
     of title 31, Code of Federal Regulations, or any other 
     Federal rule or regulation issued before the date of the 
     enactment of this Act.

     SEC. 119. ESTABLISHMENT OF DISASTER RESPONSE TEAM.

       (a) In General.--Section 7508A (relating to authority to 
     postpone certain tax-related deadlines by reason of 
     presidentially declared disaster) is amended by adding at the 
     end the following new subsection:
       ``(c) Duties of Disaster Response Team.--
       ``(1) Response to disasters.--The Secretary shall--
       ``(A) establish as a permanent office in the national 
     office of the Internal Revenue Service a disaster response 
     team composed of members, who in addition to their regular 
     responsibilities, shall assist taxpayers in clarifying and 
     resolving Federal tax matters associated with or resulting 
     from any Presidentially declared disaster (as so defined), 
     and
       ``(B) respond to requests by such taxpayers for filing 
     extensions and technical guidance expeditiously.
       ``(2) Personnel of disaster response team.--The disaster 
     response team shall be composed of--
       ``(A) personnel from the Office of the Taxpayer Advocate, 
     and
       ``(B) personnel from the national office of the Internal 
     Revenue Service with expertise in individual, corporate, and 
     small business tax matters.
       ``(3) Coordination with fema.--The disaster response team 
     shall operate in coordination with the Director of the 
     Federal Emergency Management Agency.
       ``(4) Toll-free telephone number.--The Commissioner of 
     Internal Revenue shall establish and maintain a toll-free 
     telephone number for taxpayers to use to receive assistance 
     from the disaster response team.
       ``(5) Internet webpage site.--The Commissioner of Internal 
     Revenue shall establish and maintain a site on the Internet 
     webpage of the Internal Revenue Service for information for 
     taxpayers described in paragraph (1)(A).''.
       (b) FEMA.--The Director of the Federal Emergency Management 
     Agency shall work in coordination with the disaster response 
     team established under section 7804(c)(1)(A) of the Internal 
     Revenue Code of 1986 to provide timely assistance to disaster 
     victims described in such section, including--
       (1) informing the disaster response team regarding any tax-
     related problems or issues arising in connection with the 
     disaster,

[[Page S5214]]

       (2) providing the toll-free telephone number established 
     and maintained by the Internal Revenue Service for the 
     disaster victims in all materials provided to such victims, 
     and
       (3) providing the information described in section 
     7804(c)(5) of such Code on the Internet webpage of the 
     Federal Emergency Management Agency or through a link on such 
     webpage to the Internet webpage site of the Internal Revenue 
     Service described in such section.
       (c) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 120. ACCELERATED TAX REFUNDS.

       (a) Study.--The Secretary of the Treasury shall study the 
     implementation of an accelerated refund program for taxpayers 
     who--
       (1) maintain the same filing characteristics from year to 
     year, and
       (2) elect the direct deposit option for any refund under 
     the program.
       (b) Report.--Not later than the date which is 1 year after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury shall transmit a report of the study described in 
     subsection (a), including recommendations, to the Committee 
     on Finance of the Senate and the Committee on Ways and Means 
     of the House of Representatives.

     SEC. 121. STUDY ON CLARIFYING RECORD-KEEPING 
                   RESPONSIBILITIES.

       (a) Study.--The Secretary of the Treasury shall study--
       (1) the scope of the records required to be maintained by 
     taxpayers under section 6001 of the Internal Revenue Code of 
     1986,
       (2) the utility of requiring taxpayers to maintain all 
     records indefinitely,
       (3) such requirement given the necessity to upgrade 
     technological storage for outdated records,
       (4) the number of negotiated records retention agreements 
     requested by taxpayers and the number entered into by the 
     Internal Revenue Service, and
       (5) proposals regarding taxpayer record-keeping.
       (b) Report.--Not later than the date which is 1 year after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury shall transmit a report of the study described in 
     subsection (a), including recommendations, to the Committee 
     on Finance of the Senate and the Committee on Ways and Means 
     of the House of Representatives.

     SEC. 122. STREAMLINE REPORTING PROCESS FOR NATIONAL TAXPAYER 
                   ADVOCATE.

       (a) One Annual Report.--Subparagraph (B) of section 
     7803(c)(2) (relating to functions of Office) is amended--
       (1) by striking all matter preceding subclause (I) of 
     clause (ii) and inserting the following:
       ``(B) Annual report.--
       ``(i) In general.--Not later than December 31 of each 
     calendar year, the National Taxpayer Advocate shall report to 
     the Committee of Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the objectives of the Office of the Taxpayer of Advocate for 
     the fiscal year beginning in such calendar year and the 
     activities of such Office during the fiscal year ending 
     during such calendar year. Any such report shall contain full 
     and substantive analysis, in addition to statistical 
     information, and shall--'',
       (2) by striking ``clause (ii)'' in clause (iv) and 
     inserting ``clause (i)'', and
       (3) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii), respectively.
       (b) Effective Date.--The amendments made by this section 
     shall apply to reports in calendar year 2003 and thereafter.

                      Subtitle C--Other Provisions

     SEC. 131. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exception.--No penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 132. REPEAL OF PERSONAL HOLDING COMPANY TAX.

       (a) In General.--Part II of subchapter G of chapter 1 
     (relating to personal holding companies) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Section 12(2) is amended to read as follows:
       ``(2) For accumulated earnings tax, see part I of 
     subchapter G (sec. 531 and following).''.
       (2) Section 26(b)(2) is amended by striking subparagraph 
     (G) and by redesignating the succeeding subparagraphs 
     accordingly.
       (3) Section 30A(c) is amended by striking paragraph (3) and 
     by redesignating paragraph (4) as paragraph (3).
       (4) Section 41(e)(7)(E) is amended by adding ``and'' at the 
     end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (5) Section 56(b)(2) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (6) Section 170(e)(4)(D) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (7) Section 111(d) is amended to read as follows:
       ``(d) Special Rules for Accumulated Earnings Tax.--In 
     applying subsection (a) for the purpose of determining the 
     accumulated earnings tax under section 531--
       ``(1) any excluded amount under subsection (a) allowed for 
     purposes of this subtitle (other than section 531) shall be 
     allowed whether or not such amount resulted in a reduction of 
     the tax under section 531 for the prior taxable year, and
       ``(2) where any excluded amount under subsection (a) was 
     not allowed as a deduction for the prior taxable year for 
     purposes of this subtitle other than section 531 but was 
     allowable for the same taxable year under section 531, then 
     such excluded amount shall be allowable if it did not result 
     in a reduction of the tax under section 531.''.
       (8)(A) Section 316(b) is amended by striking paragraph (2) 
     and by redesignating paragraph (3) as paragraph (2).
       (B) Section 331(b) is amended by striking ``(other than a 
     distribution referred to in paragraph (2)(B) of section 
     316(b))''.
       (9) Section 341(d) is amended--
       (A) by striking ``section 544(a)'' and inserting ``section 
     465(f)'', and
       (B) by inserting before the period at the end of the next 
     to the last sentence ``and such paragraph (2) shall be 
     applied by inserting `by or for his partner' after `his 
     family' ''.
       (10) Section 381(c) is amended by striking paragraphs (14) 
     and (17).
       (11) Section 443(e) is amended by striking paragraph (2) 
     and by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (2), (3), and (4), respectively.
       (12) Section 447(g)(4)(A) is amended by striking ``other 
     than--'' and all that follows and inserting ``other than an S 
     corporation.''
       (13)(A) Section 465(a)(1)(B) is amended to read as follows:
       ``(B) a C corporation which is closely held,''.
       (B) Section 465(a)(3) is amended to read as follows:
       ``(3) Closely held determination.--For purposes of 
     paragraph (1), a corporation is closely held if, at any time 
     during the last half of the taxable year, more than 50 
     percent in value of its outstanding stock is owned, directly 
     or indirectly, by or for not more than 5 individuals. For 
     purposes of this paragraph, an organization described in 
     section 401(a), 501(c)(17), or 509(a) or a portion of a trust 
     permanently set aside or to be used exclusively for the 
     purposes described in section 642(c) shall be considered an 
     individual.''
       (C) Section 465 is amended by adding at the end the 
     following new subsection:
       ``(f) Constructive Ownership Rules.--For purposes of 
     subsection (a)(3)--
       ``(1) Stock not owned by individual.--Stock owned, directly 
     or indirectly, by or for a corporation, partnership, estate, 
     or trust shall be considered as being owned proportionately 
     by its shareholders, partners, or beneficiaries.
       ``(2) Family ownership.--An individual shall be considered 
     as owning the stock owned, directly or indirectly, by or for 
     his family. For purposes of this paragraph, the family of an 
     individual includes only his brothers and sisters (whether by 
     the whole or half blood), spouse, ancestors, and lineal 
     descendants.
       ``(3) Options.--If any person has an option to acquire 
     stock, such stock shall be considered as owned by such 
     person. For purposes of this paragraph, an option to acquire 
     such an option, and each one of a series of such options, 
     shall be considered as an option to acquire such stock.
       ``(4) Application of family and option rules.--Paragraphs 
     (2) and (3) shall be applied if, but only if, the effect is 
     to make the corporation closely held under subsection (a)(3).
       ``(5) Constructive ownership as actual ownership.--Stock 
     constructively owned by

[[Page S5215]]

     a person by reason of the application of paragraph (1) or 
     (3), shall, for purposes of applying paragraph (1) or (2), be 
     treated as actually owned by such person; but stock 
     constructively owned by an individual by reason of the 
     application of paragraph (2) shall not be treated as owned by 
     him for purposes of again applying such paragraph in order to 
     make another the constructive owner of such stock.
       ``(6) Option rule in lieu of family rule.--If stock may be 
     considered as owned by an individual under either paragraph 
     (2) or (3) it shall be considered as owned by him under 
     paragraph (3).
       ``(7) Convertible securities.--Outstanding securities 
     convertible into stock (whether or not convertible during the 
     taxable year) shall be considered as outstanding stock if the 
     effect of the inclusion of all such securities is to make the 
     corporation closely held under subsection (a)(3). The 
     requirement under the preceding sentence that all convertible 
     securities must be included if any are to be included shall 
     be subject to the exception that, where some of the 
     outstanding securities are convertible only after a later 
     date than in the case of others, the class having the earlier 
     conversion date may be included although the others are not 
     included, but no convertible securities shall be included 
     unless all outstanding securities having a prior conversion 
     date are also included.''
       (D) Section 465(c)(7)(B) is amended by striking clause (i) 
     and by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively.
       (E) Section 465(c)(7)(G) is amended to read as follows:
       ``(G) Loss of 1 member of affiliated group may not offset 
     income of personal service corporation.--Nothing in this 
     paragraph shall permit any loss of a member of an affiliated 
     group to be used as an offset against the income of any other 
     member of such group which is a personal service corporation 
     (as defined in section 269A(b) but determined by substituting 
     `5 percent' for `10 percent' in section 269A(b)(2)).''
       (14) Sections 508(d), 4947, and 4948(c)(4) are each amended 
     by striking ``545(b)(2),'' each place it appears.
       (15) Section 532(b) is amended by striking paragraph (1) 
     and by redesignating paragraphs (2), (3), and (4) as 
     paragraphs (1), (2), and (3), respectively.
       (16) Sections 535(b)(1) and 556(b)(1) are each amended by 
     striking ``section 541'' and inserting ``section 541 (as in 
     effect before its repeal)''.
       (17)(A) Section 553(a)(1) is amended by striking ``section 
     543(d)'' and inserting ``subsection (c)''.
       (B) Section 553 is amended by adding at the end the 
     following new subsection:
       ``(c) Active Business Computer Software Royalties.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `active business computer software royalties' means any 
     royalties--
       ``(A) received by any corporation during the taxable year 
     in connection with the licensing of computer software, and
       ``(B) with respect to which the requirements of paragraphs 
     (2), (3), (4), and (5) are met.
       ``(2) Royalties must be received by corporation actively 
     engaged in computer software business.--The requirements of 
     this paragraph are met if the royalties described in 
     paragraph (1)--
       ``(A) are received by a corporation engaged in the active 
     conduct of the trade or business of developing, 
     manufacturing, or producing computer software, and
       ``(B) are attributable to computer software which--
       ``(i) is developed, manufactured, or produced by such 
     corporation (or its predecessor) in connection with the trade 
     or business described in subparagraph (A), or
       ``(ii) is directly related to such trade or business.
       ``(3) Royalties must constitute at least 50 percent of 
     income.--The requirements of this paragraph are met if the 
     royalties described in paragraph (1) constitute at least 50 
     percent of the ordinary gross income of the corporation for 
     the taxable year.
       ``(4) Deductions under sections 162 and 174 relating to 
     royalties must equal or exceed 25 percent of ordinary gross 
     income.--
       ``(A) In general.--The requirements of this paragraph are 
     met if--
       ``(i) the sum of the deductions allowable to the 
     corporation under sections 162, 174, and 195 for the taxable 
     year which are properly allocable to the trade or business 
     described in paragraph (2) equals or exceeds 25 percent of 
     the ordinary gross income of such corporation for such 
     taxable year, or
       ``(ii) the average of such deductions for the 5-taxable 
     year period ending with such taxable year equals or exceeds 
     25 percent of the average ordinary gross income of such 
     corporation for such period.

     If a corporation has not been in existence during the 5-
     taxable year period described in clause (ii), then the period 
     of existence of such corporation shall be substituted for 
     such 5-taxable year period.
       ``(B) Deductions allowable under section 162.--For purposes 
     of subparagraph (A), a deduction shall not be treated as 
     allowable under section 162 if it is specifically allowable 
     under another section.
       ``(C) Limitation on allowable deductions.--For purposes of 
     subparagraph (A), no deduction shall be taken into account 
     with respect to compensation for personal services rendered 
     by the 5 individual shareholders holding the largest 
     percentage (by value) of the outstanding stock of the 
     corporation. For purposes of the preceding sentence 
     individuals holding less than 5 percent (by value) of the 
     stock of such corporation shall not be taken into account.''
       (18) Section 561(a) is amended by striking paragraph (3), 
     by inserting ``and'' at the end of paragraph (1), and by 
     striking '', and'' at the end of paragraph (2) and inserting 
     a period.
       (19) Section 562(b) is amended to read as follows:
       ``(b) Distributions in Liquidation.--Except in the case of 
     a foreign personal holding company described in section 552--
       ``(1) in the case of amounts distributed in liquidation, 
     the part of such distribution which is properly chargeable to 
     earnings and profits accumulated after February 28, 1913, 
     shall be treated as a dividend for purposes of computing the 
     dividends paid deduction, and
       ``(2) in the case of a complete liquidation occurring 
     within 24 months after the adoption of a plan of liquidation, 
     any distribution within such period pursuant to such plan 
     shall, to the extent of the earnings and profits (computed 
     without regard to capital losses) of the corporation for the 
     taxable year in which such distribution is made, be treated 
     as a dividend for purposes of computing the dividends paid 
     deduction.

     For purposes of paragraph (1), a liquidation includes a 
     redemption of stock to which section 302 applies. Except to 
     the extent provided in regulations, the preceding sentence 
     shall not apply in the case of any mere holding or investment 
     company which is not a regulated investment company.''
       (20) Section 563 is amended by striking subsection (b).
       (21) Section 564 is hereby repealed.
       (22) Section 631(c) is amended by striking ``or section 
     545(b)(5)''.
       (23) Section 852(b)(1) is amended by striking ``which is a 
     personal holding company (as defined in section 542) or''.
       (24)(A) Section 856(h)(1) is amended to read as follows:
       ``(1) In general.--For purposes of subsection (a)(6), a 
     corporation, trust, or association is closely held if the 
     stock ownership requirement of section 465(a)(3) is met.''
       (B) Section 856(h)(3)(A)(i) is amended by striking 
     ``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
       (C) Paragraph (3) of section 856(h) is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C) and 
     (D) as subparagraphs (B) and (C), respectively.
       (D) Subparagraph (C) of section 856(h)(3), as redesignating 
     by the preceding subparagraph, is amended by striking 
     ``subparagraph (C)'' and inserting ``subparagraph (B)''.
       (25) The last sentence of section 882(c)(2) is amended to 
     read as follows:
     ``The preceding sentence shall not be construed to deny the 
     credit provided by section 33 for tax withheld at source or 
     the credit provided by section 34 for certain uses of 
     gasoline.''.
       (26) Section 936(a)(3) is amended by striking subparagraph 
     (C), by inserting ``or'' at the end of subparagraph (B), and 
     by redesignating subparagraph (D) as subparagraph (C).
       (27) Section 992(d) is amended by striking paragraph (2) 
     and by redesignating succeeding paragraphs accordingly.
       (28) Section 992(e) is amended by striking ``and section 
     541 (relating to personal holding company tax)''.
       (29) Section 1202(e)(8) is amended by striking ``section 
     543(d)(1)'' and inserting ``section 553(c)(1)''.
       (30) Section 1362(d)(3)(C)(iii) is amended by adding at the 
     end the following new sentence: ``References to section 542 
     in the preceding sentence shall be treated as references to 
     such section as in effect on the day before its repeal.''
       (31) Section 1504(c)(2)(B) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (32) Section 2057(e)(2)(C) is amended by adding at the end 
     the following new sentence: ``References to sections 542 and 
     543 in the preceding sentence shall be treated as references 
     to such sections as in effect on the day before their 
     repeal.''
       (33) Sections 6422 is amended by striking paragraph (3) and 
     by redesignating paragraphs (4) through (12) and paragraphs 
     (3) through (11), respectively.
       (34) Section 6501 is amended by striking subsection (f).
       (35) Section 6503(k) is amended by striking paragraph (1) 
     and by redesignating paragraphs (2) through (5) as paragraphs 
     (1) through (4), respectively.
       (36) Section 6515 is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) through (6) as paragraphs (1) 
     through (5), respectively.
       (37) Subsections (d)(1)(B) and (e)(2) of section 6662 are 
     each amended by striking ``or a personal holding company (as 
     defined in section 542)''.
       (38) Section 6683 is hereby repealed.
       (c) Clerical Amendments.--
       (1) The table of parts for subchapter G of chapter 1 is 
     amended by striking the item relating to part II.
       (2) The table of sections for part IV of such subchapter G 
     is amended by striking the item relating to section 564.
       (3) The table of sections for part I of subchapter B of 
     chapter 68 is amended by striking the item relating to 
     section 6683.

[[Page S5216]]

       (d) Effective Date.--The amendments made by this Act shall 
     apply to taxable years beginning after December 31, 2003.

                TITLE II--REFORM OF PENALTY AND INTEREST

     SEC. 201. INDIVIDUAL ESTIMATED TAX.

       (a) Increase in Exception for Individuals Owing Small 
     Amount of Tax.--Section 6654(e)(1) (relating to exception 
     where tax is small amount) is amended by striking ``$1,000'' 
     and inserting ``$2,000''.
       (b) Computation of Addition to Tax.--Subsections (a) and 
     (b) of section 6654 (relating to failure by individual to pay 
     estimated taxes) are amended to read as follows:
       ``(a) Addition to the Tax.--
       ``(1) In general.--Except as otherwise provided in this 
     section, in the case of any underpayment of estimated tax by 
     an individual for a taxable year, there shall be added to the 
     tax under chapters 1 and 2 for the taxable year the amount 
     determined under paragraph (2) for each day of underpayment.
       ``(2) Amount.--The amount of the addition to tax for any 
     day shall be the product of the underpayment rate established 
     under subsection (b)(2) multiplied by the amount of the 
     underpayment.
       ``(b) Amount of Underpayment; Interest Rate.--For purposes 
     of subsection (a)--
       ``(1) Amount.--The amount of the underpayment on any day 
     shall be the excess of--
       ``(A) the sum of the required installments for the taxable 
     year the due dates for which are on or before such day, over
       ``(B) the sum of the amounts (if any) of estimated tax 
     payments made on or before such day on such required 
     installments.
       ``(2) Determination of interest rate.--
       ``(A) In general.--The underpayment rate with respect to 
     any day in an installment underpayment period shall be the 
     underpayment rate established under section 6621 for the 
     first day of the calendar quarter in which such installment 
     underpayment period begins.
       ``(B) Installment underpayment period.--For purposes of 
     subparagraph (A), the term `installment underpayment period' 
     means the period beginning on the day after the due date for 
     a required installment and ending on the due date for the 
     subsequent required installment (or in the case of the 4th 
     required installment, the 15th day of the 4th month following 
     the close of a taxable year).
       ``(C) Daily rate.--The rate determined under subparagraph 
     (A) shall be applied on a daily basis and shall be based on 
     the assumption of 365 days in a calendar year.
       ``(3) Termination of estimated tax interest.--No day after 
     the end of the installment underpayment period for the 4th 
     required installment specified in paragraph (2)(B) for a 
     taxable year shall be treated as a day of underpayment with 
     respect to such taxable year.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 202. CORPORATE ESTIMATED TAX.

       (a) Increase in Small Tax Amount Exception.--Section 
     6655(f) (relating to exception where tax is small amount) is 
     amended by striking ``$500'' and inserting ``$1,000''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 203. INCREASE IN LARGE CORPORATION THRESHOLD FOR 
                   ESTIMATED TAX PAYMENTS.

       (a) In General.--Section 6655(g)(2) (defining large 
     corporation) is amended--
       (1) by striking ``$1,000,000'' in subparagraph (A) and 
     inserting ``the applicable amount'',
       (2) by redesignating subparagraph (B) as subparagraph (C), 
     and
       (3) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) Applicable amount.--For purposes of subparagraph (A), 
     the applicable amount is $1,000,000 increased (but not above 
     $1,500,000) by $50,000 for each taxable year beginning after 
     2004.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 204. ABATEMENT OF INTEREST.

       (a) Abatement of Interest for Periods Attributable to Any 
     Unreasonable IRS Error or Delay.--Section 6404(e)(1) is 
     amended--
       (1) by striking ``in performing a ministerial or managerial 
     act'' in subparagraphs (A) and (B),
       (2) by striking ``deficiency'' in subparagraph (A) and 
     inserting ``underpayment of any tax, addition to tax, or 
     penalty imposed by this title'', and
       (3) by striking ``tax described in section 6212(a)'' in 
     subparagraph (B) and inserting ``tax, addition to tax, or 
     penalty imposed by this title''.
       (b) Abatement of Interest to Extent Interest Is 
     Attributable to Taxpayer Reliance on Written Statements of 
     the IRS.--Subsection (f) of section 6404 is amended--
       (1) in the subsection heading, by striking ``Penalty or 
     Addition'' and inserting ``Interest, Penalty, or Addition''; 
     and
       (2) in paragraph (1) and in subparagraph (B) of paragraph 
     (2), by striking ``penalty or addition'' and inserting 
     ``interest, penalty, or addition''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to interest accruing on or after the 
     date of the enactment of this Act.

     SEC. 205. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS.

       (a) In General.--Subchapter A of chapter 67 (relating to 
     interest on underpayments) is amended by adding at the end 
     the following new section:

     ``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS, ETC.

       ``(a) Authority To Make Deposits Other Than As Payment of 
     Tax.--A taxpayer may make a cash deposit with the Secretary 
     which may be used by the Secretary to pay any tax imposed 
     under subtitle A or B or chapter 41, 42, 43, or 44 which has 
     not been assessed at the time of the deposit. Such a deposit 
     shall be made in such manner as the Secretary shall 
     prescribe.
       ``(b) No Interest Imposed.--To the extent that such deposit 
     is used by the Secretary to pay tax, for purposes of section 
     6601 (relating to interest on underpayments), the tax shall 
     be treated as paid when the deposit is made.
       ``(c) Return of Deposit.--Except in a case where the 
     Secretary determines that collection of tax is in jeopardy, 
     the Secretary shall return to the taxpayer any amount of the 
     deposit (to the extent not used for a payment of tax) which 
     the taxpayer requests in writing.
       ``(d) Payment of Interest.--
       ``(1) In general.--For purposes of section 6611 (relating 
     to interest on overpayments), a deposit which is returned to 
     a taxpayer shall be treated as a payment of tax for any 
     period to the extent (and only to the extent) attributable to 
     a disputable tax for such period. Under regulations 
     prescribed by the Secretary, rules similar to the rules of 
     section 6611(b)(2) shall apply.
       ``(2) Disputable tax.--
       ``(A) In general.--For purposes of this section, the term 
     `disputable tax' means the amount of tax specified at the 
     time of the deposit as the taxpayer's reasonable estimate of 
     the maximum amount of any tax attributable to disputable 
     items.
       ``(B) Safe harbor based on 30-day letter.--In the case of a 
     taxpayer who has been issued a 30-day letter, the maximum 
     amount of tax under subparagraph (A) shall not be less than 
     the amount of the proposed deficiency specified in such 
     letter.
       ``(3) Other definitions.--For purposes of paragraph (2)--
       ``(A) Disputable item.--The term `disputable item' means 
     any item of income, gain, loss, deduction, or credit if the 
     taxpayer--
       ``(i) has a reasonable basis for its treatment of such 
     item, and
       ``(ii) reasonably believes that the Secretary also has a 
     reasonable basis for disallowing the taxpayer's treatment of 
     such item.
       ``(B) 30-day letter.--The term `30-day letter' means the 
     first letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals.
       ``(4) Rate of interest.--The rate of interest allowable 
     under this subsection shall be the Federal short-term rate 
     determined under section 6621(b), compounded daily.
       ``(e) Use of Deposits.--
       ``(1) Payment of tax.--Except as otherwise provided by the 
     taxpayer, deposits shall be treated as used for the payment 
     of tax in the order deposited.
       ``(2) Returns of deposits.--Deposits shall be treated as 
     returned to the taxpayer on a last-in, first-out basis.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter A of chapter 67 is amended by adding at the end 
     the following new item:

``Sec. 6603. Deposits made to suspend running of interest on potential 
              underpayments, etc.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to deposits made after December 31, 2003.
       (2) Coordination with deposits made under revenue procedure 
     84-58.--In the case of an amount held by the Secretary of the 
     Treasury or his delegate on the date of the enactment of this 
     Act as a deposit in the nature of a cash bond deposit 
     pursuant to Revenue Procedure 84-58, the date that the 
     taxpayer identifies such amount as a deposit made pursuant to 
     section 6603 of the Internal Revenue Code (as added by this 
     Act) shall be treated as the date such amount is deposited 
     for purposes of such section 6603.

     SEC. 206. FREEZE OF PROVISIONS REGARDING SUSPENSION OF 
                   INTEREST WHERE SECRETARY FAILS TO CONTACT 
                   TAXPAYER.

       (a) In General.--Section 6404(G) (relating to suspension of 
     interest and certain penalties where secretary fails to 
     contact taxpayer) is amended by striking ``1-year period (18-
     month period in the case of taxable years beginning before 
     January 1, 2004)'' both places it appears and inserting ``18-
     month period''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 207. EXPANSION OF INTEREST NETTING.

       (a) In General.--Subsection (d) of section 6621 (relating 
     to elimination of interest on overlapping periods of tax 
     overpayments and underpayments) is amended by adding at the 
     end the following: ``Solely for purposes of the preceding 
     sentence, section 6611(e) shall not apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to interest accrued after December 31, 2003.

[[Page S5217]]

     SEC. 208. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT 
                   PENALTY.

       Nothing in section 6656 of the Internal Revenue Code of 
     1986 shall be construed to permit the percentage specified in 
     subsection (b)(1)(A)(iii) thereof to apply other than in a 
     case where the failure is for more than 15 days.

     SEC. 209. FRIVOLOUS TAX SUBMISSIONS.

       (a) Civil Penalties.--Section 6702 is amended to read as 
     follows:

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 7811 (relating to taxpayer assistance 
     orders),
       ``(II) section 6159 (relating to agreements for payment of 
     tax liability in installments), or
       ``(III) section 7122 (relating to compromises).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified frivolous submission and such person withdraws such 
     submission promptly after such notice, the penalty imposed 
     under paragraph (1) shall not apply with respect to such 
     submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to submissions made and issues raised after the 
     date on which the Secretary first prescribes a list under 
     section 6702(c) of the Internal Revenue Code of 1986, as 
     amended by subsection (a).

            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

     SEC. 301. JURISDICTION OF TAX COURT OVER COLLECTION DUE 
                   PROCESS CASES.

       (a) In General.--Paragraph (1) of section 6330(d) (relating 
     to proceeding after hearing) is amended to read as follows:
       ``(1) Judicial review of determination.--The person may, 
     within 30 days of a determination under this section, appeal 
     such determination to the Tax Court (and the Tax Court shall 
     have jurisdiction with respect to such matter).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to determinations made after the date of the 
     enactment of this Act.

     SEC. 302. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND 
                   DECIDE CERTAIN EMPLOYMENT STATUS CASES.

       (a) In General.--Section 7443A(b) (relating to proceedings 
     which may be assigned to special trial judges) is amended by 
     striking ``and'' at the end of paragraph (4), by 
     redesignating paragraph (5) as paragraph (6), and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) any proceeding under section 7436(c), and''.
       (b) Conforming Amendment.--Section 7443A(c) is amended by 
     striking ``or (4)'' and inserting ``(4), or (5)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any proceeding under section 7436(c) of the 
     Internal Revenue Code of 1986 with respect to which a 
     decision has not become final (as determined under section 
     7481 of such Code) before the date of the enactment of this 
     Act.

     SEC. 303. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY 
                   DOCTRINE OF EQUITABLE RECOUPMENT.

       (a) Confirmation of Authority of Tax Court To Apply 
     Doctrine of Equitable Recoupment.--Section 6214(b) (relating 
     to jurisdiction over other years and quarters) is amended by 
     adding at the end the following new sentence: 
     ``Notwithstanding the preceding sentence, the Tax Court may 
     apply the doctrine of equitable recoupment to the same extent 
     that it is available in civil tax cases before the district 
     courts of the United States and the United States Court of 
     Federal Claims.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any action or proceeding in the United States 
     Tax Court with respect to which a decision has not become 
     final (as determined under section 7481 of the Internal 
     Revenue Code of 1986) as of the date of the enactment of this 
     Act.

     SEC. 304. TAX COURT FILING FEE IN ALL CASES COMMENCED BY 
                   FILING PETITION.

       (a) In General.--Section 7451 (relating to fee for filing a 
     Tax Court petition) is amended by striking all that follows 
     ``petition'' and inserting a period.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 305. AMENDMENTS TO APPOINT EMPLOYEES.

       (a) In General.--Subsection (a) of section 7471 (relating 
     to Tax Court employees) is amended to read as follows:
       ``(a) Appointment and Compensation.--
       ``(1) Clerk.--The Tax Court may appoint a clerk without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service. The clerk 
     shall serve at the pleasure of the Tax Court.
       ``(2) Law clerks and secretaries.--
       ``(A) In general.--The judges and special trial judges of 
     the Tax Court may appoint law clerks and secretaries, in such 
     numbers as the Tax Court may approve, without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service. Any such law clerk 
     or secretary shall serve at the pleasure of the appointing 
     judge.
       ``(B) Exemption from federal leave provisions.--A law clerk 
     appointed under this subsection shall be exempt from the 
     provisions of subchapter I of chapter 63 of title 5, United 
     States Code. Any unused sick leave or annual leave standing 
     to the employee's

[[Page S5218]]

     credit as of the effective date of this subsection shall 
     remain credited to the employee and shall be available to the 
     employee upon separation from the Federal Government.
       ``(3) Deputies and other employees.--The clerk may appoint 
     necessary deputies and employees without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service. Such deputies and 
     employees shall be subject to removal by the clerk.
       ``(4) Pay.--The Tax Court may fix and adjust the 
     compensation for the clerk and other employees of the Tax 
     Court without regard to the provisions of chapter 51, 
     subchapter III of chapter 53, or section 5373 of title 5, 
     United States Code. To the maximum extent feasible, the Tax 
     Court shall compensate employees at rates consistent with 
     those for employees holding comparable positions in the 
     judicial branch.
       ``(5) Programs.--The Tax Court may establish programs for 
     employee evaluations, incentive awards, flexible work 
     schedules, premium pay, and resolution of employee 
     grievances.
       ``(6) Discrimination prohibited.--The Tax Court shall--
       ``(A) prohibit discrimination on the basis of race, color, 
     religion, age, sex, national origin, political affiliation, 
     marital status, or handicapping condition; and
       ``(B) promulgate regulations providing procedures for 
     resolving complaints of discrimination by employees and 
     applicants for employment.
       ``(7) Experts and consultants.--The Tax Court may procure 
     the services of experts and consultants under section 3109 of 
     title 5, United States Code.
       ``(8) Rights to certain appeals reserved.--Notwithstanding 
     any other provision of law, an individual who is an employee 
     of the Tax Court on the day before the effective date of this 
     subsection and who, as of that day, was entitled to--
       ``(A) appeal a reduction in grade or removal to the Merit 
     Systems Protection Board under chapter 43 of title 5, United 
     States Code,
       ``(B) appeal an adverse action to the Merit Systems 
     Protection Board under chapter 75 of title 5, United States 
     Code,
       ``(C) appeal a prohibited personnel practice described 
     under section 2302(b) of title 5, United States Code, to the 
     Merit Systems Protection Board under chapter 77 of that 
     title,
       ``(D) make an allegation of a prohibited personnel practice 
     described under section 2302(b) of title 5, United States 
     Code, with the Office of Special Counsel under chapter 12 of 
     that title for action in accordance with that chapter, or
       ``(E) file an appeal with the Equal Employment Opportunity 
     Commission under part 1614 of title 29 of the Code of Federal 
     Regulations,
     shall be entitled to file such appeal or make such an 
     allegation so long as the individual remains an employee of 
     the Tax Court.
       ``(9) Competitive status.--Notwithstanding any other 
     provision of law, any employee of the Tax Court who has 
     completed at least 1 year of continuous service under a non 
     temporary appointment with the Tax Court acquires a 
     competitive status for appointment to any position in the 
     competitive service for which the employee possesses the 
     required qualifications.
       ``(10) Merit system principles; prohibited personnel 
     practices; and preference eligibles.--Any personnel 
     management system of the Tax Court shall--
       ``(A) include the principles set forth in section 2301(b) 
     of title 5, United States Code;
       ``(B) prohibit personnel practices prohibited under section 
     2302(b) of title 5, United States Code; and
       ``(C) in the case of any individual who would be a 
     preference eligible in the executive branch, the Tax Court 
     will provide preference for that individual in a manner and 
     to an extent consistent with preference accorded to 
     preference eligibles in the executive branch.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date the United States Tax Court 
     adopts a personnel management system after the date of the 
     enactment of this Act.

     SEC. 306. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE 
                   TAXPAYERS.

       (a) In General.--Section 7475(b) (relating to use of fees) 
     is amended by inserting before the period at the end ``and to 
     provide services to pro se taxpayers''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

             Subtitle B--Tax Court Pension and Compensation

     SEC. 311. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO ARE 
                   ASSASSINATED.

       (a) Eligibility in Case of Death by Assassination.--
     Subsection (h) of section 7448 (relating to annuities to 
     surviving spouses and dependent children of judges) is 
     amended to read as follows:
       ``(h) Entitlement to Annuity.--
       ``(1) In general.--
       ``(A) Annuity to surviving spouse.--If a judge described in 
     paragraph (2) is survived by a surviving spouse but not by a 
     dependent child, there shall be paid to such surviving spouse 
     an annuity beginning with the day of the death of the judge 
     or following the surviving spouse's attainment of the age of 
     50 years, whichever is the later, in an amount computed as 
     provided in subsection (m).
       ``(B) Annuity to child.--If such a judge is survived by a 
     surviving spouse and a dependent child or children, there 
     shall be paid to such surviving spouse an immediate annuity 
     in an amount computed as provided in subsection (m), and 
     there shall also be paid to or on behalf of each such child 
     an immediate annuity equal to the lesser of--
       ``(i) 10 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 20 percent of such average annual salary, divided by 
     the number of such children.
       ``(C) Annuity to surviving dependent children.--If such a 
     judge leaves no surviving spouse but leaves a surviving 
     dependent child or children, there shall be paid to or on 
     behalf of each such child an immediate annuity equal to the 
     lesser of--
       ``(i) 20 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 40 percent of such average annual salary, divided by 
     the number of such children.
       ``(2) Covered judges.--Paragraph (1) applies to any judge 
     electing under subsection (b)--
       ``(A) who dies while a judge after having rendered at least 
     5 years of civilian service computed as prescribed in 
     subsection (n), for the last 5 years of which the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made or the 
     salary deductions required by the civil service retirement 
     laws have actually been made, or
       ``(B) who dies by assassination after having rendered less 
     than 5 years of civilian service computed as prescribed in 
     subsection (n) if, for the period of such service, the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made.
       ``(3) Termination of annuity.--
       ``(A) In the case of a surviving spouse.--The annuity 
     payable to a surviving spouse under this subsection shall be 
     terminable upon such surviving spouse's death or such 
     surviving spouse's remarriage before attaining age 55.
       ``(B) In the case of a child.--The annuity payable to a 
     child under this subsection shall be terminable upon (i) the 
     child attaining the age of 18 years, (ii) the child's 
     marriage, or (iii) the child's death, whichever first occurs, 
     except that if such child is incapable of self-support by 
     reason of mental or physical disability the child's annuity 
     shall be terminable only upon death, marriage, or recovery 
     from such disability.
       ``(C) In the case of a dependent child after death of 
     surviving spouse.--In case of the death of a surviving spouse 
     of a judge leaving a dependent child or children of the judge 
     surviving such spouse, the annuity of such child or children 
     shall be recomputed and paid as provided in paragraph (1)(C).
       ``(D) Recomputation.--In any case in which the annuity of a 
     dependent child is terminated under this subsection, the 
     annuities of any remaining dependent child or children, based 
     upon the service of the same judge, shall be recomputed and 
     paid as though the child whose annuity was so terminated had 
     not survived such judge.
       ``(4) Special rule for assassinated judges.--In the case of 
     a survivor or survivors of a judge described in paragraph 
     (2)(B), there shall be deducted from the annuities otherwise 
     payable under this section an amount equal to--
       ``(A) the amount of salary deductions provided for by 
     subsection (c)(1) that would have been made if such 
     deductions had been made for 5 years of civilian service 
     computed as prescribed in subsection (n) before the judge's 
     death, reduced by
       ``(B) the amount of such salary deductions that were 
     actually made before the date of the judge's death.
       (b) Definition of Assassination.--Section 7448(a) (relating 
     to definitions) is amended by adding at the end the following 
     new paragraph:
       ``(8) The terms `assassinated' and `assassination' mean the 
     killing of a judge that is motivated by the performance by 
     that judge of his or her official duties.''.
       (c) Determination of Assassination.--Subsection (i) of 
     section 7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(i) Determinations by Chief Judge.--
       ``(1) Dependency and disability.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassination.--The chief judge shall determine 
     whether the killing of a judge was an assassination, subject 
     to review only by the Tax Court. The head of any Federal 
     agency that investigates the killing of a judge shall provide 
     information to the chief judge that would assist the chief 
     judge in making such a determination.''.
       (d) Computation of Annuities.--Subsection (m) of section 
     7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(m) Computation of Annuities.--
       ``(1) In general.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassinated judges.--In the case of a judge who is 
     assassinated and who has served less than 3 years, the 
     annuity of the surviving spouse of such judge shall be based

[[Page S5219]]

     upon the average annual salary received by such judge for 
     judicial service.''.
       (e) Other Benefits.--Section 7448 is amended by adding at 
     the end the following:
       ``(u) Other Benefits.--In the case of a judge who is 
     assassinated, an annuity shall be paid under this section 
     notwithstanding a survivor's eligibility for or receipt of 
     benefits under chapter 81 of title 5, United States Code, 
     except that the annuity for which a surviving spouse is 
     eligible under this section shall be reduced to the extent 
     that the total benefits paid under this section and chapter 
     81 of that title for any year would exceed the current salary 
     for that year of the office of the judge.''.

     SEC. 312. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL 
                   SURVIVOR ANNUITIES.

       (a) In General.--Subsection (s) of section 7448 (relating 
     to annuities to surviving spouses and dependent children of 
     judges) is amended to read as follows:
       ``(s) Increases in Survivor Annuities.--Each time that an 
     increase is made under section 8340(b) of title 5, United 
     States Code, in annuities payable under subchapter III of 
     chapter 83 of that title, each annuity payable from the 
     survivors annuity fund under this section shall be increased 
     at the same time by the same percentage by which annuities 
     are increased under such section 8340(b).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to increases made under section 
     8340(b) of title 5, United States Code, in annuities payable 
     under subchapter III of chapter 83 of that title, taking 
     effect after the date of the enactment of this Act.

     SEC. 313. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.

       (a) In General.--Section 7447 (relating to retirement of 
     judges) is amended by adding at the end the following new 
     subsection:
       ``(j) Life insurance coverage.--For purposes of chapter 87 
     of title 5, United States Code (relating to life insurance), 
     any individual who is serving as a judge of the Tax Court or 
     who is retired under this section is deemed to be an employee 
     who is continuing in active employment.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a judge of the 
     United States Tax Court or to any retired judge of the United 
     States Tax Court on the date of the enactment of this Act.

     SEC. 314. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT 
                   JUDGES AGE 65 OR OVER.

       Section 7472 (relating to expenditures) is amended by 
     inserting after the first sentence the following new 
     sentence: ``Notwithstanding any other provision of law, the 
     Tax Court is authorized to pay on behalf of its judges, age 
     65 or over, any increase in the cost of Federal Employees' 
     Group Life Insurance imposed after April 24, 1999, including 
     any expenses generated by such payments, as authorized by the 
     chief judge in a manner consistent with such payments 
     authorized by the Judicial Conference of the United States 
     pursuant to section 604(a)(5) of title 28, United States 
     Code.''.

     SEC. 315. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF 
                   JUDGES' ACCRUED ANNUAL LEAVE.

       (a) In General.--Section 7443 (relating to membership of 
     the Tax Court) is amended by adding at the end the following 
     new subsection:
       ``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
     Notwithstanding the provisions of sections 5551 and 6301 of 
     title 5, United States Code, when an individual subject to 
     the leave system provided in chapter 63 of that title is 
     appointed by the President to be a judge of the Tax Court, 
     the individual shall be entitled to receive, upon appointment 
     to the Tax Court, a lump-sum payment from the Tax Court of 
     the accumulated and accrued current annual leave standing to 
     the individual's credit as certified by the agency from which 
     the individual resigned.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any judge of the United States Tax Court who 
     has an outstanding leave balance on the date of the enactment 
     of this Act and to any individual appointed by the President 
     to serve as a judge of the United States Tax Court after such 
     date.

     SEC. 316. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT 
                   SAVINGS PLAN.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(k) Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A judge of the Tax Court may elect to 
     contribute to the Thrift Savings Fund established by section 
     8437 of title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     judge to the Thrift Savings Fund in any pay period shall not 
     exceed the maximum percentage of such judge's basic pay for 
     such period as allowable under section 8440f of title 5, 
     United States Code. Basic pay does not include any retired 
     pay paid pursuant to this section.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for the benefit of a judge under section 8432(c) 
     of title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5 whether 
     or not judge retires.--Section 8433(b) of title 5, United 
     States Code, applies with respect to a judge who makes an 
     election under paragraph (1) and who either--
       ``(i) retires under subsection (b), or
       ``(ii) ceases to serve as a judge of the Tax Court but does 
     not retire under subsection (b).
     Retirement under subsection (b) is a separation from service 
     for purposes of subchapters III and VII of chapter 84 of that 
     title.
       ``(D) Applicability of section 8351(b)(5) of title 5.--The 
     provisions of section 8351(b)(5) of title 5, United States 
     Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(E) Exception.--Notwithstanding subparagraph (C), if any 
     judge retires under this section, or resigns without having 
     met the age and service requirements set forth under 
     subsection (b)(2), and such judge's nonforfeitable account 
     balance is less than an amount that the Executive Director of 
     the Office of Personnel Management prescribes by regulation, 
     the Executive Director shall pay the nonforfeitable account 
     balance to the participant in a single payment.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act, 
     except that United States Tax Court judges may only begin to 
     participate in the Thrift Savings Plan at the next open 
     season beginning after such date.

     SEC. 317. EXEMPTION OF TEACHING COMPENSATION OF RETIRED 
                   JUDGES FROM LIMITATION ON OUTSIDE EARNED 
                   INCOME.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(l) Teaching Compensation of Retired Judges.--For 
     purposes of the limitation under section 501(a) of the Ethics 
     in Government Act of 1978 (5 U.S.C. App.), any compensation 
     for teaching approved under subsection (a)(5) of that section 
     shall not be treated as outside earned income when received 
     by a judge of the Tax Court who has retired under subsection 
     (b) for teaching performed during any calendar year for which 
     such a judge has met the requirements of subsection (c), as 
     certified by the chief judge of the Tax Court.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a retired judge of 
     the United States Tax Court on or after the date of the 
     enactment of this Act.

     SEC. 318. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES OF 
                   THE TAX COURT.

       (a) Title of Special Trial Judge Changed to Magistrate 
     Judge of the Tax Court.--The heading of section 7443A is 
     amended to read as follows:

     ``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''.

       (b) Appointment, Tenure, and Removal.--Subsection (a) of 
     section 7443A is amended to read as follows:
       ``(a) Appointment, Tenure, and Removal.--
       ``(1) Appointment.--The chief judge may, from time to time, 
     appoint and reappoint magistrate judges of the Tax Court for 
     a term of 8 years. The magistrate judges of the Tax Court 
     shall proceed under such rules as may be promulgated by 
     the Tax Court.
       ``(2) Removal.--Removal of a magistrate judge of the Tax 
     Court during the term for which he or she is appointed shall 
     be only for incompetency, misconduct, neglect of duty, or 
     physical or mental disability, but the office of a magistrate 
     judge of the Tax Court shall be terminated if the judges of 
     the Tax Court determine that the services performed by the 
     magistrate judge of the Tax Court are no longer needed. 
     Removal shall not occur unless a majority of all the judges 
     of the Tax Court concur in the order of removal. Before any 
     order of removal shall be entered, a full specification of 
     the charges shall be furnished to the magistrate judge of the 
     Tax Court, and he or she shall be accorded by the judges of 
     the Tax Court an opportunity to be heard on the charges.''.
       (c) Salary.--Section 7443A(d) (relating to salary) is 
     amended by striking ``90'' and inserting ``92''.
       (d) Exemption From Federal Leave Provisions.--Section 7443A 
     is amended by adding at the end the following new subsection:
       ``(f) Exemption From Federal Leave Provisions.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     appointed under this section shall be exempt from the 
     provisions of subchapter I of chapter 63 of title 5, United 
     States Code.
       ``(2) Treatment of unused leave.--
       ``(A) After service as magistrate judge.--If an individual 
     who is exempted under paragraph (1) from the subchapter 
     referred to in such paragraph was previously subject to such 
     subchapter and, without a break in service, again becomes 
     subject to such subchapter on completion of the individual's 
     service as a magistrate judge, the unused annual leave and 
     sick leave standing to the individual's credit when such 
     individual was exempted from this subchapter is

[[Page S5220]]

     deemed to have remained to the individual's credit.
       ``(B) Computation of annuity.--In computing an annuity 
     under section 8339 of title 5, United States Code, the total 
     service of an individual specified in subparagraph (A) who 
     retires on an immediate annuity or dies leaving a survivor or 
     survivors entitled to an annuity includes, without regard to 
     the limitations imposed by subsection (f) of such section 
     8339, the days of unused sick leave standing to the 
     individual's credit when such individual was exempted from 
     subchapter I of chapter 63 of title 5, United States Code, 
     except that these days will not be counted in determining 
     average pay or annuity eligibility.
       ``(C) Lump sum payment.--Any accumulated and current 
     accrued annual leave or vacation balances credited to a 
     magistrate judge as of the date of the enactment of this 
     subsection shall be paid in a lump sum at the time of 
     separation from service pursuant to the provisions and 
     restrictions set forth in section 5551 of title 5, United 
     States Code, and related provisions referred to in such 
     section.''.
       (e) Conforming Amendments.--
       (1) The heading of subsection (b) of section 7443A is 
     amended by striking ``Special Trial Judges'' and inserting 
     ``Magistrate Judges of the Tax Court''.
       (2) Section 7443A(b) is amended by striking ``special trial 
     judges of the court'' and inserting ``magistrate judges of 
     the Tax Court''.
       (3) Subsections (c) and (d) of section 7443A are amended by 
     striking ``special trial judge'' and inserting ``magistrate 
     judge of the Tax Court'' each place it appears.
       (4) Section 7443A(e) is amended by striking ``special trial 
     judges'' and inserting ``magistrate judges of the Tax 
     Court''.
       (5) Section 7456(a) is amended by striking ``special trial 
     judge'' each place it appears and inserting ``magistrate 
     judge''.
       (6) Subsection (c) of section 7471 is amended--
       (A) by striking the subsection heading and inserting 
     ``Magistrate Judges of the Tax Court.--'', and
       (B) by striking ``special trial judges'' and inserting 
     ``magistrate judges''.

     SEC. 319. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT 
                   CHILDREN OF MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Definitions.--Section 7448(a) (relating to 
     definitions), as amended by this Act, is amended by 
     redesignating paragraphs (5), (6), (7), and (8) as paragraphs 
     (7), (8), (9), and (10), respectively, and by inserting after 
     paragraph (4) the following new paragraphs:
       ``(5) The term `magistrate judge' means a judicial officer 
     appointed pursuant to section 7443A, including any individual 
     receiving an annuity under section 7443B, or chapters 83 or 
     84, as the case may be, of title 5, United States Code, 
     whether or not performing judicial duties under section 
     7443C.
       ``(6) The term `magistrate judge's salary' means the salary 
     of a magistrate judge received under section 7443A(d), any 
     amount received as an annuity under section 7443B, or 
     chapters 83 or 84, as the case may be, of title 5, United 
     States Code, and compensation received under section 
     7443C.''.
       (b) Election.--Subsection (b) of section 7448 (relating to 
     annuities to surviving spouses and dependent children of 
     judges) is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(b) Election.--
       ``(1) Judges.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Magistrate judges.--Any magistrate judge may by 
     written election filed with the chief judge bring himself or 
     herself within the purview of this section. Such election 
     shall be filed not later than the later of 6 months after--
       ``(A) 6 months after the date of the enactment of this 
     paragraph,
       ``(B) the date the judge takes office, or
       ``(C) the date the judge marries.''.
       (c) Conforming Amendments.--
       (1) The heading of section 7448 is amended by inserting 
     ``AND MAGISTRATE JUDGES'' after ``JUDGES''.
       (2) The item relating to section 7448 in the table of 
     sections for part I of subchapter C of chapter 76 is amended 
     by inserting ``and magistrate judges'' after ``judges''.
       (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
     and (u) of section 7448, as amended by this Act, are each 
     amended--
       (A) by inserting ``or magistrate judge'' after ``judge'' 
     each place it appears other than in the phrase ``chief 
     judge'', and
       (B) by inserting ``or magistrate judge's'' after 
     ``judge's'' each place it appears.
       (4) Section 7448(c) is amended--
       (A) in paragraph (1), by striking ``Tax Court judges'' and 
     inserting ``Tax Court judicial officers'',
       (B) in paragraph (2)--
       (i) in subparagraph (A), by inserting ``and section 
     7443A(d)'' after ``(a)(4)'', and
       (ii) in subparagraph (B), by striking ``subsection (a)(4)'' 
     and inserting ``subsections (a)(4) and (a)(6)''.
       (5) Section 7448(g) is amended by inserting ``or section 
     7443B'' after ``section 7447'' each place it appears, and by 
     inserting ``or an annuity'' after ``retired pay''.
       (6) Section 7448(j)(1) is amended--
       (A) in subparagraph (A), by striking ``service or retired'' 
     and inserting ``service, retired'', and by inserting ``, or 
     receiving any annuity under section 7443B or chapters 83 or 
     84 of title 5, United States Code,'' after ``section 7447'', 
     and
       (B) in the last sentence, by striking ``subsections (a)(6) 
     and (7)'' and inserting ``paragraphs (8) and (9) of 
     subsection (a)''.
       (7) Section 7448(m)(1), as amended by this Act, is 
     amended--
       (A) by inserting ``or any annuity under section 7443B or 
     chapters 83 or 84 of title 5, United States Code'' after 
     ``7447(d)'', and
       (B) by inserting ``or 7443B(m)(1)(B) after ``7447(f)(4)''.
       (8) Section 7448(n) is amended by inserting ``his years of 
     service pursuant to any appointment under section 7443A,'' 
     after ``of the Tax Court,''.
       (9) Section 3121(b)(5)(E) is amended by inserting ``or 
     magistrate judge'' before ``of the United States Tax Court''.
       (10) Section 210(a)(5)(E) of the Social Security Act is 
     amended by inserting ``or magistrate judge'' before ``of the 
     United States Tax Court''.

     SEC. 320. RETIREMENT AND ANNUITY PROGRAM.

       (a) Retirement and Annuity Program.--Part I of subchapter C 
     of chapter 76 is amended by inserting after section 7443A the 
     following new section:

     ``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX 
                   COURT.

       ``(a) Retirement Based on Years of Service.--A magistrate 
     judge of the Tax Court to whom this section applies and who 
     retires from office after attaining the age of 65 years and 
     serving at least 14 years, whether continuously or otherwise, 
     as such magistrate judge shall, subject to subsection (f), be 
     entitled to receive, during the remainder of the magistrate 
     judge's lifetime, an annuity equal to the salary being 
     received at the time the magistrate judge leaves office.
       ``(b) Retirement Upon Failure of Reappointment.--A 
     magistrate judge of the Tax Court to whom this section 
     applies who is not reappointed following the expiration of 
     the term of office of such magistrate judge, and who retires 
     upon the completion of the term shall, subject to subsection 
     (f), be entitled to receive, upon attaining the age of 65 
     years and during the remainder of such magistrate judge's 
     lifetime, an annuity equal to that portion of the salary 
     being received at the time the magistrate judge leaves office 
     which the aggregate number of years of service, not to exceed 
     14, bears to 14, if--
       ``(1) such magistrate judge has served at least 1 full term 
     as a magistrate judge, and
       ``(2) not earlier than 9 months before the date on which 
     the term of office of such magistrate judge expires, and not 
     later than 6 months before such date, such magistrate judge 
     notified the chief judge of the Tax Court in writing that 
     such magistrate judge was willing to accept reappointment to 
     the position in which such magistrate judge was serving.
       ``(c) Service of at Least 8 Years.--A magistrate judge of 
     the Tax Court to whom this section applies and who retires 
     after serving at least 8 years, whether continuously or 
     otherwise, as such a magistrate judge shall, subject to 
     subsection (f), be entitled to receive, upon attaining the 
     age of 65 years and during the remainder of the magistrate 
     judge's lifetime, an annuity equal to that portion of the 
     salary being received at the time the magistrate judge leaves 
     office which the aggregate number of years of service, not to 
     exceed 14, bears to 14. Such annuity shall be reduced by \1/
     6\ of 1 percent for each full month such magistrate judge was 
     under the age of 65 at the time the magistrate judge left 
     office, except that such reduction shall not exceed 20 
     percent.
       ``(d) Retirement for Disability.--A magistrate judge of the 
     Tax Court to whom this section applies, who has served at 
     least 5 years, whether continuously or otherwise, as such a 
     magistrate judge, and who retires or is removed from office 
     upon the sole ground of mental or physical disability shall, 
     subject to subsection (f), be entitled to receive, during the 
     remainder of the magistrate judge's lifetime, an annuity 
     equal to 40 percent of the salary being received at the time 
     of retirement or removal or, in the case of a magistrate 
     judge who has served for at least 10 years, an amount equal 
     to that proportion of the salary being received at the time 
     of retirement or removal which the aggregate number of years 
     of service, not to exceed 14, bears to 14.
       ``(e) Cost-of-Living Adjustments.--A magistrate judge of 
     the Tax Court who is entitled to an annuity under this 
     section is also entitled to a cost-of-living adjustment in 
     such annuity, calculated and payable in the same manner as 
     adjustments under section 8340(b) of title 5, United States 
     Code, except that any such annuity, as increased under this 
     subsection, may not exceed the salary then payable for the 
     position from which the magistrate judge retired or was 
     removed.
       ``(f) Election; Annuity in Lieu of Other Annuities.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     shall be entitled to an annuity under this section if the 
     magistrate judge elects an annuity under this section by 
     notifying the chief judge of the Tax Court not later than the 
     later of--
       ``(A) 5 years after the magistrate judge of the Tax Court 
     begins judicial service, or
       ``(B) 5 years after the date of the enactment of this 
     subsection.
     Such notice shall be given in accordance with procedures 
     prescribed by the Tax Court.

[[Page S5221]]

       ``(2) Annuity in lieu of other annuity.--A magistrate judge 
     who elects to receive an annuity under this section shall not 
     be entitled to receive--
       ``(A) any annuity to which such magistrate judge would 
     otherwise have been entitled under subchapter III of chapter 
     83, or under chapter 84 (except for subchapters III and VII), 
     of title 5, United States Code, for service performed as a 
     magistrate or otherwise,
       ``(B) an annuity or salary in senior status or retirement 
     under section 371 or 372 of title 28, United States Code,
       ``(C) retired pay under section 7447, or
       ``(D) retired pay under section 7296 of title 38, United 
     States Code.
       ``(3) Coordination with title 5.--A magistrate judge of the 
     Tax Court who elects to receive an annuity under this 
     section--
       ``(A) shall not be subject to deductions and contributions 
     otherwise required by section 8334(a) of title 5, United 
     States Code,
       ``(B) shall be excluded from the operation of chapter 84 
     (other than subchapters III and VII) of such title 5, and
       ``(C) is entitled to a lump-sum credit under section 
     8342(a) or 8424 of such title 5, as the case may be.
       ``(g) Calculation of Service.--For purposes of calculating 
     an annuity under this section--
       ``(1) service as a magistrate judge of the Tax Court to 
     whom this section applies may be credited, and
       ``(2) each month of service shall be credited as \1/12\ of 
     a year, and the fractional part of any month shall not be 
     credited.
       ``(h) Covered Positions and Service.--This section applies 
     to any magistrate judge of the Tax Court or special trial 
     judge of the Tax Court appointed under this subchapter, but 
     only with respect to service as such a magistrate judge or 
     special trial judge after a date not earlier than 9\1/2\ 
     years before the date of the enactment of this subsection.
       ``(i) Payments Pursuant to Court Order.--
       ``(1) In general.--Payments under this section which would 
     otherwise be made to a magistrate judge of the Tax Court 
     based upon his or her service shall be paid (in whole or in 
     part) by the chief judge of the Tax Court to another person 
     if and to the extent expressly provided for in the terms of 
     any court decree of divorce, annulment, or legal separation, 
     or the terms of any court order or court-approved property 
     settlement agreement incident to any court decree of divorce, 
     annulment, or legal separation. Any payment under this 
     paragraph to a person bars recovery by any other person.
       ``(2) Requirements for payment.--Paragraph (1) shall apply 
     only to payments made by the chief judge of the Tax Court 
     after the date of receipt by the chief judge of written 
     notice of such decree, order, or agreement, and such 
     additional information as the chief judge may prescribe.
       ``(3) Court defined.--For purposes of this subsection, the 
     term `court' means any court of any State, the District of 
     Columbia, the Commonwealth of Puerto Rico, Guam, the Northern 
     Mariana Islands, or the Virgin Islands, and any Indian tribal 
     court or courts of Indian offense.
       ``(j) Deductions, Contributions, and Deposits.--
       ``(1) Deductions.--Beginning with the next pay period after 
     the chief judge of the Tax Court receives a notice under 
     subsection (f) that a magistrate judge of the Tax Court has 
     elected an annuity under this section, the chief judge shall 
     deduct and withhold 1 percent of the salary of such 
     magistrate judge. Amounts shall be so deducted and withheld 
     in a manner determined by the chief judge. Amounts deducted 
     and withheld under this subsection shall be deposited in the 
     Treasury of the United States to the credit of the Tax Court 
     Judicial Officers' Retirement Fund. Deductions under this 
     subsection from the salary of a magistrate judge shall 
     terminate upon the retirement of the magistrate judge or upon 
     completion of 14 years of service for which contributions 
     under this section have been made, whether continuously or 
     otherwise, as calculated under subsection (g), whichever 
     occurs first.
       ``(2) Consent to deductions; discharge of claims.--Each 
     magistrate judge of the Tax Court who makes an election under 
     subsection (f) shall be deemed to consent and agree to the 
     deductions from salary which are made under paragraph (1). 
     Payment of such salary less such deductions (and any 
     deductions made under section 7448) is a full and complete 
     discharge and acquittance of all claims and demands for all 
     services rendered by such magistrate judge during the period 
     covered by such payment, except the right to those benefits 
     to which the magistrate judge is entitled under this section 
     (and section 7448).
       ``(k) Deposits for Prior Service.--Each magistrate judge of 
     the Tax Court who makes an election under subsection (f) may 
     deposit, for service performed before such election for which 
     contributions may be made under this section, an amount equal 
     to 1 percent of the salary received for that service. Credit 
     for any period covered by that service may not be allowed for 
     purposes of an annuity under this section until a deposit 
     under this subsection has been made for that period.
       ``(l) Individual Retirement Records.--The amounts deducted 
     and withheld under subsection (j), and the amounts deposited 
     under subsection (k), shall be credited to individual 
     accounts in the name of each magistrate judge of the Tax 
     Court from whom such amounts are received, for credit to the 
     Tax Court Judicial Officers' Retirement Fund.
       ``(m) Annuities Affected in Certain Cases.--
       ``(1) 1-year forfeiture for failure to perform judicial 
     duties.--Subject to paragraph (3), any magistrate judge of 
     the Tax Court who retires under this section and who fails to 
     perform judicial duties required of such individual by 
     section 7443C shall forfeit all rights to an annuity under 
     this section for a 1-year period which begins on the 1st day 
     on which such individual fails to perform such duties.
       ``(2) Permanent forfeiture of retired pay where certain 
     non-government services performed.--Subject to paragraph (3), 
     any magistrate judge of the Tax Court who retires under this 
     section and who thereafter performs (or supervises or directs 
     the performance of) legal or accounting services in the field 
     of Federal taxation for the individual's client, the 
     individual's employer, or any of such employer's clients, 
     shall forfeit all rights to an annuity under this section for 
     all periods beginning on or after the first day on which the 
     individual performs (or supervises or directs the performance 
     of) such services. The preceding sentence shall not apply to 
     any civil office or employment under the Government of the 
     United States.
       ``(3) Forfeitures not to apply where individual elects to 
     freeze amount of annuity.--
       ``(A) In general.--If a magistrate judge of the Tax Court 
     makes an election under this paragraph--
       ``(i) paragraphs (1) and (2) (and section 7443C) shall not 
     apply to such magistrate judge beginning on the date such 
     election takes effect, and
       ``(ii) the annuity payable under this section to such 
     magistrate judge, for periods beginning on or after the date 
     such election takes effect, shall be equal to the annuity to 
     which such magistrate judge is entitled on the day before 
     such effective date.
       ``(B) Election requirements.--An election under 
     subparagraph (A)--
       ``(i) may be made by a magistrate judge of the Tax Court 
     eligible for retirement under this section, and
       ``(ii) shall be filed with the chief judge of the Tax 
     Court.

     Such an election, once it takes effect, shall be irrevocable.
       ``(C) Effective date of election.--Any election under 
     subparagraph (A) shall take effect on the first day of the 
     first month following the month in which the election is 
     made.
       ``(4) Accepting other employment.--Any magistrate judge of 
     the Tax Court who retires under this section and thereafter 
     accepts compensation for civil office or employment under the 
     United States Government (other than for the performance of 
     functions as a magistrate judge of the Tax Court under 
     section 7443C) shall forfeit all rights to an annuity under 
     this section for the period for which such compensation is 
     received. For purposes of this paragraph, the term 
     `compensation' includes retired pay or salary received in 
     retired status.
       ``(n) Lump-Sum Payments.--
       ``(1) Eligibility.--
       ``(A) In general.--Subject to paragraph (2), an individual 
     who serves as a magistrate judge of the Tax Court and--
       ``(i) who leaves office and is not reappointed as a 
     magistrate judge of the Tax Court for at least 31 consecutive 
     days,
       ``(ii) who files an application with the chief judge of the 
     Tax Court for payment of a lump-sum credit,
       ``(iii) is not serving as a magistrate judge of the Tax 
     Court at the time of filing of the application, and
       ``(iv) will not become eligible to receive an annuity under 
     this section within 31 days after filing the application,

     is entitled to be paid the lump-sum credit. Payment of the 
     lump-sum credit voids all rights to an annuity under this 
     section based on the service on which the lump-sum credit is 
     based, until that individual resumes office as a magistrate 
     judge of the Tax Court.
       ``(B) Payment to survivors.--Lump-sum benefits authorized 
     by subparagraphs (C), (D), and (E) of this paragraph shall be 
     paid to the person or persons surviving the magistrate judge 
     of the Tax Court and alive on the date title to the payment 
     arises, in the order of precedence set forth in subsection 
     (o) of section 376 of title 28, United States Code, and in 
     accordance with the last 2 sentences of paragraph (1) of that 
     subsection. For purposes of the preceding sentence, the term 
     `judicial official' as used in subsection (o) of such section 
     376 shall be deemed to mean `magistrate judge of the Tax 
     Court' and the terms `Administrative Office of the United 
     States Courts' and `Director of the Administrative Office of 
     the United States Courts' shall be deemed to mean `chief 
     judge of the Tax Court'.
       ``(C) Payment upon death of judge before receipt of 
     annuity.--If a magistrate judge of the Tax Court dies before 
     receiving an annuity under this section, the lump-sum credit 
     shall be paid.
       ``(D) Payment of annuity remainder.--If all annuity rights 
     under this section based on the service of a deceased 
     magistrate judge of the Tax Court terminate before the total 
     annuity paid equals the lump-sum credit, the difference shall 
     be paid.
       ``(E) Payment upon death of judge during receipt of 
     annuity.--If a magistrate judge of the Tax Court who is 
     receiving an annuity under this section dies, any accrued 
     annuity benefits remaining unpaid shall be paid.

[[Page S5222]]

       ``(F) Payment upon termination.--Any accrued annuity 
     benefits remaining unpaid on the termination, except by 
     death, of the annuity of a magistrate judge of the Tax Court 
     shall be paid to that individual.
       ``(G) Payment upon accepting other employment.--Subject to 
     paragraph (2), a magistrate judge of the Tax Court who 
     forfeits rights to an annuity under subsection (m)(4) before 
     the total annuity paid equals the lump-sum credit shall be 
     entitled to be paid the difference if the magistrate judge of 
     the Tax Court files an application with the chief judge of 
     the Tax Court for payment of that difference. A payment under 
     this subparagraph voids all rights to an annuity on which the 
     payment is based.
       ``(2) Spouses and former spouses.--
       ``(A) In general.--Payment of the lump-sum credit under 
     paragraph (1)(A) or a payment under paragraph (1)(G)--
       ``(i) may be made only if any current spouse and any former 
     spouse of the magistrate judge of the Tax Court are notified 
     of the magistrate judge's application, and
       ``(ii) shall be subject to the terms of a court decree of 
     divorce, annulment, or legal separation, or any court or 
     court approved property settlement agreement incident to such 
     decree, if--

       ``(I) the decree, order, or agreement expressly relates to 
     any portion of the lump-sum credit or other payment involved, 
     and
       ``(II) payment of the lump-sum credit or other payment 
     would extinguish entitlement of the magistrate judge's spouse 
     or former spouse to any portion of an annuity under 
     subsection (i).

       ``(B) Notification.--Notification of a spouse or former 
     spouse under this paragraph shall be made in accordance with 
     such procedures as the chief judge of the Tax Court shall 
     prescribe. The chief judge may provide under such procedures 
     that subparagraph (A)(i) may be waived with respect to a 
     spouse or former spouse if the magistrate judge establishes 
     to the satisfaction of the chief judge that the whereabouts 
     of such spouse or former spouse cannot be determined.
       ``(C) Resolution of 2 or more orders.--The chief judge 
     shall prescribe procedures under which this paragraph shall 
     be applied in any case in which the chief judge receives 2 or 
     more orders or decrees described in subparagraph (A).
       ``(3) Definition.--For purposes of this subsection, the 
     term `lump-sum credit' means the unrefunded amount consisting 
     of--
       ``(A) retirement deductions made under this section from 
     the salary of a magistrate judge of the Tax Court,
       ``(B) amounts deposited under subsection (k) by a 
     magistrate judge of the Tax Court covering earlier service, 
     and
       ``(C) interest on the deductions and deposits which, for 
     any calendar year, shall be equal to the overall average 
     yield to the Tax Court Judicial Officers' Retirement Fund 
     during the preceding fiscal year from all obligations 
     purchased by the Secretary during such fiscal year under 
     subsection (o); but does not include interest--
       ``(i) if the service covered thereby aggregates 1 year or 
     less, or
       ``(ii) for the fractional part of a month in the total 
     service.
       ``(o) Tax Court Judicial Officers' Retirement Fund.--
       ``(1) Establishment.--There is established in the Treasury 
     a fund which shall be known as the `Tax Court Judicial 
     Officers' Retirement Fund'. Amounts in the Fund are 
     authorized to be appropriated for the payment of annuities, 
     refunds, and other payments under this section.
       ``(2) Investment of Fund.--The Secretary shall invest, in 
     interest bearing securities of the United States, such 
     currently available portions of the Tax Court Judicial 
     Officers' Retirement Fund as are not immediately required for 
     payments from the Fund. The income derived from these 
     investments constitutes a part of the Fund.
       ``(3) Unfunded liability.--
       ``(A) In general.--There are authorized to be appropriated 
     to the Tax Court Judicial Officers' Retirement Fund amounts 
     required to reduce to zero the unfunded liability of the 
     Fund.
       ``(B) Unfunded liability.--For purposes of subparagraph 
     (A), the term `unfunded liability' means the estimated 
     excess, determined on an annual basis in accordance with the 
     provisions of section 9503 of title 31, United States Code, 
     of the present value of all benefits payable from the Tax 
     Court Judicial Officers' Retirement Fund over the sum of--
       ``(i) the present value of deductions to be withheld under 
     this section from the future basic pay of magistrate judges 
     of the Tax Court, plus
       ``(ii) the balance in the Fund as of the date the unfunded 
     liability is determined.
       ``(p) Participation in Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A magistrate judge of the Tax Court who 
     elects to receive an annuity under this section or under 
     section 321 of the Tax Administration Good Government Act may 
     elect to contribute an amount of such individual's basic pay 
     to the Thrift Savings Fund established by section 8437 of 
     title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a magistrate judge 
     who makes an election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     magistrate judge to the Thrift Savings Fund in any pay period 
     shall not exceed the maximum percentage of such judge's basic 
     pay for such pay period as allowable under section 8440f of 
     title 5, United States Code.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for the benefit of a magistrate judge under 
     section 8432(c) of title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5.--Section 
     8433(b) of title 5, United States Code, applies with respect 
     to a magistrate judge who makes an election under paragraph 
     (1) and--
       ``(i) who retires entitled to an immediate annuity under 
     this section (including a disability annuity under subsection 
     (d) of this section) or section 321 of the Tax Administration 
     Good Government Act,
       ``(ii) who retires before attaining age 65 but is entitled, 
     upon attaining age 65, to an annuity under this section or 
     section 321 of the Tax Administration Good Government Act, or
       ``(iii) who retires before becoming entitled to an 
     immediate annuity, or an annuity upon attaining age 65, under 
     this section or section 321 of the Tax Administration Good 
     Government Act.
       ``(D) Separation from service.--With respect to a 
     magistrate judge to whom this subsection applies, retirement 
     under this section or section 321 of the Tax Administration 
     Good Government Act is a separation from service for purposes 
     of subchapters III and VII of chapter 84 of title 5, United 
     States Code.
       ``(4) Definitions.--For purposes of this subsection, the 
     terms `retirement' and `retire' include removal from office 
     under section 7443A(a)(2) on the sole ground of mental or 
     physical disability.
       ``(5) Offset.--In the case of a magistrate judge who 
     receives a distribution from the Thrift Savings Fund and who 
     later receives an annuity under this section, that annuity 
     shall be offset by an amount equal to the amount which 
     represents the Government's contribution to that person's 
     Thrift Savings Account, without regard to earnings 
     attributable to that amount. Where such an offset would 
     exceed 50 percent of the annuity to be received in the first 
     year, the offset may be divided equally over the first 2 
     years in which that person receives the annuity.
       ``(6) Exception.--Notwithstanding clauses (i) and (ii) of 
     paragraph (3)(C), if any magistrate judge retires under 
     circumstances making such magistrate judge eligible to make 
     an election under subsection (b) of section 8433 of title 5, 
     United States Code, and such magistrate judge's 
     nonforfeitable account balance is less than an amount that 
     the Executive Director of the Office of Personnel Management 
     prescribes by regulation, the Executive Director shall pay 
     the nonforfeitable account balance to the participant in a 
     single payment.''.
       (b) Conforming Amendment.--The table of section for part I 
     of subchapter C of chapter 76 is amended by inserting after 
     the item relating to section 7443A the following new item:

``Sec. 7443B. Retirement for magistrate judges of the Tax Court.''.

     SEC. 321. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Retirement Annuity Under Title 5 and Section 7443B of 
     the Internal Revenue Code of 1986.--A magistrate judge of the 
     United States Tax Court in active service on the date of the 
     enactment of this Act shall, subject to subsection (b), be 
     entitled, in lieu of the annuity otherwise provided under the 
     amendments made by this title, to--
       (1) an annuity under subchapter III of chapter 83, or under 
     chapter 84 (except for subchapters III and VII), of title 5, 
     United States Code, as the case may be, for creditable 
     service before the date on which service would begin to be 
     credited for purposes of paragraph (2), and
       (2) an annuity calculated under subsection (b) or (c) and 
     subsection (g) of section 7443B of the Internal Revenue Code 
     of 1986, as added by this Act, for any service as a 
     magistrate judge of the United States Tax Court or special 
     trial judge of the United States Tax Court but only with 
     respect to service as such a magistrate judge or special 
     trial judge after a date not earlier than 9\1/2\ years prior 
     to the date of the enactment of this Act (as specified in the 
     election pursuant to subsection (b)) for which deductions and 
     deposits are made under subsections (j) and (k) of such 
     section 7443B, as applicable, without regard to the minimum 
     number of years of service as such a magistrate judge of the 
     United States Tax Court, except that--
       (A) in the case of a magistrate judge who retired with less 
     than 8 years of service, the annuity under subsection (c) of 
     such section 7443B shall be equal to that proportion of the 
     salary being received at the time the magistrate judge leaves 
     office which the years of service bears to 14, subject to a 
     reduction in accordance with subsection (c) of such section 
     7443B if the magistrate judge is under age 65 at the time he 
     or she leaves office, and
       (B) the aggregate amount of the annuity initially payable 
     on retirement under this subsection may not exceed the rate 
     of pay

[[Page S5223]]

     for the magistrate judge which is in effect on the day before 
     the retirement becomes effective.
       (b) Filing of Notice of Election.--A magistrate judge of 
     the United States Tax Court shall be entitled to an annuity 
     under this section only if the magistrate judge files a 
     notice of that election with the chief judge of the United 
     States Tax Court specifying the date on which service would 
     begin to be credited under section 7443B of the Internal 
     Revenue Code of 1986, as added by this Act, in lieu of 
     chapter 83 or chapter 84 of title 5, United States Code. Such 
     notice shall be filed in accordance with such procedures as 
     the chief judge of the United States Tax Court shall 
     prescribe.
       (c) Lump-Sum Credit Under Title 5.--A magistrate judge of 
     the United States Tax Court who makes an election under 
     subsection (b) shall be entitled to a lump-sum credit under 
     section 8342 or 8424 of title 5, United States Code, as the 
     case may be, for any service which is covered under section 
     7443B of the Internal Revenue Code of 1986, as added by this 
     Act, pursuant to that election, and with respect to which any 
     contributions were made by the magistrate judge under the 
     applicable provisions of title 5, United States Code.
       (d) Recall.--With respect to any magistrate judge of the 
     United States Tax Court receiving an annuity under this 
     section who is recalled to serve under section 7443C of the 
     Internal Revenue Code of 1986, as added by this Act--
       (1) the amount of compensation which such recalled 
     magistrate judge receives under such section 7443C shall be 
     calculated on the basis of the annuity received under this 
     section, and
       (2) such recalled magistrate judge of the United States Tax 
     Court may serve as a reemployed annuitant to the extent 
     otherwise permitted under title 5, United States Code.

     Section 7443B(m)(4) of the Internal Revenue Code of 1986, as 
     added by this Act, shall not apply with respect to service as 
     a reemployed annuitant described in paragraph (2).

     SEC. 322. PROVISIONS FOR RECALL.

       (a) In General.--Part I of subchapter C of chapter 76, as 
     amended by this Act, is amended by inserting after section 
     7443B the following new section:

     ``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.

       ``(a) Recalling of Retired Magistrate Judges.--Any 
     individual who has retired pursuant to section 7443B or the 
     applicable provisions of title 5, United States Code, upon 
     reaching the age and service requirements established 
     therein, may at or after retirement be called upon by the 
     chief judge of the Tax Court to perform such judicial duties 
     with the Tax Court as may be requested of such individual for 
     any period or periods specified by the chief judge; except 
     that in the case of any such individual--
       ``(1) the aggregate of such periods in any 1 calendar year 
     shall not (without such individual's consent) exceed 90 
     calendar days, and
       ``(2) such individual shall be relieved of performing such 
     duties during any period in which illness or disability 
     precludes the performance of such duties.

     Any act, or failure to act, by an individual performing 
     judicial duties pursuant to this subsection shall have the 
     same force and effect as if it were the act (or failure to 
     act) of a magistrate judge of the Tax Court.
       ``(b) Compensation.--For the year in which a period of 
     recall occurs, the magistrate judge shall receive, in 
     addition to the annuity provided under the provisions of 
     section 7443B or under the applicable provisions of title 5, 
     United States Code, an amount equal to the difference between 
     that annuity and the current salary of the office to which 
     the magistrate judge is recalled. The annuity of the 
     magistrate judge who completes that period of service, who is 
     not recalled in a subsequent year, and who retired under 
     section 7443B, shall be equal to the salary in effect at the 
     end of the year in which the period of recall occurred for 
     the office from which such individual retired.
       ``(c) Rulemaking Authority.--The provisions of this section 
     may be implemented under such rules as may be promulgated by 
     the Tax Court.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter C of chapter 76, as amended by this Act, is 
     amended by inserting after the item relating to section 7443B 
     the following new item:

``Sec. 7443C. Recall of magistrate judges of the Tax Court.''.

     SEC. 323. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     subtitle shall take effect on the date of the enactment of 
     this Act.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

     SEC. 401. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

       Subsection (i) of section 7611 (relating to section not to 
     apply to criminal investigations, etc.) is amended by 
     striking ``or'' at the end of paragraph (4), by striking the 
     period at the end of paragraph (5) and inserting ``, or'', 
     and by inserting after paragraph (5) the following:
       ``(6) information provided by the Secretary related to the 
     standards for exemption from tax under this title and the 
     requirements under this title relating to unrelated business 
     taxable income.''.

     SEC. 402. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN 
                   DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL 
                   REQUEST.

       (a) In General.--Paragraph (8) of section 6103(e) (relating 
     to disclosure of collection activities with respect to joint 
     return) is amended by striking ``in writing'' the first place 
     it appears.
       (b) Elimination of Reporting Requirement.--Section 
     7803(d)(1) (relating to annual reporting) is amended by 
     striking subparagraph (B) and by redesignating subparagraphs 
     (C), (D), (E), (F), and (G) as subparagraphs (B), (C), (D), 
     (E), and (F), respectively.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to requests made after the date of the enactment 
     of this Act.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to reports made after the date of the enactment 
     of this Act.

     SEC. 403. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION 
                   ON SOLE BASIS OF REPRESENTATION OF TAXPAYERS.

       (a) In General.--Paragraph (1) of section 6103(h) (relating 
     to disclosure to certain Federal officers and employees for 
     purposes of tax administration, etc.) is amended--
       (1) by striking ``treasury.--Returns and return 
     information'' and inserting ``treasury.--
       ``(A) In general.--Returns and return information'', and
       (2) by adding at the end the following new subparagraph:
       ``(B) Taxpayer representatives.--Notwithstanding 
     subparagraph (A), the return or return information of the 
     representative of a taxpayer whose return is being examined 
     by an officer or employee of the Department of the Treasury 
     shall not be open to inspection by such officer or employee 
     on the sole basis of the representative's relationship to the 
     taxpayer unless a supervisor of such officer or employee has 
     approved the inspection of the return or return information 
     of such representative on a basis other than by reason of 
     such relationship.''.
       (b) 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.

     SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER IDENTIFYING 
                   NUMBER WITH RESPECT TO DISCLOSURE OF ACCEPTED 
                   OFFERS-IN-COMPROMISE.

       (a) In General.--Paragraph (1) of section 6103(k) (relating 
     to disclosure of certain returns and return information for 
     tax administrative purposes) is amended by inserting ``(other 
     than the taxpayer's identifying number)'' after ``Return 
     information''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to disclosures made after the date of the 
     enactment of this Act.

     SEC. 405. COMPLIANCE BY CONTRACTORS AND OTHER AGENTS WITH 
                   CONFIDENTIALITY SAFEGUARDS.

       (a) In General.--Section 6103(p) (relating to State law 
     requirements) is amended by adding at the end the following 
     new paragraph:
       ``(9) Disclosure to contractors and other agents.--
     Notwithstanding any other provision of this section, no 
     return or return information shall be disclosed to any 
     contractor or other agent of a Federal, State, or local 
     agency unless such agency, to the satisfaction of the 
     Secretary--
       ``(A) has requirements in effect which require each such 
     contractor or other agent which would have access to returns 
     or return information to provide safeguards (within the 
     meaning of paragraph (4)) to protect the confidentiality of 
     such returns or return information,
       ``(B) agrees to conduct an on-site review every 3 years 
     (mid-point review in the case of contracts or agreements of 
     less than 1 year in duration) of each contractor or other 
     agent to determine compliance with such requirements,
       ``(C) submits the findings of the most recent review 
     conducted under subparagraph (B) to the Secretary as part of 
     the report required by paragraph (4)(E), and
       ``(D) certifies to the Secretary for the most recent annual 
     period that such contractor or other agent is in compliance 
     with all such requirements.

     The certification required by subparagraph (D) shall include 
     the name and address of each contractor and other agent, a 
     description of the contract or agreement with such contractor 
     or other agent, and the duration of such contract or 
     agreement. The requirements of this paragraph shall not apply 
     to disclosures pursuant to subsection (n) for purposes of 
     Federal tax administration.''.
       (b) Conforming Amendment.--Subparagraph (B) of section 
     6103(p)(8) is amended by inserting ``or paragraph (9)'' after 
     ``subparagraph (A)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to disclosures made after December 31, 2003.
       (2) Certifications.--The first certification under section 
     6103(p)(9)(D) of the Internal Revenue Code of 1986, as added 
     by subsection (a), shall be made with respect to calendar 
     year 2004.

     SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO 
                   DISCLOSURE.

       (a) In General.--Subsection (c) of section 6103 (relating 
     to disclosure of returns and return information to designee 
     of taxpayer) is amended--

[[Page S5224]]

       (1) by striking ``Taxpayer.--The Secretary'' and inserting 
     ``Taxpayer.--
       ``(1) In General.--The Secretary'', and
       (2) by adding at the end the following new paragraphs:
       ``(2) Restrictions on persons obtaining information.--The 
     return of any taxpayer, or return information with respect to 
     such taxpayer, disclosed to a person or persons under 
     paragraph (1) for a purpose specified in writing, 
     electronically, or orally may be disclosed or used by such 
     person or persons only for the purpose of, and to the extent 
     necessary in, accomplishing the purpose for disclosure 
     specified and shall not be disclosed or used for any other 
     purpose.
       ``(3) Requirements for form prescribed by secretary.--For 
     purposes of this subsection, the Secretary shall prescribe a 
     form for written requests and consents which shall--
       ``(A) contain a warning, prominently displayed, informing 
     the taxpayer that the form should not be signed unless it is 
     completed,
       ``(B) state that if the taxpayer believes there is an 
     attempt to coerce him to sign an incomplete or blank form, 
     the taxpayer should report the matter to the Treasury 
     Inspector General for Tax Administration, and
       ``(C) contain the address and telephone number of the 
     Treasury Inspector General for Tax Administration.
       ``(4) Cross Reference.--

  ``For provision providing for civil damages for violation of 
paragraph (2), see section 7431(i).''.
       (b) Civil Damages.--Section 7431 (relating to civil damages 
     for unauthorized inspection or disclosure of returns and 
     return information) is amended by adding at the end the 
     following new subsection:
       ``(i) Disclosure or Use of Returns and Return Information 
     Obtained Under Subsection 6103(c).--Disclosure or use of 
     returns or return information obtained under section 6103(c) 
     other than for--
       ``(1) the purpose of, and to the extent necessary in, 
     accomplishing the purpose for disclosure specified in 
     writing, electronically, or orally, or
       ``(2) subject to the safeguards set forth in section 6103, 
     for purposes permitted under section 6103,
     shall be treated as a violation of section 6103(a).''.
       (b) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Secretary of the Treasury shall 
     submit a report to the Congress on compliance with the 
     designation and certification requirements applicable to 
     requests for or consent to disclosure of returns and return 
     information under section 6103(c) of the Internal Revenue 
     Code of 1986, as amended by subsection (a). Such report 
     shall--
       (1) evaluate (on the basis of random sampling) whether--
       (A) the amendment made by subsection (a) is achieving the 
     purposes of this section;
       (B) requesters and submitters for such disclosure are 
     continuing to evade the purposes of this section and, if so, 
     how; and
       (C) the sanctions for violations of such requirements are 
     adequate; and
       (2) include such recommendations that the Secretary of the 
     Treasury considers necessary or appropriate to better achieve 
     the purposes of this section.
       (d) Sunset of Existing Consents.--Notwithstanding any other 
     provision of law, any request for or consent to disclose any 
     return or return information under section 6103(c) of the 
     Internal Revenue Code of 1986 made before the date of the 
     enactment of this Act shall remain in effect until the 
     earlier of the date such request or consent is otherwise 
     terminated or the date which is 3 taxable years after such 
     date of enactment.
       (e) Effective Date.--The amendments made by this section 
     shall apply to requests and consents made after 3 months 
     after the date of the enactment of this Act.

     SEC. 407. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OR 
                   DISCLOSURE.

       (a) Notice to Taxpayer.--Subsection (e) of section 7431 
     (relating to notification of unlawful inspection and 
     disclosure) is amended by adding at the end the following: 
     ``The Secretary shall also notify such taxpayer if the 
     Internal Revenue Service or, upon notice to the Secretary by 
     a Federal or State agency, if such Federal or State agency, 
     proposes an administrative determination as to disciplinary 
     or adverse action against an employee arising from the 
     employee's unauthorized inspection or disclosure of the 
     taxpayer's return or return information. The notice described 
     in this subsection shall include the date of the inspection 
     or disclosure and the rights of the taxpayer under such 
     administrative determination.''.
       (b) Exhaustion of Administrative Remedies Required.--
     Section 7431, as amended by this Act, is amended by adding at 
     the end the following new subsection:
       ``(j) Exhaustion of Administrative Remedies Required.--A 
     judgment for damages shall not be awarded under subsection 
     (c) unless the court determines that the plaintiff has 
     exhausted the administrative remedies available to such 
     plaintiff within the Internal Revenue Service.''.
       (c) Payment Authority Clarified.--
       (1) In general.--Section 7431, as amended by subsection 
     (b), is amended by adding at the end the following new 
     subsection:
       ``(k) Payment Authority.--Claims pursuant to this section 
     shall be payable out of funds appropriated under section 1304 
     of title 31, United States Code.''.
       (2) Annual reports of payments.--The Secretary of the 
     Treasury shall annually report to the Committee of Finance of 
     the Senate and the Committee on Ways and Means of the House 
     of Representatives regarding payments made from the United 
     States Judgment Fund under section 7431(k) of the Internal 
     Revenue Code of 1986.
       (d) Burden of Proof for Good Faith Exception Rests With 
     Secretary.--Section 7431(b) (relating to exceptions) is 
     amended by adding at the end the following new flush 
     sentence:
     ``In any proceeding involving the issue of the existence of 
     good faith, the burden of proof with respect to such issue 
     shall be on the Secretary.''.
       (e) Reports.--Subsection (p) of section 6103 (relating to 
     procedure and recordkeeping), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(10) Report on willful unauthorized disclosure and 
     inspection.--As part of the report required by paragraph 
     (3)(C) for each calendar year, the Secretary shall furnish 
     information regarding the willful unauthorized disclosure and 
     inspection of returns and return information, including the 
     number, status, and results of--
       ``(A) administrative investigations,
       ``(B) civil lawsuits brought under section 7431 (including 
     the amounts for which such lawsuits were settled and the 
     amounts of damages awarded), and
       ``(C) criminal prosecutions.''.
       (c) Effective Dates.--
       (1) Notice.--The amendment made by subsection (a) shall 
     apply to determinations made after the date of the enactment 
     of this Act.
       (2) Exhaustion of remedies and burden of proof.--The 
     amendments made by subsections (b) and (d) shall apply to 
     inspections and disclosures occurring on and after the date 
     of the enactment of this Act.
       (3) Payment authority.--The amendment made by subsection 
     (c)(1) shall take effect on the date of the enactment of this 
     Act.
       (4) Reports.--The amendment made by subsection (e) shall 
     apply to calendar years ending after the date of the 
     enactment of this Act.

     SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.

       (a) In General.--Section 6103(i)(3)(B)(i) (relating to 
     danger of death or physical injury) is amended by striking 
     ``or State law enforcement agency'' and inserting ``, State, 
     or local law enforcement agency''.
       (b) Conforming Amendments.--Section 6103(p)(4) is amended--
       (1) by striking ``(i)(3)(B)(i) or (7)(A)(ii)'' and 
     inserting ``(i)(7)(A)(ii)'', and
       (2) by striking ``, (i)(3)(B)(i),''.
       (c) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND 
                   PURPOSES.

       (a) In General.--Section 6103(m)(1) (relating to tax 
     refunds) is amended by striking ``taxpayer identity 
     information to the press and other media'' and by inserting 
     ``a person's name and the city, State, and zip code of the 
     person's mailing address to the press, other media, and 
     through any other means of mass communication,''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS 
                   RELATED TO SECTION 501(C) ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 6104 is amended 
     by striking paragraph (2) and inserting the following new 
     paragraphs:
       ``(2) Disclosure of proposed actions related to charitable 
     organizations.--
       ``(A) Specific notifications.--In the case of an 
     organization to which paragraph (1) applies, the Secretary 
     may disclose to the appropriate State officer--
       ``(i) a notice of proposed refusal to recognize such 
     organization as an organization described in section 
     501(c)(3) or a notice of proposed revocation of such 
     organization's recognition as an organization exempt from 
     taxation,
       ``(ii) the issuance of a letter of proposed deficiency of 
     tax imposed under section 507 or chapter 41 or 42, and
       ``(iii) the names, addresses, and taxpayer identification 
     numbers of organizations which have applied for recognition 
     as organizations described in section 501(c)(3).
       ``(B) Additional disclosures.--Returns and return 
     information of organizations with respect to which 
     information is disclosed under subparagraph (A) may be made 
     available for inspection by or disclosed to an appropriate 
     State officer.
       ``(C) Procedures for disclosure.--Information may be 
     inspected or disclosed under subparagraph (A) or (B) only--
       ``(i) upon written request by an appropriate State officer, 
     and
       ``(ii) for the purpose of, and only to the extent necessary 
     in, the administration of State laws regulating such 
     organizations.

     Such information may only be inspected by or disclosed to 
     representatives of the appropriate State officer designated 
     as the individuals who are to inspect or to receive the 
     returns or return information under this paragraph on behalf 
     of such officer. Such representatives shall not include any 
     contractor or agent.
       ``(D) Disclosures other than by request.--The Secretary may 
     make available for inspection or disclose returns and return 
     information of an organization to which paragraph (1) applies 
     to an appropriate State

[[Page S5225]]

     officer of any State if the Secretary determines that such 
     inspection or disclosure may facilitate the resolution of 
     Federal or State issues relating to the tax-exempt status of 
     such organization.
       ``(3) Disclosure with respect to certain other exempt 
     organizations.--Upon written request by an appropriate State 
     officer, the Secretary may make available for inspection or 
     disclosure returns and return information of an organization 
     described in paragraph (2), (4), (6), (7), (8), (10), or (13) 
     of section 501(c) for the purpose of, and to the extent 
     necessary in, the administration of State laws regulating the 
     solicitation or administration of the charitable funds or 
     charitable assets of such organizations. Such information may 
     be inspected only by or disclosed only to representatives of 
     the appropriate State officer designated as the individuals 
     who are to inspect or to receive the returns or return 
     information under this paragraph on behalf of such officer. 
     Such representatives shall not include any contractor or 
     agent.
       ``(4) Use in civil judicial and administrative 
     proceedings.--Returns and return information disclosed 
     pursuant to this subsection may be disclosed in civil 
     administrative and civil judicial proceedings pertaining to 
     the enforcement of State laws regulating such organizations 
     in a manner prescribed by the Secretary similar to that for 
     tax administration proceedings under section 6103(h)(4).
       ``(5) No disclosure if impairment.--Returns and return 
     information shall not be disclosed under this subsection, or 
     in any proceeding described in paragraph (4), to the extent 
     that the Secretary determines that such disclosure would 
     seriously impair Federal tax administration.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Return and return information.--The terms `return' 
     and `return information' have the respective meanings given 
     to such terms by section 6103(b).
       ``(B) Appropriate state officer.--The term `appropriate 
     State officer' means--
       ``(i) the State attorney general,
       ``(ii) in the case of an organization to which paragraph 
     (1) applies, any other State official charged with overseeing 
     organizations of the type described in section 501(c)(3), and
       ``(iii) in the case of an organization to which paragraph 
     (3) applies, the head of an agency designated by the State 
     attorney general as having primary responsibility for 
     overseeing the solicitation of funds for charitable 
     purposes.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 6103 is amended--
       (A) by inserting ``or any appropriate State officer who has 
     or had access to returns or return information under section 
     6104(c)'' after ``this section'' in paragraph (2), and
       (B) by striking ``or subsection (n)'' in paragraph (3) and 
     inserting ``subsection (n), or section 6104(c)''.
       (2) Subparagraph (A) of section 6103(p)(3) is amended by 
     inserting ``and section 6104(c)'' after ``section'' in the 
     first sentence.
       (3) Paragraph (4) of section 6103(p), as amended by section 
     202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 
     116 Stat. 961), is amended by striking ``or (17)'' after 
     ``any other person described in subsection (l)(16)'' each 
     place it appears and inserting ``or (18) or any appropriate 
     State officer (as defined in section 6104(c))''.
       (4) The heading for paragraph (1) of section 6104(c) is 
     amended by inserting ``for charitable organizations''.
       (5) Paragraph (2) of section 7213(a) is amended by 
     inserting ``or under section 6104(c)'' after ``6103''.
       (6) Paragraph (2) of section 7213A(a) is amended by 
     inserting ``or 6104(c)'' after ``6103''.
       (7) Paragraph (2) of section 7431(a) is amended by 
     inserting ``(including any disclosure in violation of section 
     6104(c))'' after ``6103''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to requests made before such date.

     SEC. 411. TREATMENT OF PUBLIC RECORDS.

       (a) In General.--Section 6103(b) (relating to definitions) 
     is amended by adding at the end the following new paragraph:
       ``(12) Treatment of public records.--Returns and return 
     information shall not be subject to subsection (a) if 
     disclosed--
       ``(A) in the course of any judicial or administrative 
     proceeding or pursuant to tax administration activities, and
       ``(B) properly made part of the public record.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect before, on, and after the date of the 
     enactment of this Act.

     SEC. 412. INVESTIGATIVE DISCLOSURES.

       (a) In General.--Section 6103 (confidentiality and 
     disclosure of returns and return information) is amended by 
     redesignating subsection (q) as subsection (r) and by 
     inserting after subsection (p) the following new subsection:
       ``(q) Investigative Disclosures.--Nothing in this section 
     may be construed to prohibit investigative agents of the 
     Internal Revenue Service from identifying themselves, their 
     organizational affiliation, and the criminal nature of an 
     investigation when contacting third parties in writing or in 
     person.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 413. TIN MATCHING.

       (a) In General.--Section 6103(k) (relating to disclosure of 
     certain returns and return information for tax administration 
     purposes) is amended by adding at the end the following new 
     paragraph:
       ``(10) TIN matching.--The Secretary may disclose to any 
     person required to provide a taxpayer identifying number (as 
     described in section 6109) to the Secretary whether such 
     information matches records maintained by the Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 414. FORM 8300 DISCLOSURES.

       (a) In General.--Section 6103(p)(4) (relating to 
     safeguards) is amended by striking ``(15),'' both places it 
     appears.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 415. TECHNICAL AMENDMENT.

       (a) In General.--Section 6103(i)(7)(A) (relating to 
     disclosure to law enforcement agencies) is amended by adding 
     at the end the following new clause:
       ``(v) Taxpayer identity.--For purposes of this 
     subparagraph, a taxpayer's identity shall not be treated as 
     taxpayer return information.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

     SEC. 501. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE 
                   PROVISIONS.

       (a) In General.--
       (1) Adjustments in tax tables so that inflation will not 
     result in tax increases.--Paragraph (7) of section 1(f) is 
     amended to read as follows:
       ``(7) Special rule for certain brackets.--In prescribing 
     tables under paragraph (1) which apply to taxable years 
     beginning in a calendar year after 1994, the cost-of-living 
     adjustment used in making adjustments to the dollar amounts 
     at which the 36 percent rate bracket begins or at which the 
     39.6 percent rate bracket begins shall be determined under 
     paragraph (3) by substituting `1993' for `1992'.''.
       (2) Reduced capital gain rates for qualified 5-year gain.--
     Paragraph (2) of section 1(h) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 2000, 
     the'' and inserting ``The''.
       (3) Credit for producing fuel from nonconventional 
     source.--Section 29 is amended by striking subsection (e) and 
     by redesignating subsections (f) and (g) as subsections (e) 
     and (f), respectively.
       (4) Earned income credit.--Paragraph (1) of section 32(b) 
     is amended--
       (A) by striking subparagraphs (B) and (C), and
       (B) in subparagraph (A) by striking ``(A) In general.--In 
     the case of taxable years beginning after 1995'' and moving 
     the table 2 ems to the left.
       (5) General business credits.--Subsection (d) of section 38 
     is amended by striking paragraph (3).
       (6) Carryback and carryforward of unused credits.--
     Subsection (d) of section 39 is amended by striking 
     paragraphs (1) through (8) and by redesignating paragraphs 
     (9) and (10) as paragraphs (1) and (2), respectively.
       (7) Adjustments based on adjusted current earnings.--Clause 
     (ii) of section 56(g)(4)(F) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 1992, 
     clause'' and inserting ``Clause''.
       (8) Items of tax preference; depletion.--Paragraph (1) of 
     section 57(a) is amended by striking ``Effective with respect 
     to taxable years beginning after December 31, 1992, this'' 
     and inserting ``This''.
       (9) Intangible drilling costs.--
       (A) Clause (i) of section 57(a)(2)(E) is amended by 
     striking ``In the case of any taxable year beginning after 
     December 31, 1992, this'' and inserting ``This''.
       (B) Clause (ii) of section 57(a)(2)(E) is amended by 
     striking ``(30 percent in the case of taxable years beginning 
     in 1993)''.
       (10) Annuities; certain proceeds of endowment and life 
     insurance contracts.--Section 72 is amended--
       (A) in subsection (c)(4) by striking ``; except that if 
     such date was before January 1, 1954, then the annuity 
     starting date is January 1, 1954'', and
       (B) in subsection (g)(3) by striking ``January 1, 1954, 
     or'' and ``, whichever is later''.
       (11) Accident and health plans.--Section 105(f) is amended 
     by striking ``or (d)''.
       (12) Flexible spending arrangements.--Section 106(c)(1) is 
     amended by striking ``Effective on and after January 1, 1997, 
     gross'' and inserting ``Gross''.
       (13) Certain combat zone compensation of members of the 
     armed forces.--Subsection (c) of section 112 is amended--
       (A) by striking ``(after June 24, 1950)'' in paragraph (2), 
     and
       (B) striking ``such zone;'' and all that follows in 
     paragraph (3) and inserting ``such zone.''.
       (14) Principal residence.--Section 121(b)(3) is amended--
       (A) by striking subparagraph (B); and
       (B) in subparagraph (A) by striking ``(A) In general.--'' 
     and moving the text 2 ems to the left.

[[Page S5226]]

       (15) Certain reduced uniformed services retirement pay.--
     Section 122(b)(1) is amended by striking ``after December 31, 
     1965,''.
       (16) Great plains conservation program.--Section 126(a) is 
     amended by striking paragraph (6) and by redesignating 
     paragraphs (7), (8), (9), and (10) as paragraphs (6), (7), 
     (8), and (9), respectively.
       (17) Mortgage revenue bonds for residences in federal 
     disaster areas.--Section 143(k) is amended by striking 
     paragraph (11).
       (18) Interim authority for governor.--
       (A) Section 146(e) is amended by striking paragraph (2) and 
     by redesignating paragraph (3) as paragraph (2).
       (B) Section 42(h)(3)(F) is amended by striking ``(other 
     than paragraph (2)(B) thereof)''.
       (19) Treble damage payments under the antitrust law.--
     Section 162(g) is amended by striking the last sentence.
       (20) State legislators' travel expenses away from home.--
     Paragraph (4) of section 162(h) is amended by striking ``For 
     taxable years beginning after December 31, 1980, this'' and 
     inserting ``This''.
       (21) Interest.--
       (A) Section 163 is amended by striking paragraph (6) of 
     subsection (d) and paragraph (5) (relating to phase-in of 
     limitation) of subsection (h).
       (B) Section 56(b)(1)(C) is amended by striking clause (ii) 
     and by redesignating clauses (iii), (iv), and (v) as clauses 
     (ii), (iii), and (iv), respectively.
       (22) Charitable, etc., contributions and gifts.--Section 
     170 is amended by striking subsection (k).
       (23) Amortizable bond premium.--Subparagraph (B) of section 
     171(b)(1) is amended to read as follows:
       ``(B)(i) in the case of a bond described in subsection 
     (a)(2), with reference to the amount payable on maturity or 
     earlier call date, and
       ``(ii) in the case of a bond described in subsection 
     (a)(1), with reference to the amount payable on maturity (or 
     if it results in a smaller amortizable bond premium 
     attributable to the period of earlier call date, with 
     reference to the amount payable on earlier call date), and''.
       (24) Net operating loss carrybacks and carryovers.--
       (A) Section 172 is amended--
       (i) by striking subparagraph (D) of subsection (b)(1) and 
     by redesignating subparagraphs (E), (F), and (G) as 
     subparagraphs (D), (E), and (F), respectively,
       (ii) by striking subsection (g), and
       (iii) by striking subparagraph (F) of subsection (h)(2).
       (B) Section 172(h)(4) is amended by striking ``subsection 
     (b)(1)(E)'' each place it appears and inserting ``subsection 
     (b)(1)(D)''.
       (C) Section 172(i)(3) is amended by striking ``subsection 
     (b)(1)(G)'' each place it appears and inserting ``subsection 
     (b)(1)(F)''.
       (D) Section 172(j) is amended by striking ``subsection 
     (b)(1)(H)'' each place it appears and inserting ``subsection 
     (b)(1)(G)''.
       (E) Section 172, as amended by subparagraphs (A) through 
     (D) of this paragraph, is amended--
       (i) by redesignating subsections (h), (i), and (j) as 
     subsections (g), (h), and (i), respectively,
       (ii) by striking ``subsection (h)'' each place it appears 
     and inserting ``subsection (g)'', and
       (iii) by striking ``subsection (i)'' each place it appears 
     and inserting ``subsection (h)''.
       (25) Research and experimental expenditures.--Subparagraph 
     (A) of section 174(a)(2) is amended to read as follows:
       ``(A) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this 
     subsection for his first taxable year for which expenditures 
     described in paragraph (1) are paid or incurred.''.
       (26) Amortization of certain research and experimental 
     expenditures.--Paragraph (2) of section 174(b)(2) is amended 
     by striking ``beginning after December 31, 1953''.
       (27) Soil and water conservation expenditures.--Paragraph 
     (1) of section 175(d) is amended to read as follows:
       ``(1) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this section 
     for his first taxable year for which expenditures described 
     in subsection (a) are paid or incurred.''.
       (28) Activities not engaged in for profit.--Section 
     183(e)(1) is amended by striking the last sentence.
       (29) Dividends received on certain preferred stock; and 
     dividends paid on certain preferred stock of public 
     utilities.--
       (A) Sections 244 and 247 are hereby repealed and the table 
     of sections for part VIII of subchapter B of chapter 1 is 
     amended by striking the items relating to sections 244 and 
     247.
       (B) Paragraph (5) of section 172(d) is amended to read as 
     follows:
       ``(5) Computation of deduction for dividends received.--The 
     deductions allowed by section 243 (relating to dividends 
     received by corporations) and 245 (relating to dividends 
     received from certain foreign corporations) shall be computed 
     without regard to section 246(b) (relating to limitation on 
     aggregate amount of deductions).''.
       (C) Paragraph (1) of section 243(c) is amended to read as 
     follows:
       ``(1) In general.--In the case of any dividend received 
     from a 20-percent owned corporation, subsection (a)(1) shall 
     be applied by substituting `80 percent' for `70 percent'.''.
       (D) Section 243(d) is amended by striking paragraph (4).
       (E) Section 246 is amended--
       (i) by striking ``, 244,'' in subsection (a)(1),
       (ii) in subsection (b)(1)--

       (I) by striking ``sections 243(a)(1), and 244(a),'' the 
     first place it appears and inserting ``section 243(a)(1),'',
       (II) by striking ``244(a),'' the second place it appears 
     therein, and
       (III) by striking ``subsection (a) or (b) of section 245, 
     and 247,'' and inserting ``and subsection (a) or (b) of 
     section 245,'', and

       (iii) by striking ``, 244,'' in subsection (c)(1).
       (F) Section 246A is amended by striking ``, 244,'' both 
     places it appears in subsections (a) and (e).
       (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
     469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and (D) of 
     section 805(a)(4), 805(b)(5), 812(e)(2)(A), 
     815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), 1059(b)(2)(B), 
     and 1244(c)(2)(C) are each amended by striking ``, 244,'' 
     each place it appears.
       (H) Section 805(a)(4)(B) is amended by striking ``, 
     244(a),'' each place it appears.
       (I) Section 810(c)(2)(B) is amended by striking ``244 
     (relating to dividends on certain preferred stock of public 
     utilities),''.
       (30) Organization expenses.--Section 248(c) is amended by 
     striking ``beginning after December 31, 1953,'' and by 
     striking the last sentence.
       (31) Bond repurchase premium.--Section 249(b)(1) is amended 
     by striking ``, in the case of bonds or other evidences of 
     indebtedness issued after February 28, 1913,''.
       (32) Amount of gain where loss previously disallowed.--
     Section 267(d) is amended by striking ``(or by reason of 
     section 24(b) of the Internal Revenue Code of 1939)'' in 
     paragraph (1), by striking ``after December 31, 1953,'' in 
     paragraph (2), by striking the second sentence, and by 
     striking ``or by reason of section 118 of the Internal 
     Revenue Code of 1939'' in the last sentence.
       (33) Acquisitions made to evade or avoid income tax.--
     Paragraphs (1) and (2) of section 269(a) are each amended by 
     striking ``or acquired on or after October 8, 1940,''.
       (34) Interest on indebtedness incurred by corporations to 
     acquire stock or assets of another corporation.--Section 279 
     is amended--
       (A) by striking ``after December 31, 1967,'' in subsection 
     (a)(2),
       (B) by striking ``after October 9, 1969,'' in subsection 
     (b),
       (C) by striking ``after October 9, 1969, and'' in 
     subsection (d)(5), and
       (D) by striking subsection (i) and by redesignating 
     subsection (j) as subsection (i).
       (35) Special rules relating to corporate preference 
     items.--Paragraph (4) of section 291(a) is amended by 
     striking ``In the case of taxable years beginning after 
     December 31, 1984, section'' and inserting ``Section''.
       (36) Qualifications for tax credit employee stock ownership 
     plan.--Section 409 is amended by striking subsections (a), 
     (g), and (q).
       (37) Funding standards.--Section 412(m)(4) is amended--
       (A) by striking ``the applicable percentage'' in 
     subparagraph (A) and inserting ``25 percent'', and
       (B) by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (38) Retiree health accounts.--Section 420 is amended--
       (A) by striking paragraph (4) in subsection (b) and by 
     redesignating paragraph (5) as paragraph (4), and
       (B) by amending paragraph (2) of subsection (c) to read as 
     follows:
       ``(2) Requirements relating to pension benefits accruing 
     before transfer.--The requirements of this paragraph are met 
     if the plan provides that the accrued pension benefits of any 
     participant or beneficiary under the plan become 
     nonforfeitable in the same manner which would be required if 
     the plan had terminated immediately before the qualified 
     transfer (or in the case of a participant who separated 
     during the 1-year period ending on the date of the transfer, 
     immediately before such separation).''.
       (39) Employee stock purchase plans.--Section 423(a) is 
     amended by striking ``after December 31, 1963,''.
       (40) Limitation on deductions for certain farming.--Section 
     464 is amended--
       (A) by striking ``any farming syndicate (as defined in 
     subsection (c))'' both places it appears in subsections (a) 
     and (b) and inserting ``any taxpayer to whom subsection (f) 
     applies'', and
       (B) by striking subsection (g).
       (41) Deductions limited to amount at risk.--
       (A) Paragraph (3) of section 465(c) is amended by striking 
     ``In the case of taxable years beginning after December 31, 
     1978, this'' and inserting ``This''.
       (B) Paragraph (2) of section 465(e)(2)(A) is amended by 
     striking ``beginning after December 31, 1978''.
       (42) Nuclear decommissioning costs.--Section 468A(e)(2) is 
     amended--
       (A) by striking ``at the rate set forth in subparagraph 
     (B)'' in subparagraph (A) and inserting ``at a rate of 20 
     percent'', and
       (B) by striking subparagraph (B) and by redesignating 
     subparagraphs (C) and (D) as subparagraphs (B) and (C), 
     respectively.
       (43) Passive activity losses and credits limited.--
       (A) Section 469 is amended by striking subsection (m).
       (B) Subsection (b) of section 58 is amended by adding 
     ``and'' at the end of paragraph (1), by striking paragraph 
     (2), and by redesignating paragraph (3) as paragraph (2).

[[Page S5227]]

       (44) Adjustments required by changes in method of 
     accounting.--Section 481(b)(3) is amended by striking 
     subparagraph (C).
       (45) Exemption from tax on corporations, certain trusts, 
     etc.--Section 501 is amended by striking subsection (p).
       (46) Requirements for exemption.--
       (A) Section 503(a)(1) is amended to read as follows:
       ``(1) General rule.--An organization described in paragraph 
     (17) or (18) of section 501(a) or described in section 401(a) 
     and referred to in section 4975(g)(2) or (3) shall not be 
     exempt from taxation under section 501(a) if it has engaged 
     in a prohibited transaction.''.
       (B) Paragraph (2) of section 503(a) is amended by striking 
     ``described in section 501(c)(17) or (18) or paragraph 
     (a)(1)(B)'' and inserting ``described in paragraph (1)''.
       (C) Subsection (c) of section 503 is amended by striking 
     ``described in section 501(c)(17) or (18) or subsection 
     (a)(1)(B)'' and inserting ``described in subsection (a)(1)''.
       (47) Amounts received by surviving annuitant under joint 
     and survivor annuity contract.--Subparagraph (A) of section 
     691(d)(1) is amended by striking ``after December 31, 1953, 
     and''.
       (48) Income taxes of members of armed forces on death.--
     Section 692(a)(1) is amended by striking ``after June 24, 
     1950''.
       (49) Insurance company taxable income.--
       (A) Section 832(e) is amended by striking ``of taxable 
     years beginning after December 31, 1966,''.
       (B) Section 832(e)(6) is amended by striking ``In the case 
     of any taxable year beginning after December 31, 1970, the'' 
     and by inserting ``The''.
       (50) Tax on nonresident alien individuals.--Subparagraph 
     (B) of section 871(a)(1) is amended to read as follows:
       ``(B) gains described in subsection (b) or (c) of section 
     631,''.
       (51) Property on which lessee has made improvements.--
     Section 1019 is amended by striking the last sentence.
       (52) Involuntary conversion.--Section 1033 is amended by 
     striking subsection (j) and by redesignating subsection (k) 
     as subsection (j).
       (53) Property acquired during affiliation.--Section 1051 is 
     repealed and the table of sections for part IV of subchapter 
     O of chapter 1 is amended by striking the item relating to 
     section 1051.
       (54) Holding period of property.--
       (A) Paragraph (5) of section 1223 is amended by striking 
     ``(or under so much of section 1052(c) as refers to section 
     113(a)(23) of the Internal Revenue Code of 1939)''.
       (B) Paragraph (7) of section 1223 is amended by striking 
     the last sentence.
       (C) Paragraph (9) of section 1223 is repealed.
       (55) Property used in the trade or business and involuntary 
     conversions.--Subparagraph (A) of section 1231(c)(2) is 
     amended by striking ``beginning after December 31, 1981''.
       (56) Sale or exchange of patents.--Section 1235 is 
     amended--
       (A) by striking subsection (c) and by redesignating 
     subsections (d) and (e) as (c) and (d), respectively, and
       (B) by striking ``(d)'' in subsection (b) and inserting 
     ``(c)''.
       (57) Dealers in securities.--Subsection (b) of section 1236 
     is amended by striking ``after November 19, 1951,''.
       (58) Sale of patents.--Subsection (a) of section 1249 is 
     amended by striking ``after December 31, 1962,''.
       (59) Gain from disposition of farm land.--Paragraph (1) of 
     section 1252(a) is amended by striking ``after December 31, 
     1969,'' both places it appears.
       (60) Treatment of amounts received on retirement or sale or 
     exchange of debt instruments.--Subsection (c) of section 1271 
     is amended to read as follows:
       ``(c) Special Rule for Certain Obligations with Respect to 
     Which Original Issue Discount not Currently Includible.--
       ``(1) In general.--On the sale or exchange of debt 
     instruments issued by a government or political subdivision 
     thereof after December 31, 1954, and before July 2, 1982, or 
     by a corporation after December 31, 1954, and on or before 
     May 27, 1969, any gain realized which does not exceed--
       ``(A) an amount equal to the original issue discount, or
       ``(B) if at the time of original issue there was no 
     intention to call the debt instrument before maturity, an 
     amount which bears the same ratio to the original issue 
     discount as the number of complete months that the debt 
     instrument was held by the taxpayer bears to the number of 
     complete months from the date of original issue to the date 
     of maturity,
     shall be considered as ordinary income.
       ``(2) Subsection (a)(2)(A) not to apply.--Subsection 
     (a)(2)(A) shall not apply to any debt instrument referred to 
     in subparagraph (A) of this paragraph.
       ``(3) Cross reference.--

  ``For current inclusion of original issue discount, see section 
1272.''.
       (61) Amount and method of adjustment.--Section 1314 is 
     amended by striking subsection (d) and by redesignating 
     subsection (e) as subsection (d).
       (62) Election; revocation; termination.--Clause (iii) of 
     section 1362(d)(3) is amended by striking ``unless'' and all 
     that follows and inserting ``unless the corporation was an S 
     corporation for such taxable year.''.
       (63) Old-age, survivors, and disability insurance.--
     Subsection (a) of section 1401 is amended by striking ``the 
     following percent'' and all that follows and inserting ``12.4 
     percent of the amount of the self-employment income for such 
     taxable year.''.
       (64) Hospital insurance.--Subsection (b) of section 1401 is 
     amended by striking ``the following percent'' and all that 
     follows and inserting ``2.9 percent of the amount of the 
     self-employment income for such taxable year.''.
       (65) Ministers, members of religious orders, and christian 
     science practitioners.--Paragraph (3) of section 1402(e) is 
     amended by striking ``whichever of the following dates is 
     later: (A)'' and by striking ``; or (B)'' and all that 
     follows and by inserting a period.
       (66) Withholding of tax on nonresident aliens.--The first 
     sentence of subsection (b) of section 1441 and the first 
     sentence of paragraph (5) of section 1441(c) are each amended 
     by striking ``gains subject to tax'' and all that follows 
     through ``October 4, 1966'' and inserting ``and gains subject 
     to tax under section 871(a)(1)(D)''.
       (67) Affiliated group defined.--Subparagraph (A) of section 
     1504(a)(3) is amended by striking ``for a taxable year which 
     includes any period after December 31, 1984'' in clause (i) 
     and by striking ``in a taxable year beginning after December 
     31, 1984'' in clause (ii).
       (68) Disallowance of the benefits of the graduated 
     corporate rates and accumulated earnings credit.--
       (A) Subsection (a) of section 1551 is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (B) Section 1551(b) is amended--
       (i) by striking ``or (2)'' in paragraph (1), and
       (ii) by striking ``(a)(3)'' in paragraph (2) and inserting 
     ``(a)(2)''.
       (69) Definition of wages.--Section 3121(b) is amended by 
     striking paragraph (17).
       (70) Credits against tax.--
       (A) Paragraph (4) of section 3302(f) is amended by striking 
     ``subsection--'' and all that follows through ``(A) In 
     general.--'', by striking subparagraph (B), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively, and by moving the text of such subparagraphs 
     (as so redesignated) 2 ems to the left.
       (B) Paragraph (5) of section 3302(f) is amended by striking 
     subparagraphs (D) and by redesignating subparagraph (E) as 
     subparagraph (D).
       (71) Domestic service employment taxes.--Section 3510(b) is 
     amended by striking paragraph (4).
       (72) Tax on fuel used in commercial transportation on 
     inland waterways.--Section 4042(b)(2)(A) is amended to read 
     as follows:
       ``(A) The Inland Waterways Trust Fund financing rate is 20 
     cents per gallon.''.
       (73) Transportation by air.--Section 4261(e) is amended--
       (A) in paragraph (1) by striking subparagraph (C), and
       (B) by striking paragraph (5).
       (74) Taxes on failure to distribute income.--Section 4942 
     is amended--
       (A) by striking subsection (f)(2)(D),
       (B) in subsection (g)(2)(A) by striking ``For all taxable 
     years beginning on or after January 1, 1975, subject'' and 
     inserting ``Subject'',
       (C) in subsection (g) by striking paragraph (4), and
       (D) in subsection (i)(2) by striking ``beginning after 
     December 31, 1969, and''.
       (75) Taxes on taxable expenditures.--Section 4945(f) is 
     amended by striking ``(excluding therefrom any preceding 
     taxable year which begins before January 1, 1970)''.
       (76) Returns.--Subsection (a) of section 6039D is amended 
     by striking ``beginning after December 31, 1984,''.
       (77) Information returns.--Subsection (c) of section 6060 
     is amended by striking ``year'' and all that follows and 
     inserting ``year.''.
       (78) Abatements.--Section 6404(f) is amended by striking 
     paragraph (3).
       (79) Failure by corporation to pay estimated income tax.--
     Clause (i) of section 6655(g)(4)(A) is amended by striking 
     ``(or the corresponding provisions of prior law)''.
       (80) Retirement.--Section 7447(i)(3)(B)(ii) is amended by 
     striking ``at 4 percent per annum to December 31, 1947, and 
     at 3 percent per annum thereafter'', and inserting ``at 3 
     percent per annum''.
       (81) Annuities to surviving spouses and dependent children 
     of judges.--
       (A) Paragraph (2) of section 7448(a) is amended by striking 
     ``or under section 1106 of the Internal Revenue Code of 
     1939'' and by striking ``or pursuant to section 1106(d) of 
     the Internal Revenue Code of 1939''.
       (B) Subsection (g) of section 7448 is amended by striking 
     ``or other than pursuant to section 1106 of the Internal 
     Revenue Code of 1939''.
       (C) Subsection (j)(1) and (j)(2) of section 7448 are each 
     amended by striking ``at 4 percent per annum to December 31, 
     1947, and at 3 percent per annum thereafter'' and inserting 
     ``at 3 percent per annum''.
       (82) Merchant marine capital construction funds.--Paragraph 
     (4) of section 7518(g) is amended by striking ``any 
     nonqualified withdrawal'' and all that follows through 
     ``shall be determined'' and inserting ``any nonqualified 
     withdrawal shall be determined''.
       (83) Valuation tables.--Paragraph (3) of section 7520(c) is 
     amended--
       (A) by striking ``Not later than December 31, 1989, the'' 
     and inserting ``The'', and

[[Page S5228]]

       (B) by striking ``thereafter'' in the last sentence 
     thereof.
       (84) Administration and collection of taxes in 
     possessions.--Section 7651 is amended by striking paragraph 
     (4) and by redesignating paragraph (5) as paragraph (4).
       (85) Definition of employee.--(A) Section 7701(a)(20) is 
     amended by striking ``chapter 21'' and all that follows and 
     inserting ``chapter 21.''.
       (b) Effective Date.--
       (1) General rule.--Except as otherwise provided in 
     paragraph (2), the amendments made by subsection (a) shall 
     take effect on the date of enactment of this Act.
       (2) Savings provision.--If--
       (A) any provision amended or repealed by subsection (a) 
     applied to--
       (i) any transaction occurring before the date of the 
     enactment of this Act,
       (ii) any property acquired before such date of enactment, 
     or
       (iii) any item of income, loss, deduction, or credit taken 
     into account before such date of enactment, and
       (B) the treatment of such transaction, property, or item 
     under such provision would (without regard to the amendments 
     made by subsection (a)) affect the liability for tax for 
     periods ending after such date of enactment,
     nothing in the amendments made by subsection (a) shall be 
     construed to affect the treatment of such transaction, 
     property, or item for purposes of determining liability for 
     tax for periods ending after such date of enactment.
                                  ____


    Tax Administration Good Government Act Introduced April 10, 2003


    i. improve tax administration and establish taxpayer safeguards

     Collection
       Waiver of user fee for installment agreements using 
     automated withdrawals. The IRS imposes a $43 user fee on 
     taxpayers entering into an installment agreement. The 
     proposal would waive the user fee if the taxpayer agrees to 
     automated withdrawal of installment payments from a bank 
     account. This proposal will help facilitate collection 
     through automated withdrawals.
       Authorize partial pay installment agreements. The proposal 
     restores authority that the IRS had prior to 1998 to allow 
     IRS to enter into installment agreements with taxpayers that 
     want to resolve their tax liability but cannot afford to make 
     payments large enough to fully pay the liability at the end 
     of the term of the installment agreement. The proposal would 
     permit the collection of taxes from cases that are otherwise 
     placed in the currently not collectible inventory.
       Terminate installment agreements for failure to file 
     returns and failure to make tax deposits. The proposal would 
     stop the downward spiral where taxpayers owe more and the 
     Government collects less. Although a significant number of 
     taxpayers violate the terms of their installment agreements 
     by failing to timely file their tax returns or make required 
     Federal tax deposits, the IRS is not permitted to terminate 
     installment agreements for these reasons.
       Remove $50,000 threshold requirement for office of chief 
     counsel review of offers in compromise--IRC section 7122(b). 
     The proposal would remove the dollar threshold and give IRS 
     discretion in determining when a Chief Counsel opinion is 
     necessary. IRS attorneys are presently required to review 
     offers where the tax assessed, including penalties and 
     interest, exceeds $50,000. As a practical matter, IRS lawyer 
     offer little in the way of review and often contribute to the 
     delay in processing OICs.
       Seven-day threshold on tolling of statute of limitations 
     during National Taxpayer Advocate review. The proposal 
     provides additional time, without tolling the statute of 
     limitations, for review by the National Taxpayer Advocate for 
     taxpayer assistance orders.
       Increase Penalty for Bad Checks. Proposal would increase 
     penalty for bad checks to $20 or 2 % of amount over $1,000.
       Allow the Financial Management Service to Retain 
     Transaction Fees from Levied Amounts. Proposal would allow 
     FMS to retain directly a portion of the levied funds as 
     payment of FMS fees. A delinquent taxpayer, however, would 
     receive full credit for the amount levied upon (i.e., the 
     amount credited to a taxpayer's account would not be reduced 
     by FMS's fee). The IRS pays FMS fees out of its own 
     appropriations. The proposal would alter internal government 
     accounting and allow the use of appropriated funds to 
     administer the tax system.
       Elimination or Restriction on Offsetting Refunds from 
     former residents. The proposal would allow States to offset 
     Federal tax refunds owed by former residents. In 1998, 
     Congress authorized the state refund offset program. However, 
     the provision did not authorize states to offset Federal tax 
     refunds for State tax debts owed by former residents who had 
     subsequently moved to another State. Former residents have 
     the same safeguards as residents in these situations and 
     there is strong precedence that clearly gives States 
     authority to impose and collect taxes on former residents.
     Processing and Personnel
       Explanation of Statute of Limitations and Consequences of 
     Failure to Timely File. The proposal would require the IRS to 
     provide taxpayers with an explanation of the consequences of 
     failing to timely file refund claims.
       Disclosure of tax information to facilitate combined 
     employment tax reporting. The proposal would expand and make 
     permanent the disclosure authority of the IRS to permit 
     disclosures of name, address, taxpayer identification number, 
     and signature to any State entity for purposes of carrying 
     out a combined federal and state employment tax reporting 
     program. Under current law, no tax information may be 
     furnished by the Internal Revenue Service to another agency 
     except as permitted under section 6103 which requires the 
     other agency to establish procedural safeguards satisfactory 
     to the IRS. A pilot program was established in 1997 in the 
     State of Montana to assess the feasibility and desirability 
     of expanding combined reporting. Reports from Montana were 
     very positive about the program.
       Expansion of declaratory judgment remedy to tax-exempt 
     organizations. The proposal would extend declaratory judgment 
     procedures similar to those currently available only to 
     charities under section 7428 to other section 501(c) 
     determinations. The proposal would limit jurisdiction over 
     controversies involving such determinations to the United 
     States Tax Court. In addition, the proposal would modify the 
     present-law declaratory judgment procedures to provide that 
     an organization is deemed to have exhausted its 
     administrative remedies under the declaratory judgment 
     procedures at the expiration of (1) 270 days after the date 
     on which the request for a determination was made, or (2) in 
     the case of a failure by any office of the IRS to make a 
     determination (other than the office responsible for initial 
     determinations with respect to the issue), 450 days after the 
     date on which the request for a determination was made. 
     The proposal would also require the organization to take, 
     in a timely manner, all reasonable steps to secure such 
     determination.
       Amendment to Treasury auction reforms. The proposal would 
     permit earlier disclosure upon the release by the Secretary 
     of the minutes of the meeting. Under current law, members of 
     the Treasury Borrowing Advisory Committee are prohibited from 
     disclosing anything relating to the securities to be 
     auctioned in a midquarter refunding by the Secretary until 
     the Secretary makes a public announcement of the refunding.
       Revisions relating to termination of employment of IRS 
     employee misconduct. Proposal would modify section 1203 by 
     removing the late filing of refund returns from the list of 
     violations and removing employee versus employee acts (i.e. 
     for violation of an employee's rather than a taxpayer's 
     Constitutional or civil rights) from the list of violations.
       IRS Oversight Board approval of use of critical pay 
     authority. The proposal would require IRS Oversight Board 
     review and approve the use of critical pay authority. 
     Critical pay allows the IRS to hire employees critical to the 
     mission of the IRS as well as allow the IRS to hire up to 40 
     individuals for four year terms under streamlined procedures.
       Low-income taxpayer clinics. The proposal would increase 
     the authorization for low-income taxpayer controversy clinics 
     to $10 million and authorize a similar grant program for low-
     income taxpayer preparation clinics for $10 million. The 
     proposal would specify that grants may not be used for any 
     purpose other than those specified in the Code (this 
     restriction would be inapplicable to funds from other 
     sources). The proposal would also authorize the IRS to 
     promote the benefits and encourage the use of low-income 
     taxpayer clinics.
       Enrolled agents. The proposal would add a new section to 
     the Code permitting the Secretary to prescribe regulations to 
     regulate the conduct of enrolled agents in regard to their 
     practice before the IRS and to permit enrolled agents meeting 
     the Secretary's qualifications to use the credentials or 
     designation ``enrolled agent'', ``EA'', or ``E.A.''.
       Establishment of disaster response team. Proposal would 
     require the IRS to establish a permanent Disaster Response 
     Team which, in coordination with the Federal Emergency 
     Management Agency, is to assist taxpayers in clarifying and 
     resolving tax matters associated with a Presidentially 
     declared disaster or a terroristic or military action. The 
     Team is to be staffed by IRS employees with a relevant 
     knowledge and experience, including a representative from the 
     Office of the Taxpayer Advocate.
       Accelerated tax refunds. Proposal would require the 
     Secretary of Treasury to study and report to the tax writing 
     committees on options to accelerate tax refunds for taxpayers 
     who maintain the same filing characteristics and elect the 
     direct option for any refund.
       Study on clarifying record-keeping responsibilities. The 
     proposal would require the Secretary of the Treasury to study 
     the scope of records required to be maintained by taxpayers, 
     the utility of requiring taxpayers to maintain records 
     indefinitely, the taxpayer burden incurred by such 
     requirement given the necessity to upgrade technological 
     storage for outdated records, the number of negotiated 
     records retention agreements requested by taxpayers and the 
     number entered into by the IRS, and proposals regarding 
     taxpayer record-keeping. Under current law, every person 
     liable for any tax imposed by the Code, or for any collection 
     thereof, shall keep such records as the Secretary of the 
     Treasury may from time to time prescribe.
       Streamline National Taxpayer Advocate Annual Reports. Each 
     year, the National Taxpayer Advocate is required to issue two 
     reports to Congress: (1) an annual report on

[[Page S5229]]

     objectives of the Advocate for the year due June 30 and (2) 
     an annual report on the Advocate's activities including the 
     20 most serious problems confronting taxpayers. The 
     Advocate's office spends an enormous amount of time and 
     effort preparing these reports. The proposal would streamline 
     the reporting process by requiring the Advocate to issue only 
     one report each year.
       Penalty on failure to report interests in foreign financial 
     accounts. The proposal would establish a $5,000 penalty for 
     non-willful failure to report interest in foreign bank 
     accounts. Under present law there is only a penalty of 
     $25,000 for willful failures.
       Repeal of personal holding company tax. The proposal would 
     repeal the personal holding company (PHC) tax. Subsequent 
     changes in the tax code resulted in the provisions 
     ineffectiveness as originally intended.


           II. Simplification of Interest and Penalty Regimes

       Individual estimated tax. The proposal simplifies the 
     individual estmated tax penalty including, increase the 
     penalty threshold for individuals to $2,000 from $1,000; 
     apply one interest rate per estimated tax underpayment; and 
     adopt 365-day year.
       Corporate estimated tax. The proposal simplifies the 
     corporate estimated tax penalty by increasing the exception 
     for small amount of tax shown on the return from less than 
     $500 to less than $1,000.
       Increase in large corporation threshold for estimated tax 
     payments. The proposal simplifies the corporate estimated tax 
     by expanding the safe harbor exception used by small 
     corporations by increasing the threshold from $1 million to 
     $1.5 million of taxable income.
       Expansion of interest abatement. The proposal would: (1) 
     expand the circumstances in which interest may be abated to 
     include periods attributable to any unreasonable IRS error or 
     delay and (2) allow the abatement of interest to the extent 
     interest is attributable to the taxpayer's reliance on 
     written statement by the IRS.
       Deposits made to stop the running of interest. Proposal 
     would permit deposits to be made to an interest bearing 
     account within Treasury to cover tax underpayments related to 
     issues potentially subject to dispute with the IRS.
       Freeze provision regarding suspension of interest where 
     Secretary fails to contact taxpayer. The proposal would 
     repeal current law which requires the suspension of interest 
     on taxes owed until 21 days after the IRS sends a notice of 
     deficiency. The suspension is triggered if the IRS fails to 
     contact the taxpayer within 1 year for taxable years after 
     January 1, 2004 or 18 months for taxable years before January 
     1, 2004. The proposal is unnecessary with expanded interest 
     abatement.
       Expansion of interest netting. Applies interest netting 
     rules without regard to the 45-day period in which the 
     Secretary may refund an overpayment of tax without the 
     payment of interest.
       Clarification of application of Federal tax deposit 
     penalty. The proposal would clarify that the 10 percent 
     penalty rate only applies in cases where the failure to 
     deposit extends for more than 15 days.
       Frivolous tax submissions. The proposal would increase the 
     penalty for frivolous tax returns from $500 to $5,000. In 
     addition, the proposal would permit the IRS to dismiss 
     requests for Collection Due Process hearings, installment 
     agreements, offers-in-compromise, and taxpayer assistance 
     orders if they are based on frivolous arguments or are 
     intended to delay or impede tax administration. Individuals 
     submitting such requests are subject to a $5,000 penalty for 
     repeat behavior or failure to withdraw the request after 
     being given the opportunity to do so.


                   iii. u.s. tax court modernization

       Jurisdiction of Tax Court over collection due process 
     cases. Currently, if a taxpayer's underlying tax liability 
     does not relate to income taxes or a type of tax over which 
     the Tax Court normally has deficiency jurisdiction, there is 
     no opportunity for Tax Court review and the taxpayer must 
     file in a District Court to obtain review. This provision 
     consolidates judicial review of collection due process 
     activity in the Tax Court.
       Authority for special trial judges to hear and decide 
     certain employment status cases. This provision clarifies 
     that the Tax Court may authorize its special trial judges to 
     enter decisions in employment status cases that are subject 
     to small case proceedings under section 7436(c).
       Confirmation of authority of Tax Court to apply doctrine of 
     equitable recoupment. The common-law principle of equitable 
     recoupment permits a party to asset an otherwise time-barred 
     claim to reduce or defeat an opponent's claim if both claims 
     arise from the same transaction. This provision confirms 
     statutorily that the Tax Court may apply equitable recoupment 
     principles to the same extent as District Court and the Court 
     of Federal Claims.
       Tax Court filing fee in all cases commenced by filing 
     petition. This provision clarifies, in keeping with current 
     Tax Court procedure, that the Tax Court is authorized to 
     impose a $60 filing fee for all cases commenced by petition. 
     The proposal would eliminate the need to amend section 7451 
     each time the Tax Court is granted new jurisdiction.
       Amendments to appoint employees. Currently, the Tax Court 
     has to go to the executive branch, the Office of Personnel 
     Management, to change a position. It is inappropriate to 
     require the Tax Court to seek permission from the executive 
     since that branch is a party (Commissioner of Internal 
     Revenue) before the Tax Court. This change would allow the 
     Tax Court to be independent in fact and perception from the 
     Executive Branch while ensuring that basic employee rights, 
     protections, and remedies are retained or required in an 
     appropriate way (e.g., whistleblower protection, civil 
     rights, merit system principles, etc.).
       Expanded use of Tax Court practice fee for pro se 
     taxpayers. The Tax Court is authorized to charge 
     practitioners a fee of up to $30 per year and to use these 
     fees to pursue disciplinary matters. The provision expands 
     use of these fees to provide services to pro se taxpayers. 
     Fees could be used for education programs for pro se 
     taxpayers.
       Annuities for survivors of Tax Court judges who are 
     assassinated. The reality is that many people do not like to 
     pay taxes. there is as much risk of a Tax Court judge being 
     assassinated as any other Federal judge. The proposal would 
     conform the treatment of Tax Court judges to District Court 
     judges.
       Cost-of-living adjustments for Tax Court judicial survivor 
     annuities. All Federal employees have this provision except 
     the Tax Court. Survivors of Tax Court judges are subject to 
     an obsolete method of indexing.
       Life insurance coverage for Tax Court judges. This simply 
     codifies current Office of Personnel Management 
     interpretation, as was previously done for District Court 
     judges.
       Cost of life insurance coverage for Tax Court judges age 65 
     or over. Congress established the Tax Court in 1969 and 
     required that Tax Court judges receive the same compensation 
     as District Court judges. The District Court judges were 
     given this benefit to ensure that there was no diminution of 
     their compensation (as required by the Constitution). This 
     provision is in keeping with the original intent of Congress.
       Modification of timing of lump-sum payment of judge's 
     accrued annual leave. District Court judges are allowed to 
     receive a lump-sum payment due to the life-time tenure of 
     Article III judges. Tax Court judges, while they have a 15 
     year term, effectively have a life-time term because they are 
     always subject to recall.
       Participation of Tax Court judges in the Thrift Savings 
     Plan. The proposal would allow Tax Court judges to 
     participate in Thrift Savings Plan. Currently, only 19 
     federal government employees are left out of the Thrift 
     Savings Plan (i.e., Tax Court judges).
       Exemption of teaching compensation of retired judges for 
     limitation on outside earned income. After retirement, Tax 
     Court judges should have the same ability to teach as 
     District Court judges.
       General provisions relating to magistrate judges of the Tax 
     Court. ``Magistrate'' is more recognizable to the American 
     public because it is the term used by Article III courts. The 
     provision changes the term ``Special Trial Judge'' to 
     ``Magistrate Judge of the United States Tax Court'' and 
     provides for alignment of term of office and removal 
     applicable to District Court magistrate judges.
       Annuities to surviving spouses and dependent children of 
     magistrate judges of the Tax Court. This section gives 
     Magistrates/Special Trial Judges the same advantages as Tax 
     Court judges, thus ensuring a greater pool of participants in 
     the fund.
       Retirement and annuity program for magistrate judges. A 
     retirement and annuity program more aligned with District 
     Court Magistrates and the Tax Court judges is key for 
     attracting and retaining qualified judges.
       Incumbent magistrate judges of the Tax Court. The provision 
     provides transition rules similar to those given to the 
     District Court magistrate judges.
       Provisions for recall. Article III judges are ``self-
     recalling'' (i.e., they decide for themselves whether they 
     are recalled or not). In contrast, Tax Court judges are 
     subject to provisions that authorize mandatory recall by the 
     Chief Judge. These provisions authorize the recall of 
     Magistrates/Special Trial judges in a manner similar to those 
     now applicable to the regular judges of the Court.


               iv. confidentiality and disclosure reforms

       Clarification of definition of church tax inquiry. The 
     proposal would clarify that the present-law church tax 
     inquiry procedures do not apply to contacts made by the IRS 
     for the purpose of educating churches with respect to the law 
     governing tax-exempt organizations. For example, the proposal 
     clarifies that the IRS does not violate the church tax 
     inquiry procedures when written materials are provided to a 
     church or churches for the purpose of educating such church 
     or churches with respect to the types of activities that are 
     not permissible under section 501(c)(3).
       Collection activities with respect to joint return 
     disclosable to either spouse based on oral request. The 
     proposal would eliminate the requirement for former spouses 
     to make a written request for disclosure of collection 
     activities with respect to a joint return. Under present law, 
     section 6103(e)(7) permits the IRS to disclose return 
     information to the same persons who may have access to a 
     return under the other provisions of section 6103(e), thus 
     either spouse may obtain return information regarding a joint 
     return upon oral request.
       Taxpayer representatives not subject to examination on sole 
     basis of representation of taxpayers. The proposal would 
     clarify that

[[Page S5230]]

     an IRS employee conducting an examination of a taxpayer is 
     not authorized to inspect a taxpayer representative's return 
     or return information solely on the basis of the 
     representative relationship to the taxpayer. Under the 
     proposal, the supervisor of the IRS employee would be 
     required to approve such inspection after making a 
     determination that other grounds justified such an 
     inspection. The proposal would not affect the ability of 
     employees of the IRS Director of Professional Responsibility, 
     or other employees whose assigned duties concern the 
     regulation of practice before the IRS, to access returns and 
     return information of a representative.
       Prohibition of disclosure of taxpayer identifying number 
     with respect to disclosure of accepted offers-in-compromise. 
     The proposal would prohibit the disclosure of the taxpayer 
     identification number as part of the publicly available 
     summaries of accepted offers in compromise.
       Compliance by contractors with confidentiality safeguards. 
     The proposal would require that a State or Federal agency 
     conduct on-site reviews of all of its contractors receiving 
     Federal returns and return information every three years. 
     This review is intended to cover secure storage, restricting 
     access, computer security, and other safeguards deemed 
     appropriate by the Secretary. Under the proposal, the State 
     or Federal agency would be required to submit a report of its 
     findings to the IRS and certify annually that all contractors 
     are in compliance with the requirements to safeguard the 
     confidentiality of Federal returns and return information.
       Higher standards for requests for and consents to 
     disclosure. The proposal would render invalid a consent that 
     does not designate a recipient or is not dated at the time of 
     execution. The person submitting the consent to the IRS would 
     be required to verify under penalties of perjury that the 
     form was complete and dated at the time it was signed by the 
     taxpayer. Inspection or disclosure of a return or return 
     information pursuant to an invalid consent would be 
     unauthorized under section 6103. Thus, a person making such 
     unauthorized disclosure or inspection could be liable for 
     civil damages under section 7431, and criminal penalties 
     under section 7213 or 7213A for willful unauthorized 
     disclosure or inspection.
       Civil damages for unauthorized inspection or disclosure. 
     The proposal would require the IRS to notify a taxpayer at 
     the point of proposed administrative action as to 
     disciplinary or adverse action against an employee arising 
     from the unauthorized inspection or disclosure of the 
     taxpayer's return or return information.
       Expanded disclosure in emergency circumstances. The 
     proposal would permit disclosure to local law enforcement 
     authorities emergency situations including suicide threats.
       Disclosure of taxpayer identity for tax refund purposes.--
     On April 15, 2002, about 1.7 million people who did not file 
     their 1998 income tax return who lose more than $2.3 billion 
     in tax refunds. When the IRS is unable to find a taxpayer due 
     a refund, present law provides that it may use ``the press or 
     other media'' to notify the taxpayer of the refund. The IRS 
     believes the current statutory framework in Section 6103(m) 
     does not permit disclosure via the Internet. The proposal 
     would allow the IRS to use any means of ``mass 
     communicating,'' including the Internet to notify a taxpayer 
     of an undelivered refund.
       Disclosure to State officials of proposed actions related 
     to section 501(c) organizations. The proposal provides that 
     upon written request by an appropriate State officer, the 
     Secretary may disclose: (1) a notice of proposed refusal to 
     recognize an organization as a section 501(c)(3) 
     organization; (2) a notice of proposed revocation of tax-
     exemption of a section 501(c)(3) organization; (3) the 
     issuance of a proposed deficiency of tax imposed under 
     section 507, chapter 41, or chapter 42; (4) the names, 
     addresses, and taxpayer identification numbers of 
     organizations that have applied for recognition as section 
     501(c)(3) organizations; and (5) returns and return 
     information of organizations with respect to which 
     information has been disclosed under (1) through (4) above. 
     Disclosure or inspection is permitted for the purpose of, and 
     only to the extent necessary in, the administration of State 
     laws regulating section 501(c)(3) organizations, such as laws 
     regulating tax-exempt status, charitable trusts, charitable 
     solicitation, and fraud.
       Treatment of public records. The proposal clarifies that 
     public record data (e.g., press releases re criminal cases) 
     does not retain 6103 protections in the files of the IRS.
       Investigative disclosures. The proposal permits the IRS 
     Criminal Investigation agents to identify themselves, 
     organizational affiliation, and criminal nature of 
     investigation when contacting third parties in writing or in 
     person.
       TIN matching. The proposal permits taxpayer identification 
     number (TIN) verification by persons required to provide the 
     information to the IRS (limited to whether information 
     matches) to permit early error resolution and enhance 
     compliance. Under present law, over 30 million information 
     returns are received by the IRS from payors that contain 
     missing or incorrect name and TIN information. However, the 
     IRS is only permitted to disclose the error to the payor at 
     the point at which the payment is subject to backup 
     withholding.
       Form 8300 disclosures. The proposal ensures that the Form 
     8300 (for reporting transactions in excess of $10,000) can be 
     disclosed to law enforcement in the same manner as financial 
     reporting documents required under the Bank Secrecy Act 
     (under Title 31).


    V. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

       1. Adjustments in tax tables so that inflation will not 
     result in tax increases. Paragraph (7) of section 1(f) is 
     amended to read as follows: ``(7) Special rule for certain 
     brackets--In prescribing tables under paragraph (1) which 
     apply to taxable years beginning in a calendar year after 
     1994, the cost-of-living adjustment used in making 
     adjustments to the dollar amounts at which the 36 percent 
     bracket begins or at which the 39.6 rate bracket begins shall 
     be determined under paragraph (3) by substituting `1993' for 
     `1992'.''
       2. Reduced capital gain rates for qualified 5-year gain. 
     Paragraph (2) of section 1(h) is amended by striking ``In the 
     case of taxable years beginning after December 31, 2000, 
     the'' and inserting ``The''.
       3. Credit for producing fuel from nonconventional source. 
     Section 29 is amended by striking subsection (e).
       4. Earned income credit. Paragraph (1) of section 32(b) is 
     amended by striking subparagraphs (B) and (C) and by striking 
     ``(A) In General. In the case of taxable years beginning 
     after 1995:''.
       5. General business credits. Subsection (d) of section 38 
     is amended by striking paragraph (3).
       6. Carryback and carryforward of unused credits. Section 39 
     is amended by striking subsection (d).
       7. Adjustments based on adjusted current earnings. Clause 
     (ii) of section 56(g)(4)(F) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 1992, 
     clause'' and inserting ``Clause''.
       8. Items of tax preference; Depletion. Paragraph (1) of 
     section 57(a) is amended by striking ``Effective with respect 
     to taxable years beginning after December 31, 1992, this'' 
     and inserting ``This''.
       9. Intangible drilling costs. Clause (i) of section 
     57(a)(E) is amended by striking ``In the case of any taxable 
     year beginning after December 31, 1992, this'' and inserting 
     ``This''. Clause (ii) of section 57(a)(2)(E) is amended by 
     striking ``(30 percent in the case of taxable years beginning 
     in 1993''.
       10. Annuities; certain proceeds of endowment and life 
     insurance contracts. Paragraph (4) of section 72(c) is 
     amended by striking ``under the contract'' and all that 
     follows and inserting'' under the contract.'' Paragraph (3) 
     of section 72(g) is amended by striking ``January 1, 1954, 
     or''.
       11. Accident and health plans. Section 105(f) is amended by 
     striking ``or (d)''.
       12. Flexible spending arrangements. Section 106(c)(1) is 
     amended by striking ``Effective on and after January 1, 1997, 
     gross'' and inserting ``Gross''.
       13. Certain combat zone compensation of members of the 
     Armed Forces. Subsection (c) of section 112 is amended by 
     striking ``(after June 24, 1950)'' in paragraph (2), and 
     striking ``such zone,'' and all that follows in paragraph (3) 
     and inserting ``such zone.''
       14. Principal residence. Section 121(b)(3) is amended by 
     striking subparagraph (B).
       15. Certain reduced uniformed services retirement pay. 
     Section 112(b)(1) is amended by striking ``after December 31, 
     1965,''.
       16. Great plains conservation program. Section 126(a) is 
     amended by striking paragraph (6).
       17. Mortgage revenue bonds--Federal disaster area 
     modifications. Eliminate special qualified mortgage bond 
     rules or residences located in Federal disaster areas. 
     (utility expired January 1, 1999).
       18. Interim authority for governors regarding allocation of 
     private activity bond volume limits. Eliminate temporary 
     gubernatorial authority to allocate the volume limit.
       19. Treble damage payments under the antitrust law. Section 
     162(g) is amended by striking the last sentence.
       20. State legislators' travel expenses away from home. 
     Paragraph (4) of section 162(h) is amended by striking ``For 
     taxable years beginning after December 31, 1980, this'' and 
     inserting ``This''.
       21. Interest. Section 163 is amended by striking paragraph 
     (6) of subsection (d) and paragraph (5) of subsection (h). 
     Section 56(b)(1)(C) is amended by striking clause (ii) and by 
     redesignating clauses (iii) and (iv) as clauses (ii) and 
     (iii) respectively.
       22. Charitable, etc., contributions and gifts. Section 170 
     is amended by striking subsection (k).
       23. Amortizable bond premium. Subparagraph (B) of section 
     171(b)(1) is amended to read as follows:
       ``(B)(i) in the case of a bond described in subsection 
     (a)(2), with reference to the amount payable on maturity or 
     earlier call date, and
       ``(ii) in the case of a bond described in subsection 
     (a)(1), with reference to the amount payable on maturity (or 
     if it results in a smaller amortizable bond premium 
     attributable to the period to earlier call date, with 
     reference to the amount payable on earlier call date), and''
       24. Net operating loss carrybacks and carryovers. Section 
     172 is amended by striking subparagraph (D) of subsection 
     (b)(1), subsection (g), and subparagraph (F) of the paragraph 
     (h)(2).
       25. Research and experimental expenditures. Subparagraph 
     (A) of section 174(a)(2) is amended to read as follows: ``(A) 
     Without

[[Page S5231]]

     consent.--A taxpayer may, without the consent of the 
     Secretary, adopt the method provided in this subsection for 
     his first taxable year for which expenditures described in 
     paragraph (l) are paid or incurred.''
       26. Amortization of certain research and experimental 
     expenditures. Paragraph (2) of section 174(b)(2) is amended 
     by striking ``beginning after December 31, 1953''.
       27. Soil and water conservation expenditures. Paragraph (1) 
     of section 175(d) is amended to read as follows: ``(1) 
     Without consent.--A taxpayer may, without the consent of the 
     Secretary, adopt the method provided in this section for his 
     first taxable year for which expenditures described in 
     subsection (a) are paid or incurred.''
       28. Activities not engaged in for profit. Section 183(e)(1) 
     is amended by striking the last sentence.
       29. Dividends received on certain preferred stock; and 
     Dividends paid on certain preferred stock of public 
     utilities. Sections 244 and 247 are repealed. Paragraph (5) 
     of section 172(d) is amended to read as follows:
       ``(5) Computation of deduction for dividends received. The 
     deductions allowed by section 243 and 245 shall be computed 
     without regard to section 246(b) (relating to limitation on 
     aggregate amount of deductions).''
       Paragraph (1) of section 243(c) is amended to read as 
     follows:
       ``(1) In General.--In the case of any dividend received 
     from a 20-percent owned corporation, subsection (a)(1) shall 
     be applied by substituting `80 percent' for `70 percent'.''
       Section 243(d) is amended by striking paragraph (4).
       Section 246 is amended--
       (i) by striking ``, 244,'' in subsection (a)(1),
       (ii) by striking ``sections 243(a)(1), and 244(a),'' the 
     first place it appears in subsection (b)(1) and inserting 
     ``section 243(a)(1),'' and by striking ``244(a),'' the second 
     place it appears therein, and
       (iii) by striking in subsection (c)(1).
       Section 246A is amended by striking ``244'' in subsections 
     (a) and (e).
       Sections 277(a), 301(e), 469(e)(4), 512(a)(3)(A), 
     subparagraphs (A), (C), and (D) of section 805(a)(4), 
     805(b)(5), 812(e)(2)(A), 832(b)(5), 833(b)(3)(E), 
     1059(b)(2)(B), and 1244(c)(2)(C) are each amended by striking 
     ``, 244,'' each place it appears.
       Section 805(a)(4)(B) is amended by striking ``, 244(a),'' 
     each place it appears.
       Section 810(c)(2) is amended by striking ``244 (relating to 
     dividends on certain preferred stock of public utilities),''.
       30. Organization expenses. Section 248(c) is amended by 
     striking ``beginning after December 31, 1953,'' and by 
     striking the last sentence.
       31. Bond repurchase premium. Section 249(b)(1) is amended 
     by striking ``, in the case of bonds or other evidences of 
     indebtedness issued after February 28, 1913,''.
       32. Amount of gain where loss previously disallowed. 
     Section 267(d) is amended by striking ``(or by reason of 
     section 24(b) of the Internal Revenue Code of 1939)'' in 
     paragraph (1), by striking ``after December 31, 1953,'' in 
     paragraph (2), by striking the second sentence, and by 
     striking ``or by reason of section 118 of the Internal 
     Revenue Code of 1939'' in the last sentence.
       33. Acquisitions made to evade or avoid income tax. 
     Paragraphs (1) and (2) of section 269 are each amended by 
     striking ``or acquired on or after October 8, 1940,''.
       34. Interest on indebtedness incurred by corporations to 
     acquire stock or assets of another corporation. Section 279 
     is amended--(A) by striking ``after December 31, 1967,'' in 
     subsection (a)(2), (B) by striking ``after October 9, 1969,'' 
     in subsections (b), (C) by striking ``after October 9, 1969, 
     and'', and (D) by striking subsection (i) and redesignating 
     subsection (j) as subsection (i).
       35. Special rules relating to corporate preference items. 
     Paragraph (4) of section 291(a) is amended by striking ``In 
     the case of taxable years beginning after December 31, 1984, 
     section'' and inserting ``Section''.
       36. Qualifications for tax credit employee stock ownership 
     plan. Section 409 is amended by striking subsections (a), 
     (g), and (p).
       37. Funding standards. Section 412(m)(4) is amended by 
     striking ``the applicable percentage'' in subparagraph (A) 
     and by inserting ``25 percent'', and by striking subparagraph 
     (C).
       38. Retiree health accounts. Section 420 is amended by 
     striking subsections (b)(4) and (c)(2)(B).
       39. Employee stock purchase plans. Section 423(a) is 
     amended by striking ``after December 31, 1963,''.
       40. Limitation on deductions for certain farming. Section 
     464 is amended by striking ``any farming syndicate (as 
     defined in subsection (c))'' in subsections (a) and (b) and 
     inserting ``any taxpayer to whom subsection (f) applies'', 
     and by striking subsections (c) and (g).
       41. Deductions limited to amount at risk. Paragraph (3) of 
     section 465(c)(3) is amended by striking ``In the case of 
     taxable years beginning after December 31, 1978, this'' and 
     inserting ``This''. Paragraph (2) of section 465(e)(2)(A) is 
     amended by striking ``beginning after December 31, 1978''.
       42. Nuclear decommissioning costs. Section 468A(e)(2) is 
     amended by striking ``at the rate set forth in subparagraph 
     (B)'' in subparagraph (A) and inserting ``at a rate of 20 
     percent'', and by striking subparagraph (B).
       43. Passive activity losses and credits limited. Section 
     469 is amended by striking subsection (m). Subsection (b) of 
     section 58 is amended by adding ``and'' at the end of 
     paragraph (1), by striking paragraph (2), and by 
     redesignating paragraph (3) as paragraph (2).
       44. Adjustments required by changes in method of 
     accounting. Section 481(b)(3) is amended by striking 
     subparagraph (C).
       45. Exemption from tax on corporations, certain trusts, 
     etc. Section 501 is amended by striking subsection (p).
       46. Requirements for exemption. Section 503(a)(1) is 
     amended to read as follows: ``(1) General rule.--An 
     organization described in paragraph (17) or (18) of section 
     501(a) or described in section 401(a) and referred to in 
     section 4975(g)(2) or (3) shall not be exempt from taxation 
     under section 501(a) if it has engaged in a prohibited 
     transaction.'' Paragraph (2) of section 503(a) is amended by 
     striking ``described in section 501(c)(17) or (18) or 
     paragraph (a)(1)(B)'' and inserting ``described in paragraph 
     (1)''. Subsection (c) of section 503 is amended by striking 
     ``described in section 501(c)(17) or (18) or subsection 
     (a)(1)(B)'' and inserting ``described in subsection (a)(1)''.
       47. Amounts received by surviving annuitant under joint and 
     survivor annuity contract. Subparagraph (A) of section 
     691(d)(1) is amended by striking ``after December 31, 1953, 
     and''.
       48. Income taxes of members of Armed Forces on death. 
     Section 692(a)(1) is amended by striking ``after June 24, 
     1950''.
       49. Insurance company taxable income. Section 832(e)(1) is 
     amended by striking ``of taxable years beginning after 
     December 31, 1966,'' Section 832(e)(6) is amended by striking 
     ``In the case of any taxable year beginning after December 
     31, 1970, the'' and by inserting ``The''.
       50. Tax on nonresident alien individuals. Subparagraph (B) 
     of section 871(a)(1) is amended to read as follows: ``(B) 
     gains described in section 631(b) or (c),''.
       51. Property on which lessee has made improvements. Section 
     1019 is amended by striking the last sentence.
       52. Involuntary conversion. Section 1033 is amended by 
     striking subsection (j).
       53. Property acquired during affiliation. Section 1051 is 
     repealed.
       54. Holding period of property. Paragraphs (5) of section 
     1223 is amended by striking ``(or under so much of section 
     1052(c) as refers to section 113(a)(23) of the Internal 
     Revenue Code of 1939)''. Paragraph (7) of section 1223 is 
     amended by striking the last sentence. Paragraph (9) of 
     section 1223 is repealed.
       55. Property used in the trade or business and involuntary 
     conversions. Paragraph (2) of section 1231(c) is amended by 
     striking ``beginning after December 31, 1981''.
       56. Sale or exchange of patents. Section 1235 is amended by 
     striking subsection (c) and redesignating subsections (d) and 
     (e) as (c) and (d) respectively.
       57. Dealers in securities. Subsection (b) of section 1236 
     is amended by striking ``after November 19, 1951,''.
       58. Sale of patents. Subsection (a) of section 1249 is 
     amended by striking ``after December 31, 1962,''.
       59. Gain from disposition of farm land. Subparagraph (a) of 
     section 1252 is amended by striking ``after December 31, 
     1969,''.
       60. Treatment of amounts received on retirement or sale or 
     exchange of debt instruments. Subsection (c) of section 1271 
     is amended by striking paragraph (1).
       61. Amount and method of adjustment. Section 1314 is 
     amended by striking subsection (d).
       62. Election; revocation; termination. Clause (iii) of 
     section 1362(d)(3) is amended by striking ``unless`` and all 
     that follows and inserting ``unless the corporation was an S 
     corporation for such taxable year.''
       63. Old-age, survivors, and disability insurance. 
     Subsection (a) of section 1401 is amended by striking ``the 
     following percent'' and all that follows and inserting ``12.4 
     percent of the amount of the self-employment income for such 
     taxable year.''
       64. Hospital insurance. Subsection (b) of section 1401 is 
     amended by striking ``the following percent'' and all that 
     follows and inserting ``2.9 percent of the amount of the 
     self-employment income for such taxable year.''
       65. Ministers, members of religious orders, and Christian 
     Science practitioners. Paragraph (3) of section 1402(e) is 
     amended by striking ``whichever of the following dates is 
     later: (A)'' and by striking ``; or (B)'' and all that 
     follows and by inserting a period.
       66. Withholding of tax on nonresident aliens. The first 
     sentence of subsection (b) of section 1441 and the first 
     sentence of paragraph (5) of section 1441(c) are each amended 
     by striking the ``gains subject to tax'' and all that follows 
     through ``October 4, 1966'' and inserting ``and gains subject 
     to tax under section 871(a)(1)(D)''
       67. Affiliated group defined. Subparagraph (A) of section 
     1504(a)(3) is amended by striking ``for a taxable year which 
     includes any period after December 31, 1984'' in clause (i) 
     and by striking ``in a taxable year beginning after December 
     31, 1984'' in clause (ii).
       68. Disallowance of the benefits of the graduated corporate 
     rates and accumulated earnings credit. Subsection (a) of 
     section 1551 is amended--
       (1) by striking paragraph (1) and designating paragraphs 
     (2) and (3) as (1) and (2) respectively, and
       (2) by striking ``(2) or (3)'' and inserting ``(1) or 
     (2)''.
       Subsection (b) of section 1551 is amended by striking ``or 
     (2)''.
       69. Definition of wages. Section 3121(b) is amended by 
     striking paragraph (17).
       70. Credits against tax. Section 3302(f) is amended by 
     striking paragraphs (4)(B) and (5)(D).

[[Page S5232]]

       71. Domestic service employment taxes. Section 3510(b) is 
     amended by striking paragraph (4).
       72. Tax on fuel used in commercial transportation on inland 
     waterways. Section 4042(b)(2)(A) is amended to read as 
     follows: ``(A) The Inland Waterways Trust Fund financing rate 
     is 20 cents per gallon.''
       73. Transportation by air. Section 4261(e) is amended by 
     striking paragraphs (1)(C) and (5).
       74. Taxes on failure to distribute income. Section 4942 is 
     amended--
       (1) by striking subsection (f)(2)(D),
       (2) by striking ``For all taxable years beginning on or 
     after January 1, 1975, subject'' and inserting ``Subject'' in 
     subsection (g)(2)(A),
       (3) by striking subsection (g)(4), and
       (4) by striking ``after December 31, 1969, and'' in 
     subsection (i)(2).
       75. Taxes on taxable expenditures. Section 4945(f) is 
     amended by striking ``(excluding therefrom any preceding 
     taxable year which begins before January 1, 1970)''.
       76. Returns. Subsection (a) of section 6039D is amended by 
     striking ``beginning after December 31, 1984,''
       77. Information returns. Subsection (c) of section 6060 is 
     amended by striking ``year'' and all that follows and 
     inserting ``year.''.
       78. Abatements. Section 6404(f) is amended by striking 
     paragraph (3).
       79. Failure by corporation to pay estimated income tax. 
     Clause (i) of section 6655(g)(4)(A) is amended by striking 
     ``(or the corresponding provisions of prior law)''.
       80. Retirement. Section 7447(i)(3)(B)(ii) is amended by 
     striking ``at 4 percent per annum to December 31, 1947, and 
     at 3 percent per annum thereafter'', and inserting ``at 3 
     percent per annum''.
       81. Annuities to surviving spouses and dependent children 
     of judges. Paragraph (2) of section 7448(a) is amended by 
     striking ``or under section 1106 of the Internal Revenue Code 
     of 1939''.
       Subsectin (g) of section 7448 is amended by striking ``or 
     other than pursuant to section 106 of the Internal Revenue 
     Code of 1939''.
       Subsection (j)(1)(B) and (j)(2) of section 7448 are each 
     amended by striking ``at 4 percent per annum to December 31, 
     1947, and at 3 percent per annum thereafter'' and inserting 
     ``at 3 percent per annum''.
       82. Merchant Marine capital construction funds. Paragraph 
     (4) of section 7518(g) is amended by striking ``any 
     nonqualified withdrawal'' and all that follows through 
     ``shall be determined'' and inserting ``any nonqualified 
     withdrawal shall be determined''.
       83. Valuation tables. Paragraph (3) of section 7520(c) is 
     amended by striking ``not later than December 31, 1989, the'' 
     and inserting ``The''.
       84. Administration and collection of taxes in possessions. 
     Section 7561 is amended by striking paragraph (4).
       85. Definition of employee. Section 7701(a)(20) is amended 
     by striking ``chapter 21'' and all that follows and inserting 
     ``chapter 21.''.
       Effective Date.--
       General Rule.--Except as otherwise provided in this part, 
     the amendments made by this part shall take effect of the 
     date of enactment of this Act.
       Savings Provision.--If
       (1) any provision amended or repealed by this part applied 
     to--
       (a) any transaction occurring before the date of the 
     enactment of this Act,
       (b) any property acquired before such date of enactment, or
       (c) any item of income, loss, deduction, or credit taken 
     into account before such date of enactment, and
       (2) the treatment of such transaction, property, or item 
     under such provision would (without regard to the amendments 
     made by this part) affect the liability for tax for periods 
     ending after such date of enactment, nothing in the 
     amendments made by this part shall be construed to affect the 
     treatment of such transaction, property, or item for purposes 
     of determining liability for tax for periods ending after 
     such date of enactment.
                                 ______