[Congressional Record (Bound Edition), Volume 150 (2004), Part 4]
[Senate]
[Pages 5247-5251]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 2936. Mr. LEVIN submitted an amendment intended to be proposed by 
him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to 
comply with the World Trade Organization rulings on the FSC/ETI benefit 
in a manner that preserves jobs and production activities in the United 
States, to reform and simplify the international taxation rules of the 
United States, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the end of title IV add the following:

Subtitle G--Provisions Designed To Restrict Use of Abusive Tax Shelters 
                        and Offshore Tax Havens

     SEC. 499. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

       (a) Penalty for Promoting Abusive Tax Shelters.--Section 
     6700 (relating to promoting abusive tax shelters, etc.) is 
     amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (d) and (e), respectively,
       (2) by striking ``a penalty'' and all that follows through 
     the period in the first sentence of subsection (a) and 
     inserting ``a penalty determined under subsection (b)'', and
       (3) by inserting after subsection (a) the following new 
     subsections:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed 150 percent of the gross 
     income derived (or to be derived) from such activity by the 
     person or persons subject to such penalty.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of an activity described in 
     subsection (a), each instance in which income was derived by 
     the person or persons subject to such penalty, and each 
     person who participated in such an activity.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to such activity, 
     all such persons shall be jointly and severally liable for 
     the penalty under such subsection.
       ``(c) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.
       (c) Prior Section To Have No Effect.--Notwithstanding 
     section 415(b) of this Act, such section, and the amendment 
     made by such section, shall not take effect.

     SEC. 499A. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT 
                   OF TAX LIABILITY.

       (a) In General.--Section 6701(a) (relating to imposition of 
     penalty) is amended--
       (1) by inserting ``the tax liability or'' after ``respect 
     to,'' in paragraph (1),
       (2) by inserting ``aid, assistance, procurement, or advice 
     with respect to such'' before ``portion'' both places it 
     appears in paragraphs (2) and (3), and
       (3) by inserting ``instance of aid, assistance, 
     procurement, or advice or each such'' before ``document'' in 
     the matter following paragraph (3).
       (b) Amount of Penalty.--Subsection (b) of section 6701 
     (relating to penalties for aiding and abetting understatement 
     of tax liability) is amended to read as follows:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed 150 percent of the gross 
     income derived (or to be derived) from such aid, assistance, 
     procurement, or advice provided by the person or persons 
     subject to such penalty.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of aid, assistance, procurement, or 
     advice described in subsection (a), each instance in which 
     income was derived by the person or persons subject to such 
     penalty, and each person who made such an understatement of 
     the liability for tax.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to providing such 
     aid, assistance, procurement, or advice, all such persons 
     shall be jointly and severally liable for the penalty under 
     such subsection.''.
       (c) Penalty Not Deductible.--Section 6701 is amended by 
     adding at the end the following new subsection:
       ``(g) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 499B. PENALTY FOR FAILURE TO REGISTER TAX SHELTER.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION ON POTENTIALLY 
                   ABUSIVE TAX SHELTER OR LISTED TRANSACTION.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111 with respect to any potentially 
     abusive tax shelter--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such shelter,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be not less than $50,000 and not more than 
     $100,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or

[[Page 5248]]

       ``(B) 100 percent of the gross income derived by such 
     person for providing aid, assistance, procurement, advice, or 
     other services with respect to the listed transaction before 
     the date the return including the transaction is filed under 
     section 6111.

     Subparagraph (B) shall be applied by substituting `150 
     percent' for `100 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Certain Rules To Apply.--The provisions of section 
     6707A(d) allowing the Commissioner of Internal Revenue to 
     rescind a penalty under certain circumstances shall apply to 
     any penalty imposed under this section.
       ``(d) Potentially Abusive Tax Shelters and Listed 
     Transactions.--The terms `potentially abusive tax shelter' 
     and `listed transaction' have the respective meanings given 
     to such terms by section 6707A(c).
       ``(e) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``regarding tax shelters'' 
     and inserting ``on potentially abusive tax shelter or listed 
     transaction''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.
       (d) Prior Section To Have No Effect.--Notwithstanding 
     section 408(c) of this Act, such section, and the amendments 
     made by such section, shall not take effect.

     SEC. 499C. PENALTY FOR FAILING TO MAINTAIN CLIENT LIST.

       (a) In General.--Subsection (a) of section 6708 (relating 
     to failure to maintain lists of investors in potentially 
     abusive tax shelters) is amended to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day. If such person makes available an incomplete list 
     upon such request, such person shall pay a penalty of $100 
     per each omitted name for each day of such omission after 
     such 20th day.
       ``(2) Good cause exception.--No penalty shall be imposed by 
     paragraph (1) with respect to the failure on any day if, in 
     the judgment of the Secretary, such failure is due to good 
     cause.''.
       (b) Penalty Not Deductible.--Section 6708 is amended by 
     adding at the end the following new subsection:
       ``(c) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made by the Secretary of the Treasury 
     after the date of the enactment of this Act.
       (d) Prior Section To Have No Effect.--Notwithstanding 
     section 409(b) of this Act, such section, and the amendment 
     made by such section, shall not take effect.

     SEC. 499D. PENALTY FOR FAILING TO DISCLOSE POTENTIALLY 
                   ABUSIVE TAX SHELTER.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE POTENTIALLY 
                   ABUSIVE TAX SHELTER INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a potentially abusive tax shelter which is 
     required under section 6011 to be included with such return 
     or statement shall pay a penalty in the amount determined 
     under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--Except as provided in paragraph 
     3, the amount of the penalty under subsection (a) with 
     respect to a listed transaction shall be $100,000.
       ``(3) Increase in penalty for intentional nondisclosure.--
     In the case of an intentional failure by any person under 
     subsection (a), the penalty under paragraph (1) shall be 
     $100,000 and the penalty under paragraph (2) shall be 
     $200,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Potentially abusive tax shelter.--The term 
     `potentially abusive tax shelter' means any transaction with 
     respect to which information is required to be included with 
     a return or statement, because the Secretary has determined 
     by regulation or otherwise that such transaction has a 
     potential for tax avoidance or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a 
     potentially abusive tax shelter which is the same as, or 
     substantially similar to, a transaction specifically 
     identified by the Secretary as a tax avoidance transaction 
     for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of a penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a potentially 
     abusive tax shelter other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact,
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
     A copy of such opinion shall be provided upon written request 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, the 
     Joint Committee on Taxation, or the General Accounting 
     Office.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any potentially abusive tax shelter at a rate 
     prescribed under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Penalty in Addition to Other Penalties.--The penalty 
     imposed by this section shall be in addition to any other 
     penalty provided by law.
       ``(g) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include potentially abusive tax 
              shelter information with return or statement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.
       (d) Prior Section To Have No Effect.--Notwithstanding 
     section 402(c) of this Act, such section, and the amendments 
     made by such section, shall not take effect.

[[Page 5249]]



     SEC. 499E. IMPROVED DISCLOSURE OF POTENTIALLY ABUSIVE TAX 
                   SHELTERS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF POTENTIALLY ABUSIVE TAX SHELTERS.

       ``(a) In General.--Each material advisor with respect to 
     any potentially abusive tax shelter shall make a return (in 
     such form as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing such shelter,
       ``(2) information describing any potential tax benefits 
     expected to result from the shelter, and
       ``(3) such other information as the Secretary may 
     prescribe.

     Such return shall be filed not later than the date which is 
     30 days before the date on which the first sale of such 
     shelter occurs or on any other date specified by the 
     Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to designing, organizing, managing, promoting, 
     selling, implementing, or carrying out any potentially 
     abusive tax shelter, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a potentially abusive tax 
     shelter substantially all of the tax benefits from which are 
     provided to natural persons, and
       ``(ii) $100,000 in any other case.
       ``(2) Potentially abusive tax shelter.--The term 
     `potentially abusive tax shelter' has the meaning given to 
     such term by section 6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''.
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of potentially abusive tax shelters.''.
       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF POTENTIALLY ABUSIVE TAX 
                   SHELTERS MUST KEEP CLIENT LISTS.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any potentially abusive tax 
     shelter (as defined in section 6707A(c)) shall maintain, in 
     such manner as the Secretary may by regulations prescribe, a 
     list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     shelter, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.

     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of potentially abusive tax shelters must 
              keep client lists.''.
       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN CLIENT LISTS WITH RESPECT TO 
                   POTENTIALLY ABUSIVE TAX SHELTERS.''.

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain client lists with respect to 
              potentially abusive tax shelters.''.
       (c) Required Disclosure Not Subject to Claim of 
     Confidentiality.--Section 6112(b)(1), as redesignated by 
     subsection (b)(2)(B), is amended by adding at the end the 
     following new flush sentence:

     ``For purposes of this section, the identity of any person on 
     such list shall not be privileged.''.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to transactions 
     with respect to which material aid, assistance, or advice 
     referred to in section 6111(b)(1)(A)(i) of the Internal 
     Revenue Code of 1986 (as added by this section) is provided 
     after the date of the enactment of this Act.
       (2) No claim of confidentiality against disclosure.--The 
     amendment made by subsection (c) shall take effect as if 
     included in the amendments made by section 142 of the Deficit 
     Reduction Act of 1984.
       (e) Prior Section To Have No Effect.--Notwithstanding 
     section 407(d) of this Act, such section, and the amendments 
     made by such section, shall not take effect.

     SEC. 499F. EXTENSION OF STATUTE OF LIMITATIONS FOR 
                   UNDISCLOSED TAX SHELTER.

       (a) In General.--Section 6501(c) (relating to exceptions) 
     is amended by adding at the end the following new paragraph:
       ``(10) Potentially abusive tax shelters.--If a taxpayer 
     fails to include on any return or statement for any taxable 
     year any information with respect to a potentially abusive 
     tax shelter (as defined in section 6707A(c)) which is 
     required under section 6011 to be included with such return 
     or statement, the time for assessment of any tax imposed by 
     this title with respect to such transaction shall not expire 
     before the date which is 2 years after the earlier of--
       ``(A) the date on which the Secretary is furnished the 
     information so required; or
       ``(B) the date that a material advisor (as defined in 
     section 6111) meets the requirements of section 6112 with 
     respect to a request by the Secretary under section 6112(b) 
     relating to such transaction with respect to such 
     taxpayer.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years with respect to which the period 
     for assessing a deficiency did not expire before the date of 
     the enactment of this Act.
       (c) Prior Section To Have No Effect.--Notwithstanding 
     section 416(b) of this Act, such section, and the amendment 
     made by such section, shall not take effect.

     SEC. 499G. PENALTY FOR FAILING 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 $10,000.
       ``(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, the amount of the civil 
     penalty imposed under subparagraph (A) shall be--
       ``(i) not less than $5,000,
       ``(ii) not more than 50 percent of the amount determined 
     under subparagraph (D), and
       ``(iii) 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.
       (c) Prior Section To Have No Effect.--Notwithstanding 
     section 412(b) of this Act, such section, and the amendment 
     made by such section, shall not take effect.

     SEC. 499H. CENSURE, CIVIL FINES, AND TAX OPINION STANDARDS 
                   FOR TAX PRACTITIONERS.

       (a) Censure; Imposition of Monetary Penalty.--
       (1) In general.--Section 330(b) of title 31, United States 
     Code, is amended--
       (A) by inserting ``, or censure,'' after ``Department'', 
     and
       (B) by adding at the end the following new flush sentence:

     ``The Secretary may impose a monetary penalty on any 
     representative described in the preceding sentence. If the 
     representative was acting on behalf of an employer or any 
     firm or other entity in connection with the conduct giving 
     rise to such penalty, the Secretary may impose a monetary 
     penalty on such employer, firm, or entity if it knew, or 
     reasonably should have known, of such conduct. Such penalty 
     may be in addition to, or in lieu of, any suspension, 
     disbarment, or censure of the representative.''.

[[Page 5250]]

       (2) Effective date.--The amendments made by this subsection 
     shall apply to actions taken after the date of the enactment 
     of this Act.
       (b) Tax Opinion Standards.--Section 330 of such title 31 is 
     amended by adding at the end the following new subsection:
       ``(d) The Secretary of the Treasury shall impose standards 
     applicable to the rendering of written advice with respect to 
     any potentially abusive tax shelter or any entity, plan, 
     arrangement, or transaction which has a potential for tax 
     avoidance or evasion. Such standards shall address, but not 
     be limited to, the following issues:
       ``(1) Independence of the practitioner issuing such written 
     advice from persons promoting, marketing, or recommending the 
     subject of the advice.
       ``(2) Collaboration among practitioners, or between a 
     practitioner and other party, which could result in such 
     collaborating parties having a joint financial interest in 
     the subject of the advice.
       ``(3) Avoidance of conflicts of interest which would impair 
     auditor independence.
       ``(4) For written advice issued by a firm, standards for 
     reviewing the advice and ensuring the consensus support of 
     the firm for positions taken.
       ``(5) Reliance on reasonable factual representations by the 
     taxpayer and other parties.
       ``(6) Appropriateness of the fees charged by the 
     practitioner for the written advice.''.
       (c) Prior Section To Have No Effect.--Notwithstanding 
     section 414(a)(2) of this Act, such section, and the 
     amendments made by such section, shall not take effect.

     SEC. 499I. INFORMATION SHARING FOR ENFORCEMENT PURPOSES.

       (a) Promotion of Prohibited Tax Shelters or Tax Avoidance 
     Schemes.--Section 6103(h) (relating to disclosure to certain 
     Federal officers and employees for purposes of tax 
     administration, etc.) is amended by adding at the end the 
     following new paragraph:
       ``(7) Disclosure of returns and return information related 
     to promotion of prohibited tax shelters or tax avoidance 
     schemes.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission, an appropriate Federal banking agency as 
     defined under section 1813(q) of title 12, United States 
     Code, or the Public Company Accounting Oversight Board, a 
     return or return information shall be disclosed to such 
     requestor's officers and employees who are personally and 
     directly engaged in an investigation, examination, or 
     proceeding by such requestor to evaluate, determine, 
     penalize, or deter conduct by a financial institution, 
     issuer, or public accounting firm, or associated person, in 
     connection with a potential or actual violation of section 
     6700 (promotion of abusive tax shelters), 6701 (aiding and 
     abetting understatement of tax liability), or activities 
     related to promoting or facilitating inappropriate tax 
     avoidance or tax evasion. Such disclosure shall be solely for 
     use by such officers and employees in such investigation, 
     examination, or proceeding.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the financial institution, 
     issuer, or public accounting firm to which such return 
     information relates,
       ``(iv) the taxable period or periods to which such return 
     information relates, and
       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.
       ``(C) Financial institution.--For the purposes of this 
     paragraph, the term `financial institution' means a 
     depository institution, foreign bank, insured institution, 
     industrial loan company, broker, dealer, investment company, 
     investment advisor, or other entity subject to regulation or 
     oversight by the United States Securities and Exchange 
     Commission or an appropriate Federal banking agency.''.
       (b) Financial and Accounting Fraud Investigations.--Section 
     6103(i) (relating to disclosure to Federal officers or 
     employees for administration of Federal laws not relating to 
     tax administration) is amended by adding at the end the 
     following new paragraph:
       ``(9) Disclosure of returns and return information for use 
     in financial and accounting fraud investigations.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission or the Public Company Accounting 
     Oversight Board, a return or return information shall be 
     disclosed to such requestor's officers and employees who are 
     personally and directly engaged in an investigation, 
     examination, or proceeding by such requester to evaluate the 
     accuracy of a financial statement or report or to determine, 
     require a restatement, penalize, or deter conduct by an 
     issuer, investment company, or public accounting firm, or 
     associated person, in connection with a potential or actual 
     violation of auditing standards or prohibitions against false 
     or misleading statements or omissions in financial statements 
     or reports. Such disclosure shall be solely for use by such 
     officers and employees in such investigation, examination or 
     proceeding.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the issuer, investment 
     company, or public accounting firm to which such return 
     information relates,
       ``(iv) the taxable period or periods to which such return 
     information relates, and
       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures and to information and document 
     requests made after the date of the enactment of this Act.

     SEC. 499J. CERTAIN DISCLOSURES BY SUBPOENA NOT SUBJECT TO 
                   PENALTY.

       (a) In General.--Section 7216(b)(1) (relating to 
     disclosure) is amended by striking ``or''at the end of 
     subparagraph (A), by striking the period at the end of 
     subparagraph (B) and inserting ``, or'', and by adding at the 
     end the following new subparagraph:
       ``(C) pursuant to a subpoena which is issued in the 
     performance of its duties by any Federal agency or Congress 
     (including any committee or subcommittee thereof).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to disclosures made after the date of the 
     enactment of this Act.

     SEC. 499K. CONTINGENT FEE PROHIBITION.

       (a) In General.--Section 6701, as amended by this Act, is 
     amended--
       (1) by redesignating subsections (f) and (g) as subsections 
     (g) and (h), respectively,
       (2) by striking ``subsection (a).'' in paragraphs (2) and 
     (3) of subsection (g) (as redesignated by paragraph (1)) and 
     inserting ``subsection (a) or (f).'', and
       (3) by inserting after subsection (e) the following new 
     subsection:
       ``(f) Contingent Fee Prohibition.--
       ``(1) In general.--Any person who makes an agreement for, 
     charges, or collects a fee which is for services provided in 
     connection with the internal revenue laws, and which is 
     contingent upon the actual or projected achievement of--
       ``(A) Federal tax savings or benefits, or
       ``(B) losses which can be used to offset other taxable 
     income,

     shall pay a penalty with respect to each such fee activity in 
     the amount determined under subsection (b).
       ``(2) Regulations.--The Secretary may issue rules to carry 
     out the purposes of this subsection and may provide for 
     exceptions for fee arrangements that are in the public 
     interest.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to fee agreements, charges, and collections made 
     after the date of the enactment of this Act.

     SEC. 499L. DISCLOSING PAYMENTS TO PERSONS IN UNCOOPERATIVE 
                   TAX HAVENS.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6038C the 
     following new section:

     ``SEC. 6038D. DETERRING UNCOOPERATIVE TAX HAVENS THROUGH 
                   LISTING AND REPORTING REQUIREMENTS.

       ``(a) In General.--Each United States person who transfers 
     money or other property directly or indirectly to any 
     uncooperative tax haven, to any financial institution 
     licensed by or operating in any uncooperative tax haven, or 
     to any person who is a resident of any uncooperative tax 
     haven shall furnish to the Secretary, at such time and in 
     such manner as the Secretary shall by regulation prescribe, 
     such information with respect to such transfer as the 
     Secretary may require.
       ``(b) Exceptions.--Subsection (a) shall not apply to a 
     transfer by a United States person if the amount of money 
     (and the fair market value of property) transferred is less 
     than $10,000. Related transfers shall be treated as 1 
     transfer for purposes of this subsection.
       ``(c) Uncooperative Tax Haven.--For purposes of this 
     section--
       ``(1) In general.--The term `uncooperative tax haven' means 
     any foreign jurisdiction which is identified on a list 
     maintained by the Secretary under paragraph (2) as being a 
     jurisdiction--
       ``(A) which imposes no or nominal taxation either generally 
     or on specified classes of income, and
       ``(B) has corporate, business, bank, or tax secrecy or 
     confidentiality rules and practices, or has ineffective 
     information exchange practices which, in the judgment of the 
     Secretary, effectively limit or restrict the ability of the 
     United States to obtain information relevant to the 
     enforcement of this title.

[[Page 5251]]

       ``(2) Maintenance of list.--Not later than November 1 of 
     each calendar year, the Secretary shall issue a list of 
     foreign jurisdictions which the Secretary determines qualify 
     as uncooperative tax havens under paragraph (1).
       ``(3) Ineffective information exchange practices.--For 
     purposes of paragraph (1), a jurisdiction shall be deemed to 
     have ineffective information exchange practices if the 
     Secretary determines that during any taxable year ending in 
     the 12-month period preceding the issuance of the list under 
     paragraph (2)--
       ``(A) the exchange of information between the United States 
     and such jurisdiction was inadequate to prevent evasion or 
     avoidance of United States income tax by United States 
     persons or to enable the United States effectively to enforce 
     this title, or
       ``(B) such jurisdiction was identified by an 
     intergovernmental group or organization of which the United 
     States is a member as uncooperative with international tax 
     enforcement or information exchange and the United States 
     concurs in the determination.
       ``(d) Penalty for Failure To File Information.--If a United 
     States person fails to furnish the information required by 
     subsection (a) with respect to any transfer within the time 
     prescribed therefor (including extensions), such United 
     States person shall pay (upon notice and demand by the 
     Secretary and in the same manner as tax) an amount equal to 
     20 percent of the amount of such transfer.
       ``(e) Simplified Reporting.--The Secretary may by 
     regulations provide for simplified reporting under this 
     section for United States persons making large volumes of 
     similar payments.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by inserting after the item relating to 
     section 6038C the following new item:

``Sec. 6038D. Deterring uncooperative tax havens through listing and 
              reporting requirements.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date which is 180 days 
     after the date of the enactment of this Act.

     SEC. 499M. DETERRING UNCOOPERATIVE TAX HAVENS BY RESTRICTING 
                   ALLOWABLE TAX BENEFITS.

       (a) Limitation on Deferral.--
       (1) In general.--Subsection (a) of section 952 (defining 
     subpart F income) is amended by striking ``and'' at the end 
     of paragraph (4), by striking the period at the end of 
     paragraph (5) and inserting ``, and'', and by inserting after 
     paragraph (5) the following new paragraph:
       ``(6) an amount equal to the applicable fraction (as 
     defined in subsection (e)) of the income of such corporation 
     other than income which--
       ``(A) is attributable to earnings and profits of the 
     foreign corporation included in the gross income of a United 
     States person under section 951 (other than by reason of this 
     paragraph or paragraph (3)(A)(i)), or
       ``(B) is described in subsection (b).''.
       (2) Applicable fraction.--Section 952 is amended by adding 
     at the end the following new subsection:
       ``(e) Identified Tax Haven Income Which is Subpart F 
     Income.--
       ``(1) In general.--For purposes of subsection (a)(6), the 
     term `applicable fraction' means the fraction--
       ``(A) the numerator of which is the aggregate identified 
     tax haven income for the taxable year, and
       ``(B) the denominator of which is the aggregate income for 
     the taxable year which is from sources outside the United 
     States.
       ``(2) Identified tax haven income.--For purposes of 
     paragraph (1), the term `identified tax haven income' means 
     income for the taxable year which is attributable to a 
     foreign jurisdiction for any period during which such 
     jurisdiction has been identified as an uncooperative tax 
     haven under section 6038D(c).
       ``(3) Regulations.--The Secretary shall prescribe 
     regulations similar to the regulations issued under section 
     999(c) to carry out the purposes of this subsection.''.
       (b) Denial of Foreign Tax Credit.--Section 901 (relating to 
     taxes of foreign countries and of possessions of United 
     States) is amended by redesignating subsection (l) as 
     subsection (m) and by inserting after subsection (k) the 
     following new subsection:
       ``(l) Reduction of Foreign Tax Credit, Etc., for Identified 
     Tax Haven Income.--
       ``(1) In general.--Notwithstanding any other provision of 
     this part--
       ``(A) no credit shall be allowed under subsection (a) for 
     any income, war profits, or excess profits taxes paid or 
     accrued (or deemed paid under section 902 or 960) to any 
     foreign jurisdiction if such taxes are with respect to income 
     attributable to a period during which such jurisdiction has 
     been identified as an uncooperative tax haven under section 
     6038D(c), and
       ``(B) subsections (a), (b), (c), and (d) of section 904 and 
     sections 902 and 960 shall be applied separately with respect 
     to all income of a taxpayer attributable to periods described 
     in subparagraph (A) with respect to all such jurisdictions.
       ``(2) Taxes allowed as a deduction, etc.--Sections 275 and 
     78 shall not apply to any tax which is not allowable as a 
     credit under subsection (a) by reason of this subsection.
       ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations which 
     treat income paid through 1 or more entities as derived from 
     a foreign jurisdiction to which this subsection applies if 
     such income was, without regard to such entities, derived 
     from such jurisdiction.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

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